The Indian textile and apparel sector closed the first three quarters of FY26 with a marginal contraction of 0.26 per cent, reaching $23.25 billion as of December 2025. This decline reflects a high-stakes standoff between domestic exporters and global trade policy shifts. While overall merchandise shipments rose, the textile segment was stifled by the 50 per cent tariff on Indian garment imports enacted by the United States in late 2025. This move has fundamentally altered the competitive landscape, forcing exporters to offer deep discounts of up to 25 per cent to retain market share in their single largest destination.
Logistical bottlenecks and regional constraints
Beyond Western trade barriers, the sector is grappling with regional disruptions in its secondary markets. Historically the primary destination for Indian yarn, Bangladesh implemented restrictive land-port import policies in early 2025, contributing to a 2.19 per cent decline in overall textile shipments. Furthermore, domestic cotton production is projected to reach a two-decade low this season. The Confederation of Indian Textile Industry (CITI) has recently urged the government to eliminate the 11 per cent cotton import duty to offset these supply shortages and rising input costs, which currently put Indian spinners at a structural disadvantage against duty-free competitors like Vietnam.
Strategic move towards domestic demand
Despite the export cooling, the industry is finding a vital buffer in the domestic market, which is projected to grow by 10.5 per cent in FY26. Brands are increasingly focusing on the ‘Aspirational India’ segment in Tier-II and Tier-III cities to compensate for sluggish overseas volumes. Ready-made garments (RMG) have shown resilience, growing by 2.36 per cent during the nine-month period, driven by a surge in man-made fiber (MMF) adoption. Companies that integrated downstream operations have fared better, maintaining credit metrics by capitalizing on the $142 billion domestic market even as home textile exports to the US face fierce price competition from neighboring nations.
Industry stewardship
The Confederation of Indian Textile Industry (CITI) serves as the apex body for the entire textile value chain, representing manufacturers, exporters, and regional associations. It facilitates policy advocacy with the Ministry of Textiles, focusing on raw material security and ESG compliance. With India’s apparel market projected to reach $350 billion by 2030, CITI’s current strategy emphasizes diversifying export destinations to the UK and UAE to mitigate US-specific tariff risks.
