India gains as US tariffs rise: Local firms see export boom

Chief executives of leading homegrown companies including Dixon Technologies, Tata Consumer Products, Blue Star, Havells and Arvind, have told analysts that Indian businesses are at a competitive position in the US tariff scenario and most of them are now flooded with queries for higher business from their US partners.

The chief executives said the India-US bilateral trade agreement (BTA) currently being discussed will provide an impetus to business.

Dixon managing director Atul Lall told an earnings call last week that the company was expanding capacity for its anchor customer by 50% to meet its increased order book, a large part of it will be for exports to North America in the light of the evolving geopolitical scenario. He said production volume for a large US brand, through its partner Compal, will increase "with potential opportunities for exports."

While Lall didn't specify any of the brands, analysts said its anchor customer is Motorola, which exports handsets to the US and the US-brand is Google's Pixel.

ET had also reported last month that Google wants to export handsets from India.

While US president Donald Trump has asked mobile phone companies like Apple and Samsung to produce locally in the US instead of sourcing from India and other places or face 25% tariff, experts have opined that despite the additional tariff, it will be cheaper for companies to produce in India and export.

Leading apparel manufacturer Arvind vice chairman Punit Lalbhai said in the short-term some of its "strategic customers" have seen their cost structures go up, which the company has also absorbed a bit and could lead to a "little bit of margin pressure" in the first and second quarters.

He, however, said the company was seeing a jump in volume orders from many of its US customers.

Lalbhai said margins will soon normalise and the benefits will flow in the second half of the fiscal year with a robust demand scenario. "This year we should add significant garment volume growth over last year in the textile space. Many of our capacities that we've been investing in are now coming on stream...temporary margin headwinds, but very optimistic growth and demand outlook," he said.

The optimism from top CEOs comes at a time when the US has already reduced tariffs on China from 145% to 30% as compared to India's 26%, which is currently on hold. The US has levied only 10% tariff on India and the 26% tariff could be enforced again from July.

Another apparel company, Gokaldas Exports, said in its investor presentation that higher tariff on China and political uncertainties in Bangladesh contribute to the overall attractiveness of India as a sourcing destination despite short hiccups.

FMCG major Tata Consumer Products CEO Sunil D'Souza said since products like coffee and tea, which it exports to the US, are not produced there and hence "from a competitive scenario, we'll be on even keel with everyone else" and not way off.

Havells has just sent its first consignment of Made in India ACs to the US and the management said India will be a beneficiary of the US BTA. BlueStar and Amber Enterprises CEOs said they were receiving a huge number of export enquiries as companies prepared their supply chains for tariff disruptions.

Titan Company's CEO for international business, R Kuruvilla Markose, said the company is tracking competition on price increase in the US and expects the BTA will be signed quickly.