Impact of US Tariffs on the Credit Outlook of India’s Textile and Gems & Jewellery Sectors

America is one of the nations that imports a lot of textile products from the rest of the globe for its domestic consumption. Considering this, many of India's large producers send their best products to the United States retail sector. Keeping the capacity and the quality demanded from them, Indian producers did give the maximum of their quality exports to the US consumers. Many of the products were sold through the wholesale markets, and later the profits came in from their retail stores, such as Macy’s, Walmart, and so on. With many of the products, such as bathing solutions, sportswear, and accessories, being efficiently produced in India stood to gain right before the tariffs kicked in.

With the tariffs, the majority of the sector's revenues had seen a significant decline. This will definitely have an impact in terms of their daily operations and, over a period of time, see a cut in their operational costs. This would mean a significant reduction in their workforce, and reorganizing and restructuring the organization would be the way forward for many of the major textile players in India.

Many rating agencies have stated that the industry is likely to experience a decline in revenue due to the imposition of higher tariffs of 50%. This would mean a decline in revenue of manufacturers in a range of 4-10% annually. Producers would look in terms of the diversification of their exports to other countries in terms of creating better pastures and favorable terms of trade, but it would take time to materialize. With the agreements with Europe and the United Kingdom having been finalized, India would likely focus on those markets.

Exports of India to the United States in Billions

In terms of credit for the sector (India's Textile and Gems & Jewellery), it is most likely going to be really slow. Considering the aspect of uncertainty in the trade, the flow of credit to many of the textile firms would be slower than expected. This is also because of the lack of clarity in terms of negotiations in terms of the talks with the American counterparts, as no concrete evidence is seen in terms of where we stand in terms of trade with the commodities.

Because the US is playing hard in terms of gaining maximum access to the domestic markets of other nations, it would be very difficult to deal with the sentiments of the domestic players in the market. It would give the US products an unfair advantage in terms of their sales, hurting the domestic producers and workforces as well. A compromise in the terms of trade would give both economies a fair chance in the global trade game.

Indian Gems and jewelry- US tariffs impact

The Gems and Jewellery sector is one of the labor-intensive sectors in India. Many craftsmen and semi-skilled individuals are employed in this sector. With the level of craftsmanship and precision in their artistry, the demand for products such as gems and jewellery is significant for the Indian economy.

The first quarter (Q1) of FY2025–26 unfolded amidst a complex global economic landscape, presenting both challenges and opportunities for India’s gem and jewellery sector. Despite a year-on-year decline of 5.31% in gross exports to US$6.50 billion, the sector demonstrated notable resilience, supported by strong performances in gold jewellery (plain and studded), platinum jewellery, and coloured gemstones. This data is as per the reports from the Gems and Jewellery Export Promotion Council of India (GJEPC).

The sector had seen a tough year of performance in the last 12 months due to various important factors. For starters, in terms of the gems sector, the global demand had slowed down significantly due to the world economic slowdown. This is also due to the decline in discretionary spending from many developed economies worldwide. Also, the growing geopolitical tensions across the global economy- the Russia-Ukraine war, US-China frictions, Middle East disturbances- all these factors contribute to the decrease in the demand for these precious items. Another important finding is the rise in the prices of precious metals such as gold, platinum, and silver. Over the period of last year, the prices of these precious metals did see an increase in the prices to the tune of  40%, 17% and 9% (gold, silver, platinum, respectively).

Gem and Jewellery gross exports have declined by (-)5.25% to US$6.50 billion in April -June 2025 as compared to US$6.86 billion during April- June 2024. While net exports have risen by around 1.66%  to US$5.50 billion during April -June 2025, as against US$5.41 billion in April -June 2024.

Credit for the sector will get to see some improvement as the government reduces duty rates to support the export sector. This will help to incentivize the process of production costs. This will, in turn, help in terms of the exports. With these benefits, reinvestments into the businesses and better cash flows in businesses will help the sector grow and expand.

Overall, both sectors would have their own challenges going through this year. Because the challenges of tariffs and geopolitics also remain as a constant niggle in the system, the path to navigate through this is to look forward to opportunities via policies and concessions that the government may give over a period of time. This would help people working in these sectors to take ample time and make decisions to stay valid in the continuous changes that the global economy throws at these sectors.

Tweaks in the policies and reduction of levies from the government would help sectors see significant improvement in terms of performance during the course of the year.