CNBC's Inside India newsletter: Diwali sans sparkles for tariff-hit Indian exporters

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The large story

Indians celebrated Diwali this week — offering prayers for prosperity and bully fortune.

Those invocations travel astatine a important time, arsenic Indian exporters proceed to grapple with punishing U.S. tariffs of 50%.

The levies person been peculiarly worrisome for India's labor-intensive textiles, and gems and jewelry sectors. The U.S. remains the country's azygous largest export destination, accounting for much than $45.8 billion, oregon implicit 20%, of its full exports betwixt April — commencement of India's fiscal twelvemonth — and September.

For industries that deduce 30% oregon much of their export concern from the U.S., the tariff daze has been a treble whammy. Not lone has it jeopardized billions of dollars successful revenue, but besides the employment of millions of workers whose livelihoods hinge connected cross-border demand. The textile manufacture employs 45 cardinal radical straight portion gems and jewelry gives jobs to much than 5 cardinal people.

It takes manufacturers astir six months to hole garments based connected customers' guidelines, specified arsenic those provided by U.S. retailers including Walmart and Macys, said Ajay Kapoor, proprietor of a Mumbai-based textile and apparel sourcing company.

With steep tariffs coming into effect successful August, respective Indian garment manufacturers for whom Kapoor sources textiles are present sitting connected unsold inventory and abdominous bills to wage for the earthy materials already consumed.

"Their concern is bad. There is nary business, crores [millions] of rupees are stuck successful unsold inventory and the machines are lying idle," Kapoor said.

Textile exports were down astir 10% twelvemonth connected twelvemonth successful September compared to a 5% maturation successful July, earlier the 50% tariffs came into effect.

India's exports of textiles, including ready-made garments, earthy and synthetic yarns and handloom products, stood astatine $36.5 cardinal globally, with shipments to the U.S. making up $10.9 cardinal successful fiscal twelvemonth ended March 2025.

Surat-based cloth and covering shaper Parnika India, which has been selling Indian taste deterioration to 150 stores successful the U.S., is among companies seeing their exports to the U.S. adust up.

While the home marketplace is simply a large root of gross for the company, Vishal Pacheriwal, a second-generation entrepreneur and managing manager astatine Parnika, said helium plans to chopped down accumulation aft the Diwali festive period.

"The drying up of orders successful U.S. concern coupled with anemic home request this Diwali has near maine with inventory," helium said, adding that it is financially prudent to chopped production.

Another assemblage facing the brunt of tariffs is the gems and jewelry business.

Rajesh Rokde, president of All India Gem and Jewelry Domestic Council that represents much than 600,000 gems and jewelry businesses crossed India, said that the manufacture is expected to instrumentality a deed of $9 cardinal owed to U.S. tariffs.

"Exporters person been deed badly. Generally, a assemblage tin sorb a 10% hit, but erstwhile implicit 30% of its exports are impacted, it is simply a large blow," helium said.

According to authorities commercialized information for fiscal twelvemonth 2025, India exported gems and jewelry worthy $29.8 billion, with astir a 3rd of that going to the U.S. Rokde said that astir 80% of exports to the U.S. were of diamond jewelry portion 15% were golden ornaments.

That premix gives a flimsy borderline to exporters successful this class compared to textiles, arsenic 14 retired of 15 diamonds utilized successful jewelry spell done India for processing.

September commercialized information shows that gems and jewelry exports grew astatine 0.4%, twelvemonth connected twelvemonth basis. This indicates "offsetting effect of shipments to different geographies," said Indian brokerage ICICI Securities successful a study dated Oct. 18. But that maturation was overmuch little compared to 28.9% emergence successful July earlier tariffs came into effect.

Other industries are besides hoping for a commercialized woody that brings down U.S. tariffs.

Take the lawsuit of Jodhpur, a metropolis successful northwestern India, that ships woody handicraft and furnishings to the U.S. "Our exports person fallen sharply," said Raunak Singhvi, whose household owns a furnishings export concern successful the city.

Jodhpur manufactures astir 50 cardinal rupees ($570 million) worthy of furnishings annually of which astir 50% is exported to the U.S., Singhvi said, adding that these products fetch a amended terms successful the U.S. compared to the home market.

As the request roseate during Covid-19, Singhvi said galore companies similar his family's concern invested successful expanding capacity. "Many of those factories person unopen down, radical person mislaid their jobs and U.S. importers are asking for discount," helium said.

Earlier, furnishings faced a tariff of 2.5% to 5% but present it is implicit 50%. "A tariff of 15% is inactive manageable, but thing supra 25% volition beryllium a catastrophe," said Singhvi.

Indian concern regular Mint connected Wednesday reported that Washington and New Delhi could soon finalize a woody that could spot tariffs slashed to astir 15%-16%. That imaginable breakthrough could beryllium the lifeline exporters person been waiting for arsenic orders adust up and companies are forced to chopped production.

A tariff chopped could revive bid books, stabilize jobs, and assistance India's export motor regain momentum. Lack of a breakthrough could darken exporters' prospects beyond this festive season.

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In the markets

The Nifty 50 and the BSE Sensex were up implicit 0.8% arsenic of 11 a.m. section clip (1:30 a.m. ET). The indexes person gained implicit 10% and astir 9%, respectively, truthful acold this year.

The benchmark 10-year Indian authorities enslaved output was up 2 ground constituent astatine 6.527%.

Coming up

Oct. 24: HSBC manufacturing and services flash PMI for October

Oct. 28: Industrial output for September

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