India’s Textile Sector FY 2025-26

Context

India textile sector, including handicrafts recorded growth of 2.1% in the Financial Year 2025-26 and total exports in the sector stood at 3,16,334.9 crore. It is an indication of the resilience of this sector in the face of global economic headwinds and high reciprocal tariffs imposed by key markets such as the US, and in this respect, it is important to note that the sector has played a critical role in the Indian vision of Viksit Bharat.

Growth Composition: A Segmental Analysis

The growth rate of 2.1% was mainly due to high-value and finished goods which is a move towards value added exports.

• Ready-Made Garments (RMG): Remained the biggest contributor, increasing by 2.9 to ₹1,39,350 crore.
• Handicrafts: became the most rapidly growing major group, increasing by 6.1% to achieve ₹15,855 crore.
• Man-Made Textiles: Registered a good 3.6% growth, up to ₹42,688 crore.
• Cotton and Handloom: Marginal growth of 0.4 was recorded, which implied that the traditional segments remained stable despite the volatility in the world.

Market Diversification and Global Footprint

India increased its exports to more than 120 countries. The expansion was widespread, and there were high increases in:

• Traditional Markets: Japan (+20.6%), Spain (+15.5%), Germany (+9.9%), and the UK (+7.8%).
• Emerging Hubs: The UAE (22.3%), Egypt (38.3%), and Nigeria (21.4%).
• New Horizons: The markets that saw an unprecedented growth such as in Sudan (205.6%) and Senegal (54.4) were an indication of successful market penetration.

Strategic Policy Drivers

The government’s progressive policy framework has played a key role in sustaining this momentum.

1. Export Incentive Schemes: The RoSCTL and RoDTEP schemes were extended through to March 2026 where they remitted the required taxes to exporters.
2. Infrastructure Support: PM MITRA Parks (7 world-class integrated parks) is being developed to offer plug-and-play infrastructure and cut logistics costs.
3. Incentives in Manufacturing: PLI Scheme on Textiles ( 10,683 crore ) is specifically on Man-Made Fibres (MMF) and technical textiles to increase competitiveness in the world market.
4. Trade Diplomacy: Free Trade Agreement (FTA) with EU, UK, EFTA, and Oman is being actively pursued to further eliminate tariff barriers and make India part of global value chains.

Significance for the Indian Economy 

• The second-largest employer in India after agriculture is Employment Engine: Textiles that offers direct livelihood to more than 4.5 crore workers with a large majority women and rural youth.
• GDP & Industrial Contribution: It provides about 2.3 percent of GDP in India, 13 percent of the industrial production and 12 percent of the total export earnings.
• Inclusive Growth: More than 80 percent of the industry potential is in MSME clusters that support grassroots artisans and decentralized weaving industries.

Difficulties and Future Direction

The industry, though growing, is experiencing intense competition with low cost producers such as Vietnam and Bangladesh who enjoy the advantage of duty free entry in most markets and increased labor productivity. Also, the inverted duty system in MMF and increasing logistics expenses are continuing challenges.

Source: The Hindu

UPSC Mains Practice Question

Q. Examine the growth drivers of India’s textile sector in the 2025-26 fiscal year and assess the role of government initiatives in enhancing its global competitiveness.

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