India’s home textile exporters are set to face a revenue fall of 5-10% this year, along with lower operating profitability, after the United States enforced a steep 50% tariff from 27 August, according to a report by Crisil Ratings. Exports make up nearly three-quarters of the industry’s turnover, making the impact significant.As per news agency ANI, the report highlighted that three factors could help cushion the blow. These include frontloading of orders between April and August ahead of the tariff hike, limited export capacity in competing markets such as China, Pakistan and Turkey, and a gradual diversification by Indian manufacturers into other geographies. In addition, deleveraged balance sheets are expected to soften the strain on credit profiles.Manish Gupta, deputy chief rating officer at Crisil Ratings, was quoted by ANI as saying, “Home textiles are discretionary products and their exports to the US grew a modest 2-3 per cent in the first quarter of this fiscal as retailers remained cautious of demand amid inflationary concerns. But prior to the implementation of higher tariffs from August 27, exports had spiked because of some frontloading of orders.”He further noted that India should be able to retain its competitive position in the US market, given the limited cotton-based manufacturing capacity of rival countries. “That should limit the overall revenue decline for the industry to 5-10 per cent this fiscal,” Gupta added.The report pointed out that companies generating more than half of their revenue from the US will be the hardest hit. To reduce dependence, exporters are expected to expand into the European Union and the United Kingdom, which together contributed 13% of India’s home textile shipments last fiscal. The UK, in particular, offers scope following the recent free trade agreement.However, Gautam Shahi, director at Crisil Ratings, cautioned that tapping new markets will not deliver immediate relief. “Scaling up of revenue from the alternative export destinations will take time. Meanwhile, operating profitability on exports to the US over the remainder of this fiscal may decline sharply. This will be a result of the Indian exporters absorbing part of the higher tariffs and some expected reduction in demand from the US due to inflation,” he said. Shahi added that oversupply could also weigh on margins both overseas and in the domestic market, with industry-wide operating profitability likely to drop by 200-250 basis points this year compared to the last fiscal.
