For tariff-hit Indian exporters, Diwali is brighter than ever
People watch a light show on the banks of the Sarayu River on the eve of the Hindu festival of Diwali, on October 19, 2025, in Ayodhya, India. (Sanjay Kanojia/NoorPhoto via Getty Images)
Noor Photo | Noor Photo | Getty Images
This report is from this week’s CNBC’s “Inside India” newsletter that brings you timely, insightful news and market commentary on emerging powerhouses. Subscribe here
big deal
Indians celebrated Diwali this week – prayers for prosperity and good luck.
The calls come at a crucial time as Indian exporters continue to grapple with punishing US tariffs of 50%.
Tariffs are particularly worrisome for India’s labour-intensive textile and gems and jewelery sectors. The US remains the country’s single largest export destination, exporting $45.8 billion, or more than 20%, between April – the start of India’s fiscal year – and September.
For industries that derive 30% or more of their export business from the US, the tariff shock has been a double whammy. This not only jeopardizes billions of dollars in revenue, but also threatens the employment of millions of workers whose livelihoods depend on cross-border demand. The textile industry provides direct employment to 45 million people while gems and jewelery employs more than 5 million people.
It takes about six months for manufacturers to produce garments based on consumer guidelines provided by US retailers including Walmart and Macy’s, said Ajay Kapoor, owner of a Mumbai-based textile and apparel sourcing company.
With the implementation of tougher tariffs in August, many Indian garment manufacturers for whom Kapoor sources cloth are now sitting on unsold inventory and fat bills to compensate for raw materials already used.
“Their situation is bad. There is no business, crores (millions) of rupees are stuck in unsold inventory and machines are lying around,” Kapoor said.
Before the 50% tariff was imposed, textile exports were down about 10% year-on-year in September, compared to a 5% increase in July.
India’s textile exports, including ready-made garments, natural and synthetic yarns and handloom products, were $36.5 billion globally, with shipments to the US at $10.9 billion in the fiscal year ending March 2025.
Surat-based fabric and clothing manufacturer Parnika India, which sells Indian ethnic wear in 150 stores in the US, is among the companies whose exports to the US are declining.
While the domestic market is a major source of revenue for the company, Vishal Pacheriwal, second-generation entrepreneur and managing director at Parnika, said they plan to reduce production after the Diwali festive period.
“I have inventory left due to reduced orders from the US business and weak domestic demand this Diwali,” he said, adding that cutting production is economically prudent.
loss of luster
Another sector facing price hikes is the gems and jewelery business.
Rajesh Rokde, president of the All India Gem and Jewelery Domestic Council, which represents more than 600,000 gems and jewelery businesses across India, said the US tariffs are expected to hit the industry by $9 billion.
“Exporters have been hit hard. Normally, a sector can absorb a 10% hit, but when more than 30% of exports are affected, it is a big blow,” he said.
According to government trade data for fiscal year 2025, India exported gems and jewelery worth $29.8 billion, about a third of which went to the US, Rokde said, adding that nearly 80% of exports to the US were diamond jewelery while 15% was gold jewellery.
That mix gives a slight edge to exporters in this category compared to textiles, viz 14 out of 15 diamonds Gems used in jewelery go through India for processing.
Trade data for September showed that exports of diamonds and jewelery rose 0.4% on a year-on-year basis. Indian brokerage ICICI Securities said in a report on October 18 that this indicates “offsetting the impact of shipments to other geographies”. But the increase was much lower than the 28.9% increase in July before the tariffs were implemented.
Other industries are also hoping for a trade deal that lowers US tariffs.
Take the northwestern Indian city of Jodhpur, which exports wooden handicrafts and furniture to the US, for example.
Jodhpur makes about 50 billion rupees ($570 million) worth of furniture annually of which about 50% is exported to the US, Singhvi said, adding that these products fetch better prices in the US than in the domestic market.
Singhvi said many companies, like his family’s business, have invested in increasing capacity as demand has increased during Covid-19. “Many of those factories have closed, people have lost their jobs, and U.S. importers are asking for concessions,” he said.
Earlier, furniture faced a rate of 2.5% to 5% but now it is more than 50%. “A rate of 15% is still manageable, but anything above 25% would be a disaster,” Singhvi said.
Indian business daily Mint reported on Wednesday that Washington and New Delhi could soon finalize a deal that would cut rates to 15%-16%. This could be the potential breakthrough exporters have been waiting for as orders dry up and companies are forced to cut production.
Tariff cuts could revive order books, stabilize jobs and help rev up India’s export engine. A lack of progress could darken exporters’ prospects beyond this festive season.
Top TV picks on CNBC
ASK Investment Managers CEO and CIO George Haber Joseph said festive demand in India is driven by a confluence of strong consumer confidence, easing inflation and rising disposable income.
Michael Wan, senior currency analyst at MUFG, said any recovery in the Indian rupee would be modest as rate uncertainty weighed on weak trade sentiment.
Levi Strauss & Company CEO Michel Gass said the company plans to double its growth in markets like India and China.
Must know
India is close to a trade deal with the US According to an Indian media report. New Delhi and Washington are close to reach A trade agreement. The US may reduce tariffs on Indian exports from the current 50% to 15%-16%, while India may agree to gradually reduce Russian oil imports.
Walmart has suspended H-1B visas for job candidates. One of the largest US employers of H1-B visa holders Recruitment has been suspended After President Donald Trump raised the visa fee to $100,000.
Shares of Urban Company may fall by 26%. The newly listed Indian home services startup, whose shares surged more than 50% on debut, Check out his shares fell by 26%, according to Morgan Stanley and Goldman Sachs.
Quote of the week
I will say again, (Indian shares) are not cheap, they are not something that makes investors like us very happy. But India is now such a large component of global emerging markets that it is very difficult to ignore this stock.
— Kamil Dimich, Partner and Portfolio Manager at South Capital North
in the market
The Nifty 50 And the BSE Sensex was up more than 0.8% at 11 a.m. local time (1:30 a.m. ET). So far this year, the indices have gained 10% and nearly 9%, respectively.
The benchmark 10-year Indian government bond yield rose 2 basis points to 6.527%.
coming up
October 24: HSBC manufacturing and services PMI flash for October
October 28: Industrial production for September
Every weekday, CNBC’s “Inside India” news show brings you news and market commentary about the emerging powerhouse business and the people behind its rise. Stream the show live on YouTube and watch highlights here.
Showtimes:
US: Sunday-Thursday, 23:00-0000 ET
Asia: Monday-Friday, 11:00-12:00 SIN/HK, 08:30-09:30 India
Europe: Monday-Friday, 0500-06:00 CET
Share this content:
Post Comment