Indian apparel sector’s outlook upgraded to ‘Stable’ after US trade deal: Report

Mumbai, Feb 11 (IANS) The Indian apparel (exports) sector has been upgraded to ‘Stable’ outlook from ‘Negative’ after the US reduced reciprocal tariffs on Indian goods to 18 per cent from 25 per cent, a report said on Wednesday.

The report from ratings agency ICRA restored its outlook on the apparel sector, saying apparel export revenues are likely to rebound 8–11 per cent in FY27 even as shipments are still projected to decline 3–5 per cent in FY26.

The report attributed revenue growth to recent trade discussions between India and the US aimed at easing sector‑specific pressures. Operating profit margins are expected to compress to around 7.7 per cent in FY26 before recovering to about 9.5 per cent in FY27, the ratings agency said.

India’s apparel exports stood at $16 billion in FY25, with the US accounting for nearly one‑third of shipments.

“The sharp increase in US tariffs last year had been particularly debilitating for export‑oriented companies in sectors such as textiles, cut and polished diamonds, and leather and leather products,” said Jitin Makkar, Senior Vice President and Group Head, Corporate Ratings, ICRA Limited.

Apparel exporters saw their margins compress by nearly 200 basis points over the past couple of quarters as they were compelled to extend discounts to US buyers to retain volume share, he added.

On the broader outlook, the report said the lowering of US tariffs, the anticipated India‑EU free trade agreement and other bilateral pacts should support a gradual strengthening of India’s manufacturing export growth over the medium term.

The tariff cuts represent a relatively smooth landing for Indian exporters at a time when global trade dynamics remain fluid.

Following this development, the labour-intensive export sectors, including textiles, cut and polished diamonds, seafood, and footwear will see improved landed-cost competitiveness.

While the US tariff reduction offers a meaningful near-term relief to exporters, ICRA expects that over the longer term, geographical diversification will emerge as a key risk mitigation strategy that corporate India will adopt.

—IANS

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