People watch a light show on the banks of the Sarayu River on the eve of Diwali, the Hindu festival of lights, in Ayodhya, India, on October 19, 2025. (Photo by Sanjay Kanojia/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.
The big story
Indians this week celebrated Diwali — a festival of lights — offering prayers for prosperity and good fortune.
Those invocations come at a crucial time, as Indian exporters continue to grapple with punishing U.S. tariffs of 50%.
The levies have been particularly worrisome for India’s labor-intensive textiles, and gems and jewelry sectors. The U.S. remains the country’s single largest export destination, accounting for more than $45.8 billion, or over 20%, of its total exports between April — start of India’s financial year — and September.
For industries that derive 30% or more of their export business from the U.S., the tariff shock has been a double whammy. Not only has it jeopardized billions of dollars in revenue, but also the employment of millions of workers whose livelihoods hinge on cross-border demand. The textile industry employs 45 million people directly while gems and jewelry gives jobs to more than 5 million people.
It takes manufacturers about six months to prepare garments based on customers’ guidelines, such as those provided by U.S. retailers including Walmart and Macys, said Ajay Kapoor, owner of a Mumbai-based textile and apparel sourcing company.
With steep tariffs coming into effect in August, several Indian garment manufacturers for whom Kapoor sources textiles are now sitting on unsold inventory and fat bills to pay for the raw materials already consumed.
“Their situation is bad. There is no business, crores [millions] of rupees are stuck in unsold inventory and the machines are lying idle,” Kapoor said.
Textile exports were down nearly 10% year on year in September compared to a 5% growth in July, before the 50% tariffs came into effect.
India’s exports of textiles, including ready-made garments, natural and synthetic yarns and handloom products, stood at $36.5 billion globally, with shipments to the U.S. making up $10.9 billion in fiscal year ended March 2025.
Surat-based fabric and clothing manufacturer Parnika India, which has been selling Indian ethnic wear to 150 stores in the U.S., is among companies seeing their exports to the U.S. dry up.
While the domestic market is a major source of revenue for the company, Vishal Pacheriwal, a second-generation entrepreneur and managing director at Parnika, said he plans to cut down production after the Diwali festive period.
“The drying up of orders in U.S. business coupled with weak domestic demand this Diwali has left me with inventory,” he said, adding that it is financially prudent to cut production.
Losing glitter
Another sector facing the brunt of tariffs is the gems and jewelry business.
Rajesh Rokde, chairman of All India Gem and Jewelry Domestic Council that represents more than 600,000 gems and jewelry businesses across India, said that the industry is expected to take a hit of $9 billion due to U.S. tariffs.
“Exporters have been hit badly. Generally, a sector can absorb a 10% hit, but when over 30% of its exports are impacted, it is a big blow,” he said.
According to government trade data for fiscal year 2025, India exported gems and jewelry worth $29.8 billion, with about a third of that going to the U.S. Rokde said that nearly 80% of exports to the U.S. were of diamond jewelry while 15% were gold ornaments.
That mix gives a slight edge to exporters in this category compared to textiles, as 14 out of 15 diamonds used in jewelry go through India for processing.
September trade data shows that gems and jewelry exports grew at 0.4%, year on year basis. This indicates “offsetting effect of shipments to other geographies,” said Indian brokerage ICICI Securities in a report dated Oct. 18. But that growth was much lower compared to 28.9% rise in July before tariffs came into effect.
Other industries are also hoping for a trade deal that brings down U.S. tariffs.
Take the case of Jodhpur, a city in northwestern India, that ships wooden handicraft and furniture to the U.S. “Our exports have fallen sharply,” said Raunak Singhvi, whose family owns a furniture export business in the city.
Jodhpur manufactures about 50 billion rupees ($570 million) worth of furniture annually of which around 50% is exported to the U.S., Singhvi said, adding that these products fetch a better price in the U.S. compared to the domestic market.
As the demand rose during Covid-19, Singhvi said many companies like his family’s business invested in expanding capacity. “Many of those factories have shut down, people have lost their jobs and U.S. importers are asking for discount,” he said.
Earlier, furniture faced a tariff of 2.5% to 5% but now it is over 50%. “A tariff of 15% is still manageable, but anything above 25% will be a catastrophe,” said Singhvi.
Indian business daily Mint on Wednesday reported that Washington and New Delhi could soon finalize a deal that could see tariffs slashed to around 15%-16%. That potential breakthrough could be the lifeline exporters have been waiting for as orders dry up and companies are forced to cut production.
A tariff cut could revive order books, stabilize jobs, and help India’s export engine regain momentum. Lack of a breakthrough could darken exporters’ prospects beyond this festive season.
Top TV picks on CNBC
George Heber Joseph, CEO and CIO of ASK Investment Managers, said that festive demand in India is driven by the confluence of strong consumer confidence, easing inflation and rising disposable income.
MUFG’s senior currency analyst Michael Wan said any rebound in the Indian rupee will be modest as tariff uncertainty and weak trade sentiment continue to weigh on it.
Levi Strauss & Co. CEO Michelle Gass said the company plans to double down on markets such as India and China.
Need to know
India nears a trade deal with U.S. According to an Indian media report. New Delhi and Washington are close to reaching a trade deal. While the U.S. may cut tariffs on Indian exports to 15%-16% from the current 50%, India could agree to gradually wind down its imports of Russian oil.
Walmart pauses H-1B visa for job candidates. One of the largest U.S. employers of H1-B visa holders has paused hiring after President Donald Trump raised the visa fee to $100,000.
Urban Company shares could fall 26%. The newly listed Indian home services startup, whose shares gained more than 50% on debut, could see its shares drop by 26%, according to Morgan Stanley and Goldman Sachs.
Quote of the week
I’ll say again, [Indian stocks] are not cheap, they’re not something that gets value investors like us very excited. But India is now such a large component of global emerging markets that it is very hard to ignore these stocks.
— Kamil Dimmich, partner and portfolio manager at North of South Capital
In the markets
The Nifty 50 and the BSE Sensex were up over 0.8% as of 11 a.m. local time (1:30 a.m. ET). The indexes have gained over 10% and nearly 9%, respectively, so far this year.
The benchmark 10-year Indian government bond yield was up 2 basis point at 6.527%.
Coming up
Oct. 24: HSBC manufacturing and services flash PMI for October
Oct. 28: Industrial output for September
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