US tariff hike to 50% to halve India’s garment export growth in FY26

India’s readymade garment (RMG) industry is bracing for a severe slowdown this fiscal, with revenue growth expected to nearly halve to 3–5% from 8–10% last year, as the US doubles tariffs on imports from India to 50% starting August 27, CRISIL Ratings told CNBCTV-18.

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Exporters deriving over 40% of their revenues from the US are to be hit hardest, with profitability seen contracting by 300 to 500 basis points.

The US move places Indian exporters at a significant disadvantage compared to competitors in China, Bangladesh and Vietnam. America is India’s single largest RMG export destination, accounting for about one-third of outbound shipments. In FY25, India exported garments worth $16 billion, with $5.3 billion going to the US. CRISIL estimates this share could decline sharply to 20–25% in FY26.

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Post 50% tariffs, Indian exports to the US may be minimal, the report noted. Exports remain a vital revenue stream for the sector, contributing 27% of total revenue last fiscal. However, domestic demand- nearly three-fourths of the market, is projected to grow at 8–10% this year, supported by strong economic activity, lower interest rates and reduced taxes, partially cushioning the export blow.

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The tariff shock is also expected to strain the industry’s credit health. Traditional export hubs like Tiruppur in Tamil Nadu, India’s knitwear capital housing over 10,000 garmenting units are among the worst affected.