Opinion Trump’s tariffs may afford an advantage to India’s textile sector, but it will need to innovate

To address stagnant cotton productivity, the Union Budget 2025–26 introduced a five-year Cotton Mission, focusing on extra-long staple varieties. The Mission will provide support to farmers through Science and Technology to boost domestic productivity, stabilise raw material availability, reduce import dependence and enhance the global competitiveness of India’s textile sector, where MSMEs (Micro, Small and Medium Enterprises) drive 80 per cent of capacity.

The textile sector is gradually shifting its course by focusing on new areas for its development, as the global trend is shifting towards man-made fibre (MMF) textile and apparel. Today, a significant 70 per cent of global trade is conducted in MMF, highlighting their dominant role in the international textile market. India’s cotton demand is decreasing due to the growing importance of MMF textiles. Although India’s MMF exports have grown, the country faces challenges in competing with nations like Vietnam, which has displayed remarkable growth in this sector.

In terms of MMF exports, Vietnam displayed the strongest growth at 18.44 per cent in 2019, followed by Spain at 9.69 per cent and India at 5.71 per cent compounded annual growth rate. As a result, India’s share in global MMF trade was 2.72 per cent in 2019. Vietnam has been at the forefront of reclaiming the space vacated by China over the past five years and has seen the fastest growth among the top 10 exporters of man-made textile and apparel worldwide. India’s imports have grown at a CAGR (compound annual growth rate) of 8.66 per cent, while imports from Vietnam (32.75 per cent), followed by Hong Kong (20.79 per cent), Indonesia (13.67 per cent), and China (9.11 per cent) have overtaken the world growth rate. India observed a 66.10 per cent growth of exports in MMF textile from 2015–16 to 2021–22, higher than the 48.40 per cent growth in cotton textiles. MMF experienced significant momentum, particularly in the year 2021–22. However, MMF exports have not made much headway.

Data for April–October 2024 shows that India’s import of man-made textiles decreased by 13 per cent. For the same period, exports increased by 5 per cent, while cotton textile exports grew by 1 per cent. Imports of $1,859 million (the largest share in the total imports at 34 per cent) signify the growing demand for MMF textiles in the domestic market. Although India is a net exporter of technical textiles, the gap isn’t much — exports surged by 28.40 per cent from $2.21 billion in 2020–21 to $2.85 billion in 2021–22, while imports grew by 44 per cent from $1.7 billion to $2.46 billion. The question then is, how will India tackle the increasing competition from countries like Vietnam, which has witnessed remarkable growth in this sector?

India’s limited technological innovation in MMF and quality concerns have resulted in an underwhelming export performance. Conversely, imports of MMF and technical textiles from other countries are increasing. So, India is gearing up to address the challenges posed by the evolving textile industry landscape.

Under research and capacity building, the government has allocated Rs 1,948 crore, exceeding the previous budget estimate of Rs 686 crore. In this segment, the Production Linked Incentive Scheme (PLI) for textiles received a significant allocation of Rs 1,148 crore. For the National Technical Textiles Mission (NTTM), the government allocated Rs 370 crore, slightly less than the 2024–25 budget estimate of Rs 375 crore. To promote domestic production of technical textile products, such as agro-textiles, medical textiles and geo-textiles at competitive prices, two more types of shuttle-less looms were added to the list of fully exempted textile machinery. The duty on these looms has been made nil from the existing 7.50 per cent.

This provision will reduce the cost of high-quality imported looms, facilitating modernisation and capacity enhancement initiatives in the weaving sector. This will further boost “Make in India” in the technical textile sector. The government has also increased the basic customs duty rate on knitted fabrics to improve competitiveness, encourage the manufacture of Indian knitted fabric and curb cheap imports. The government’s initiative of making a uniform GST rate of 12 per cent on MMF, MMF yarns and apparel, which came into effect on January 1, 2022, was a significant move to benefit the industry. In addition to this, the Scheme for Rebate of State and Central Taxes and Levies (RoSCTL) for export of Apparels and Made-ups has been extended until March 31, 2026.

India is moving in the right direction with the government focusing on industry requirements and strengthening its competitiveness in the global market through policies such as NTTM, PLI, MITRA and RoSCTL/ RoDTEP for apparel/garments.

The recent US tariffs could create a favourable environment for India’s textile industry, potentially reshaping the global trade landscape. Higher tariffs on competing countries could give Indian exporters a competitive edge, enabling them to gain market share in the US. However, it’s crucial to balance short-term gains with long-term strategic planning. Neglecting vital investments in research and development could undermine the industry’s long-term sustainability. Focused research is essential for crafting effective policies that leverage this momentum and drive sustainable growth. As the situation unfolds, a cautious yet proactive approach will be key to maximising opportunities for the Indian textile industry.

Dolly Sunny is director and professor, Centre for Social Studies, Surat. Sneha Pawar is PhD scholar at University of Bombay