The apparel sector, which is one of the worst hit due to the US tariff, expects the upcoming Budget 2026 to introduce a Focus Market Scheme (FMS) primarily for exports to the US, a higher interest subvention under Export Promotion Mission (EPM) and also a reduction in GST on textile and apparel machinery from 18% to 5%.
Apparel exporters have also written to the Ministry of Finance seeking measures for the sector that could help them navigate through the challenges.
“The apparel sector is not seeking blanket support, but targeted, temporary, and growth-oriented interventions that address extraordinary external shocks, safeguard employment, and strengthen India’s position as a reliable global sourcing hub,” said A Sakthivel, Chairman, Apparel Export Promotion Council (AEPC). With the US imposing a 50% tariff on textile and apparel exports the cost competitiveness of the Indian exporters has been severely affected. ICRA expects the revenues of apparel exporters to decline by 6-9% in FY2026. Thus, AEPC recommended the introduction of a Focus Market Scheme specifically for apparel exports to the US.
“Under the proposed scheme, exporters should be provided freely transferable incentive scrips equivalent to 20% of the FOB value of exports, aligned with the period for which the additional U.S. tariff remains in force. This would directly offset the tariff burden, ease liquidity pressures, and help Indian exporters retain market share,” stated AEPC.
Additionally, apparel exporters seek for higher interest subvention under Export Promotion Mission (EPM). Under the EPM, an interest subvention of 2.75% with a cap of Rs 50 lakh per year is currently available to the exporters. However, they flagged that it is not sufficient and requested an increase in the interest subvention rate to 5%, along with relaxation of the Rs 50 lakh annual cap, to meaningfully support MSME exporters.
“Budget 2026 should revise interest support for exporters to lower borrowing costs considering moratorium for MSMEs in tariff-hit sectors, expand credit guarantees to encourage bank lending, and widen ECGC cover to protect against payment risks,” said Krishan Arora, Partner and Indirect Tax Leader, Grant Thornton Bharat.
Exporters also advocated for reintroducing the 15% Concessional Tax Rate under Section 115BAB, which was discontinued in March 2024. They also seek a new tech upgradation scheme post-ATUFS and a Green Transformation Fund with 5% loans to meet ESG norms, to better tap the European market.