2 days ago
Textile industry seeks short term cash flow support to ease US tariff pain
The labour intensive-textile industry has asked the government for immediate cash support and moratorium on repayment of loans to endure the shock of steep 50 per cent US tariffs that could lead to job losses in industry. The industry during a key meeting at the Ministry of Textiles on Tuesday also sought a fast-tracking of free trade agreement (FTA) negotiations with the EU that could act as a cushion for losses in the US market.
'The industry is seeking support from the government to at least absorb 20-25 per cent tariffs hit from the US so that they can retain the market share as US buyers have stopped placing fresh orders and are asking the Indian exporters to absorb the tariffs,' a source told The Indian Express
The apparel manufacturers have asked for faster implementation of the UK deal and fast tracking of EU trade deal that could ease the pain of US tariffs in the medium term, the source said. 'The manufacturers have pitched for re-introduction of Interest Equalization scheme and a focused textile market scheme,' the person quoted above said.
The meeting, chaired by Union Textiles Minister Giriraj Singh, was called to discuss the challenges being faced by exporters in their order flows, especially amid the widening tariff differentials with other competing Asian countries after the recent imposition of secondary tariffs by the US on India.
The Ministry of Textiles said in a statement that it has announced the constitution of four committees, comprising industry representatives, to submit time-bound recommendations on fiscal and ease-of-doing-business measures, structural reforms in the textile value chain, enhancing cost competitiveness and innovation, and achieving a target of $100 billion in exports by 2030.
With the US being India's largest export market for the labour-intensive textile and apparel industry, textile exporters are under stress after the hike in import tariff to 25 per cent from August 7 by the Trump administration, which is set to rise further to 50 per cent on August 27.
Textile and apparel exporters have been asking for support from the government as their orders have been hit with buyers either asking them to share the tariff hike burden or pausing the orders till further clarity emerges about the trade deal negotiations between India and the US.
One of the major concerns raised by textile and apparel exporters in their representations to the government has been about a disruption in their cash flow with a reduction in orders by buyers from the US, officials said. 'Exporters are asking for sops. They are asking for soft loans or interest subvention schemes or focused market schemes. Their concern is that they should get cash in hand,' an official told The Indian Express.
Exporters are hoping that the tariff hike is temporary and they are able to retain the orders as buyers are already shifting to other countries with lower tariffs such as Vietnam and Bangladesh, with India's 25 per cent reciprocal tariff exceeding those applicable to other competing Asian countries, except China. If the higher levies continue, there's also a worry in policy circles that the distress in the textiles and apparels sector could result in job losses.
The government is engaging continuously with exporters to understand the evolving situation. 'Exporters have been communicating their issues. The government is taking their feedback and will provide the necessary support to them,' another official said.
The Ministry of Finance has estimated that more than half of the country's merchandise exports to the US will be subject to the higher reciprocal tariff. The US is a key market for Indian Ready-Made Garments (RMG) exports; its share in India's total garment exports in 2024 stood at 33 per cent, as per the Apparel Export Promotion Council (AEPC).
Home textiles and carpets are also significant export-oriented sectors, with exports accounting for 70-75 per cent and 65-70 per cent of total sales, respectively, for these sectors. Of this, the US accounts for 60 per cent of exports for home textiles and 50 per cent of exports for carpets.
US President Donald Trump had announced a 25 per cent tariff on Indian goods in a post on social media platform Truth Social on July 30, with an additional but unspecified 'penalty' for importing energy and defence items from Russia. On August 6, the penalty was clarified to be an additional 25 per cent tariff that will be effective from August 27.
