RBI MPC member urges export diversification as US tariffs threaten Indian apparel shipments

RBI MPC member Nagesh Kumar said India must reduce reliance on the US, which takes about a third of its labour-intensive exports. Trade agreements with the UK, EFTA and EU could widen market access for textiles and garments as US tariff risks build.

— Source published Thu, 20 Aug, 2026, 15:39 IST · First seen Thu, 20 Aug, 2026, 15:42 IST · Source BL · Consumer & Economy

What happened

Reserve Bank of India · RBI MPC member Nagesh Kumar urged urgent export diversification as US tariffs threaten Indian labour-intensive exports, including

Key facts

  • US accounts for one-fifth of India's exports
  • US accounts for around one-third of India's labour-intensive exports
  • 10% tariff above MFN tariffs on Indian exports
  • 100% tariff on generic drug imports from 2028
  • 200% tariff on generic drug imports from 2029
  • EU agreement signed January 27, 2026

Why this matters

Trade-access tailwinds in Europe could make UK, EFTA and EU distribution partnerships, local sales capabilities and strategic acquisitions more valuable for Indian apparel suppliers.

What to watch

  • Formal US tariff announcements, tariff rates, product-level apparel coverage, exemption rules and implementation dates.
  • US retailer sourcing-calendar changes, order postponements, cancellation rates and requests for vendor price reductions.
  • India-US trade negotiations and any reciprocal-tariff or sectoral settlement that alters apparel exposure.
  • EU-India FTA progress on textiles tariffs, rules of origin, sustainability provisions and implementation timing.
  • UK and EFTA agreement utilization data, including preference uptake by Indian textile and garment exporters.
  • Monthly Indian apparel export data split between the US, UK, EU and EFTA markets.
  • Cotton, freight, rupee-dollar and rupee-euro movements, which determine whether exporters can absorb tariff-related buyer demands.
  • Capacity utilization, overtime, labor hiring and working-capital stress at major Indian apparel suppliers.
  • Prioritize European and UK accounts in categories where India has established strengths, including cotton basics, home textiles, embellished fashion and smaller-batch production.
  • Invest in EU-facing compliance capabilities: product traceability, chemical compliance, carbon reporting, labor audits and digital product passport readiness.
  • Reduce US customer concentration by setting account-level revenue caps and building direct relationships with European retailers, agents and marketplaces.
  • Negotiate tariff-sharing, currency-adjustment and volume-protection clauses with US buyers before finalizing seasonal commitments.
  • Shift capacity planning toward flexible production lines that can serve both US and European size, labeling and packaging requirements.
  • Monitor whether UK, EFTA and EU trade arrangements translate into usable tariff preferences and simplified rules of origin for apparel inputs.

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