Mumbai: Readymade garment (RMG) sector is set to witness a sharp slowdown in revenue growth, with Crisil Ratings projecting a halving to just 3–5% this fiscal. The trigger: a steep 50% tariff imposed by the US on Indian RMG imports, effective August 27, 2025.
The US, which accounted for a third of India’s $16 billion RMG exports last year, is expected to see its share drop to 20–25% as American retailers rework sourcing strategies. Exporters deriving over 40% of their revenue from the US are likely to be hit hardest, with profitability contracting by 300–500 basis points.
While domestic demand -- comprising three-fourths of sectoral revenue -- is expected to grow steadily at 8–10%, Crisil warns that oversupply and tariff-driven disadvantages could dent margins and credit metrics across the board.
Some relief may come from the UK, European Union, and UAE markets, which together form 45% of India’s RMG exports. The recently signed UK Free Trade Agreement (FTA) is expected to boost shipments later this fiscal.
According to Manish Gupta, deputy chief rating officer, Crisil Ratings, if the tariffs hold, RMG exports to the US will see a sharp decline. "In the first quarter of this fiscal, total exports from India rose ~10% on-year to ~$4 billion, with exports to US recording a ~14% growth during the same period. The trend is expected to sustain through August 26, 2025, till the enhanced tariffs kick in.
"Post 50% tariffs, Indian exports to the US may be minimal, despite limited capacity of competing nations in value-added garments and lead time taken by big-box retailers in the US to re-align their sourcing arrangements. Overall, we expect the share of the US in India's RMG exports to fall from 33% last fiscal to 20-25% this fiscal."
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