Following its 43^rd AGM on June 20, 2026, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has signaled a shift in strategy, emphasizing fiscal incentives alone are insufficient to secure the sector’s future. Instead, the newly approved roadmap for the FY25-26 prioritizes technological modernization, aggressive energy efficiency initiatives, and the transition toward high-value manufacturing. Mahmud Hasan Khan, President, highlighted, the industry is moving past a growth-centric phase into a period of ‘holistic development,’ where production transparency and operational agility will determine market survival.

Addressing the compliance and energy imperative

A central pillar of the BGMEA’s current agenda is the rapid integration of green manufacturing standards to meet increasingly stringent EU market requirements, including supply chain due diligence and decarbonization. To this end, the association has operationalized a landmark partnership with the German agency GIZ, focusing on circularity and digital supply chain traceability. This collaborative effort aims to mitigate the rising costs of raw material procurement and the persistent energy crisis that has hampered output capacity throughout early 2026. As Bangladesh approaches its graduation from the Least Developed Country (LDC) category, the BGMEA is lobbying for sustained state support to reduce business costs, particularly regarding port procedures and the availability of affordable, reliable electricity, which remain the primary barriers to reclaiming lost market share in the activewear and synthetic fiber segments.

Backbone of the national economy

The Bangladesh ready-made garment (RMG) sector serves as the backbone of the national economy, contributing over 84 per cent of total export earnings. Comprising thousands of manufacturing units, the industry is currently transitioning from low-cost, volume-based production toward high-value, sustainable apparel, supported by institutional modernization and international strategic partnerships.

Saudi Arabia has initiated a significant advancement in its retail and creative infrastructure with the unveiling of the ‘Fashion District’ in Riyadh. Supported by an investment framework exceeding SAR 450 million (approximately $120 million) through an MoU between Sidra Capital and the developer Four Directions, the project aims to establish a comprehensive ecosystem for the Kingdom’s burgeoning fashion sector. Unlike traditional retail developments, this mixed-use destination is designed to integrate luxury hospitality, specialized office spaces, and curated flagship retail under a single urban model. By providing dedicated exhibition venues and production facilities, the district seeks to bridge the gap between creative design and commercial execution, effectively positioning Riyadh as a primary hub for fashion discourse in the Middle East.

Building a scalable fashion value chain

This development aligns with the strategic objectives of the Saudi Fashion Commission, which has been instrumental in professionalizing the local industry since 2020. As the Kingdom enters the third phase of its Vision 2030 agenda, the focus has shifted toward sustaining long-term delivery and private sector participation. Industry data suggests the Saudi fashion apparel market is set to reach approximately US$ 3.3 billion in 2026, with a projected CAGR of 8.8 percent through 2035. According to Dr. Muhammad Currim Oozeer, CEO, Sidra Capital, the district represents a ‘promising investment opportunity’ that leverages the Kingdom’s rapid transformation. By centralizing resources and creating an environment that attracts both domestic talent and international luxury brands, the project aims to reduce the barriers to entry for local entrepreneurs while bolstering the city's overall global competitiveness.

Fostering the Saudi fashion industry

The Fashion District is an integrated urban project in Riyadh focused on fostering the Saudi fashion value chain. It encompasses luxury retail, hospitality, and creative studio spaces. Its primary goal is to professionalize the sector, attract international investment, and scale local design talent in alignment with Saudi Vision 2030.

The ready-made garment (RMG) sector in Bangladesh is contending with a contraction in demand that extends well beyond its primary Western markets. While traditional hubs like the European Union and the United States have long dominated export statistics, the recent 5.95 per cent decline in shipments to non-traditional markets during the July-May period of FY25-26 signals a more pervasive cooling in global procurement. Once viewed as the critical hedge against market volatility, destinations such as Australia, Japan, and India have reported double-digit or near-double-digit reductions in intake, illustrating that the current downturn is a structural challenge rather than a regional anomaly.

Shifting competitive dynamics

Industry stakeholders attribute this cooling to a confluence of global economic sluggishness and intensified regional competition. Exporters are navigating a complex landscape where key competitors, backed by aggressive policy support and incentives, are increasingly capturing the share of orders that historically flowed to Bangladeshi manufacturers. The data reflects a recalibration of global consumption patterns, notes Mohiuddin Rubel, Former Director, BGMEA. As global retailers adopt cautious, lean inventory strategies in response to persistent inflation, the pressure on Bangladesh to offer superior value beyond competitive pricing has reached a critical inflection point. For many factories, the challenge is now to secure long-term partnerships that prioritize transparency and technical reliability over simple volume-based transactions.

Resilience through structural upgrading

Despite these headwinds, the sector remains the engine of the national economy, with manufacturers increasingly shifting to high-value garment production and synthetic fiber integration to reclaim competitiveness. While energy-related bottlenecks and rising production costs continue to dampen factory capacity, the strategic focus is shifting toward sustainability and circular manufacturing. By accelerating investment in green production technologies and digital supply chain traceability, the industry aims to align itself with the heightened ethical and compliance requirements of modern global brands. This transition, while demanding significant capital, is essential for Bangladesh to solidify its position as a high-trust partner in a global market that no longer rewards volume at the expense of agility.

World’s second largest apparel exporter

Bangladesh is the world’s second-largest apparel exporter, with RMG accounting for over 84 per cent of its total export earnings. The sector spans thousands of factories focused on knit and woven apparel. While traditionally reliant on the EU and US, it is currently prioritizing product diversification, sustainability, and technological integration to scale. 

The 2026 edition of the 618 shopping festival has concluded, marking a fundamental transition in China’s e-commerce sector. Departing from the historical focus on ‘involution-style’ price wars and bottom-line-eroding subsidies, platforms like JD.com and Tmall have redirected their strategy toward operational efficiency and ecosystem stability. While the festival set new records for order volumes and user engagement, the emphasis has shifted toward sustainable growth. Industry analysts observe, the contemporary Chinese consumer is increasingly rational, favoring platforms that simplify decision-making through high-fidelity AI tools rather than those relying solely on intensive, short-term promotional markdowns.

Textile and apparel performance metrics

Despite a climate of tempered consumer confidence, the apparel and textile sectors emerged as unexpected pillars of growth during the month-long event. Data from industry insights indicates, clothing, footwear, and knitted textiles ranked among the top-performing categories in physical goods, driven largely by a renewed interest in quality-focused domestic labels and ‘native skin aesthetic trends. Brands that integrated AI-powered virtual try-on tools and precise inventory management saw higher conversion rates, proving that modern shoppers are willing to pay for products that address specific functional or stylistic needs. This ‘quality-over-quantity’ trajectory reflects a broader maturation of the retail market, where successful brands are moving beyond simple volume-chasing to cultivate long-term consumer retention.

Strategic infrastructure and AI integration

The 618 festival served as a definitive laboratory for the large-scale implementation of artificial intelligence, which now acts as the underlying infrastructure for Chinese commerce. From automated livestreaming hosts that reduced marketing overheads to AI-driven recommendation engines that move beyond basic keyword matching to understand intent, the technological integration has fundamentally reshaped the buying journey. For the apparel value chain, this means that real-time data - not just historical sales figures  - is now the primary currency for forecasting demand. As the festival concludes, the clear takeaway for global retailers is that digital visibility, transparency in pricing, and a seamless AI-enabled shopping experience are no longer optional, but the necessary baseline for capturing value in a high-expectation market.

JD.com is a premier Chinese e-commerce titan specializing in self-operated retail, logistics, and supply chain technology. Its expansive portfolio covers electronics, apparel, and general merchandise. The company is actively focusing on omnichannel integration and artificial intelligence to drive efficiency, maintaining a strong, growth-oriented fiscal outlook through consistent operational innovation.

The international cotton trade is witnessing a period of consolidation following a recent decline in exports from the United States. Latest data from the US Department of Agriculture (USDA) shows, for the week ending June 11, 2026, net sales of Upland cotton contracted by 15 per cent to 177,100 running bales from the preceding week. While these figures remain approximately 5 per cent above the four-week average, the decline signals a broader cooling in global buying appetite. Pima cotton experienced an even more pronounced adjustment, with net sales retreating 28 per cent and export shipments contracting 43 per cent week-on-week, highlighting an overall moderation in fiber procurement across major textile hubs.

Implications for textile manufacturers

This reduction in exports to 251,000 running bales for Upland cotton reflects the cautious stance adopted by leading spinning destinations, including Vietnam, Pakistan, and India. While these nations remain the primary drivers of US cotton consumption, the decelerated pace of delivery points to an environment where manufacturers are balancing inventory levels against sluggish demand in finished apparel retail. For the textile value chain, this suggests that mills are closely monitoring cost-competitiveness as they navigate a global market characterized by high production overheads and a pivot toward leaner inventory management. As the industry approaches the next marketing year, the current volatility underscores the need for flexible procurement strategies to mitigate the risks associated with price fluctuations and shifting macroeconomic pressures.

Supplying high-quality fiber to global markets

The US cotton sector is a foundational supplier of high-quality fiber to global spinning hubs. It focuses on the production and export of Upland and Pima varieties. The industry is currently concentrating on sustaining market share amid economic headwinds, maintaining a strong export-oriented outlook while facing significant domestic and international competition.

Extending its influence beyond Denmark, the Copenhagen International Fashion Fair (CIFF) has has launched the ‘CIFF Nordic Signatures,’ in partnership with the Milan-based 10 Corso Como.

 The move represents a tactical move to bridge the gap between Scandinavian creative output and the global fashion epicenter of Milan. By curating a selection of specialized Nordic makers and archival pieces - including an exclusive showcase of the jewelry house Monies - the exhibition transforms the 10 Corso Como mezzanine into a dialogue between northern minimalism and Italian luxury culture. The project, active from June 19 to June 21, 2026, serves as a platform for emerging talent to gain visibility within one of the world's most prestigious concept stores.

Redefining the concept store paradigm

This partnership highlights a shift in how trade platforms operate, moving away from traditional booth-based exhibitions toward immersive, culturally integrated retail experiences. For CIFF, this expansion is essential to maintain relevance in a market that increasingly favors brand storytelling and ‘slow shopping’ over high-volume wholesale. Industry observers note, such collaborations are crucial for sustaining visibility for smaller, independent designers who require the pedigree of platforms like 10 Corso Como to reach international buyers. As the textile and apparel sector faces shifting consumer behaviors, this synergy underscores the potential for trade shows to function as lifestyle curators rather than mere supply-chain intermediaries. e

The CIFF & 10 Corso Como ecosystem

CIFF is Europe’s premier fashion trade and trends platform, hosting nearly 2,000 brands across permanent showrooms and bi-annual events. Founded in 1991, 10 Corso Como is the world’s inaugural ‘concept store,’ blending fashion, art, design, and hospitality. Under Tiziana Fausti’s leadership, the brand focuses on global expansion and innovative retail architecture. 

China is undergoing one of its most consequential economic recalibrations in decades, driven by geopolitical instability, rising Western protectionism, and a prolonged domestic property downturn. Once heavily dependent on export-led manufacturing to sustain growth, Beijing is now moving quickly towards internal consumption as the central stabiliser of its industrial economy.

Early 2026 data suggests this is not a rhetorical shift but a full-scale policy experiment. As external demand channels weaken, China is actively deploying fiscal subsidies, consumer incentives, and industrial realignment strategies to ensure its vast manufacturing base remains operational this time by relying on domestic buyers rather than global markets.

External shockwaves hit the export model

Traditional exports particularly in labour-intensive sectors such as textiles and apparel, is facing multiple simultaneous disruptions. Geopolitical volatility has intensified shipping and logistics costs, with tensions linked to the US-Israel–Iran geopolitical flare-up since March 2026 introducing sustained uncertainty into key maritime corridors.

At the same time, protectionist policies across major markets including the US, Japan, and parts of ASEAN have tightened import conditions and dampened demand. Apparel exports to the US fell 2.5 per cent year-on-year, while shipments to Japan declined 4.3 per cent, reflecting weakening absorption capacity in legacy markets. ASEAN demand contracted even more sharply, down 8.4%, underscoring the broad nature of the slowdown.

Compounding these external pressures is an internal margin squeeze across Chinese manufacturing. Rising raw material costs have intensified involution dynamics, hyper-competitive price wars where firms continuously cut margins simply to retain production volume. This has led to a paradox: while total apparel exports recorded a marginal 0.2 per cent increase globally, volumes rose 6.6%, but unit prices dropped 6.2% to an average of $3.2 per piece, signalling deep pricing stress across the export chain.

China has partially offset these losses by diverting lower-margin goods to alternative destinations such as Russia, Brazil, and India, with exports to Russia alone surging 56.5 per cent. However, policymakers appear unconvinced that such rerouting can sustain long-term industrial stability.

Domestic demand becomes the anchor

In response, Beijing is scaling up its most aggressive domestic consumption strategy to date. At the core is a nationwide Consumer Goods Trade-In Programme designed to stimulate household spending by subsidising upgrades of durable goods and apparel to higher-quality, smarter, and greener alternatives.

Financing for this initiative is being driven by ultra-long special treasury bonds, with 62.5 billion yuan allocated in 2026 alone. The policy is not simply stimulative, it is, aiming to redirect consumption patterns toward higher-value domestic goods while simultaneously supporting industrial upgrading.

The programme has already generated measurable impact, recording 433.17 billion yuan in total sales activity in Q1 2026. This makes it one of the most significant consumption interventions in recent years, effectively acting as a counterweight to weakening export demand. This shift is reinforced by the launch of the 15th Five-Year Plan (2026-30), which places consumption and industrial upgrading at the centre of China’s growth model. Policy tools now include targeted credit channels such as digitalisation-specific green credit, designed to push manufacturers away from low-cost export dependency toward premium domestic production ecosystems.

Consumption vectors under this framework include the rise of ‘Chinese Chic’ (Guochao) branding, expansion of the outdoor and experience economy, and deeper digital commerce penetration into lower-tier cities through improved logistics infrastructure.

Export decline vs domestic surge

Q1 2026 data highlights a striking divergence between weakening export channels and strengthening domestic consumption. Apparel exports to the US, Japan, and ASEAN all contracted, while internal retail segments posted strong gains.

Table: Conventional export decline vs. domestic demand surge (Q1 2026)

Online clothing retail grew 11.6 per cent, outpacing overall export performance. Footwear and apparel retail expanded 9.3 per cent, while per capita clothing expenditure rose 5.6 per cent, indicating improving domestic spending intensity despite macroeconomic caution. This difference reveals a structural pivot: external markets are becoming increasingly price-sensitive and volatile, while domestic channels are absorbing both volume and value growth. The broader implication is that China’s industrial system is no longer primarily export-anchored; instead, it is being reorganised around domestic consumption as a stabilising buffer.

Factories adjust to a new balance

At the production level, the impact of this shift is visible but uneven. Capacity utilisation across above-scale textile enterprises declined to 76.5 per cent, down 1.3 percentage points, while chemical fibre utilisation fell to 84.7 per cebt. Under normal export-driven cycles, such declines would typically trigger sharper industrial contraction.

However, domestic demand has prevented deeper dislocation. Despite utilisation pressures, industrial value-added in textile enterprises still grew 3.9 per cent year-on-year. Sub-sectors aligned with domestic consumption trends particularly wool, linen, and silk used in Guochao fashion recorded double-digit growth rates. The domestic market has effectively acted as a buffer mechanism, preventing large-scale layoffs and stabilising factory throughput. In comparison with the national industrial average utilisation rate of 73.6 per cent, textiles remain relatively resilient, indicating targeted policy success in maintaining sectoral stability.

China’s savings overhang

Despite short-term stabilisation, structural concerns remain deeply embedded in China’s consumption transition. Household consumption still accounts for only around 40 per cent of GDP, significantly below the global average of approximately 60 per cent, according to estimates from institutions such as BBVA Research and Goldman Sachs.

The underlying issue is behavioural rather than cyclical. Household savings rates remain elevated at roughly 32 per cent of disposable income, reflecting precautionary saving patterns reinforced by a prolonged property sector downturn and limited social welfare coverage. While targeted fiscal programmes like the trade-in scheme demonstrate the state’s ability to stimulate consumption, they do not fundamentally resolve underlying confidence constraints. Without broader reforms in pensions, healthcare, and income redistribution, households are likely to continue prioritising savings over discretionary consumption.

A controlled rebalancing, not a full transition

China’s 2026 economic strategy represents a carefully managed rebalancing rather than a complete transformation. The state has successfully demonstrated that domestic demand can temporarily offset external shocks and stabilise manufacturing output. However, the durability of this model remains uncertain. Bond-funded stimulus and consumption subsidies can accelerate retail activity in the short term, but sustaining momentum will require deeper structural reforms in household income security and wealth distribution.

As China progresses through the early phase of its 15th Five-Year Plan, the central challenge is clear: shifting from policy-driven consumption spikes to organic, confidence-led household spending. Until that transition occurs, domestic demand will function as a powerful but partially conditional stabiliser rather than a fully independent growth engine.

The modern fashion industry has traditionally been defined by creativity, merchandising expertise and global sourcing networks. Yet few companies have challenged that formula as aggressively as Shein, whose leadership has long maintained that it is not fundamentally a fashion company using technology, but a technology company that happens to sell apparel.

That philosophy has helped transform the business from a relatively small regional player into one of the world's largest fashion retailers. In less than a decade, Shein has built a global operation generating tens of billions of dollars in annual revenue while capturing a significant share of the international fast-fashion market. Its rise has demonstrated how software architecture, data analytics and algorithmic decision-making can become competitive advantages in an industry traditionally driven by intuition and trend forecasting.

Turning demand signals into products

Conventional fashion retail operates on long planning cycles. Designers and merchandisers study runway trends, consumer behavior and seasonal forecasts months before products reach stores. Procurement teams then identify suppliers, negotiate prices and coordinate production schedules, often relying on spreadsheets, emails and fragmented communication systems. Shein's model shortens much of this process into a technology-driven workflow.

Rather than depending primarily on human forecasting, the company continuously analyzes consumer searches, browsing patterns, social media engagement and purchasing behavior. The objective is to identify emerging demand signals before they become mainstream trends. Once a potential opportunity is detected, algorithms connect product specifications with suitable manufacturing partners, initiate small production runs and monitor performance in real time. Human teams remain involved, but largely as supervisors and decision approvers rather than administrators of every operational step. The result is a retail engine designed to react to consumer demand at a pace that traditional apparel companies often struggle to match.

The speed advantage

At the heart of Shein's success is its ability to drastically shorten the product development cycle.

Table: The two retail strategies, a comparison

This micro-batch strategy allows the company to launch products in limited quantities, test consumer response and rapidly scale successful items. Products that fail to gain traction can be discontinued before substantial inventory accumulates. For an industry where excess inventory frequently erodes margins, this model provides a significant operational advantage.

From retailer to infrastructure provider

Perhaps the most important evolution in Shein's business strategy is its move beyond selling apparel. The company is positioning its technology and supply chain network as a service that other brands can use. Instead of merely competing with fashion labels, Shein aims to become a platform supporting them.

Under this model, partner brands retain control over product design and brand identity while leveraging Shein's production, logistics and demand-analysis capabilities. Small inventory runs can be tested quickly, with successful products reordered based on real-time sales data. This approach effectively converts Shein's internal operating system into a commercial product. What began as a retail advantage is being repackaged as a business-to-business service capable of generating new revenue streams while deepening the company's influence across the fashion ecosystem. The strategy also reflects a broader trend in global commerce, where companies increasingly monetize their infrastructure rather than relying solely on product sales.

Trade rules challenge the model

Despite technological strengths, Shein's growth story is entering a more complicated phase. For years, the company benefited from cross-border e-commerce structures that enabled low-cost direct shipments to consumers. Regulatory changes in major markets, however, are beginning to alter those economics.

The removal of tariff exemptions for low-value imports in key regions, combined with rising freight expenses and intensifying competition from rivals such as Temu, has increased pressure on profitability. While revenue growth remains substantial, margins have come under strain as the cost advantages that led rapid international expansion become less pronounced. These developments highlight a growing challenge for digital-first retailers: technology can optimize operations, but it cannot entirely insulate businesses from geopolitical shifts, trade policy changes and regulatory intervention.

Investing in the production backbone

In response, Shein is strengthening its manufacturing through significant investments in China. The company has committed billions of yuan toward developing an intelligent supply chain headquarters in Guangdong Province, reinforcing relationships with its extensive network of manufacturers. The investment is designed to improve automation, production visibility and supply chain resilience while supporting future growth initiatives.

Meanwhile as regulators scrutinize overseas listings and supply chain practices more closely, Shein is seeking to demonstrate its contribution to domestic industrial development while securing greater stability within its production network. For a company reportedly pursuing a major public listing, strengthening operational foundations has become as important as maintaining growth momentum.

The future of platform-led fashion

Shein's evolution offers a glimpse into the future direction of apparel retail. The company's core innovation is not a particular garment or fashion trend, but the operating system behind the business.

By treating consumer demand as a data problem rather than a merchandising challenge, Shein has built a model capable of launching products faster, reducing inventory risk and responding dynamically to market shifts. Its next ambition is even broader: transforming those capabilities into a platform that serves other brands.

Whether that strategy ultimately succeeds will depend on how effectively the company deals with regulatory scrutiny, geopolitical uncertainty and growing competition. Yet one conclusion is already clear: in the next phase of global fashion, software may prove as valuable as design, and supply chain intelligence may become as important as brand equity. For Shein, the product extends beyond apparel. It is the technology infrastructure that powers the apparel business itself.

India’s textile and apparel industry has emerged from one of the most turbulent periods in its recent history, transforming a combination of global disruptions into the foundation of a new growth cycle. According to Wazir Advisors’ sector pulse report tracking earnings discussions across 13 leading listed textile and apparel companies, the fourth quarter of FY26 subjected manufacturers to an extraordinary combination of challenges: a temporary 50 per cent US tariff regime, a geopolitical crisis in West Asia that sharply escalated energy costs, and a steep increase in raw cotton prices.

The cumulative impact initially pushed factory utilization levels down to nearly 50-60 per cent, raising concerns about profit and export competitiveness. Yet, by the end of the quarter, the industry had staged a remarkable turnaround. A rebound in US demand, rapid supply consolidation, and the emergence of favorable trade agreements have collectively pushed the sector to what many describe as its strongest short-cycle recovery in three years.

Leading companies including Vardhman, Welspun, Gokaldas Exports, Indo Count, Kitex, KPR Mill, Nitin Spinners, PDS, Pearl Global, RSWM, SP Apparels, and Trident reported improving order visibility as global buyers accelerated sourcing from India. At the same time, the recovery has revealed a growing competitive divide between large, globally integrated manufacturers and mid-sized operators struggling to meet increasingly demanding compliance and supply-chain requirements.

Supply rationalisation reshapes spinning sector

The most significant change has occurred in the spinning segment, where years of excess capacity have finally begun to unwind. Industry capacity has seen a substantial correction, with approximately 11 million spindles permanently shut down. As a result, effective operating capacity has fallen to around 41-42 million spindles against a rated capacity of 53 million.

The drop has fundamentally altered market dynamics. Yarn spreads have grown nearly 40-50 per cent, from around $0.65 per kg to between $0.90 and $0.95 per kg . The improvement has restored profit across large sections of the spinning industry and strengthened confidence among manufacturers.

Table: Indian spinning industry performance indicators (2026)

A major driver of this recovery has been China’s increased appetite for Indian yarn. Chinese manufacturers are sourcing Indian yarn at roughly four times historical volumes, averaging nearly 30 million kg per month. The reflects growing efforts by Chinese buyers to secure clean-origin cotton inputs amid heightened scrutiny over Xinjiang-related sourcing practices. Consequently, many Indian spinners have already sold export capacity several months in advance. Despite the favorable environment, companies remain cautious. Most are waiting for six to nine months of sustained profit before committing capital toward fresh capacity expansion, mindful that cotton price volatility could quickly alter economics.

Apparel exporters show resilience

The garment manufacturing segment displayed remarkable adaptability during the tariff-driven disruption. Between August 2025 and February 2026, when cumulative US tariffs reached 50 per cent, many Indian exporters absorbed part of the financial burden rather than risk losing strategic relationships with global brands.

Once the peak tariff regime expired in February, leaving only a residual 10 per cent tariff under Section 122 through July 2026, production activity rebounded rapidly. Factory utilization rates climbed from crisis levels of 50-60 per cent to nearly full capacity, reaching 90-100 per cent across several leading exporters.

Companies with diversified manufacturing footprints emerged as clear beneficiaries. Companies such as Pearl Global, PDS, and SP Apparels increased operations across multiple geographies to distribute risk and maintain customer commitments. Their ability to shift production and manage sourcing flexibility proved a critical competitive advantage during a period of heightened uncertainty.

The recovery was also supported by stronger-than-expected consumer demand in the US. Retail sales growth of approximately 8 per cent during calendar year 2025 indicated that the slowdown in imports was largely a result of tariff uncertainty rather than weak end-market consumption. Once policy visibility improved, brands quickly resumed sourcing activity.

Cost pressures persist but prices hold

Even as demand improved, manufacturers continued to grapple with inflationary pressures across the value chain. Freight rates to Europe surged by 75-80 per cent amid disruptions around the Strait of Hormuz. Industrial gas prices tripled, while polyester and dye costs rose roughly 20-25 per cent.

Raw material inflation further intensified challenges. Domestic cotton prices rose sharply from Rs 52,000 to Rs 75,000 per candy following a reduction in India’s cotton crop from 31.5 million bales to 29 million bales. Simultaneously, severe drought conditions in the US cotton-growing region of Texas pushed New York cotton futures from $0.62 to $0.83.

Yet, unlike previous cycles, exporters have largely succeeded in passing these cost increases on to international buyers, albeit with a lag of one to three months. This ability to preserve margins reflects stronger buyer dependence on reliable sourcing partners and the growing importance of supply-chain resilience.

Trade agreements create a window

Beyond the immediate cyclical recovery, the industry is increasingly focused on structural opportunities emerging from trade policy developments. The India-UK Free Trade Agreement, ratified in June 2026, and the anticipated India-EU Free Trade Agreement expected in early 2027 could reshape global sourcing patterns.

For Indian manufacturers, these agreements potentially create a tariff advantage of up to 12 per cent over Chinese competitors in European markets. Sourcing teams from European brands have already increased factory audits and supplier evaluations in India as they prepare for implementation.

The opportunity is increased by Bangladesh’s graduation from Least Developed Country status in 2029, which will eventually reduce its preferential access to European markets. Together, these developments position India as a leading contender for incremental global apparel sourcing.

However, trade access alone will not guarantee growth. Wazir Advisors notes that many mid-sized manufacturers still lack the sophisticated documentation, traceability systems, and rules-of-origin capabilities required to navigate stringent European customs regulations. As brands prioritize compliance, sustainability, and multi-country sourcing capabilities, market share is likely to concentrate further among the largest and most sophisticated exporters.

The transformation underway suggests that India’s textile industry is no longer competing solely on cost. What was once a fragmented, commodity-driven sector is evolving into an integrated manufacturing sector. The companies that combine scale, compliance capabilities, diversified production networks, and trade-agreement advantages are emerging as the primary beneficiaries of a global sourcing pattern that rewards reliability over price alone. As buyers continue to rebalance supply chains, India’s textile sector appears positioned to convert a period of extraordinary disruption into a durable phase of export-led growth.

India’s textile and apparel (T&A) sector entered FY2027 with a striking internal contradiction. While the country’s overall merchandise exports increased 18 per cent year-on-year to cross $45 billion in May 2026, the textile and apparel sector moved in the opposite direction, exposing a growing divide between upstream textile manufacturing and downstream garment production.

Latest Confederation of Indian Textile Industry (CITI) data shows India’s textile base that includes spinning, weaving and value-added fabric production continues to show resilience. Apparel exporters, however, are grappling with tariff disruptions, rising competitive pressures and changing global demand patterns. The result is a sector split between a growing raw-material and intermediate-goods business and a struggling finished-garment segment.

This difference has become significant enough to reshape the contribution of T&A to India’s export basket. In May 2026, the sector’s share of total merchandise exports declined to 6.69 per cent from 8.35 per cent a year earlier, despite the broader export economy recording strong growth.

Textile exports find stability

The textile segment emerged as the brighter spot in May. Total textile exports rose 2.47 per cent year-on-year to $1.73 billion, while cumulative exports for April-May 2026 increased 3.03 per cent to $3.40 billion. A closer look of core textile categories excluding jute and carpets reveals a sector benefiting from steady global demand for fibres, fabrics and artisanal products.

Table: Core textile export performance (excluding jute & carpets)

Cotton-based products remained the backbone of the sector, generating nearly $985 million in exports during May. Even amid domestic debates over cotton availability and import policies, Indian spinning and weaving mills continued to secure overseas orders.

The strongest momentum came from handicrafts excluding handmade carpets. Exports from this category jumped nearly 24 per cent in May and over 25 per cent during the first two months of the fiscal year, underscoring growing international demand for premium, handcrafted and culturally distinctive Indian products. Another notable development was the sharp 43.18 per cent rise in cotton raw and waste imports during May. Rather than indicating weakness, the rise reflects mills importing higher-grade fibre to meet stringent international quality specifications and maintain export competitiveness.

The experience of several spinning units in southern India reveals this shift. Following the reinstatement of Quality Control Orders (QCOs) on certain fibre imports, many manufacturers moved away from low-cost synthetic blends and invested in higher-value cotton-based production. The strategy helped preserve export opportunities in premium markets, particularly Europe, where traceability and sustainability have become critical purchasing criteria.

Apparel faces a perfect storm

The resilience visible in textiles has not extended to ready-made garments. Apparel exports fell 14.17 per cent year-on-year in May 2026 to $1.30 billion. The cumulative picture was equally challenging, with exports declining 12.98 per cent during April-May. Stakeholders attribute the drop to a combination of global trade disruptions and structural competitiveness issues. The US, India’s largest apparel market, remained a major source of pressure. Tariff increases over the past year forced many exporters to absorb part of the additional costs through price reductions, squeezing margins and reducing export earnings even where shipment volumes remained stable.

Europe presented another challenge. The suspension of preferential trade benefits at the start of 2026 increased duties on Indian apparel exports, placing suppliers at a disadvantage against competitors such as Bangladesh, Vietnam and Pakistan that continue to enjoy more favourable market access.

At the same time, India’s product mix remains heavily skewed toward cotton apparel, while global demand increasingly favours synthetic and performance-wear categories. Over 70 per cent of apparel demand in developed markets is now linked to synthetic-based products, yet synthetic-rich products account for less than 40 per cent of India’s apparel export portfolio.

Manufacturers in Tirupur, India’s largest knitwear hub, describe the current environment as one of survival rather than growth. Several exporters have accepted lower prices from overseas buyers to protect order volumes, effectively shipping more garments while earning fewer dollars. Many are now redirecting investments toward compliance upgrades, product diversification and preparation for future free-trade opportunities rather than expanding existing cotton-focused capacities.

Numbers behind the divide

The cumulative April-May data highlights just how sharply the sector has split into two distinct paths.

Table: Understanding the export gap

The data suggests that India has become more efficient at exporting fibres, yarns, fabrics and intermediate products, but faces growing obstacles when converting those materials into finished garments for international consumers.

Looking beyond FY2026

Despite current challenges, the medium-term outlook remains constructive. Industry observers expect apparel exports to stabilise over the course of FY2027 supported by easing tariff pressures and anticipated gains from trade agreements.

The India-European Union free trade agreement could significantly improve the competitiveness of Indian garments in one of the world's largest apparel markets. Industry estimates suggest India's market share in Europe could rise substantially once duty barriers are reduced. Similarly, new trade arrangements with West Asian markets are expected to create fresh opportunities for exporters seeking alternatives to traditional destinations.

For India’s textile and apparel industry, the message from May 2026 is clear. The country has strengthened its position as a reliable supplier of fibres, fabrics and specialised textile products. The next challenge is to translate that strength into higher-value garment exports. Success will depend on expanding synthetic capabilities, upgrading manufacturing technologies and leveraging emerging trade agreements to move further up the global value chain. Until then, India’s textile mills and garment factories will continue to tell two very different export stories.