Diwali sans sparkles for tariff-hit Indian exporters
People watch a light show on the banks of the Sarayu River on the eve of the Hindu festival of lights, Diwali, in Ayodhya, India, on October 19, 2025. (Photo: Sanjay Kanojia/NurPhoto via Getty Images)
Nurfoto | Nurfoto | Getty Images
This report is excerpted from CNBC’s ‘Inside India’ newsletter this week, which brings you up-to-date, informative news and market commentary on the emerging powerhouse. Subscriber Here.
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Indians celebrated Diwali this week by praying for prosperity and good luck.
These calls come at a crucial time as Indian exporters continue to grapple with punitive US tariffs of 50%.
The taxes are particularly worrisome for India’s labour-intensive textile, gem and jewelery sectors. The US remains the country’s top export destination, accounting for more than $45.8 billion, or more than 20% of total exports, between April and September, the start of India’s fiscal year.
For industries that source 30 percent or more of their exports from the United States, the tariff shock created a double whammy. It has not only jeopardized billions of dollars in revenue, but also the employment of millions of workers whose livelihoods depend on cross-border demand. While the textile sector directly employs 45 million people, the gem and jewelery sector provides employment for more than 5 million people.
Ajay Kapoor, owner of a Mumbai-based textile and garment supply company, said it takes manufacturers about six months to make garments according to customers’ instructions, such as those provided by US retailers such as Walmart and Macys.
With the higher tariffs coming into force in August, many Indian garment manufacturers from whom Kapoor sources textiles are now faced with unsold inventory and huge bills to pay for raw materials already consumed.
“Their condition is bad. No jobs, crores” [millions] “Rupees remain in unsold stocks and machines remain idle,” said Kapoor.
Textile exports fell nearly 10% year-on-year in September, compared to a 5% increase in July before the 50% tariff took effect.
India’s textile exports, including ready-made garments, natural and synthetic yarns and woven products, stood at $36.5 billion globally, while shipments to the US amounted to $10.9 billion in the fiscal year ending March 2025.
Surat-based fabric and clothing manufacturer Parnika India, which sells Indian ethnic clothing to 150 stores in the US, is among the companies that have seen their exports to the US decrease.
While the domestic market is a major source of revenue for the company, Parnika’s second-generation entrepreneur and managing director Vishal Pacheriwal said it plans to reduce production after the Diwali festive period.
“The drying up of orders from the US business and weak domestic demand this Diwali has left me stockpiled,” he said, adding that cutting production was a fiscally prudent move.
losing the shine
Another sector that faces the heaviest burden of tariffs is the gem and jewelery trade.
Rajesh Rokde, president of the All India Gem and Jewelry Domestic Council, which represents more than 600,000 gem and jewelery businesses across India, said the industry is expected to take a $9 billion hit due to US tariffs.
“Exporters have been badly hit. Generally speaking, an industry can handle a 10% hit but when more than 30% of its exports are affected, it is a big hit,” he said.
India exported gems and jewelery worth $29.8 billion, nearly a third of which went to the United States, according to the government’s trade data for fiscal year 2025. Rokde said that approximately 80% of exports to the USA consist of diamond jewelry and 15% consist of gold ornaments.
This mix gives exporters in this category a slight advantage compared to textile products. 14 out of 15 diamonds Those used in jewelery pass through India for processing.
September trade data shows that gemstone and jewelery exports rose 0.4% year-on-year. This points to the “stabilizing effect of shipments to other geographies,” Indian brokerage ICICI Securities said in an Oct. 18 report. However, this growth was much lower than the 28.9% increase in July, before the tariffs took effect.
Other industries are also hoping for a trade deal that would lower U.S. tariffs.
Take Jodhpur, a city in northwestern India that ships wooden crafts and furniture to the United States. “Our exports have fallen sharply,” said Raunak Singhvi, whose family exports furniture in the city.
Saying that Jodhpur produces furniture worth about 50 billion rupees ($570 million) annually and about 50% of it is exported to the USA, Singhvi added that these products are sold at better prices in the USA compared to the domestic market.
Singhvi said that due to the increase in demand during Covid-19, many companies, like his family’s business, have invested in capacity expansion. “Many of these factories have closed, people have lost their jobs, and U.S. importers are asking for discounts,” he said.
Previously, customs duty was between 2.5 percent and 5 percent on furniture, but now this rate is over 50 percent. “A 15 percent tariff is still manageable, but anything above 25 percent will be disastrous,” Singhvi said.
India’s business daily Mint reported on Wednesday that Washington and New Delhi may soon finalize a deal that would reduce tariffs to around 15-16%. This potential breakthrough could be the lifeline that exporters have been waiting for as orders decline and companies are forced to cut production.
Tariff reduction could revive order books, stabilize business and help India’s export engine regain momentum. The lack of a breakthrough could darken exporters’ prospects beyond this festive season.
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George Heber Joseph, CEO and CIO, ASK Investment Managers, said festive demand in India is driven by a combination of strong consumer confidence, falling inflation and rising disposable income.
Michael Wan, senior foreign exchange analyst at MUFG, said any recovery in the Indian rupee would be modest as tariff uncertainty and weak business sentiment continue to weigh on it.
Levi Strauss & Co. CEO Michelle Gass said the company plans to double down on markets like India and China.
you need to know
India nearing trade deal with US According to a report in Indian media. New Delhi and Washington are close to reaching a trade deal. The US could reduce tariffs on Indian exports to 15-16% from the current 50%, while India could agree to gradually reduce imports of Russian oil.
Walmart is pausing H-1B visas for job candidates. One of the largest U.S. employers of H1-B visa holders has halted hiring after President Donald Trump raised the visa fee to $100,000.
Urban Company shares could fall 26%. Newly listed Indian home services startup, whose shares gained more than 50% at launch see your posts According to Morgan Stanley and Goldman Sachs, there was a 26% decrease.
quote of the week
I will say it again, [Indian stocks] They’re not cheap, they’re not something that excites value investors like us. But India is now such a large component of global emerging markets that it’s hard to ignore these stocks.
— Kamil Dimmich, partner and portfolio manager at North of South Capital
In the markets
Stylish 50 and BSE Sensex was up over 0.8% at 11:00 am local time (1:30 am ET). The indices have gained over 10% and almost 9% respectively so far this year.
The benchmark 10-year Indian government bond yield rose 2 basis points to 6.527%.
approaching
24 October: HSBC manufacturing and services announced October PMI
October 28: September industrial production
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