Readymade garment industry to take a 50% dent due to tariff blows: Crisil

With a 25% additional tariff on India, notified today by the US, the domestic readymade garment industry is staring at a mega jolt. According to Crisil, revenue growth of India’s readymade garment (RMG) industry is set to nearly halve on-year this fiscal as the imposition of 50% tariffs by the US on its imports from India becomes effective from 27th August 2025. 

“That, coupled with a decline in profitability, will impact credit metrics for industry players. The impact will vary by company, some of which get more than 40% of their revenue from the US,” it added. 

“An analysis of over 120 RMG makers rated by us, with total revenue of ₹45,000 crore, indicates as much. RMG exports totalled $16 billion last fiscal and accounted for 27% of the RMG sector’s revenue. A third of the exports were to the US. The 50% tariff puts India at a distinct disadvantage compared with competing nations like China, Bangladesh and Vietnam,” it said in a release. 

“If the tariffs hold, RMG exports to the US will see a sharp decline. In the first quarter of this fiscal year, total exports from India rose 10% on-year to $4 billion, with exports to the US recording a 14% growth during the same period. The trend is expected to sustain through 26th August till the enhanced tariffs kick in. Post 50% tariffs, Indian exports to the US may be minimal, despite the limited capacity of competing nations in value-added garments and the 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,” said Manish Gupta, Deputy Chief Rating Officer, Crisil Ratings. 

The agency pointed out that the players will have to realign trade with other major export destinations—the European Union (EU), United Kingdom (UK) and United Arab Emirates (UAE), which together form 45% of India’s exports for fiscal 2025. 

“The recently signed Free Trade Agreement (FTA) with the UK is also likely to result in higher exports to that country from the end of this fiscal, providing some relief to the industry,” it added. 

The agency is, however, of the view that the domestic market is likely to offer some support. “The domestic market for RMG, accounting for three-fourths of the sector's revenue, will continue to see steady revenue growth of 8-10% this fiscal, fuelled by economic growth, interest rate cuts, and tax reductions. This, in turn, will cushion the tariff blow and spur overall growth at the sector level, but at a slower pace than last fiscal,” said Gautam Shahi, director, Crisil Ratings.