India’s home textile industry is bracing for one of its most challenging years, after the United States imposed steep tariffs of 50% on a broad set of Indian exports with effect from August 27, 2025, according to a report by Crisil Ratings. The measures, linked by Washington to New Delhi’s increased trade in discounted Russian crude oil and to longstanding concerns about market access, are expected to weigh heavily on revenue and profitability for the sector.

Home textiles are among the most exposed categories, with exports contributing nearly three quarters of the industry’s revenue. According to Crisil Ratings, the financial year ending March 2026 could see a 5–10% fall in revenue, alongside pressure on margins.

US move and its backdrop

The tariff hike follows over two years of American disquiet about India’s energy trade with Moscow. Since the invasion of Ukraine in 2022, Indian refiners have sharply raised imports of Russian oil, often paying in non-dollar currencies. For Washington, this has helped funnel critical funds to Russia despite Western sanctions. New Delhi has consistently defended the purchases, framing them as vital for its energy security, but the disagreement has spilled into trade.

By targeting Indian goods such as textiles, steel and engineering products, the US has underlined that strategic divergence will carry commercial costs. For India’s home textile exporters, highly dependent on the American market, the timing could hardly be worse.

Crisil assessment

Crisil Ratings, which studied about 40 companies accounting for nearly half of industry revenue, pointed out that the business environment was already subdued. The agency noted that home textiles are essentially discretionary items, and shipments to the US rose only 2–3% in the first quarter of FY2026, as American retailers stayed cautious amid inflation concerns. There was a brief spike in orders prior to the tariff deadline in late August, as buyers sought to frontload shipments.

At the same time, India retains advantages in cotton-based home textiles. With competing producers such as China, Pakistan and Turkey having limited capacity, India is likely to preserve its competitive edge in the near term. Crisil therefore expects revenue decline to remain contained at 5–10% for the year, though individual firms with more than half their sales tied to the US will feel a sharper impact.

To partly cushion the blow, exporters are expected to benefit from three factors: advance shipments made between April and August ahead of the tariff hike, the constrained supply base in rival markets, and relatively deleveraged balance sheets across leading players.

Yet profitability is projected to be hit harder than revenue. According to Gautam Shahi, director at Crisil Ratings, scaling up sales in alternative destinations will not be immediate. Exporters are likely to absorb part of the additional duties themselves, while US demand could soften further because of inflation. This combination, he warned, would lead to a sharper fall in margins. Shahi also highlighted that oversupply could spill into other markets, weighing on realisations both overseas and at home. As a result, operating profitability at the industry level may drop by 200–250 basis points this year compared with last year.

Financial stress and credit outlook

The weaker performance is set to strain financial metrics. Cash accruals will be lower than in the previous year, and Crisil estimates that the interest coverage ratio could decline to around 4 times from 5.4 times, while the debt-to-earnings before interest, taxes, depreciation and amortisation ratio may worsen to 2.4–2.6 times from 1.9 times. This deterioration could increase stress across companies that rely heavily on US orders.

Diversification efforts

Faced with this disruption, Indian exporters are accelerating efforts to diversify. The European Union and the United Kingdom, which together represented about 13% of India’s home textile exports in the last fiscal, are receiving greater attention. The recently signed India-UK free trade agreement is expected to support market access, though analysts caution that scaling up will take time.

For now, the outlook hinges on several variables: how long Washington keeps the higher tariffs in place, whether the Indian government extends support to soften the blow, the direction of US consumer demand under inflationary pressure, and the movement of global cotton prices. Until clarity emerges, the industry faces a prolonged period of uncertainty.