Indian textile exporter Gokaldas expects margin lift after US trade deal

What Happened

• Gokaldas Exports, one of India's largest garment exporters, stated that the India-US interim trade deal (framework announced February 6, 2026) is expected to improve its operating profit margins from 9.7% (Q3 FY26) to early double digits — a recovery driven by tariff reduction from 25% to 18% on Indian apparel exports.
• Gokaldas derives approximately 75% of its standalone revenue from the US market, counting Walmart, Gap, and JCPenney among its major clients, making the India-US tariff environment a direct determinant of its profitability.
• The company had been absorbing part of the elevated tariff costs through discounts to clients — eroding margins — as it prioritised preserving long-term buyer relationships over short-term profitability.
• The broader Indian textile sector responded dramatically: shares of Gokaldas, Indo Count Industries, Arvind, Raymond Lifestyle, and K.P.R. Mill surged up to 44% in two trading sessions following the trade deal framework announcement on February 3-4, 2026.
• India's overall textile and apparel export sector is valued at approximately $38 billion annually, with the US as the single largest destination market at roughly $10-12 billion.

Static Topic Bridges

India's Textile and Apparel Industry — Scale, Structure, and Policy

India's textile and apparel (T&A) sector is the second-largest employer in the country after agriculture, directly employing approximately 4.5 crore (45 million) people and providing livelihoods to ~10 crore (100 million) including indirect employment in cotton farming, spinning, weaving, and retail. The sector contributes approximately 2.3% of GDP, 13% of industrial output, and 12% of India's total export earnings. The textile value chain in India is uniquely integrated: India grows ~6 million tonnes of cotton annually (second-largest globally), has the world's largest spinning capacity (~50 million spindles), and a large weaving and processing sector. However, India's garment export competitiveness has lagged Bangladesh and Vietnam due to fragmentation (mostly small/medium units), relatively higher labour costs, and logistics challenges.

US Textile Tariff Architecture and India's Competitive Position

The US garment market is served primarily by China, Vietnam, Bangladesh, India, and Mexico. Tariffs on garments from different countries vary significantly. Bangladesh, as a Least Developed Country (LDC), qualifies for preferential tariff access under various US trade programmes — though unlike the EU's "Everything But Arms" (EBA), the US does not have an LDC-specific zero-duty programme for garments; Bangladesh still faces US MFN tariffs of 15-32% on garments. Vietnam negotiated a bilateral Trade and Investment Framework Agreement (TIFA) with the US but no FTA. China's garment exports faced 25%+ additional tariffs under Section 301 and IEEPA. India's 25% additional tariff (pre-deal) placed it at a disadvantage relative to these competitors; at 18%, India regains competitiveness against non-LDC competitors.

Production Linked Incentive (PLI) for Textiles

The Production Linked Incentive scheme for textiles, announced in 2021, offers incentives of 15% on incremental sales for the first two years and 11% thereafter, over five years, for companies investing in man-made fibre (MMF) fabrics and 10 categories of technical textiles. The scheme has an outlay of Rs 10,683 crore and aims to attract Rs 19,000 crore in investment, generate 7.5 lakh additional jobs, and boost textile exports by Rs 3 lakh crore by 2030. However, PLI for textiles has faced slow uptake: most Indian textile investment has been in cotton rather than MMF, and the technical textile segments (medical textiles, geotextiles, agrotextiles) require significant new technological investment. The US trade deal, by improving market access, could accelerate PLI uptake by making incremental garment exports more profitable.

India's Cotton Sector — Upstream Impact on Textile Exports

Gokaldas Exports and similar garment exporters are at the downstream end of a long value chain that begins with India's cotton farmers. India grows approximately 360 lakh bales (each ~170 kg) of cotton annually, with production concentrated in Gujarat (35%), Maharashtra (20%), Telangana and AP (15-20%), and Karnataka. Cotton price cycles directly affect garment manufacturer input costs: in 2022, global cotton prices hit multi-decade highs ($1.50+/pound) due to supply disruptions, squeezing garment manufacturers between high input costs and buyers unwilling to absorb full price increases. By 2025-26, cotton prices have moderated (~$0.65-0.75/pound). The combination of lower cotton prices and improved US tariff access creates a favourable environment for margin recovery in FY26-27.

Key Facts & Data

• Gokaldas Exports: India's large garment exporter; ~75% revenue from US; Walmart, Gap, JCPenney clients
• Q3 FY26 EBITDA margin: 9.7% (depressed by tariff absorption)
• Margin guidance post-deal: Early double digits (timeline: after Q2 FY27)
• India's total textile exports: ~$38 billion (FY25)
• Textile employment: ~4.5 crore direct; ~10 crore with indirect
• India's cotton production: ~6 million tonnes/year (2nd globally)
• US tariff on India garments (pre-deal): +25% additional = 37-57% effective
• US tariff on India garments (post-deal): +18% additional = 30-50% effective
• Textile stocks surge: Up to 44% in 2 trading sessions (February 3-4, 2026)
• PLI textiles: Rs 10,683 crore; MMF fabrics + technical textiles; 7.5 lakh job target
• Cotton price moderation: From ~$1.50/pound peak (2022) to ~$0.65-0.75/pound (2025-26)