India Budget 2026: India’s textile and apparel industry remains one of the pillars of the national economy. It contributes around 2.3% to GDP and roughly 13% to industrial production, while also being among the largest employment generators. It employs more than 45 million people.
On the global stage, India ranks as the sixth-largest exporter of textiles and apparel, with products ranging from cotton garments and home furnishings to technical textiles reaching markets across the world.
Yet, despite its size and legacy, the sector is under visible stress. India has been steadily losing price competitiveness to Bangladesh, Vietnam and China. These competitors benefit from lower labour costs, higher labour productivity, more flexible labour regimes, cheaper logistics and energy, and, most critically, preferential or duty-free access to key markets such as the European Union and, in some cases, the US and China.
Trump’s high US tariffs on Indian textile exports have been particularly damaging because the US remains India’s largest export destination for apparel and textiles. As 2026 begins, uncertainty around India-US trade negotiations has created anxiety among exporters, who risk missing the crucial US summer buying season if orders are not finalised early in the year. This pressure is already reshaping corporate strategies.
Firms such as Gokaldas Exports and Raymond Lifestyle have begun shifting or considering shifting parts of their production to African countries like Kenya and Ethiopia, where tariff structures are more favourable and production costs lower. While this may be a rational short-term response by companies, it underlines a deeper challenge for India: without policy and structural correction, domestic manufacturing risks being hollowed out at precisely the moment when global supply chains are looking for diversification.
Global fragmentation and India’s opening
Paradoxically, the same global disruptions that have intensified competition also create a rare strategic opportunity for India. The world economy is fragmenting under the pressure of tariff wars, protectionism, geopolitical conflicts and supply-chain realignments. Traditional production hubs are being reassessed by global buyers who now prioritise resilience, political stability and supply-chain diversification alongside cost.
In this fluid environment, India has an opportunity to reposition itself as a reliable and scalable manufacturing base. This requires identifying sectors that can act as “power lifters” for the economy, the industries capable of driving exports, absorbing labour, strengthening domestic value chains and embedding India more deeply in global trade networks. Textiles and apparel fit this description well. The sector spans agriculture, MSMEs and large manufacturing, employs both skilled and semi-skilled labour, and has a proven export orientation. If nurtured correctly, it can simultaneously support growth, employment and external balance at a time when global headwinds threaten overall economic momentum.
Why textiles can be a power-lifter for India
The textile and apparel sector’s potential as a power-lifter lies in its breadth and depth. It links farmers producing cotton and other fibres with spinners, weavers, processors, garment manufacturers and exporters. It is geographically dispersed, supporting regional development from Tamil Nadu and Gujarat to Uttar Pradesh and West Bengal. Importantly, it has a high employment elasticity. Incremental growth can generate large numbers of jobs, particularly for women.
At a time when India seeks both self-reliance and export expansion, textiles offer a bridge between the two. A stronger domestic textile ecosystem reduces dependence on imported fabrics and man-made fibres, while improved competitiveness can significantly lift exports. With global buyers actively seeking alternatives to over-concentrated supply chains, India could capture market share if it closes its cost and efficiency gaps. Achieving the government’s stated ambition of $100 billion in textile exports by 2030 would not only transform the sector but also provide a powerful cushion to the broader economy amid global volatility.
What the government is already doing
Recognising both the risks and opportunities, the government has begun taking a series of targeted steps. One important move is the preparation of a comprehensive cost-roadmap for the textile sector. By systematically identifying cost disadvantages, whether in raw materials, logistics, power or compliance, the government aims to align Indian production more closely with global benchmarks. A significant initiative is the decision to conduct a nationwide, detailed survey of the textile industry.
The Ministry of Statistics and Programme Implementation is designing a framework to assess enterprise health, employment conditions, gross value added, financial inclusion, export participation and access to credit. Scheduled to be launched in 2027, this survey will provide granular, data-driven insights that have long been missing in policy design for the sector.
On the incentive side, the Production Linked Incentive (PLI) scheme for textiles has been modified and extended. By lowering minimum investment and turnover thresholds and extending the deadline for fresh applications to March 2026, the government has widened participation, particularly for mid-sized firms. The scheme’s focus on man-made fibre apparel, fabrics and technical textiles reflects an attempt to push India into higher-value and faster-growing global segments. 100% FDI (automatic route) is already allowed in the sector. Last year’s labour reforms can help increase productivity and scale since textiles is a labour-intensive industry.
Infrastructure creation is being addressed through the PM MITRA scheme, which envisages seven mega integrated textile parks covering the entire value chain. These parks are designed to reduce logistics costs, improve scale efficiencies and offer plug-and-play facilities that can attract both domestic and foreign investment. Early signs are encouraging, with investment memoranda already pointing to substantial potential inflows.
Trade policy has also become more outward-looking. India has signed new trade agreements with partners such as New Zealand and Oman, and negotiations with the EU and other blocs are ongoing. These agreements are critical for textiles, as tariff differentials often determine sourcing decisions by global buyers.
What Budget 2026–27 can do
Despite all these elaborate efforts, Budget 2026–27 arrives at a moment when decisive policy signalling could alter the sector’s trajectory. One priority area is cost reduction. Targeted relief on power tariffs for textile clusters, rationalisation of logistics costs through faster port handling and freight subsidies, and easier access to competitively priced man-made fibres could narrow the gap with Bangladesh and Vietnam. Incentives for skill upgrading can directly improve productivity. Complementing this, enhanced budgetary support for skilling programmes aligned with modern manufacturing processes could help Indian firms move up the value chain. The budget could also strengthen export competitiveness by expanding interest subvention schemes, improving export credit availability and creating risk-sharing mechanisms for MSME exporters facing volatile global demand.
Budget 2026–27 can also integrate textiles more firmly into India’s broader industrial and strategic narrative. Linking PM MITRA parks with logistics corridors, encouraging sustainable and circular textile practices through fiscal incentives, and supporting innovation in technical textiles would position the sector not just as a low-cost producer, but as a future-ready manufacturing base.
The Union Budget 2025-26 allocated Rs. 5,272 crore for the Ministry of Textiles, a 19% increase from the previous year. It also introduced a five-year Cotton Mission to boost cotton productivity, reduce import dependence, and enhance MSME-driven textile competitiveness. As the sector faces challenges as well as a defining moment, Budget 2026-27 is expected to increase allocation again.
