India Budget 2025-26: What's in store for India's textile industry?

Industry anticipated that the Union Budget 2025-2026 would focus on several critical areas, including:

1. Cotton price regulation and sustainability initiatives.
2. Expansion and development of the man-made fibre (MMF) sector.
3. Enhancement of maritime opportunities and shipping routes.
4. Reduction in customs duties on key intermediates to facilitate finished goods exports.
5. Streamlining export regulations for Indian textile products.
6. Strengthening schemes like the Production-Linked Incentive (PLI) and PM MITRA.
7. Additional impetus for skill development.

New developments in the textile industry

The Budget 2025-26 prioritises labour-intensive industries that have remained stagnant in recent years. Previously overlooked opportunities have now come into focus, and tariff lines have been identified where India can leverage its cost advantages. Fibre2Fashion examines how the Union Budget 2025-2026 is poised to bolster the textile and allied industries.

Mission for cotton productivity

Given its deep reliance on cotton-based textiles, India is renewing its emphasis on cotton productivity. The country’s primary export markets—particularly the US and the EU—prioritise quality and sustainability. To address this, the government has introduced a Cotton Productivity Mission, a five-year initiative aimed at increasing the production of extra-long staple (ELS) cotton. India currently imports significant quantities of ELS cotton, which is essential for high-value segments such as baby apparel and nightwear. The mission is expected to enhance farmer incomes and facilitate greater vertical integration within the industry.

Customs duty exemptions: boost for leather and technical textiles

Leather industry: The budget eliminates the Basic Customs Duty (BCD) on wet blue leather to support imports for value addition and job creation. However, a 20 per cent duty will now be levied on crust leather exports to limit the outflow of unfinished leather by small tanners.

Technical textiles: A renewed focus has been placed on technical textiles, particularly agrotextiles, meditech textiles, and geotextiles. According to the National Technical Textiles Mission (NTTM) policy released in 2022, Indian meditech textiles are expected to capture 5.7 per cent of the global market, while agrotech textiles and Geotextiles will account for 2.7 per cent and 2 per cent, respectively. To boost domestic manufacturing, two categories of shuttle less looms will also be exempt from customs duty, addressing a longstanding gap in technological advancements. The allocation for the NTTM has more than doubled, increasing from ₹170 crore to ₹375 crore. This move aims to expand technical garment exports and strengthen India’s position in this specialised segment.

Expansion of ATUFS with increased funding

The budget significantly enhances support for technological advancements in textiles, allocating ₹5,272 crore to the Ministry of Textiles. Of this, ₹635 crore is dedicated to technology upgrades under the Amended Technology Upgradation Fund Scheme (ATUFS)—a 48 per cent increase from the previous year’s revised estimate of ₹390 crore. This investment underscores the government’s commitment to modernising textile production, fostering competitiveness, and driving productivity.

Rising costs of imported knitted fabrics: a boon or bane?

The government has raised Basic Customs Duty on knitted fabrics from 10/20 per cent to 20 per cent or ₹115 per kg (whichever is higher). This move is expected to encourage apparel exporters to source from domestic producers, making local manufacturing more attractive and reducing dependence on costly imports. The decision aligns with the government’s broader strategy of promoting vertical integration, ensuring that more intermediate goods are produced within the country.

Currently, India imports 63 per cent of its knitted fabrics from China (CY 2024). The tariff revision is a welcome relief for domestic manufacturers, who have long expressed concerns over the dumping of cheap imported fabrics. Extending the Minimum Import Price (MIP) for knitted fabrics will provide further protection to local producers.

Skill Development

A new centrally supported skill-building programme has been unveiled, targeting the training of 20 lakh (2 million) youths over five years. This initiative aims to align course designs with industry requirements, ensuring a skilled workforce for the textile sector

Final takeaways

The Union Budget 2025-2026 brings substantial support to the textile industry, emphasising cotton productivity, supporting knitted textiles production, technical textiles, technology upgradation and skill development. While direct incentives for the MMF sector and comprehensive export regulations were not explicitly addressed, indirect measures such as ATUFS expansion and customs duty exemptions seek to bridge these gaps. Overall, the budget takes a strategic approach towards enhancing domestic production, reducing import reliance, and strengthening India’s global competitiveness in textiles.

Fibre2Fashion News Desk (NS)