Apparel Exporters Face Uncertainty as US Orders Decline

India’s apparel export industry, a major contributor to the country’s foreign trade and employment, is facing a fresh wave of uncertainty as demand from the United States—its largest export market—shows signs of weakening. The slowdown, attributed to inflationary pressures, cautious consumer spending, and excess inventory in US retail, is threatening the stability of thousands of exporters, many of whom are already grappling with high production costs, global competition, and shifting fashion trends.

With the US accounting for more than 25% of India’s total garment exports, any fluctuation in American demand significantly impacts the industry's revenue and workforce. As exports dip and future orders remain uncertain, Indian apparel exporters are now turning to the central government, seeking intervention, policy support, and relief measures to survive what they fear could become a prolonged crisis.

A Sector Under Pressure

The Indian textile and garment industry supports over 45 million people directly and contributes around 2% to the country’s GDP. Within this sector, the readymade garments (RMG) segment is the largest earner of foreign exchange. The US has traditionally been a strong and steady customer for Indian garments, especially in cotton and blended apparel. However, a perfect storm of macroeconomic factors in the US—including rising interest rates, inflation, and reduced discretionary spending—has led to a cutback in retail purchases.

Exporters report that orders from major US retailers and brands have either slowed down or been deferred. Inventory levels remain high in many American stores due to pandemic-era stockpiling and cautious consumer behavior. This oversupply is resulting in delayed restocking cycles and reduced purchasing from overseas suppliers like India.

"Earlier, buyers used to place orders three to six months in advance, but now they are either shortening the cycle or postponing orders altogether," says Rajesh S., a garment exporter based in Tiruppur. “This unpredictability is hurting our production planning and cash flows.”

Stiff Competition from Low-Cost Rivals

Adding to the challenges is increased competition from countries like Bangladesh and Vietnam. These nations have struck favorable trade agreements with key Western markets and have significantly lower labor costs. For example, Bangladesh enjoys duty-free access to the European Union and preferential treatment from the US, giving it a pricing advantage over Indian exporters, who continue to face higher tariffs.

India’s relative cost disadvantage—due to higher wages, energy prices, and logistical constraints—has made it harder for its exporters to compete. In many cases, international buyers are shifting to suppliers who can deliver faster and at cheaper rates, putting Indian exporters in a vulnerable position.

"Vietnam and Bangladesh are eating into our share in the US market," says Anjali Menon, owner of a mid-sized garment factory in Noida. "They have government support, better infrastructure, and more favorable trade terms. We are not asking for favors, but a level playing field."

Appeal for Government Intervention

The Apparel Export Promotion Council (AEPC) and various textile industry bodies have made several representations to the government, requesting a mix of short-term relief and long-term structural support.

Some of their key demands include:

• Extension of Rebate of State and Central Taxes and Levies (RoSCTL): Exporters are seeking continuation and enhancement of the RoSCTL scheme to offset local taxes and remain price competitive.

• Interest Subsidy Schemes: With working capital under strain due to uncertain order volumes, exporters are asking for enhanced interest subvention to reduce borrowing costs.

• Inclusion in FTAs: Fast-tracking Free Trade Agreements (FTAs) with countries like the US and UK could significantly reduce tariff burdens and improve India’s attractiveness as a sourcing destination.

• Export Credit and Insurance: Increased support from the Export Credit Guarantee Corporation (ECGC) to secure payments from overseas buyers and improve risk appetite.

• Simplified Compliance: A call has been made to ease compliance burdens, especially for small and medium enterprises, which find the current regulatory requirements complex and costly.

Regional Impact: Tiruppur, Ludhiana, Noida Bear the Brunt

The ripple effects are being felt across India’s major garment-producing hubs. In Tiruppur (Tamil Nadu), known as the knitwear capital of India, many units are operating at reduced capacity. Ludhiana’s woollen garment industry is facing a double whammy of reduced exports and lower domestic demand, while exporters in Noida and Gurugram are worried about layoffs if the situation persists.

"Nearly 25% of our labor force is sitting idle," says a factory owner from Gurugram. "We don’t want to cut jobs, but how can we pay salaries when orders are shrinking?"

This downturn also affects backward linkages—dyeing units, packaging suppliers, transport operators, and cotton growers—whose livelihoods depend on the health of the export sector.

A Need for Diversification

Some industry experts argue that India’s over-reliance on the US market is itself a vulnerability. While the US is undeniably a major buyer, the absence of a balanced market strategy has left Indian exporters exposed to regional economic shocks.

“It’s time we seriously look at diversifying to other regions—like Latin America, the Middle East, and Africa—while also expanding our share in Europe,” says Prof. Anita Raghavan, a textile economist. “We also need to aggressively promote ‘Brand India’ to reposition ourselves as a premium and sustainable sourcing destination.”

Embracing Sustainability and Tech

As global buyers increasingly demand environmentally sustainable products, Indian exporters are being urged to invest in green manufacturing and digital supply chains. While many larger firms are pivoting in this direction, small and mid-sized exporters say they lack the financial resources and expertise to do so.

"Without government subsidies or tech support, sustainability becomes a buzzword we cannot afford," says a small-scale exporter from Bengaluru.

The Road Ahead

The coming quarters will be critical. With the US holiday season approaching, exporters are hoping for a rebound in order bookings. However, if economic conditions in the US do not improve, the slump could continue well into next year.

For now, exporters are pinning their hopes on proactive government action. Timely intervention could not only cushion the current blow but also lay the foundation for long-term competitiveness in the global apparel trade.

Without this, India risks losing a significant portion of its garment export market share—one that it has taken decades to build.