INDIA’S TEXTILE AND APPAREL SECTOR: STATUS, SIGNIFICANCE, CHALLENGES, WAY FORWARD

Why In News?

India is leveraging the PM MITRA scheme and new Free Trade Agreements to revitalize its textile industry and restore global export competitiveness.

Why is the Textile Sector Important for India?

Employment Generator

The sector directly employs 45 million workers and indirectly supports over 100 million individuals, functioning as the nation's second-largest employment provider (Source: Ministry of Textiles Annual Report 2025-26).

The apparel segment generates 153 jobs for every ₹1 crore invested, vastly outperforming capital-intensive industries like steel. (Source: Indian Express)

Contributor to Exports

The textile and apparel industry accounts for 8.63% of India's total merchandise exports, valuing USD 37.75 billion in FY 2024-25 (Source: Directorate General of Commercial Intelligence and Statistics).

It consistently maintains a strong net trade surplus, registering a surplus of US$ 28,181 million in FY 2024-25. (Source: Ministry of Textiles)

Supports Inclusive Growth

The sector empowers marginalized communities, with women constituting 88% of the candidates trained under the capacity-building SAMARTH scheme. (Source: Ministry of Textiles)

It decentralizes wealth creation by generating livelihoods in rural and semi-urban areas, curbing distress migration.

Preserves Traditional Craft Heritage

Handlooms and handicrafts engage over 3.5 million artisans, sustaining a 5,000-year-old cultural legacy dating back to the Indus Valley civilization. (Source: Office of the Development Commissioner for Handlooms)

Projects like the Kanihama Craft Village in Srinagar successfully integrated traditional Pashmina (GI) and Kani Shawl (GI) weaving with tourism to enhance artisan incomes.

Contributes to Industrial Output and GDP

The domestic textile and apparel industry contributes roughly 2.3% to the national GDP and 13% to India's total industrial production. (Source: Ministry of Textiles)

Why Has India Lost Its Earlier Competitive Advantage?

Fragmented Value Chains

Indian spinning, weaving, and garmenting units operate in geographically dispersed clusters across multiple states, which destroys "speed to market"—a fatal disadvantage in the fast-fashion retail cycle.

Weak Institutional Coordination

The sector suffers from a "missing middle", leaving it polarized between a few large players and thousands of tiny, unorganized units that lack the capital and scale to execute high-volume global orders.

Infrastructure Deficits

Fragmented operations inflate logistics and transaction costs to 14-16% of total production costs, severely eroding export competitiveness. (Source: Union Budget 2026-27)

Exporters routinely air-ship up to 20% of their orders to meet strict international delivery windows, effectively wiping out their profit margins. (Source: Vector Consulting Group) 

Competition from Other Countries

India’s share in the global apparel trade stagnates at a mere 3-4%, while Bangladesh and Vietnam command 9-10% and 6-7% respectively, leveraging favorable tariff structures and integrated industrial parks.

Limited Investment in Technology and Innovation

Indian factories operate at extremely poor efficiency, achieving only 58% to 70% of target sewing output, falling critically short of the 90% international benchmark expected by global retailers. (Source: Vector Consulting Group)

Fiber Mismatch Trap

Global apparel trade favors Man-Made Fibers (MMF) with a 25:75 cotton-to-synthetic ratio, yet India’s production remains heavily skewed toward a 60:40 cotton-to-synthetic ratio. (Source: Indian Express)

Strategic Site Selection

The government has grounded mega-projects across Greenfield and Brownfield sites in states like Tamil Nadu (Virudhunagar), Telangana (Warangal), and Madhya Pradesh (Dhar).

Major Challenges Faced by Indian Textile Industry

High Logistics and Transaction Costs

Multi-modal connectivity gaps force multi-stage long-distance transshipments that heavily inflate total shipping expenses.

Fragmented Manufacturing Base

India lacks mid-to-large scale vertically integrated garmenting factories, hindering the country's capacity to absorb the massive supply chain shifts driven by the China+1 strategy.

Skill Gaps

Sub-optimal training structures lead to low labor productivity and high defect rates, stripping India of its cost-competitiveness against Southeast Asian rivals.

Environmental Compliance Requirements

Stringent ESG (Environmental, Social, and Governance) mandates, such as the EU's Ecodesign for Sustainable Products Regulation (ESPR) and the Digital Product Passport, demand absolute traceability, threatening non-compliant exporters.

Rising Global Competition

Competitors like Bangladesh leverage Least Developed Country (LDC) duty-free preferences and targeted export processing zones to outprice Indian garments.

Slow Technological Modernisation

Indian MSMEs struggle to afford capital-intensive modern machinery, remaining stuck in low-value traditional fabric production instead of lucrative technical textiles.

Capital Constraints

Indian industrialists battle high real interest rates (6.2% to 8.2%) compared to near-zero rates in Vietnam, creating severe liquidity crunches compounded by delayed GST refunds.

What Measures Can Restore India's Global Textile Leadership?

Strengthen Integrated Textile Institutions

Empower Special Purpose Vehicles (SPVs) to act as completely autonomous single-window clearance authorities, stripping away paralyzing bureaucratic delays.

Expand PM MITRA Parks

Fast-track grounded investments in locations like Dhar to deliver immediate "plug-and-play" infrastructure to foreign investors.

Promote Sustainable and Circular Textile Manufacturing

Upgrade processing hubs with Zero Liquid Discharge (ZLD) systems and establish Digital Product Passports to seamlessly bypass the EU’s emerging green trade barriers.

Increase Investment in Technology and Automation

Expand the Amended Technology Upgradation Fund Scheme (ATUFS) to drive rapid Industry 4.0 adoption, drastically raising sewing efficiencies.

Improve Logistics and Port Connectivity

Map PM MITRA parks directly onto the PM Gati Shakti National Master Plan, ensuring multimodal transport access to slash port turnaround times.

Enhance Research, Innovation and Design Capabilities

Consolidate the Textile Research Associations (TRAs) to commercialize patents in high-performance apparel, targeting the $209 billion global technical textiles market.

Deepen Participation in Global Value Chains

Leverage the India-UK CETA (which eliminates tariffs on 99% of exports) and finalize the India-EU FTA to totally neutralize the tariff advantages currently enjoyed by Bangladesh and Vietnam.

Correct the Fiber Mismatch

Permanently eliminate the inverted duty structures on synthetic imports to explosively expand domestic capacity in Man-Made Fibers (MMF).

Conclusion 

Executing integrated institutional reforms through PM MITRA mega-parks, aggressive technological upgrading, and strategic FTAs will definitively restore India's historical hegemony, transforming it into a $350 billion global textile powerhouse by 2030.

Source: INDIANEXPRESS