- US duty on Indian fabrics fell from 50% to 18%—a catalyst for margin expansion.
- India could lift textile export share from 8% to up to 12% of total exports by 2029.
- Arvind and Raymond are already re‑engineering models to capture the upside.
- Technical and man‑made fibres are set to outpace cotton, reshaping the product mix.
- Capacity additions under Make‑in‑India could add $5‑$7 bn in export revenue within three years.
You’re overlooking the biggest trade win for Indian textiles— and it could boost returns dramatically.
Why the US Tariff Cut Transforms India’s Textile Industry
The United States, accounting for roughly 28% of India’s textile export basket, slashed duties from 50% to 18% in a surprise policy shift. The immediate effect is a sharp reduction in landed cost for U.S. buyers, translating into healthier gross margins for exporters. Historically, Indian producers operated under a “tariff penalty” that eroded price competitiveness against Chinese rivals, which enjoyed preferential rates under the U.S.–China Phase One deal. With the penalty removed, Indian manufacturers can now price closer to cost, making their products attractive for large retail contracts and private‑label programs.
Beyond the headline number, the move signals a broader de‑protectionist trend. Analysts expect forthcoming free‑trade agreements (FTAs) with the U.S., U.K., and EU to push duty‑free coverage to 70‑75% of India’s textile shipments. That would effectively eliminate the remaining tariff drag, creating a structural shift in the sector’s economics.
Sector‑Wide Trends: From Cotton to Man‑Made Fibres
While cotton still dominates 62% of export volume, the domestic market is witnessing a steady migration toward man‑made fibres (MMF). MMF offers higher productivity, lower water usage, and better alignment with sustainability mandates of Western buyers. The shift is not merely a fashion statement; it is a cost‑curve lever. Production of MMF typically yields a 5‑10% lower per‑unit cost compared with pure cotton, a margin buffer that becomes critical when competing with low‑cost Chinese output.
Technical textiles—high‑performance fabrics used in automotive, medical, and industrial applications—are another fast‑growing niche. Global demand for technical textiles is projected to rise at a compound annual growth rate (CAGR) of 6% through 2030. Indian firms with R&D capabilities are already filing patents in polymer blends, positioning themselves for export orders that carry higher freight‑in‑price ratios.
How Competitors Like Arvind and Raymond Are Poised to Capture Gains
Arvind Ltd., the flagship apparel player, has trimmed its portfolio to focus on high‑margin brands such as U.S. Polo Assn. The company’s pivot to a direct‑to‑consumer (D2C) and consignment‑led “FOFO” model has already sharpened inventory turns and pricing discipline. Management projects revenue CAGR of 13% and EBITDA CAGR of 25% through FY28, driven largely by export‑oriented apparel lines that will directly benefit from the tariff reduction.
Raymond Lifestyle, a legacy name in branded textiles, is leveraging domestic demand momentum while awaiting a gradual export recovery. Recent earnings showed a 240 basis‑point uplift in gross margins and a 260 basis‑point rise in EBITDA margins YoY, reflecting a healthier product mix and operating leverage. The firm’s calibrated capacity expansion—targeting an additional 1.2 mn meters of woven fabric annually—aligns with the expected surge in U.S. orders.
Both companies are accelerating capex under the Make‑in‑India initiative, with projected facility roll‑outs slated for 12‑18 months. The timing dovetails with the anticipated export wave, ensuring that supply‑side bottlenecks remain minimal.
Historical Context: What Past Tariff Changes Teach Us
India’s textile sector has weathered tariff volatility before. In 2008, a temporary U.S. duty hike to 30% caused a 12% dip in export volumes, but manufacturers responded by diversifying into EU markets, which later offset the loss. The key lesson was that when duty relief arrives, firms that have retained flexible production lines and diversified buyer bases can capture upside faster than those locked into single‑market contracts.
China’s experience offers another cautionary tale. After the U.S. imposed Section 301 tariffs in 2018, Chinese exporters shifted roughly 20% of their volume to Vietnam and Bangladesh, eroding China’s market share. India, with its lower overall tariff burden post‑cut, is now in a position to capture a slice of the displaced Chinese demand, especially in home‑textile categories like towels and bedding.
Impact on Your Portfolio: Numbers That Matter
Export revenue is projected to climb from $36 bn today to $45‑$50 bn by 2029—a growth trajectory that translates into an implied 9‑12% annual increase in sector‑wide earnings before interest, taxes, depreciation, and amortisation (EBITDA). Assuming an industry‑average EBITDA margin of 12% post‑tariff, the sector could generate $5‑$6 bn of EBITDA in three years, up from roughly $4.3 bn today.
For a portfolio focused on Indian equities, allocating a modest 3‑5% weight to textile leaders could add 0.9‑1.5% annualized return, assuming the sector outperforms the broader NIFTY‑50 by 3‑4% due to margin expansion and export growth.
Investor Playbook: Bull vs. Bear Cases
Bull Case
- Full implementation of pending FTAs pushes duty‑free coverage to 75%.
- Capacity expansions complete on schedule, delivering 12‑18% YoY volume growth.
- Technical textile exports accelerate, contributing 15% of total textile earnings by FY29.
- Arvind and Raymond hit projected revenue and EBITDA CAGR targets, boosting sector multiples.
Bear Case
- Geopolitical frictions delay FTA ratifications, keeping duty levels higher than anticipated.
- Supply‑chain constraints (e.g., cotton procurement, labor shortages) curb capacity ramp‑up.
- Global recession dampens discretionary home‑textile demand in the U.S. and EU.
- Currency volatility erodes export‑derived profits.
Investors should monitor three leading indicators: (1) US‑India FTA negotiation milestones, (2) quarterly capacity addition reports from major players, and (3) cotton‑to‑MMF price spread trends. A phased entry—starting with a 2% exposure to Arvind followed by incremental additions to Raymond as earnings beat forecasts—offers a balanced risk‑reward profile.