India Textiles Ministry Proposes Duty Cuts Amid Global Price Hikes

India's government is proposing lower import duties on key materials and prioritizing energy supply for its textile sector, aiming to shield it from global conflict impacts. However, the industry faces significant challenges from its own structural issues and volatile international markets.

The Ministry of Textiles is seeking lower import duties on essential man-made fibre (MMF) inputs like cotton, rayon pulp, and yarns to combat rising costs and supply disruptions from global conflicts. The ministry is coordinating with the Agriculture Ministry on cotton policy. It has also asked to pause anti-dumping duty investigations on elastomeric fibre yarn and viscose rayon filament yarn. The government is also being asked to prioritize gas allocation for textiles, following a recent increase in LPG supply to labour-intensive sectors, which aims for 70% of pre-crisis levels.

These efforts are crucial as Poly-ethylene Terephthalate (PET), a primary material for polyester fibre making up about 40% of India's apparel output, has seen price and availability issues due to the conflict. The industry is also burdened by emergency surcharges on container shipping, raising costs for finished products. Additionally, the sector has an estimated $1.8 billion in exports to regions like the UAE, Saudi Arabia, and Israel, which are affected by the conflicts.

The global logistics picture is mixed for Indian textile makers. While the Baltic Dry Index, which tracks raw material shipping costs, rose 100.08% year-on-year to 2,523 points by April 16, 2026, container shipping rates have recently softened. The Drewry World Container Index dropped 3% to $2,246 per 40-foot container on the same date, suggesting that transport costs for finished goods might ease, following a six-week increase driven by fuel prices.

The industry has faced severe impacts during past periods of high input costs and geopolitical instability. For example, the Russia-Ukraine war in early 2022 led European buyers to cut apparel orders from India by up to 25%, and yarn prices doubled since 2020. Crude oil also hit $104 per barrel then, reducing consumer spending. The government's focus on energy security, including prioritizing gas for textiles, shows a proactive approach to disruptions. Additionally, proposed Free Trade Agreements (FTAs), like one with the UK, could boost India's competitive edge against countries like Bangladesh and Pakistan by providing duty-free access for some textile goods.

However, the sector's dependence on imported materials and global commodity price swings means proposed measures might only offer temporary relief, not solve long-term supply chain issues. Financial performance varies widely across companies. For instance, Arvind Limited has a Price-to-Earnings (P/E) ratio of about 24-27x. Raymond Ltd. has an unusually low P/E below 1x, possibly indicating financial strain or undervaluation. Lakshmi Machine Works, a textile machinery maker, has a much higher P/E ratio over 125x, reflecting its specialized market.

Analysts forecast a 9-10% drop in textile exports to the US by 2026 due to tariffs and policy uncertainty, a significant concern given that US exports represent nearly 29% of India's total textile shipments. Exporters are increasingly experiencing order cancellations and margin pressures, leading them to focus on profitability over volume. The sector's vulnerability to raw material price swings is evident; cotton prices, for example, jumped from INR 78,000 to INR 83,000 per candy in just 20 days in early 2022, highlighting cost management challenges.

Looking forward, while input costs might stabilize, export risks persist. The Indian textile industry is navigating global demand uncertainty and needs stronger supply chains. Future growth will likely depend on diversifying export markets, increasing value-added production, and meeting sustainability standards, possibly supported by domestic demand and government help with key materials.