Textile stocks experienced a significant uptick, with gains of up to 9%, following renewed hopes for an India-US trade deal. The surge comes in the wake of positive signals from both countries' leaders regarding ongoing trade discussions.

Key Highlights

• Welspun Living, Gokaldas Exports, Vardhman Textiles, Pearl Global, and Trident saw stock price increases of up to 9%.
• The optimism stems from US President Donald Trump's recent post on Truth Social about continuing trade talks with India.
• Trump expressed anticipation to speak with Indian Prime Minister Narendra Modi, who responded positively on X (formerly Twitter).
• These developments have reignited hopes for resolving trade tensions between the two nations.

Background on Trade Tensions

The renewed optimism comes against a backdrop of strained trade relations:

• The Trump administration had previously imposed an additional 25% tariff on Indian exports.
• This increase brought the total tariffs to 50%, significantly impacting Indian exporters.
• Over 66% of India's exports to the US were affected, particularly in sectors such as textiles, seafood, and gems and jewellery.
• The tariffs were reportedly linked to India's oil purchases from Russia.

Impact on Textile Industry

The textile sector, which heavily relies on the US market, has been particularly affected:

• Most textile companies derive 50-70% of their revenue from the US market.
• Pearl Global's management reported that US companies are seeking 15-20% discounts to offset tariff impacts.
• There are concerns that persistent tariffs could potentially shift $6.00 billion in exports and threaten numerous jobs in the sector.

Market Response

The stock market's reaction to the potential trade deal has been notable:

• Textile stocks had previously declined by 15-20% over the past month.
• The recent gains of up to 9% reflect a significant reversal in investor sentiment.
• The surge indicates that market participants are optimistic about a possible resolution to the trade issues.

As negotiations continue, the textile industry and investors alike will be closely monitoring developments in the India-US trade relationship. A successful trade deal could potentially alleviate the tariff burden and restore more favorable conditions for Indian textile exporters in the US market.

In a significant move that promises to reshape the textile industry landscape, the GST Council has approved a major restructuring of tax rates, potentially benefiting a wide range of textile companies. The new tax structure, set to take effect from September 22, 2025, introduces a simplified two-slab system of 5% and 18%, eliminating the current 12% and 28% slabs, while introducing a new 40% slab for luxury and sin goods.

Key Changes in GST Rates

The textile sector stands to gain substantially from these revisions:

• Man-made fibre: GST rate reduced from 18% to 5%
• Man-made yarn: GST rate cut from 12% to 5%
• Yarn and sewing thread made from man-made filament: Now taxed at 5%
• Finished textile products (including carpets, rugs, bath linen, and apparel priced up to ₹2,500 per unit): GST rate lowered from 12% to 5%

Impact on the Textile Value Chain

The reduction in GST rates is expected to have a cascading positive effect across the entire textile value chain. By easing input costs, the new tax structure aims to enhance the competitiveness of Indian textile products in both domestic and international markets.

Companies Poised to Benefit

Several key players in the textile industry are likely to see positive impacts from these GST rate cuts, including:

• Welspun Living
• Indo Count
• KPR Mills
• Gokaldas Exports
• Vardhman Textiles
• Nitin Spinners

These companies, spanning various segments of the textile industry from yarn production to finished garments, are expected to experience reduced tax burdens and potentially improved profit margins.

Industry Outlook

The GST rate reductions come as a welcome move for the textile sector, which has been facing challenges due to global economic uncertainties and fluctuating raw material costs. By simplifying the tax structure and reducing rates on key inputs and finished products, the government aims to stimulate growth and enhance the sector's competitiveness.

The new GST structure could lead to:

• Reduced production costs
• Improved cash flows for businesses
• Enhanced export competitiveness
• Potential for increased domestic demand due to lower prices

As the implementation date approaches, textile companies are likely to reassess their pricing strategies and supply chain operations to fully leverage the benefits of the new tax regime. The industry will be watching closely to see how these changes translate into market dynamics and consumer behavior in the coming years.

This GST overhaul represents a significant policy shift aimed at boosting one of India's largest employment-generating sectors. As companies adapt to the new tax environment, the full impact of these changes on the textile industry's growth and competitiveness will unfold in the months following implementation.