US Tariff Reduction Ignites Job Revival Hopes in India's Textile and Gems Hubs
The recent announcement of a significant tariff reduction by the United States on Indian goods has sparked optimism across India's key export-oriented manufacturing hubs. After months of economic strain characterized by weak orders and widespread job losses, this development promises to breathe new life into labor-intensive sectors such as textiles and gems and jewellery.
From Crisis to Recovery: The Impact of Lower Tariffs
Under the newly announced trade deal between India and the US, tariffs on Indian goods have been slashed to approximately 18% from the steep rate of roughly 50% imposed last year. This dramatic reduction is expected to restore India's competitive advantage in the global market, particularly against rival exporters like Bangladesh and Vietnam.
The textile industry, which employs an estimated 7-10 million people across the country, had been particularly hard hit by the previous tariff structure. According to industry experts, US buyers continued sourcing from India during the high-tariff period but demanded substantial discounts, squeezing profit margins and forcing many smaller operations to shut down completely.
Tiruppur's Transformation: From Layoffs to Renewed Hiring
The Tiruppur cluster in Tamil Nadu, which employs approximately 800,000 workers and exported goods worth nearly ₹40,000 crore ($4.79 billion) in FY25, stands to benefit significantly from this policy shift. As one of India's largest textile exporters to the US market—with about 30% of its exports destined for American buyers—Tiruppur is poised for a substantial recovery in order volumes.
"With this ongoing trade development and the increased requirement to supply more, production will increase, and we will need more manpower for this," explained Raja Shanmugam, a Tiruppur-based exporter of garments and textiles to the US and other major markets.
Industry analysts predict that every additional $1 billion in exports could generate nearly 150,000 direct jobs, offering substantial relief to regions that have experienced significant workforce reductions over the past year.
Broader Economic Implications Across Manufacturing Hubs
The positive effects of the tariff reduction extend beyond textiles to other key export sectors. The gems and jewellery industry, which also suffered under the previous tariff regime, is expected to see renewed hiring activity in major hubs including Surat, Mumbai, and Jaipur.
According to Vijay Vasanth, senior vice president at GI Group Holding, a prominent HR services firm, the textiles sector could witness a noticeable increase in recruitment over the next 12-18 months, particularly in manufacturing clusters across Tamil Nadu, Gujarat, and Maharashtra.
"As order books stabilize before expanding further, initial demand is likely to be concentrated on shop-floor positions, quality control, merchandising and supply-chain activities," Vasanth noted, while adding that employers will likely remain cautious in the near term despite improving medium-term hiring prospects.
Challenges and Opportunities for Smaller Exporters
While the tariff reduction brings welcome relief, the agreement's specific details remain somewhat unclear, creating some uncertainty within the industry. Smaller and medium-sized exporters, who were disproportionately affected by last year's tariff hikes due to their limited financial resilience, now stand to gain the most from the eased trade conditions.
P Senthilkumar, senior partner at Vector Consulting Group, highlighted the differential impact: "Big corporates who have the muscle power to sail through this crisis have given discounts of 10-20% to their US customers just to retain orders and keep the shopfloor running. If you're not a vertical setup, if you're buying fabric from an outside mill and are just a standalone player like the people who are in Tiruppur, then you do not have that kind of margin luxury."
The reconciliation between India and the US comes after months of strained trade relations that significantly impacted exports across multiple job-creating sectors. This development, coupled with India's recent trade agreement with the European Union to eliminate tariffs on 80-90% of goods, represents a strategic shift toward trade diversification that could strengthen India's position in global markets.
As export-oriented manufacturing gradually recovers, industry stakeholders remain cautiously optimistic about the employment revival in India's traditional manufacturing hubs, recognizing both the opportunities and challenges that lie ahead in this evolving trade landscape.
