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The Union Budget 2025-26 has made significant strides toward boosting the global competitiveness of India’s textile industry, a sector that employs 110 million people, predominantly in rural areas. The government’s vision aims to grow the textile industry from $162 billion to $350 billion and increase exports from $35 billion to $100 billion by 2030.
The Southern India Mills Association (SIMA), representing the textile value chain in South India, welcomed the budget’s focus on addressing structural issues to enhance competitiveness. One key initiative is the Rs600 crore allocation for improving cotton productivity and sustainability. This will focus on promoting high-yielding seeds, enhancing agronomy practices, and branding Indian cotton, aligning with the Prime Minister’s 5F Vision (Farm to Fibre to Factory to Fashion to Foreign). Cotton remains the backbone of the textile industry, accounting for around 80 per cent of exports. However, India’s production of extra-long staple (ELS) cotton has declined, and the industry has been forced to import a significant portion of its ELS needs. The budget’s emphasis on improving domestic ELS cotton production aims to boost exports and reduce reliance on imports.
SIMA Chairman also highlighted that the Ministry of Agriculture and Ministry of Textiles are working on a Special Project covering 15,000 hectares of land across leading cotton-producing states, focusing on high-density planting and improving ELS cotton productivity. Pilot projects have shown potential to increase productivity by 30-50 per cent. Furthermore, the Cotton Textile Export Promotion Council (TEXPROCIL), in collaboration with other employer organizations, launched ‘Kasturi Cotton Bharat,’ a branding initiative for high-quality Indian cotton.
Additionally, the budget’s revision of MSME turnover limits will benefit the predominantly small-scale textile industry, providing easier access to fiscal and non-fiscal support. Measures to curb cheaper imports, such as the 20 per cent import duty on knitted fabrics, will also encourage domestic production. The extension of customs duty exemptions on key machinery like shuttleless looms, knitting, and garmenting equipment will further support growth.
SIMA also praised the government's Export Promotion Mission, which will improve access to export credit, cross-border factoring, and assistance with non-tariff measures such as sustainability certifications. These steps will support the MSME sector, enhance infrastructure, and bolster skill development initiatives, significantly strengthening India’s textile industry on the global stage.
Reacting to the Union Budget 2025, AEPC Chairman Sudhir Sekhri called it inclusive, forward-looking, and a strong push for export-led growth and job creation in the textile sector. He highlighted key measures supporting MSMEs, innovation, and competitiveness.
The budget promotes the ‘Make in India, Make for the World’ vision with MSME financing ease, skilling programs, and support for start-ups. It extends concessional duty on textile machinery imports until 2027 and fully exempts two shuttle-less loom types from import duties to boost advanced textile production.
A five-year cotton productivity mission will help farmers grow extra-long staple cotton with scientific support, ensuring a steady supply for India’s textile industry. Credit guarantee cover for micro enterprises doubles to Rs 10 crore, unlocking Rs1.5 lakh crore in financing. MSME investment and turnover limits will also increase for better access to capital.
The government will launch an Export Promotion Mission with MSMEs to tackle non-tariff barriers. Five National Centres of Excellence for skilling will equip youth with expertise for global manufacturing.
AEPC Secretary General Mithileshwar Thakur said initiatives like BharatTradeNet for digital export processes will drive investment and export growth, reinforcing India’s competitive edge.
The Union Budget 2025-26 has delivered a mixed bag of outcomes for the textile, apparel, and retail sectors, with some initiatives receiving enthusiastic applause while others await further clarification. A clear theme resonating throughout the budget is the government's emphasis on bolstering domestic manufacturing, particularly within the MSME sector, and enhancing cotton productivity.
Textiles: A focus on cotton and domestic production
The textile industry has received a significant boost with the announcement of a five-year "Cotton Productivity Mission." As Prabhu Dhamodharan, Convenor of the Indian Texpreneurs Federation (ITF), Coimbatore, points out, this mission is "a vital initiative to improve cotton yield in India" from the current 450-500 kg per hectare to a targeted 1,000 kg per hectare. This "time-bound mission, driven by advanced technology and scientific support," aims to not only boost farmer income but also, crucially, ensure "raw material security for the Indian textile and apparel sector." This sentiment is echoed by Sanjay Jain, Group Chief Executive Officer of PDS Ltd., who is "pleased with the inclusion of enhancing Extra Long Staple (ELS) Cotton Productivity" in the mission. He believes this will "foster production of superior quality raw material for the textile industry, strengthen India’s traditional textile sector, boost exports, and reduce dependency on imports." The government's commitment to cotton is further underscored by the increased budget allocation for the sector, as noted by sources, rising "steeply from FY 24-25 revised figures of Rs 3342 crores to Rs 5252 crores." This increase, primarily directed towards ATUF & PLI, signifies faster flow of incentive funds to the industry.
Another significant move impacting the textile sector is the revision of customs duty on knitted fabrics. The duty has been revised from "10 percent/20 percent to “20 per cent or Rs115 per kg, whichever is higher” on nine varieties of knitted fabrics," as stated in the budget announcement. This measure, long demanded by the Indian textile industry, aims to control the influx of cheaper imports, particularly from China. Ashok Singhal, a Ludhiana-based textile yarn trader, believes that "at the moment about 70 to 80 percent of HSN codes of knitting fabric imports will be covered for minimum duty of Rs115 per kg. This will restrict import to a great extent.” Sanjay K Jain, Chairman ICC Textiles Committee & Managing Director, TT Ltd, explains that this is "an effort from the government to block evasion of customs duty on knitted fabric by making it 20 per cent or Minimum Import duty on all HS codes.” He further adds that this move is a "PLUS for the local MMF based industry." The Polyester Textile Apparel Association (formerly known as PTA) also highlighted this change, noting that the BCD rate on knitted fabrics under nine tariff lines has been revised to "20 per cent or Rs115 per kg, whichever is higher."
Adding to the positive momentum, the budget also includes the addition of "shuttle-less looms to the import duty exemption list of Technical Textiles Machinery," as mentioned in the budget. This move, also noted by PTAA, is expected to further boost domestic manufacturing and promote the growth of technical textiles, including agro-textiles, medical textiles, and geo-textiles.
Apparel: Riding the MSME wave
The apparel sector, heavily reliant on MSMEs, is poised to benefit from the budget's focus on this segment. Santosh Katariya, President of the Clothing Manufacturers Association of India (CMAI), sees "a huge benefit for the Industry from two angles." He highlights the "measures proposed for MSMEs, especially the Micro Sector," including the increase in various upper limits, as a significant boost. He also believes that the "measures to improve competitiveness of the Export Sector, Domestic Manufacturing Capacities, and Ease of Doing Business will all help give an impetus to Manufacturing." The PTAA also emphasized the enhanced investment and turnover limits for MSMEs, stating that these will be "enhanced to 2.5 and 2 times respectively" to help them achieve higher efficiencies. The enhancements to the credit guarantee cover for MSMEs, including increased credit limits and reduced guarantee fees, will further support the growth of apparel businesses. The introduction of customized credit cards for MSMEs through the Udyam Portal, with a limit of Rs 5 lakh, is another welcome move. The PTA also noted the improved access to credit for MSMEs, including increased credit guarantee cover for micro and small enterprises and startups.
Retail: Consumption is key
For the retail sector, the budget's emphasis on consumption is a positive sign. Katariya notes that the "lowering of Income Tax at various levels will hopefully provide a huge increase in disposable income, increasing consumption." He also points to the "various changes in the TDS and TCS limits" as contributing to increased consumption.
Dhamodharan of ITF believes that the "revisions in income tax slabs and exemptions are a positive step to boost consumption and economic growth." He adds that "these measures, along with potential RBI rate cuts, will strengthen spending power and drive demand further." The increased disposable income resulting from tax relief measures is expected to translate into higher spending on apparel and other retail goods.
The PTAA highlighted several other key budget announcements, including the extension of the time limit for the end-use of imported inputs and the extension of the export period for handicrafts, both aimed at providing greater flexibility to businesses.
Challenges and the road ahead
While the budget has been largely welcomed by the industry, some challenges remain. Katariya expresses a concern about potential increases in GST rates, particularly in the textile and apparel sector, which could negate the positive impacts of the budget. The industry also awaits further clarity on the implementation of the proposed measures to fully assess their impact.
Overall, the Union Budget 2025-26 presents a promising outlook for the textile, apparel, and retail sectors. The focus on cotton productivity, MSME support, and enhanced domestic manufacturing capacity, coupled with measures to boost consumption, are expected to drive growth and innovation in these crucial sectors.
A Sakthivel, Chairman of AMHSSC (Apparel Made-ups & Home Textiles Sector Skill Council), has wholeheartedly welcomed the Union Budget for 2025-26, praising its visionary and growth-oriented approach. He expressed his gratitude to the Hon'ble Prime Minister and the Hon'ble Finance Minister for their progressive and impactful budget, which he believes will pave the way for a stronger and more prosperous India.
Sakthivel highlighted that the budget is designed to accelerate growth, promote inclusive development, invigorate private sector investment, uplift household sentiment, and enhance the spending power of India's rising middle class. These measures are expected to drive rapid economic progress and secure a brighter future for the nation.
Key announcements for the industry include the launch of the ‘Mission for Cotton Productivity,’ a 5-year initiative aimed at improving cotton farming sustainability and productivity. This mission will support farmers with advanced science and technology and promote extra-long staple cotton varieties, ensuring a steady supply for India's traditional textile sector.
In support of MSMEs, the government has revised the classification criteria, increasing investment limits from Rs1 crore to Rs2.5 crore and turnover limits from Rs 5 crore to Rs10 crore, helping these enterprises achieve higher efficiencies and better access to capital. This change will empower MSMEs to grow, innovate, and generate employment opportunities for the youth.
The budget also introduces enhancements in credit availability, particularly for Micro and Small Enterprises (MSEs) and Startups. The credit guarantee cover will increase from Rs 5 crore to Rs10 crore for MSEs, leading to an additional credit flow of Rs1.5 lakh crore over the next 5 years. For Startups, the guarantee cover will rise from Rs10 crore to Rs20 crore, with the guarantee fee moderated to 1 per cent for loans in 27 focus sectors.
Additionally, five National Centres of Excellence for skilling will be established to equip the youth with skills for global manufacturing, boosting India’s potential as a key player in global trade.
For international trade, the government plans to set up an Export Promotion Mission and a unified digital platform, ‘BharatTradeNet,’ to streamline export documentation and financing solutions, boosting the growth of India’s exports.
The budget also includes significant tax relief for middle-class citizens, with no income tax payable up to an income of Rs12 lakh, which will support increased consumption, savings, and investment.
This Union Budget marks a strong commitment to inclusive growth, ensuring that farmers, MSMEs, and the broader manufacturing sector benefit from transformative reforms.
Major retail group Mosaic plans to close all its remaining stores under the Millers and Noni B brands in Australia resulting in the loss of 933 jobs. This follows earlier closures of other Mosaic-owned chains, Katies and Rivers, bringing the total job losses to over 1,500.
KPMG, the receivers for Mosaic, confirmed the unsuccessful search for a buyer for the remaining brands. Filing for bankruptcy in October with $249 million in debt, the group employed over 2,500 workers across 651 stores in Australia and New Zealand. The fallout extends beyond Australia's borders. Garment factories in Bangladesh, reportedly owed $30 million by Mosaic, now face potential default, jeopardizing thousands of jobs.
Overseeing the administration process, FTI Consulting has not commented on whether creditors, including employees owed wages and entitlements, will receive compensation. An official statement from FTI noted they're focused on investigations and reporting to creditors, with a second creditors' meeting scheduled for May.
Mosaic's collapse reflects a broader trend of Australian businesses struggling with rising costs. Creditor Watch reports a 40 per cent increase in insolvencies compared to pre-pandemic levels, with business failures at their highest rate since October 2020. Along with food and beverage and administrative services, the retail sector has been particularly affected. Cautious consumer spending, rising interest rates, and economic strains are putting immense pressure on retail businesses.
Experts suggest that increased voluntary busitess closures may foreshadow further layoffs across Australia. Indeed data from November 2024 indicates that approximately 1.4 per cent of the Australian labor force has been laid off or made redundant. The Mosaic collapse serves as a stark example of the challenges facing the retail industry and the potential for widespread job losses.
New Economic Survey by India advocates for a strategic overhaul of the textile sector, aligning with the global surge in demand for man-made fiber (MMF) products.
Currently, India constitutes only 9.2 per cent of global MMF production . The country trails significantly behind global leaders like Vietnam, China, and Taiwan. A shift to MMF will help boost India's textile exports, as MMF dominated 77 per cent of global fiber consumption in 2024, while cotton accounted for only 22 per cent, says the survey.
Further, the survey highlights concerns about the cotton segment's complex value chain and lack of localization, hindering cost competitiveness. It urges the development of vertically integrated ‘fiber-to-fashion’ firms, similar to those in China and Vietnam, to streamline production. India's cotton production, concentrated in Gujarat, Madhya Pradesh, and Andhra Pradesh, involves a convoluted process of transporting raw materials to Tamil Nadu for yarn production, then back to Maharashtra and Gujarat for weaving. This contrasts sharply with the efficient, localized production of competitor nations.
Furthermore, the survey points out, complex customs procedures and pre-shipment inspection requirements create logistical bottlenecks and increase costs for Indian textile exporters, putting them at a disadvantage compared to China and Vietnam.
While India holds a comparative advantage in cotton-based products, global demand has gravitated towards MMF, used in everything from athleisure wear to technical textiles for aerospace and automotive industries. India's textile export basket is heavily skewed towards cotton, with cotton and cotton-based products comprising eight of the top ten textile exports.
Technical textiles present another promising growth area, notes the survey. India's technical textile sector, currently the fifth largest globally, is rapidly expanding, with a market size of $26.8 billion in FY24. India is a net exporter of technical textiles, with exports valued at $2.58 billion in FY24.
The survey acknowledges that the dominance of micro, small, and medium enterprises (MSMEs) limits scale and efficiency, while the sector's fragmented nature increases logistical costs. Limited foreign direct investment has hampered technological advancements, leading to reliance on imported machinery. A significant skills gap also restricts productivity and innovation.
The textile and apparel industry contributes 2.3 per cent to India's GDP, 13 per cent to industrial production, and 12 per cent to exports, employing over 45 million people. In 2023, India's textile exports reached $34 billion, with apparel accounting for 42 per cent, raw and semi-finished materials for 34 per cent, and finished non-apparel goods for 30 per cent. Europe and the US are the primary destinations for India's apparel exports.
Despite being a significant player, India's global apparel market share of 2.8 per cent in 2023 pales in comparison to China's 30 per cent, Bangladesh's 9 per cent, and Vietnam's 7 per cent. By embracing MMF, streamlining production, and addressing the challenges faced by MSMEs, India aims to capture a larger share of the global textile market.
During the Union Budget for 2025-26, Nirmala Sitharaman, Finance Minister, announced a 5-year mission to enhance cotton production, with a specific focus on extra-long staple (ELS) cotton. India heavily relies on imports for ELS cotton fibers, which are longer than 35mm and used in high-quality fabrics.
The mission will provide farmers with cutting-edge science and technology support to increase income and ensure a consistent supply of quality cotton, revitalizing India's traditional textile sector. This initiative comes as India faces challenges in the global textile market.
In September 2024, the World Bank reported that India's share of global exports in labor-intensive sectors, including apparel, leather, textiles, and footwear, has declined. Meanwhile, countries like Bangladesh, Vietnam, Poland, Germany, and France have increased their global export share in these job-creating sectors by up to 2 per cent between 2015 and 2022.
India's textile and garment exports have stagnated at around $35 billion, while Vietnam and Bangladesh have gained market share, aided by free trade agreements (FTAs) and Least Developed Country (LDC) status, which provide a 10-15 per cent duty concession in Western markets. By boosting domestic cotton production, particularly ELS cotton, India aims to improve its competitiveness in the global textile industry.
The Union Budget 2025-26 introduces the Cotton Productivity Mission, a five-year plan to increase India’s cotton yield from 450-500 kg to 1,000 kg per hectare. With advanced technology and scientific support, the initiative aims to boost farmer income and secure raw material supply for the textile and apparel sector.
Additionally, income tax revisions and exemptions are expected to drive consumption and economic growth. Coupled with potential RBI rate cuts, these measures will enhance spending power and demand across industries.
Prabhu Dhamodharan, Convenor of the Indian Texpreneurs Federation (ITF), welcomed the initiatives, stating that they align with the industry's long-term vision. The focus on cotton productivity and economic stimulus will strengthen India's textile sector and boost its global competitiveness.
Clothing Manufacturers Association of India (CMAI) President Santosh Katariya has welcomed the Union Budget 2025-26, citing key benefits for the textile sector.
While no direct incentives were announced, he highlighted the boost for MSMEs, especially micro enterprises, and the launch of the Cotton Mission as significant steps. Measures to enhance export competitiveness, domestic manufacturing, and ease of doing business were also praised.
On the consumption front, Katariya noted that reduced income tax rates would increase disposable income, potentially driving higher demand. Adjustments in TDS and TCS limits are also expected to support consumption. Additionally, the reduction in basic customs duties on select textile machinery is seen as a positive move.
However, he cautioned that any hike in GST rates on textiles and apparel could offset these advantages. "A big thumbs up to the budget, provided there are no surprises in the fine print," he concluded.
The Union Budget 2025 prioritizes national manufacturing across industries, offering a significant boost to the domestic textile sector, says Sanjay Jain, Group CEO of PDS Ltd. He highlights that PDS, aligning with the Viksit Bharat strategy, recently acquired a 55 per cent stake in Knit Galley India Pvt Ltd to strengthen manufacturing capabilities and enhance sourcing opportunities.
Jain also welcomes the government's five-year mission to improve Extra Long Staple (ELS) cotton productivity, which will enhance raw material quality, support traditional textiles, boost exports, and reduce import dependence.
He emphasizes that these reforms position India as a global manufacturing hub, reinforcing the Make in India initiative. “At PDS, we are committed to advancing sustainable manufacturing while leveraging India’s growing potential,” Jain adds.
The Budget 2025’s focus on strengthening domestic production marks a strategic shift toward self-reliance and global competitiveness in the textile industry.
