Diwali sans sparkles for tariff-hit Indian exporters

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The big story

Indians celebrated Diwali this week and offered prayers for prosperity and good luck.

These calls come at a critical time, as Indian exporters continue to struggle with punitive 50% US tariffs.

The tariffs were particularly worrying for India’s labour-intensive textiles and gems and jewelery sectors. The United States remains the largest destination for the country’s exports, accounting for more than $45.8 billion, or more than 20%, of its total exports between April – the beginning of India’s fiscal year – and September.

For industries that derive 30% or more of their export business from the United States, the tariff shock was a double whammy. Not only has it put billions of dollars in revenue at risk, but also the employment of millions of workers whose livelihoods depend on cross-border demand. The textile industry directly employs 45 million people while gems and jewelery provide employment to over 5 million people.

Ajay Kapoor, owner of a Mumbai-based textile and apparel supply company, said it takes manufacturers about six months to prepare clothes based on customer guidelines, such as those provided by US retailers including Walmart and Macy’s.

With higher tariffs coming into effect in August, many Indian garment makers to whom Kapoor supplies textiles are now sitting on unsold inventory and large bills to pay for raw materials already consumed.

“Their situation is bad. There is no work, Crore [millions] “Of rupees are stuck in unsold inventory and machines are idle,” Kapoor said.

Textile exports fell by almost 10% year-on-year in September compared to 5% growth in July, before the 50% tariffs took effect.

India’s textile exports, including ready-made garments, natural and synthetic threads and handloom products, stood at $36.5 billion globally, and shipments to the US stood at $10.9 billion in the fiscal year ending March 2025.

Surat-based textile and apparel maker Parnika India, which sells Indian ethnic wear to 150 stores in the United States, is among the companies seeing its exports to the United States dry up.

While the domestic market is a major source of revenue for the company, Vishal Bhasherwal, second generation businessman and managing director of Parnika, said he plans to reduce production after the Diwali festive period.

“The drying up of orders at US companies coupled with weak domestic demand on Diwali has left me stocked,” he said, adding that it was financially prudent to cut production.

This combination gives a slight advantage to exporters in this category compared to textiles 14 out of 15 diamonds Used in jewelry passes through India for processing.

Trade data for September shows that gem and jewelry exports grew 0.4% year-on-year. This indicates an “equivalent effect of shipments to other geographies,” Indian brokerage ICICI Securities said in a report dated October 18. But this growth was much lower compared to a 28.9% rise in July before the tariffs took effect.

Other industries are also hoping for a trade deal that reduces US tariffs.

Take the case of Jodhpur, a city in northwestern India, which ships wooden handicrafts and furniture to the United States. “Our exports have declined sharply,” said Ronak Singhvi, whose family owns a furniture export business in the city.

Jodhpur manufactures furniture worth about 50 billion rupees ($570 million) annually, of which about 50% is exported to the United States, Singhvi said, adding that these products fetch a better price in the United States than in the domestic market.

With demand surging during Covid-19, Singhvi said many companies like his family’s have invested in expanding their capacity. “Many of these factories have closed, people have lost their jobs, and American importers are demanding a discount,” he added.

Earlier, furniture faced a tariff of 2.5% to 5%, but now it is more than 50%. “The 15% tariff is still manageable, but anything above 25% will be a disaster,” Singhvi said.

Indian business daily Mint reported on Wednesday that Washington and New Delhi may be finalizing an agreement that could see tariffs reduced to about 15% to 16%. This potential breakthrough could be the lifeline exporters have been waiting for as orders dry up and companies are forced to cut production.

Reducing tariffs could revive demand books, stabilize jobs and help India’s export engine regain momentum. Failure to achieve a breakthrough could darken the outlook for exporters after this holiday season.

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Festive demand in India is driven by the confluence of strong consumer confidence, easing inflation and rising disposable income, said George Heber Joseph, CEO and CIO, ASK Investment Managers.

Any recovery in the Indian rupee will be modest, as uncertainty over tariffs and weak business sentiment continue to weigh on it, said Michael Wan, senior currency strategist at MUFG.

Michele Gass, CEO of Levi Strauss & Co., said the company plans to double its efforts in markets such as India and China.

Need to know

India is close to reaching a trade agreement with the United States According to an Indian media report. New Delhi and Washington Close to reach Business deal. While the United States may reduce tariffs on Indian exports to 15% to 16% from the current 50%, it is possible that India will agree to gradually reduce its imports of Russian oil.

Walmart is temporarily pausing the H-1B visa for job candidates. One of the largest US employers of H1-B visa holders Recruitment has been temporarily suspended After President Donald Trump raised the visa fee to $100,000.

Urban Company shares could fall 26%. The newly listed Indian home services company, whose shares rose more than 50% in its debut, can do just that See its shares It’s down 26%, according to Morgan Stanley and Goldman Sachs.

In the markets

the Stylish 50’s The BSE Sensex was up more than 0.8% as of 11 a.m. local time (1:30 a.m. ET). The indexes have risen more than 10% and about 9% respectively so far this year.

The yield on 10-year Indian government bonds rose by 2 basis points to 6.527%.

Coming

October 24: HSBC Manufacturing and Services PMI for October

October 28: Industrial production for September

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