From Disruption to Dominance: Indian Textiles Navigating 2025 and Shaping 2026

January 24, 2026 | By Textile Sphere India

Drawing on strategic, policy, and industry-wide perspectives, Dr. Gurudas Aras, Strategic Advisor and Independent Director, examines how the Indian textile and apparel sector confronted unprecedented global disruptions in 2025 and positioned itself for scale, sustainability, and global leadership in 2026.

In 2025, the Indian textile and apparel industry underwent a defining transformation, marked by a decisive shift toward large-scale integrated manufacturing and advanced technology. Characterised by resilience in the face of global headwinds, the sector reinforced its position as a primary driver of India’s export economy.

Critical Challenges Faced in 2025

The industry navigated severe external shocks that threatened its export-oriented hubs:

• The U.S. Tariff Shock: In 2025, the United States (India’s largest export market) imposed reciprocal and punitive tariffs, bringing total duties on some Indian textiles to a staggering 50%. This made Indian goods 30–35% more expensive than those from competitors like Bangladesh or Vietnam, leading to a potential 70% contraction in U.S.-bound orders for certain segments.
• Hub Distress & Job Risks: Manufacturing clusters in Tirupur, Noida, and Surat faced severe production slowdowns due to these tariffs, putting an estimated 100,000 to 200,000 jobs at risk, particularly for women and migrant workers.
• Sustainability & ESG Compliance: As the European Union’s Green Deal and Carbon Border Adjustment Mechanism (CBAM) gained momentum, Indian firms—especially MSMEs—struggled with the high costs of meeting strict global environmental and social standards.
• Raw Material Volatility: Fluctuating costs of cotton and man-made fibres, combined with geopolitical disruptions in shipping routes like the Red Sea, squeezed the profit margins of small-scale manufacturers.

How did India tackle the challenges?

• Efforts to tap New Markets: To reduce reliance on the U.S., which buys 29% of textile exports, India has targeted 40 countries like the UK, Japan, Germany, and the UAE, where global textile imports top $590 billion but India’s share is just 5-6%. Export councils are matching products like Tirupur’s knitwear to local demand and joining trade fairs to promote Brand India
• Using the Trade Agreements: India focused on leveraging the existing Free Trade Agreements with countries like the UK and has worked hard to speed up the long-pending EU (European Union) talks to lower duties and ease market access. This would go a long way in spreading the risk and ensuring stability if U.S. tariffs increase further.
• Some policy measures:  India announced the GST reforms, which had a very positive effect on consumer goods like textiles and apparel. Removal of import duty on longer staple cottons was helpful in the value addition efforts of the industry.

Exports showed resilience despite challenges in 2025

India’s textile and apparel exports have demonstrated resilience in December 2025, growing for the second straight month on a year-on-year basis, despite a subdued global trade environment and a 50% tariff imposed by the US, the country’s largest export market for the segment. These trends underline India’s competitive advantage in value-added manufacturing, traditional crafts, and employment-intensive production, even amid volatile global demand conditions.