India’s Textile Industry

Introduction

The Government of India is preparing a comprehensive cost roadmap for the textile sector to bring domestic production costs in line with global standards. This initiative comes at a time when India faces increasing competition from textile-exporting countries such as Bangladesh, Vietnam, and China.

Status of India’s Textile Industry

Economic Contribution

India’s textile industry plays a crucial role in the national economy. It contributes 2.3% to the GDP, 13% to industrial production, and 12% to total exports, underscoring its importance in manufacturing and trade.

Export Performance

During 2023–24, India exported USD 34.4 billion worth of textile products. Apparel had the highest share at 42%, followed by raw and semi-finished materials at 34%, and non-apparel finished goods at 30%.

Employment Generation

The textile sector is the second-largest source of employment in India after agriculture. It provides direct employment to more than 45 million people, many of whom are women and rural workers.

Global Standing

India ranks 5th globally in the textile market as of 2024. The domestic textile market is projected to expand from USD 174 billion to USD 350 billion by 2030.

Production Capacity

India produces nearly 22,000 million garments every year, reflecting robust manufacturing capabilities. Approximately 80% of this capacity is located in MSME clusters, highlighting the decentralized structure of the industry.

Factors Hindering India’s Global Competitiveness

High Input Costs

Restrictions on polyester and viscose imports due to Quality Control Orders (QCOs) have increased reliance on domestic polyester fibre, which is 33–36% costlier than Chinese alternatives. This raises production costs for Indian manufacturers.

Low Labour Productivity

Labour productivity in India remains 20–40% lower than in Bangladesh and Vietnam, reducing efficiency and competitiveness.

Regulatory and Trade Barriers

Rigid labour regulations and the absence of Free Trade Agreements (FTAs) with key markets—especially the European Union—prevent India from enjoying the duty-free access that competitor countries receive.

Competitive Advantages of Other Countries

Bangladesh benefits from lower labour costs and preferential market access, while Vietnam enjoys stronger FTAs, flexible labour rules, and duty-free access to Chinese raw materials.

Technological Limitations

A large segment of India’s textile industry consists of MSMEs that struggle to access affordable capital. This results in outdated machinery, low productivity, and reduced innovation—a situation often referred to as MSME dwarfism.

Workforce and Compliance Challenges

There is a shortage of workers skilled in modern textile technologies, especially in technical textiles, design, and marketing. Environmental regulations and labour compliance also impose additional burdens on smaller units.

Reforms Required to Enhance India’s Competitiveness

Government’s Proposed Roadmap

a. Three-Phased Strategy

The government plans to introduce a cost roadmap divided into short-term (2 years), medium-term (5 years), and long-term phases to benchmark and reduce costs across the value chain.

Focus on Cost Reduction

The roadmap will aim to reduce raw material costs, compliance costs, taxation burdens, and manufacturing wastage.

Promoting Innovation

A dedicated committee will work to:

• Strengthen research and development in technical textiles and sustainable materials.

• Integrate innovation into branding and design.

• Support textile start-ups and design houses.

d. Long-Term Vision

The government aims to achieve USD 100 billion in textile exports by 2030 and set up global innovation centres to develop new-age textile technologies.

Strategic Reforms Needed

a. Enhancing Cost Competitiveness

India must modernise port infrastructure, simplify export documentation, and ensure access to affordable and reliable power. Rationalising import duties on cotton and man-made fibres is essential for cost parity with global competitors.

b. Trade and Regulatory Reforms

Key FTAs, especially with the European Union, must be expedited. Labour laws under the four Labour Codes—Wages, Industrial Relations, Social Security, and Occupational Safety—should be tailored to the needs of the textile sector. A stable GST framework is also crucial.

c. Strengthening Productivity and Innovation

Bridging the productivity gap requires investment in skill development. MSMEs need better access to credit for adopting Industry 4.0 technologies, such as automation and AI.
The Economic Survey FY25 warned that textile costs will rise globally due to a shift toward sustainable sourcing, making innovation and efficiency even more urgent.

d. Sustainability and Branding Measures

The government and industry must adopt green technologies, promote water recycling, and embrace circular economy models. Strengthening branding initiatives like India Handloom and India Craft will help promote India’s textile heritage globally.

Conclusion

A comprehensive cost roadmap—integrating short-term, medium-term, and long-term strategies—can transform India's textile sector. By reducing input costs, enhancing productivity, promoting R&D and sustainability, and securing critical FTAs, India can work towards achieving its target of USD 100 billion in textile exports and strengthening its global competitiveness by 2030.