India is one of the world’s fastest-growing retail markets, with the sector projected to cross $1.4 trillion by 2027. Fashion apparel is a key driver of this growth. The overall Indian textile and apparel (T&A) market was estimated at $165 billion in 2022, and is on track to reach $350 billion by 2030, growing at roughly 10 per cent CAGR. Domestic consumption dominates in FY2024-25, India’s domestic T&A market is valued around $147 billion, of which $108 billion is apparel alone. The remaining segment comes from exports (~$37 billion) in textiles and garments. This robust expansion is driven by urbanisation, rising incomes, and evolving consumer preferences fuelling demand for new fashion. Post-pandemic recovery has further boosted discretionary spending on apparel, especially in premium and occasion wear categories.

Industry Market Trends
A notable trend is the rapid formalisation of the retail sector. Approximately 80 per cent of India’s apparel retail market is still unorganised – comprised of local independent stores and markets. However, organised players (national chains, brands, and online retailers) are expanding faster than the market overall. While India’s apparel market is growing about 11 per cent annually, the organised fashion retail segment is surging at 18–20 per cent per year, steadily increasing its share. The rise of shopping malls, international brand entries, and e-commerce has ushered in a new era of omnichannel retail. Retailers are leveraging technology for efficient inventory management and personalised marketing, reflecting a ‘new era of efficiency and growth’ in organised apparel retail. Categories like sportswear and athleisure are booming as well – driven by a health-conscious youth demographic – with some brands in this segment seeing 15–20 per cent annual growth. Overall, India’s fashion retail market is on a strong growth trajectory, underpinned by favourable demographics (a young population) and increasing consumer spending power.

Major Challenges in Fashion Retail
Despite its growth, the Indian fashion retail industry faces several hurdles that could impede its progress:

  • Supply Chain & Infrastructure: The supply chain for textiles and garments in India is highly fragmented, from cotton farming to textile mills and retail. This fragmentation leads to inefficiencies and higher costs. In recent years, global disruptions (like the COVID-19 pandemic) caused raw material shortages and shipping delays, exposing vulnerabilities in the supply chain. For instance, volatility in cotton prices and import dependency on certain fabrics have squeezed retailers’ margins. Improving logistics, warehousing, and sourcing efficiency remains an ongoing challenge.
  • Fast Fashion & Over-competition: The influx of fast fashion – characterised by rapid product cycles and low prices – has intensified competition and put pressure on local players. Global fast-fashion giants (Zara, H&M) and value-focused domestic brands are flooding the market with new collections, raising consumer expectations for variety and price. Fast fashion is expected to account for 25–30 per cent of India’s overall fashion retail sector by 2030, with sales projected to exceed $50 billion. While this growth indicates opportunity, it also means traditional retailers must keep up in terms of speed and trends. Additionally, the fast fashion phenomenon contributes to overconsumption and waste, creating an environmental challenge. India already produces nearly 7.8 million tonnes of textile waste annually, and about 34 per cent of post-consumer fashion waste ends up in landfills. The sheer pace of fast fashion exacerbates this waste issue, straining waste management and recycling systems.
  • Sustainability Concerns: The fashion and textile industry’s environmental footprint are a rising concern. Globally, fashion is the second-largest consumer of water and responsible for about 10 per cent of carbon emissions. In India, major rivers near textile hubs have faced pollution from dyeing units, and the industry’s energy usage is significant. Consumers and regulators are increasingly aware of these impacts. There is growing pressure on retailers to adopt sustainable practices – such as using eco-friendly materials, reducing water/chemical use, and improving labour conditions. Many Indian brands are still in early stages of this transition, and implementing sustainable sourcing and production can be costly. Balancing affordability with eco-conscious practices is a tough challenge in a price-sensitive market.
  • Regulatory & Policy Barriers: Regulatory hurdles also pose challenges. Goods and Services Tax (GST) implementation in 2017 unified various tax structures into one regime – a long-term positive – but compliance has been complexing for smaller retailers. The government has kept GST on most apparel relatively low (5 per cent on affordable segments), after industry pushback against a proposed increase to 12 per cent. Any future tax hikes on apparel could dampen demand, especially in price-sensitive categories. Additionally, the government’s push for quality standards – such as Quality Control Orders (QCOs) on fibres and textiles – has met resistance. In 2024, new QCO regulations aimed at improving product standards sparked debate, with industry players concerned about higher costs and compliance timelines, leading authorities to defer implementation by a year. Foreign investment regulations historically limited multi-brand retail: even now, foreign multi-brand retailers (like supermarket chains or fashion department stores) face a cap of 51 per cent ownership and state-level approvals, which can deter some entrants. Navigating these regulatory nuances adds to the complexity for companies operating in India’s fashion space.

Opportunities and Growth Drivers
Conversely, the Indian fashion retail sector enjoys significant opportunities that promise long-term growth:

  • E-commerce Boom: India’s fashion e-commerce is expanding at breakneck speed, unlocking new markets. Widespread internet access and affordable smartphones have brought hundreds of millions of Indians online, creating a vast customer base for digital retail. Online fashion sales in India are projected to grow at over 22 per cent CAGR from 2025 to 2029, adding more than $36 billion in new revenue. Platforms like Myntra, Ajio, Amazon Fashion, and Flipkart are aggressively increasing their offerings and personalisation algorithms to cater to consumers beyond the metro cities. The convenience of online shopping, coupled with features like virtual try-ons, one-day delivery, and easy returns, is drawing in first-time buyers from tier-2 and tier-3 cities. This omnichannel trend (integrating online and offline experiences) allows traditional retailers to expand their reach via digital channels, while online players are opening physical experience stores – blurring the line between clicks and bricks.
  • Digital Transformation: Indian retailers are rapidly adopting technology and innovative retail models. Digital transformation is evident in the use of data analytics for trend forecasting, AI-driven inventory optimisation, and tech-infused in-store experiences (such as smart mirrors or mobile POS systems). Many brands now leverage social media and influencers to drive fashion trends and use consumer data to curate localised assortments. Quick commerce innovations are emerging in fashion too – for example, leading e-tailer Myntra piloted an ‘M-Now’ service for ultra-fast delivery of select fashion items within hours. Additionally, the rise of direct-to-consumer (D2C) fashion startups in India showcases how digital-native brands (often launched on Instagram or through their own websites) are finding niche markets – from sustainable clothing to size-inclusive apparel – and scaling rapidly. These digital-first brands are attracting venture investment and collaborating with big retail platforms, adding fresh momentum to the industry.
  • Sustainability and ‘Green’ Fashion: Heightened awareness of sustainability is not just a challenge but also an opportunity. A segment of Indian consumers – especially urban millennials and Gen Z – are beginning to prefer brands that are environmentally and ethically conscious. This is driving demand for organic fabrics, handloom and khadi products, and recycled or upcycled fashion. Brands that build a reputation for sustainability can tap into this growing loyalty. The industry is responding: several large Indian retailers and manufacturers are investing in eco-friendly production and circular fashion initiatives. For example, exporters are adopting cleaner processes due to pressure from Western buyers, and larger domestic brands are now prioritising eco-friendly production, resource efficiency, and circularity in their supply chains. This shift not only appeals to conscious consumers but also prepares Indian companies to meet global standards (potentially opening doors to eco-conscious export markets). Government incentives may soon follow – discussions are underway about formal programs for textile recycling and possibly extended producer responsibility for apparel. As sustainability moves from a niche concern to mainstream demand, it presents a growth avenue for innovators in the fashion retail space.
  • Government Support & Policy Initiatives: The Indian government is actively promoting the textile and apparel sector through various schemes, which in turn create growth opportunities for retail. One major program is the Production-Linked Incentive (PLI) Scheme for Textiles, with an outlay of ₹10,683 crore (~$1.4 billion) to boost domestic manufacturing of man-made fibre apparel and technical textiles. This scheme incentivises companies to scale up production in high-value categories, strengthening the supply base for fashion retailers and encouraging vertical integration. Another initiative is the establishment of PM MITRA mega textile parks across seven states, aimed at creating integrated textile value chain hubs with world-class infrastructure. Over time, these parks can improve logistics and reduce lead times for retailers by housing spinning, weaving, processing, and garment units in one location. Additionally, the easing of FDI norms – such as allowing 100 per cent foreign direct investment in single-brand retail – has attracted global brands to set up stores in India, increasing the variety and investment in the sector. The government’s focus on skill development (through programs like SAMARTH for training textile workers and export promotion (through tax rebate schemes like RoSCTL) further bolsters the ecosystem. Collectively, these initiatives enhance India’s competitiveness in fashion and textiles, creating a more conducive environment for retail growth.

Global Comparison: India vs. Key Markets
India’s fashion retail market, valued at $100–110 billion in 2022–23, trails China and the US (each at $300–360 billion) and the EU, but it is growing much faster. With double-digit growth compared to the single-digit pace in mature markets, India is on track to narrow this gap significantly.

Per capita fashion spending in India remains low, offering vast growth potential as incomes rise. While 80 per cent of India's apparel retail is still unorganised, organised and digital channels are rapidly gaining ground—mirroring China’s retail evolution a decade ago.

India is also one of the world’s top textile producers, contributing ~2.3 per cent to GDP and 12 per cent to exports. Though China, Bangladesh, and Vietnam export more garments today, India stands to benefit from the China+1 sourcing strategy, boosting its global role.

In summary, India may be smaller in size today but is far more dynamic, with strong potential to emerge as a global fashion retail leader in the coming years.

Government Regulations and Policies
Government policies in India have a profound influence on the retail sector, including fashion and apparel. Key regulations and policy aspects include:

  • FDI Norms in Retail: India has gradually liberalised foreign direct investment in retail. In single-brand retail, up to 100 per cent FDI is permitted under the automatic route (with certain conditions). This has attracted global fashion brands like Uniqlo, Zara (through a joint venture), and H&M to open stores in India. A caveat is the 30 per cent local sourcing requirement for foreign single-brand retailers beyond 51 per cent ownership, aimed at boosting domestic procurement. For multi-brand retail, FDI up to 51 per cent is allowed under the government approval route – this area is more restrictive, which is why international supermarket chains and multi-brand fashion department stores (like Walmart or Carrefour) have a limited presence on their own. These FDI rules have encouraged foreign brands to enter via partnerships or franchises in some cases. Overall, the liberalisation of FDI has been positive for fashion retail variety and investment, but the multi-brand cap remains a debated policy point.
  • Taxation (GST) Impact: The introduction of the Goods and Services Tax (GST) was a landmark reform that replaced a web of central, state, and local taxes with a unified tax structure in 2017. For the fashion industry, GST simplified interstate commerce and input tax credits (manufacturers and retailers can offset taxes paid on inputs against those on sales). Most clothing items were put in lower GST slabs (5 per cent for affordable apparel, 12 per cent for certain higher-priced categories). This helped avoid a major price shock to consumers. However, the compliance aspect of GST (such as filing monthly returns, e-way bills for transport of goods, etc.) initially posed challenges, especially for small retailers and artisans. The government has periodically reviewed GST rates for this sector; a proposed increase of the lowest slab from 5 per cent to 12 per cent in late 2021 was deferred after industry protests about its potential impact on sales and livelihoods. Thus, GST’s net impact has been a more streamlined tax regime, albeit with a learning curve. Clarity and stability in GST rates going forward would aid business planning for fashion companies.
  • Labour and Sourcing Regulations: The fashion retail supply chain is affected by labour laws and sourcing rules. India has a large workforce in textile manufacturing, and recent labour code reforms aim to simplify compliance while balancing worker welfare. Retailers and brands are also subject to regulations on product labelling (country of origin, fibre content) and sourcing norms. For example, the government encourages sourcing from the domestic cottage industry – evident in the single-brand FDI rule of procuring from MSMEs. Additionally, there are import duties on certain textiles and garments to protect domestic industry, which retailers must factor in when bringing in imported collections. Navigating these sourcing-related rules is part of the regulatory landscape for fashion retailers, especially those dealing with both local and imported products.
  • Sustainability and Quality Standards: While not yet as codified as in some Western markets, Indian policymakers are increasingly discussing sustainability in fashion. There are no dedicated nationwide mandates on textile recycling or waste reduction yet, but the government has signalled intent toward circular economy principles. We may see future regulations pushing for Extended Producer Responsibility (EPR) in textiles, requiring brands to take back or recycle end-of-life garments. On quality, the mentioned Quality Control Orders (QCOs) are an example of recent policy to enforce standards for fibres (like setting minimum quality for cotton, polyester, etc.). Though implementation is deferred, such regulations indicate a move towards formalising quality and safety in the textile value chain. Furthermore, the government provides incentives for eco-friendly manufacturing (for instance, cheaper loans for setting up less-polluting dyeing units, etc.) as part of broader industrial policies. Export-related compliance, such as adhering to international sustainability certifications, is also indirectly encouraged through schemes that assist firms in upgrading technology. In summary, government policies are gradually steering the industry to be more open to investment, uniformly taxed, and quality-conscious, while also aligning with global trends in sustainability.

Key Players in Indian Fashion Retail
India’s fashion retail space is led by a mix of conglomerates, digital giants, and legacy brands, all contributing to a dynamic and competitive market.

  • Reliance Retail (Reliance Industries): India’s largest retailer, Reliance has a stronghold through formats like Reliance Trends and AJIO.com. It has expanded aggressively with over 2,600 stores, partnerships with global luxury brands, and a growing portfolio of private labels. Its B2B platform, AJIO Business, helps ‘organise the unorganised’ by supplying fashion to local retailers. The brand’s recent partnership to reintroduce Shein in India underscores its multi-channel growth strategy.
  • Tata Group (Trent Ltd): Tata operates Westside and the booming value fashion chain Zudio, which has scaled to over 560 stores. Its success lies in affordable, trendy apparel for budget-conscious shoppers. The group also runs Tata CLiQ and Tata Neu, while managing Zara’s India operations via a joint venture with Inditex. Tata’s strength lies in private labels, joint ventures, and digital integration.
  • Flipkart & Myntra (Walmart-owned): Myntra dominates online fashion with a wide range of domestic and international brands, influencer-led campaigns, and sales events like End of Reason Sale. With AI-based personalisation and innovations like M-Now (fast fashion delivery), Myntra supports small sellers and regional labels. Flipkart’s marketplace model also helps aggregate India’s fragmented fashion supply.
  • Aditya Birla Fashion and Retail (ABFRL): ABFRL owns Pantaloons and key brands like Van Heusen, Peter England, Allen Solly, and Louis Philippe, plus ethnic labels such as Jaypore and W (via TCNS acquisition). It focuses on omnichannel retail, strategic global partnerships (e.g., American Eagle, Sabyasachi), and expanding in both premium and mass markets. ABFRL is seen as a reliable barometer of Indian apparel retail.