Ahmedabad: Gujarat’s denim industry is feeling the pinch in its blue seams. Rising US tariffs have pulled loose a relationship that once fitted perfectly. From large integrated mills to specialised exporters, America absorbed a substantial share of India’s denim output, offering scale, predictable volumes and relatively stable profit margins. That equation is now fraying. The fabric of the business is shifting away from export comfort and mills are now tailoring their output for homegrown brands that buy big but bargain hard.The result is a high-speed, low-margin business stitched together by agility rather than scale. Denim’s old blueprint is being cut down to size.Indian denim exports to the US face a steep 50% total tariff, a combination of baseline duties and punitive additional tariffs imposed in 2025 due to geopolitical issues, making them significantly more expensive than products from competitors like Bangladesh or Vietnam and drastically impacting Indian competitiveness. The numbers reveal the impact clearly. According to data from the Union ministry of commerce and industry, denim exports from India to the US fell sharply from 49.68 lakh sq m in FY 2024-25 to just 2.47 lakh sq m in FY 2025-26 for the April-Aug period. If the first five months of FY 2024-25 are taken as a like-for-like comparison, exports should have been around 20.7 lakh sq m. Instead, volumes are down by 86% year on year.For Gujarat, which accounts for more than half of India’s denim manufacturing capacity and a sizeable share of exports, the impact has been disproportionately severe. Mills that were once export-led are now pushing more capacity into the domestic market, crowding an already competitive space and putting profit margins under strain.However, Bharat Chhajer, former chairman of PDEXCIL, said the broader denim story is not entirely bleak. “The global denim market is seeing a renewed upswing as denim usage expands across multiple applications. Gujarat denim manufacturers are currently operating at 75-80% capacity, supported by both domestic and international demand. A growing number of international brands are now sourcing garments from India, which significantly boosts demand for Indian denim,” he said.Even so, with US visibility weakening, the industry’s shift towards the home market is happening more out of necessity than choice.Domestic demand: Volumes strong, margins thinThe Indian market is emerging as a crucial revenue cushion for denim makers as exports slow, but it is far from a comfort zone. While volumes remain strong, demand is increasingly fragmented, price-sensitive and unpredictable. What is playing out is not a slowdown in consumption, but a structural shift in where the demand is coming from and what it pays.Fast-fashion and value-led brands now dominate denim consumption in India. Rahul Shah, co-chair of the GCCI textile committee, said most of the growth in volumes is coming from brands priced between Rs 400 and Rs 2,000 in offline retail. Players such as Zudio, Style Up and Reliance Retail’s private labels are driving scale. Online, brands like Roadster and Highlander on Myntra operate in a similar Rs 600 to Rs 1,800 band, which has become the industry’s largest buying engine.“This is where scale is being generated, but also where pressure is the highest. Value brands typically operate on 2 to 2.5 times retail multipliers, leaving little room for fabric cost inflation. As a result, denim manufacturers are facing intense negotiations on pricing even as volumes remain healthy,” Shah explained.Beyond this value segment, demand has not disappeared, but it is no longer growing fast enough to matter. Brands priced between Rs 3,000 and Rs 7,000 cater to a narrower audience and contribute limited incremental volumes. The real momentum is firmly in value fashion, but it is squeezing manufacturers. Fast fashion has also changed the rhythm of the business. Denim trends no longer move season by season, Shah said. “They move at social-media speed. Loose and baggy fits in rigid and non-stretch fabrics are in demand now, but styles that once stayed relevant for six months can lose steam within weeks. While this keeps order books active, it also shortens product life cycles and raises the risk of unsold inventory,” Shah further said.Seasonality still helps. Nov to March remains the strongest period for domestic denim sales, with Dec and Jan as peak months. Exports also usually show some pickup from Jan. Yet even during this traditionally strong window, inventory levels across the industry remain low, reflecting caution on both sides of the supply chain. In this environment, success is no longer about selling more. It is about selling quickly, keeping prices competitive and holding as little stock as possible.Jaimin Gupta, managing director of Varvee Global Limited, said demand has picked up in recent months. “When we acquired this unit, our installed capacity was around 30 lakh metres a month, but we were utilising only about 5 lakh metres. Now we are producing 8 to 10 lakh metres a month, driven by better demand in domestic markets. Currently, around 75% of our output is sold in India, while about 25% is exported,” he said.Inventory: From asset to liabilityWeak exports and rapidly shifting domestic demand have forced denim manufacturers to rethink inventory itself. What was once a safety buffer is increasingly seen as a risk. With payment cycles stretching and liquidity tighter, excess stock ties up cash that companies cannot afford to block.Over the past four to five months, manufacturers have reduced inventory levels by nearly half compared to pre-Covid norms, even though overall volumes have remained steady.“Demand is unpredictable, even though volumes are good,” said Suketu Shah, CEO of Vishal Fabrics Limited. “Export thresholds came down, which means more capacity is chasing the domestic market, increasing competition and putting pressure on profit margins. At the same time, payment cycles are stretched, so holding excess inventory is no longer viable.”This shift is visible across Gujarat’s denim mills, where production decisions are increasingly shaped by balance-sheet discipline rather than just order books.Kumar Aggarwal, owner of Venus Denim, said domestic demand is helping export-led businesses stay afloat, but margins remain tight. “Value brands and fast fashion are driving volumes, but price points are tight and trends change very quickly. That is why we are keeping very close control over inventory and liquidity,” he said. Over the past six months, the company cut its combined ready stock and work-in-progress inventory from about 30 days to 15 days.Aggarwal added that while capacity utilisation across the industry remains healthy, companies are avoiding fresh capacity additions. “The focus has shifted to modernisation and backward integration to lower costs, manage volatility and protect profit margins,” he said.Rapidly changing fashion cycles are adding to the pressure. Shah pointed out that knit dobby fabrics, which performed well for nearly a decade, have seen demand weaken as trends moved on. With value brands and social media pushing constant micro-trends, manufacturers are being forced to constantly recalibrate their product mix, leaving little room to stock ahead of demand.“The objective is no longer to build inventory,” Shah said. “It is to stay light and responsive, producing what fast fashion and value brands are actually selling, not what they might sell months later.”Raw materials under pressureThe effects are also being felt further up the supply chain. Yarn procurement is now being approached with surgical precision. While demand for repeat and running styles remains strong, other segments have slowed sharply.Jayesh Patel, senior vice-president of the Spinners’ Association Gujarat, said overall yarn demand is uneven, but open-end yarn used in denim is holding firm. “We are seeing robust orders for 6s to 20s count open-end yarn, which is the core input for denim. Spinning mills producing these yarns currently have order books of around one to one-and-a-half months, and prices in this category remained firm,” he said.This uneven demand pattern is adding stress for yarn makers as well, reinforcing caution across the supply chain.Denim, once a business driven largely by exports and scale, is being reshaped. Today, agility, cash discipline and the ability to respond quickly to changing consumer tastes matter as much as looms, capacity and technology.
