Indian Textiles: Global Headwinds, Policy Reforms and the Road to 2026
January 24, 2026 | By Textile Sphere India
Against a backdrop of uneven global demand and rising geopolitical and cost pressures, India’s textile industry in 2025 navigated cautious growth, policy-led reforms and structural transformation—setting the foundation for competitiveness, diversification and sustainability-driven expansion in 2026, states J.M. Balaji, Vice President of Lakshmi Ring Travellers Pvt Ltd.
Global Textile Industry Context
In 2025, the global textile and apparel sector faced uneven growth and divergent regional performance. According to the International Textile Manufacturers Federation (ITMF), the global industry’s business situation remained challenging but showed cautious optimism for the second half of the year. While demand pressures and weak order intake were prevalent globally, certain regions such as Africa and South America reported positive momentum, in contrast to East Asia and Europe where demand and sentiment remained subdued. Capacity utilization averaged around 72–73%. Many sectors like spinning and Apparel finishing showed decline in capacity utilisation compared to the previous years. A decline in order intake and demand worries dominated respondents’ concerns, alongside geopolitical tensions and operational cost pressures.
These global trends set the stage for India’s textile industry in 2025, where external headwinds and domestic reforms intersected with structural makeover efforts.
India’s Textile Industry Performance in 2025
- Overall Growth & Contribution
The Indian textile and apparel sector continued to be one of the leading manufacturing and export sectors in the country in 2025. Textile and apparel exports in 2025 is expected to be flat compared to 2024 reaching around USD 38 billion, contributing about 8.6% of India’s total merchandise exports.
The industry remained a significant employment generator, directly employing tens of millions across farm, mill, garmenting, handloom, and allied segments. India also retained its status as one of the top producers and exporters of cotton, silk, jute, and man-made fibres, supported by abundant raw material availability and a large, skilled workforce.
However, performance was uneven across segments and geographies — while nuanced domestic demand and diversification into technical textiles showed promise, traditional apparel exports faced acute geopolitical and tariff pressures.
- Production & Market Size
Domestic textile production in 2025 saw modest increases, with various segments including traditional cotton, MMF (man-made fibres), and technical textiles showing differentiated performance. Government data shows textile manufacturing indices indicating small year-on-year expansion, backed by infrastructure investment and technology adoption incentives. - Segmental Insights
- Cotton Textiles: Cotton continues to be a principal raw material, though crop volatility and import policy reforms influenced supply economics. Government suspension of cotton import duties led to a surge in cotton imports over late 2025 and early 2026, reflecting attempts to stabilize input costs amid domestic crop challenges.
- Man-Made Fibres (MMF): MMF segments grew in strategic importance as global consumption patterns shifted toward synthetic and blended fibres. India’s MMF share, though historically lower than global averages, attracted targeted incentives under the PLI scheme to bridge competitiveness gaps.
- Technical Textiles: Export growth of technical textiles was robust — with 15+% growth in shipments to overseas markets — indicating demand in specialized applications such as industrial, automotive, medical, and protective textiles.
- Home Textiles & Apparel: Home textiles saw consistent overseas demand, supported by free trade pacts and branding efforts. Garment production faced pricing and competitiveness challenges linked to tariffs and rising cost structures.
Government policy in 2025 was a cornerstone of the industry’s evolution, marked by fiscal incentives, infrastructural programs, and regulatory reforms aimed at expanding competitiveness and exports.
“The convergence of PLI-driven investment,
PM MITRA infrastructure, and fibre diversification is reshaping India’s textile competitiveness for the next decade.”
“As tariff pressures intensify in traditional
markets, India’s future growth lies in technical textiles, FTAs, and a decisive move up the global value chain.”
4. Production Linked Incentive (PLI) Scheme
The PLI scheme continued to be a central policy instrument, aiming to boost domestic manufacturing and exports by offering incentives for value-added textile production, especially in man-made fibres, technical textiles, and integrated garments. Investments exceeding ₹28,700 crore were reported under approved PLI applications, with significant activity underway.
Budget allocations also rose, with increases for the Textile Ministry and specific schemes such as technology upgradation and PLI incentives to spur modernization and scale.
5. PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks
A flagship initiative, PM MITRA Parks — envisioned as integrated textile clusters with plug-and-play infrastructure — made progress on the ground in 2025. Foundation stones were laid and Detailed Project Reports (DPRs) approved for major parks in states including Madhya Pradesh, Tamil Nadu, Gujarat, Telangana, Karnataka, Uttar Pradesh and Maharashtra.
These parks are designed to integrate spinning, weaving, processing, garmenting, and accessories manufacturing, reducing fragmentation and supply chain costs, while attracting large domestic and foreign investment.
6. Export Promotion & Trade Diplomacy
Policy focus on export facilitation included extension of duty remission schemes, simplified compliance mechanisms, trade missions to key markets, and active negotiation of Free Trade Agreements (FTAs), including progress on agreements with the United Kingdom, which promises competitive access for Indian textiles from 2026 onwards.
There has also been newer policy talk — such as the Export Promotion Mission (EPM) — aimed at providing targeted support to MSME exporters via finance, technology, and global marketing support, reflecting long-term commitment to strengthening competitiveness.
7. Raw Material and Quality Reforms
Government reforms also extended to raw materials and quality control frameworks. Measures such as MSP (Minimum Support Price) procurement for cotton, digitization of cotton trading via apps like Kapas Kisan, and traceability programs were introduced to enhance producer incomes and export quality.
Despite these reforms, some regulatory barriers — particularly Quality Control Orders (QCOs) restricting imports of key fibres like polyester and viscose — still affected competitive cost structures relative to rivals.
“2025 was not a year of expansion, but one of
adjustment—where resilience mattered more than scale. The global slowdown forced producers to reassess efficiency, fibre strategies, and market dependence.”
8. Skill Development & Sectoral Missions
Skill development through the SAMARTH scheme and expansion of sectoral missions such as the National Technical Textiles Mission aimed to boost workforce competencies, especially in advanced and specialized textiles, while promoting domestic research and market development.
9. Tariff Pressures and Competitiveness Challenge
Despite diversification efforts, trade tensions, particularly with the United States, posed headwinds in late 2025. The U.S. government raised tariffs on a range of Indian textile products — reportedly up to 50% on certain items — which led to notable export declines in selected segments. Data suggests exports from major clusters such as Gujarat and Tiruppur experienced order cancellations, renegotiations, and competitive pressures.
Industry observers noted that part of the slowdown in exports was directly linked to these tariff changes, unsettling the apparel export outlook. Such tariff barriers disrupted competitiveness on price-sensitive products and highlighted the imperative for trade diplomacy and value-added market access.
10. FTA Gains and Future Access
While tariff barriers hit some markets, free trade agreements offered new opportunities. For instance, the UK–India FTA is expected to remove existing duties on textiles, enhancing price competitiveness and enabling Indian exporters to gain share against rivals such as Bangladesh and Pakistan.
The impending elimination of duties in key markets is projected to deliver long-term export growth beyond 2025.
11. Segmental Export Trends
- Technical Textiles: Grew at a double-digit pace, riding on demand for specialized materials — an indication of shifting portfolio from commoditized garments to higher value, differentiated products.
- Handicrafts & Home Textiles: Exhibited resilience due to niche market demand and branding efforts showcased at global trade events.
- Apparel & Cotton Textiles: Experienced mixed performance due to tariff headwinds and raw material cost pressures.
Industry Challenges
- Fibre Mix and Value Chain Integration
One of the most consequential shifts in industry structure has been the pivot from cotton-dominant production toward man-made fibres (MMFs) and blended fabrics. Global consumption patterns show MMFs accounting for majority of fibre use, whereas India historically leaned toward natural fibres. Bridging this gap remains a strategic goal under PLI incentives to capture global athleisure and technical segments. - Supply Chain Fragmentation
India’s textile value chain remains highly fragmented, with spinning, weaving, processing, and garmenting spread across states, leading to higher logistics costs and less streamlined production compared to more vertically integrated competitors (e.g., China). - Raw Material Volatility
Cotton price volatility due to weather, global market conditions, and policy shifts in import duties influenced production costs and export competitiveness. While duty suspensions encouraged cotton inflows to stabilize supply, long-term strategy for balanced raw material sourcing remains critical. - Labour and Productivity Issues
India’s labour productivity in key areas such as garment sewing and finishing is lower than that of competitors like Vietnam and Bangladesh. This impacts lead times, cost competitiveness, and margin performance. Skills shortages in advanced manufacturing and automation intensify this challenge. - Compliance, ESG & Sustainability Pressures
Global buyers increasingly demand compliance with environmental, social, and governance (ESG) norms, including water efficiency, chemical safety, emissions reporting, and worker welfare. European and other advanced markets have introduced regulations that affect nearly a fifth of India’s textile exports.
Environmental concerns — such as high-water usage, pollution from dyeing and finishing processes, and carbon emissions — present long-term structural challenges that India will need to address, particularly as global sustainability standards tighten.
- Industry 4.0 Adoption
To drive competitiveness and efficiency, textile manufacturers are increasingly adopting Industry 4.0 technologies such as automation, AI-enabled quality inspection, and real-time production monitoring. Automation in sewing, material handling, and finishing is helping reduce reliance on manual labour and enhance precision.
Emerging research into advanced automation — for example, AI-driven sewing robotics and machine learning-based fabric pattern recognition — suggests future production systems could drastically boost throughput while lowering waste.
- Sustainable Practices & Circularity
Sustainability initiatives in 2025 focused on:
- Water and energy conservation through optimized dyeing technologies
- Recycling and circular production systems
- Use of sustainable fibres and traceability tools
Innovative recycling technologies — including AI-enabled sorting and hyperspectral textile classification — are being developed to support circular textile ecosystems, although large-scale industrial adoption is still nascent.
- Digital Traceability & Supply Chain Transparency
Increased focus on blockchain and digital tracking systems enables better traceability of raw materials, improving compliance with ESG norms and facilitating premium market access.
2026 Outlook & Expectations
Export Prospects
Projection models for 2026 suggest continued diversification of export markets, with diminishing reliance on any single geography. With FTAs taking effect (especially with the UK and potentially the EU), Indian textiles are expected to gain tariff-free market access that could stimulate export growth.
Encouraging signs from global apparel buyers shifting supply chains due to geopolitical risks (“China Plus One”) provide medium-term opportunity — especially if India can swiftly navigate tariff negotiations with the U.S.
- One of the most immediate issues for 2026 is lagging export demand to the United States. Analysts forecast a contraction of ~9–10% in Indian textile exports to the U.S. in 2026, with margins under pressure due to punitive tariffs and renegotiation cycles.
- The uncertainty around India-U.S. trade agreements and the risk of delayed order finalizations could reduce overall export volumes early in the season.
- Free Trade Agreements (FTAs) — particularly the comprehensive deal with the United Kingdom — are coming into effect in 2026, offering duty-free access for many textile categories, improving competitiveness relative to Bangladesh, Pakistan, and Turkey.
- The EU is also tightening regulatory frameworks (e.g., Digital Product Passport, carbon and eco-design standards), which creates compliance costs but long-term market access advantages for compliant exporters.
Diversification — Emerging Destinations
Indian exporters are reorienting to Middle East, Africa, Latin America, and ASEAN markets where tariff barriers are lower and demand is growing. These markets will contribute meaningfully to stabilizing exports in 2026.
Summary Export Outlook
2026 is likely to see mixed export performance: a short-term contraction in traditional markets like the U.S., balanced by accelerated access in FTAs (UK/EU), diversified markets, and niche high-value segments, especially technical textiles.
Challenges Ahead
Tariff risk: Trade policy unpredictability remains a key risk factor.
Global macroeconomic conditions: Demand softness in some regions could dampen growth rates.
Structural productivity: Labour and supply chain fragmentation remain areas requiring long-term solutions.
Conclusion
The Indian textile industry in 2025 stands at a strategic inflection point — balancing legacy strengths in production and raw materials with emerging structural reforms, technology transitions, and global market pressures. Effective implementation of integrated park models, export diplomacy, innovation adoption, and sustainability practices will be central to realizing India’s Vision 2030 target of USD 100 billion in textile exports.
#TAGS International Textile Manufacturers Federation (ITMF), spinning and Apparel finishing, Textile and apparel exports, cotton, silk, jute, man-made fibres, technical textiles,