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Fibre2Fashion explores the impact of this budget on the Indian textile industry—an essential component of the MSME sector that employs 45 million people. The textile sector has witnessed a positive shift, with increased allocations to the Ministry of Textiles and an expanded Production Linked Incentive (PLI) scheme covering both technical textiles and the man-made fibre industry. This sector remains vital to rural livelihoods, particularly through small and medium enterprises (SMEs) engaged in handloom production, one of India's oldest and most culturally significant textile traditions.
Textile sector – A comprehensive snapshot
The Indian textile and apparel industry stands as a cornerstone of the country’s economy, playing a pivotal role in employment generation, industrial growth, and export performance. As one of the oldest industries in India, it has seamlessly blended tradition with innovation to maintain its competitive edge on the global stage.
Economic contribution
The sector’s significance is evident in its substantial contribution to the national economy:
Employment powerhouse
The textile and apparel sector is one of the largest employment providers in India, offering direct and indirect livelihood opportunities across the nation:
Dominance of MSMEs
Micro, small, and medium enterprises (MSMEs) form the backbone of India's textile ecosystem, accounting for nearly 80 per cent of the industry’s capacity. These enterprises drive innovation, foster entrepreneurship, and ensure the sector remains labour-intensive, preserving traditional crafts while adopting modern production techniques.
India’s position in global apparel trade
India holds a strong position in apparel exports, with a market share of nearly $3 billion. However, despite its rich textile heritage and vast production capacity, there remains untapped potential in several high-value segments where global competitors currently dominate. Advanced textile technologies, product diversification, and strategic trade policies could help India bridge this gap and expand its footprint in global markets.
Moving forward, leveraging policy support, sustainability initiatives, and digital transformation will be key to unlocking the full potential of India’s textile sector, ensuring long-term growth and global competitiveness.
Ministry of Textiles’ allocation up 19 per cent with a significant boost to PLI scheme
Strengthened commitment to textiles: Budget allocation sees a steady rise
The Union Budget 2025-26 continues the trend of increased financial support for the textile sector, reinforcing its role as a key pillar of India’s industrial and export growth. The allocation for the Ministry of Textiles has witnessed a steady and substantial rise over the past three years, demonstrating the government’s commitment to strengthening domestic manufacturing, innovation, and global competitiveness.
Top of Form
Exhibit 1: Actuals, budget estimates, and revised estimates for FY23, FY24 & FY25 (in ₹1,000 crore)
Source: India Budget
However, despite the ambitious allocation in 2024, the Revised Estimate (RE) stood at ₹3,342 crore (~$382.20 million), indicating a shortfall from the originally planned budget. This reduction may have resulted from changes in project execution, delays, or reassessments of fund utilisation. While the revised estimate suggests some recalibration, the 19 per cent increase in the 2025 budget projection signals a reinforced focus on the textile industry, particularly in expanding domestic production, fostering exports, and encouraging technological advancements.
A balanced approach: ATUFS remains unchanged, incentives introduced
One key component of textile industry support—the Amended Technology Upgradation Fund Scheme (ATUFS)—has maintained the same allocation as the previous year at ₹635 crore (~$72.62 million). While this ensures continuity in supporting technological advancements, it also suggests that no additional push has been provided for scaling up capabilities in textile modernisation.
To compensate, the government has introduced exemptions on certain textile-related goods, aiming to reduce input costs and enhance production efficiency. However, the budget falls short in significantly investing in capacity-building initiatives, which could be crucial for achieving long-term industry growth and competitiveness.
A strategic focus on growth and global competitiveness
This progressive budget allocation underlines the textile sector’s critical role in India’s economic development. The increased funding aims to drive:
While the budget provides strong financial backing, the industry’s long-term success will depend on effective fund utilisation, infrastructure development, and further investments in R&D and capacity building. The coming months will determine how well these allocations translate into tangible benefits for the textile sector and its stakeholders.
PLI scheme for textiles: A strong financial commitment towards growth
The financial trajectory of the PLI scheme for textiles highlights the Indian government’s strategic emphasis on strengthening domestic manufacturing, enhancing global competitiveness, and generating employment in the sector. The scheme, designed to boost large-scale investments in textile production, has seen a significant surge in budgetary allocation over the past three years, reflecting the government’s long-term vision for the industry.
Exhibit 2: PLI allocations for FY23, FY24 and FY25 (in ₹1,000 crore)
Source: India Budget
For fiscal 2023-24, the actual expenditure under the PLI scheme stood at ₹4,000 crore (~$457.46 million), indicating steady progress in its implementation. However, the budget estimates for the following years depict an exponential increase in financial commitment, demonstrating a firm push toward scaling up textile production capabilities:
Driving manufacturing, exports and employment
The steep increase in financial outlay indicates a strategic focus on three key areas:
A consistent approach to policy execution
The alignment between the revised estimates for 2024-25 and the initially projected budget reflects stable planning and confidence in the PLI scheme's effectiveness. This predictability in financial allocation suggests that the government is committed to maintaining momentum in textile sector investments without abrupt fluctuations or policy shifts.
Given this trend, it is anticipated that the revised estimates for 2025-26 will remain close to the allocated budget, ensuring sustained financial backing for the sector. However, effective execution and fund utilisation will be critical in ensuring that this substantial financial commitment translates into real growth, increased exports, and a globally competitive Indian textile industry.
Cotton Productivity Mission
Cotton: The backbone of India's textile industry
Cotton remains the lifeline of India’s textile sector, accounting for nearly 60-75 per cent of apparel exports. As the second-largest exporter of cotton globally, India maintains strong trade partnerships with major economies, including the United States, the European Union, and China. The Indian textile industry is significantly cotton-dependent, with a cotton-to-non-cotton fibre ratio of approximately 60:40, starkly contrasting with the global ratio of 30:70. This heavy reliance underscores cotton’s indispensable role in the country’s textile ecosystem.
Beyond its importance in manufacturing, cotton holds tremendous economic significance, contributing substantially to India’s foreign exchange earnings. Indian cotton exports span across the value chain, including raw cotton, yarn, fabrics, and finished products such as garments, made-ups, and knitwear. Given its economic weight and essential nature—second only to food in importance—cotton has rightfully earned the title of ‘White Gold’.
Challenges hindering India’s cotton productivity
Despite its prominence, India faces persistent challenges in cotton production, particularly in yield efficiency. India's average cotton yield stands at 461 kg per hectare according to the United States Foreign Agricultural Service, which is significantly lower than China's 2,252 kg per hectare. Furthermore, this represents an 8 per cent decline from the 502 kg per hectare recorded in 2014-15.
Although India cultivates approximately 130.61 lakh hectares of cotton—substantially more than China—the yield remains suboptimal due to multiple constraints, including:
These productivity challenges hinder India’s ability to maximise cotton output, ultimately affecting the textile industry’s raw material supply and export competitiveness.
Cotton productivity mission: A strategic initiative
Recognising these challenges, the Cotton Productivity Mission has been launched to enhance cotton cultivation, improve quality, and ensure sustainable production. This mission aims to bridge the yield gap, strengthen supply chains, and boost India’s position in the global cotton market through three key strategic pillars:
1) Technological advancements and automation
To counter labour shortages and improve production efficiency, the mission emphasises automation and mechanisation in cotton farming. The adoption of precision agriculture, high-yield seed varieties, and AI-driven crop monitoring will significantly enhance productivity. Key focus areas include:
2) Ensuring raw material security for the textile industry
India is a major cotton supplier to global apparel manufacturing hubs such as Vietnam, Bangladesh, and China. To stabilise supply chains and enhance domestic value addition, the Cotton Productivity Mission promotes:
3) Enhancing high-quality cotton production
A key objective of the mission is to increase the cultivation of premium cotton varieties, such as Extra-Long Staple (ELS) cotton, which is in high demand in developed markets like the EU and the US. Producing higher-quality cotton will:
The Cotton Productivity Mission, therefore, represents a transformative step in securing India’s position as a leading global cotton producer and exporter. By leveraging technology, ensuring raw material security, and prioritising high-quality cotton cultivation, this initiative aims to bridge the yield gap, enhance textile industry growth, and boost foreign exchange earnings.
With cotton being the foundation of India’s textile success, this mission is poised to strengthen the sector’s global competitiveness, uplift millions of farmers, and drive sustainable growth in the years ahead.
Internal changes in customs duty and exemptions: Strengthening India’s textile competitiveness
Customs duty policies have long been a focal point of discussion, impacting both imports and exports in the Indian textile industry. While India remains import-dependent for several raw materials essential in manufacturing, it is also steadily expanding its footprint in high-value textile exports. The latest budget introduces key customs duty revisions and exemptions, strategically designed to bolster domestic production, enhance global competitiveness, and support critical segments such as technical textiles and fabric manufacturing.
Strengthening India’s position in technical textiles
India’s technical textile sector has been gaining momentum, ranking 5th globally, with projected growth exceeding $10 billion by 2023. A key factor in this growth is the import of textile machinery, particularly for intermediate processes rather than advanced technologies. Currently, India ranks 3rd worldwide in textile machinery imports, highlighting its dependence on foreign equipment for scaling production efficiency.
One notable policy change in this year’s budget is the full exemption of customs duty on two key types of shuttle-less looms:
Previously subject to a 7.5 per cent customs duty, these exemptions indicate a strategic push towards expanding technical textile production, particularly in agrotech, meditech, and geotextiles. Shuttle-less looms provide higher speed, precision, and versatility, making them essential for producing complex fabric structures required in advanced textile applications. By reducing costs for manufacturers, this policy aims to boost domestic production and export competitiveness in technical textiles.
A two-pronged approach: Reducing import dependence, protecting domestic manufacturing
Alongside duty reductions, the budget also adopts a protective stance against imports that threaten India’s textile industry. One such segment is knitted fabrics, where manufacturers have raised concerns over the influx of cheap imports, particularly from China.
Data from January to June FY24 indicates a 16 per cent increase in imports of knitted or crocheted fabrics compared to the previous year, reaching $280 million.
Indian manufacturers have consistently highlighted potential manipulation of HS codes, leading to unfair competition in the domestic market. To address this, the government has increased duties on certain textile materials, helping Indian fabric manufacturers expand their domestic market share and reduce import dependency.
Boosting the leather industry through duty exemptions
The leather industry, a significant contributor to India’s textile value chain, has also received notable attention in the budget.
Crust leather has been exempted from the existing 20 per cent export duty, a move aimed at supporting small-scale tanners and increasing exports. Wet blue leather, commonly used in upholstery fabrics for furniture, has been fully exempted from Basic Customs Duty (BCD).
This aligns with India’s broader strategy to strengthen the leather sector, building on similar duty reductions in the 2024 budget to promote domestic value addition and employment generation.
Creating a conducive ecosystem for textile growth
Beyond tariff adjustments, the budget also introduces several strategic initiatives to boost textile manufacturing, trade, and employment:
The customs duty revisions and policy measures introduced in this budget, therefore, reflect a well-balanced approach to enhancing India’s textile industry. While duty exemptions aim to facilitate technology adoption and manufacturing advancements, increased tariffs on certain imports serve to protect domestic industries from unfair competition. With strategic support for technical textiles, knitted fabrics, and leather production, the government is positioning India’s textile sector for long-term global competitiveness, enhanced employment opportunities, and greater value addition in exports.
Other key announcements to strengthen the textile sector
National Manufacturing Mission
The National Manufacturing Mission, introduced in the Union Budget 2025-26, holds the potential to significantly benefit the textile sector by fostering a more business-friendly environment, improving access to advanced technology, and strengthening the MSME ecosystem. The mission’s emphasis on Clean Tech manufacturing could drive sustainable practices within the textile industry, encouraging innovations such as eco-friendly dyeing techniques and energy-efficient textile machinery.
Additionally, the Focus Product Scheme for the footwear and leather sectors is expected to create synergies with textile manufacturers engaged in apparel and accessories. By promoting the production of high-quality footwear, this initiative may indirectly boost demand for textile components used in leather-based products.
A key aspect of the mission is developing a future-ready workforce, which will enhance the skillset of textile workers, improving both productivity and global competitiveness. Furthermore, its strong focus on exports and innovation could pave the way for new international market opportunities, particularly for high-value textile products that integrate leather and fabric elements.
Addressing non-tariff barriers: Bharat Trade Net & enhanced logistics
One of the major challenges faced by India’s textile industry is the presence of non-tariff trade barriers, which complicate export processes and increase operational costs. The introduction of Bharat Trade Net, a digital trade facilitation platform, is set to revolutionise India's export landscape by integrating key stakeholders such as government agencies, exporters, importers, logistics providers, and financial institutions.
For the textile industry, this platform will be instrumental in reducing non-tariff barriers by streamlining compliance procedures, simplifying certifications, and enhancing customs clearance efficiency. By centralising trade-related processes, Bharat Trade Net will increase transparency, enable real-time tracking, and reduce delays, ensuring faster turnaround times and lower operational costs for exporters. This will strengthen India’s global competitiveness by making textile exports more cost-effective, efficient, and accessible to international buyers.
In addition, the transformation of India Post into a large-scale logistics hub will play a crucial role in enhancing regional connectivity for exports. Given its extensive presence at the village level, this initiative is expected to significantly benefit India’s rural economy, particularly the handloom industry, by improving access to domestic and international markets. Strengthening logistical networks through India Post will empower artisans and small-scale weavers in remote areas, helping them expand their reach and integrate more seamlessly into the global value chain.
Export Promotion Mission: Strengthening India's textile trade
The Export Promotion Mission, with an allocated outlay of ₹2,250 crore (~$257.32 million), is designed to enhance export competitiveness by improving access to export credit and providing cross-border factoring support. A key focus of the mission is addressing the non-tariff barriers (NTBs) that pose challenges, particularly for MSMEs engaged in global trade.
For the textile industry, non-tariff measures (NTMs) imposed by the European Union (EU) have been a significant hurdle. Apparel exporters frequently face challenges related to certifications, stringent regulatory compliance, and specific Sanitary and Phytosanitary (SPS) as well as Technical Barriers to Trade (TBT) standards. These regulatory complexities often increase costs and delay shipments, affecting India's competitiveness in key global markets.
By actively supporting exporters in navigating complex compliance frameworks and easing access to credit, the Export Promotion Mission is expected to bolster India’s textile exports, particularly in developed markets such as the EU, the UK, and the US. The initiative will help Indian textile manufacturers meet international standards more efficiently, thereby expanding market access, reducing trade-related bottlenecks, and enhancing India's position as a leading global textile exporter.
Conclusion
The Union Budget 2025 marks a pivotal moment for India’s textile sector, laying the foundation for enhanced competitiveness, innovation, and global expansion. With a 19 per cent increase in allocations to the Ministry of Textiles and a substantial boost to the PLI scheme, the government has reaffirmed its commitment to strengthening domestic manufacturing, supporting MSMEs, and promoting export-driven growth.
A key highlight of this budget is its strategic focus on technological advancements, particularly in cotton productivity, automation, and technical textiles. The Cotton Productivity Mission aims to address low-yield challenges and secure a stable supply of high-quality cotton, while the National Manufacturing Mission seeks to enhance sustainable production practices and modernise the industry. Meanwhile, initiatives such as the Export Promotion Mission and the launch of Bharat Trade Net will streamline trade processes, reduce non-tariff barriers, and improve India’s export efficiency in key markets like the EU, UK, and US.
The budget also delivers targeted policy support, including customs duty reductions on essential textile machinery and raw materials, which will boost domestic capabilities in technical textiles—a high-growth segment with immense global potential. Additionally, the government's pro-business approach in facilitating MSME growth and promoting sustainable textile manufacturing will further position India as a competitive leader in the global textile value chain.
With these comprehensive measures, the Indian textile industry is poised for accelerated growth, driving employment generation, technological innovation, and export expansion. As the sector strengthens its foothold in sustainable and value-added textile production, India is set to emerge as a key player in the future of global textiles, reinforcing its role as a major contributor to economic growth and international trade.
Fibre2Fashion News Desk (NS)
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