India’s apparel exports grew by a modest 1.5% year-on-year in USD terms during 10M FY2026, as tariffs imposed by the US continued to weigh on demand, ICRA said in its latest report released on Tuesday, March 31. A depreciating rupee, however, supported a relatively stronger 5.8% growth in INR terms.
Exports to the US declined by around 6% in USD terms during the period, reflecting the impact of tariff pressures on demand. This was partly offset by increased shipments to other geographies such as the UK and the UAE.
Globally, apparel trade is estimated at around $550 billion, with imports from the US and Europe accounting for nearly 50% of the total. Imports from these regions are estimated to have grown by 5-6% year-on-year in 11M CY2025, led by around 9% growth in the EU amid higher restocking by retailers. In contrast, US import volumes declined by 3-4% due to the adverse impact of tariffs.
India’s apparel exports, which stood at around $16 billion in FY2025, account for nearly 3% of global trade. The US and Europe (including the EU and the UK) remain key markets, contributing about 32-33% and 31-32% share, respectively.
ICRA has revised the outlook on the Indian apparel export sector to Stable from Negative in February 2026, supported by reduction in tariffs and expected opportunities from free trade agreements with the EU and the UK.
For FY2027, the agency expects revenues of apparel exporters to grow by 8-11% year-on-year, with operating margins likely to improve by around 200 basis points to about 9.5%.
However, ICRA maintained that geopolitical risks, particularly in West Asia, remain a key monitorable. Around 8% of India’s apparel exports are to the UAE with a higher exposure to the broader West Asian region. Any prolonged disruption in key shipping routes such as the Strait of Hormuz or the Red Sea could delay shipments, necessitate rerouting and elongate the cash conversion cycle.
The agency also noted that while capex spending is expected to remain lower in FY2026, a moderate increase is likely in FY2027 with the potential formalisation of FTAs with the UK and the EU, although the evolving tariff environment in the US may continue to deter large debt-funded expansions.
A recovery in credit metrics is also expected in FY2027, with interest coverage likely to improve to around 4.6 times from 3.3 times in FY2026 and total debt to OPBDITA expected to moderate to around 2.3 times from 3.3 times.
