India’s textile and garment industry is still trying to emerge from one of its roughest recent phases. First came the US tariff shock and months of uncertainty. Just as exporters began to see a revival, fresh tensions in West Asia threatened to unsettle those gains.
The immediate disruption may ease. The larger problem will not. A sector that runs on thin margins and depends heavily on a few overseas markets remains exposed to every tariff change, freight spike and geopolitical flare-up. That is the real lesson of the past year.
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India’s export dependence
The textile and apparel sector remains one of India’s large manufacturing employers and export earners. The Ministry of Textiles says India was the world’s sixth-largest exporter of textiles and apparel in 2023, and that the US and the EU together accounted for about 47% of India’s textile and apparel exports in 2023-24. That concentration explains why a policy shock in one major market can quickly travel through India’s textile clusters.
The United States remains India’s largest market for textile and apparel exports. The European Union follows. Bangladesh, the United Arab Emirates and the United Kingdom also absorb a large share of shipments. For a sector dependent on a narrow set of destinations, diversification is not a strategic luxury. It is risk management.
Until early last year, Indian exporters were working with manageable tariff assumptions in the US market. Then came a sharp increase. For an industry where margins are often below 5%, that was not a routine cost increase. It was a commercial shock. Buyers paused shipments, reopened contracts and shifted some sourcing to other suppliers. Exporters, especially in labour-intensive clusters, were forced either to absorb the hit or lose buyers.
India textile industry felt the shock in Tiruppur
The pressure was most visible in Tiruppur, the centre of India’s knitwear export economy. Recent reporting, drawing on representations made by the Tamil Nadu government and industry, said the cluster saw confirmed orders worth about Rs 15,000 crore wiped out, production cuts of up to 30%, and daily revenue losses of about Rs 60 crore across Tiruppur, Coimbatore, Erode and Karur at the peak of the tariff disruption.
That matters beyond local distress. The textile business is not just an export line item. It is an employment system. When orders are deferred in a place like Tiruppur, the strain moves quickly to workers, subcontractors and small units that have little ability to absorb volatility.
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Textile industry faces tougher Asian competition
External shocks alone do not explain India’s vulnerability. Bangladesh and Vietnam have used their trade access and industrial ecosystems better. The newer ICRIER competitiveness work makes the point sharply: countries that have gained ground in apparel exports did not do so only because of lower wages. They built scale, integrated capacity, labour systems and trade access around buyer needs.
That is where the Indian debate often becomes too comforting. India’s export basket remains too cotton-heavy, even as global demand has shifted towards man-made fibre products, athleisure, winterwear and blended categories. ICRIER identifies this cotton-heavy production pattern, India’s limited penetration in Japan and Korea, and low utilisation of FTAs as structural weaknesses in apparel exports.
The same study also points to a second weakness that the industry tends to understate: labour productivity. It notes low productivity, a thin supervisory layer, high attrition, weak support systems for migrant workers and inadequate product-specific skilling. Buyers do not shift sourcing only because tariffs move. They also shift when lead times slip, compliance systems are weak or factories cannot scale reliably.
Textile industry and the West Asia risk
West Asia adds another layer of vulnerability. The United Arab Emirates is an important market in itself and also a re-export hub for garments moving into the wider Middle East and Africa. The region is also a vital transit corridor. Conflict there raises freight rates, insurance costs and delivery uncertainty across routes used by Indian exporters.
This is not only a shipping problem. It can also become an input-cost problem, especially for firms dependent on synthetic fibres, chemicals and energy-intensive processing. Recent reporting from textile centres in Tamil Nadu has already flagged conflict-linked increases in polyester fibre prices and broader anxiety over input costs.
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Industry needs diversification and product change
Diversification is no longer a slogan. Exporters have already begun looking more seriously at Japan, Australia, South Korea and parts of Latin America. But new markets alone will not fix the problem if India keeps selling too much of the same product mix. The industry needs to move more decisively into categories where global demand is growing, not remain tied disproportionately to cotton basics.
Much of India’s garment sector still operates through small and medium units with limited access to advanced machinery, integrated production systems or digital supply-chain tools. Global buyers now want shorter lead times, compliance visibility and credible sustainability standards. India cannot meet those expectations on fragmented capacity alone.
Industry cannot rely on policy announcements alone
The government is not unaware of these weaknesses. It has approved seven PM MITRA parks to build integrated textile ecosystems and says infrastructure work has started across all seven sites. It is also using the textile PLI scheme to promote MMF apparel, MMF fabrics and technical textiles; as of September 30, 2025, 91 companies had been selected under the scheme, with reported investment of Rs 7,731 crore and turnover of Rs 7,290 crore.
That is relevant, but it is not yet a verdict. The policy direction is sensible: scale, integration and a push towards MMF and technical textiles. The harder question is whether these schemes will move fast enough, and whether they can fix the older problems of logistics, labour productivity, product capability and commercially useful market access. Those are the constraints that have kept India behind more agile Asian competitors.
For India’s textile industry, the challenge is not merely to recover from the last disruption. It is to become less fragile before the next one arrives.