Whalesbook
India's textile and garment sector achieved a 2.1% export growth in fiscal year 2025-26, reaching ₹3,16,334.9 crore. This performance countered earlier forecasts predicting a decline. While official Ministry of Textiles data shows this increase from ₹3,09,859.3 crore in FY 2024-25, signaling sustained global demand, the figures mask deeper issues regarding export value and competitive standing in a tough global market.
Growth was primarily driven by value-added categories. Ready-Made Garments (RMG), the biggest export item, rose 2.9% to ₹1,39,349.6 crore. Man-made textiles also increased by 3.6%, and handicrafts saw the fastest growth with a 6.1% rise to ₹15,855.1 crore. Traditional segments like cotton yarn and fabrics grew modestly by 0.4%. The sector expanded its reach to over 120 destinations, with notable growth in markets like the UAE, UK, and Germany.
However, India's 2.1% growth lags behind competitors like Vietnam and Bangladesh, whose textile exports have seen stronger expansion. India's competitiveness was impacted by significant US tariffs, sometimes reaching 50% on certain products, making Indian goods more expensive than those from countries with preferential trade agreements. Global inflation in raw materials, energy, and logistics, alongside rising wages, also squeezed profit margins and increased production costs. While currency depreciation can aid export prices, its benefit can be offset by inflation if real dollar earnings don't rise.
Concerns persist about export value, with some data suggesting India may be earning fewer dollars despite higher rupee figures, indicating a potential loss of pricing power. Conflicting reports of overall de-growth in specific segments hint at underlying vulnerabilities. Structural disadvantages also affect competitiveness. Unlike Vietnam and Bangladesh, which benefit from near-duty-free access to major markets through free trade agreements, India faces higher tariffs in crucial blocs. Challenges like a fragmented manufacturing base and specific duty structures on materials further limit the ability to translate production volume into strong export value.
Despite these challenges, the sector has positive long-term projections, with market size expected to reach $190 billion in FY26 and $350 billion by 2030. The government is supporting the industry through initiatives like the Production-Linked Incentive (PLI) scheme and development of industrial parks. Progress on Free Trade Agreements (FTAs) with countries including the UK and EU is also anticipated to improve market access and reduce tariff disadvantages. The sector's future success will depend on translating these supports into gains in value addition and global market share.