50% Tariff to Hit India’s Home Textile & RMG Sectors: Crisil

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The recent U.S. decision to impose a 25% tariff on imports from India is projected to have a substantial impact on earnings across sectors such as home textiles and carpets, according to a report by Crisil Ratings. Furthermore, an additional penalty tariff of 25% on crude oil imports from Russia, effective August 27, 2025, is likely to render exports from these sectors, as well as readymade garments (RMG), chemicals, agrochemicals, capital goods, and solar panels, economically unfeasible.

The report indicates that the extent of the impact will largely depend on each sector’s exposure to the U.S. market, their ability to transfer costs onto consumers, and how they compete against other countries. Presently, the U.S. is responsible for about 20% of India’s merchandise exports, contributing approximately 2% to the country’s GDP. The existing reciprocal tariffs already surpass those of many Asian competitors, with the exception of China, and are anticipated to diminish India’s competitive edge in sectors that heavily rely on U.S. demand.

Home textiles and carpets, which derive 70–75% and 65–70% of their sales from exports respectively, will likely face significant drops in both volume and profitability, particularly as the U.S. is a major market for these products. The RMG sector, which has 10–15% of its revenue linked to the U.S., will struggle to compete against suppliers from China and Vietnam.

While capital goods manufacturers may be slightly better positioned to absorb some cost increases due to their established market presence, they are likely to experience a decrease in new orders as buyers seek out suppliers from tariff-friendly nations like Mexico.

The report also cautioned about potential secondary effects, such as a slowdown in U.S. demand and a possible influx of exports from other tariff-affected countries into India, which could negatively impact local producers. However, robust corporate balance sheets, potential protective measures from the Indian government, and bilateral trade agreements with other nations could help mitigate some of these challenges.

For the RMG sector, the new tariffs will render exports to the U.S., which currently account for 10-15% of total revenue, completely unviable, as the imposed tariffs will be significantly higher compared to those faced by manufacturers in China and Vietnam.

Crisil Ratings plans to keep a close watch on the evolving situation and will adjust credit ratings as necessary, emphasizing that any future trade agreements between the U.S. and India could significantly alter the current landscape.

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