Domestic Market For Readymade Garment To See Steady Revenue Growth Of 8-10 Pc In FY26

(MENAFN- IANS) New Delhi, Aug 26 (IANS) The domestic market for readymade garment (RMG), accounting for three-fourths of the sector's revenue, will continue to see steady revenue growth of 8-10 per cent this fiscal, a report said on Tuesday.

This will be fuelled by economic growth, interest rate cuts, and tax reductions, according to a Crisil Ratings report.

"This, in turn, will cushion the tariff blow and spur overall growth at the sector level, but at a slower pace than last fiscal," Gautam Shahi, Director, Crisil Ratings.

Meanwhile, revenue growth of India's RMG industry is set to nearly halve on-year this fiscal as the imposition of 50 per cent tariffs by the US on its imports from India becomes effective from August 27.

Credit metrics for industry participants will be impacted by that, as well as a drop in profitability. Each company will be affected differently; some receive over 40 per cent of their revenue from the US.

RMG exports totalled $16 billion last fiscal and accounted for 27 per cent of the RMG sector's revenue, of which a third of the exports was to the US.

The 50 per cent tariff puts India at a distinct disadvantage compared with competing nations like China, Bangladesh and Vietnam, the report stated.

“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 per cent on-year to $4 billion, with exports to the US recording a 14 per cent growth during the same period. The trend is expected to sustain through 26th August till the enhanced tariffs kick in," said Manish Gupta, Deputy Chief Rating Officer, Crisil Ratings.

Post 50 per cent 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, Gupta added.

Overall, "we expect the share of the US in India's RMG exports to fall from 33 per cent last fiscal to 20-25 per cent this fiscal", Gupta said further.

According to the report, this would mean 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 per cent 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 year, providing some relief to the industry.

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