The Indian apparel sector’s outlook has been revised to ‘Stable’ from ‘Negative’ following the US slashing reciprocal tariffs on Indian goods to 18% from 25%. ICRA’s report predicts a rebound of 8–11% in apparel export revenues in FY27, despite an expected 3–5% decline in shipments for FY26.
ICRA attributes the revenue growth to recent trade discussions between India and the US, aimed at alleviating sector-specific pressures. Operating profit margins are forecasted to dip to around 7.7% in FY26 before bouncing back to about 9.5% in FY27, according to the ratings agency.
In FY25, India’s apparel exports totaled $16 billion, with the US accounting for approximately one-third of the shipments. The surge in US tariffs last year significantly impacted export-oriented companies in various sectors, leading to margin compression for apparel exporters.
Jitin Makkar, Senior Vice President and Group Head, Corporate Ratings at ICRA Limited, highlighted the challenges faced by exporters, including the necessity to offer discounts to US buyers to maintain volume share. Looking ahead, the report anticipates a gradual strengthening of India’s manufacturing export growth over the medium term, supported by the reduction in US tariffs and potential trade agreements.
