India’s Textile Industry and Union Budget

The textile industry of India is one of the country’s oldest and most vital sectors, deeply interwoven with its cultural, economic, and social fabric. It serves as a bridge between agriculture and industry, offering large-scale employment and export potential. Contributing significantly to industrial output, foreign exchange earnings, and rural development, the textile sector remains a key pillar of India’s manufacturing and economic strategy. The Union Budget plays a decisive role in shaping its direction through fiscal policies, incentives, and developmental programmes.

Overview of India’s Textile Industry

India’s textile industry is among the largest in the world, encompassing the entire value chain—from raw materials such as cotton, jute, silk, and wool to fibre production, spinning, weaving, processing, and apparel manufacturing. It represents about 13 per cent of India’s industrial output, 2 to 3 per cent of the GDP, and nearly 12 per cent of total export earnings, employing more than 45 million people directly and indirectly.
The sector comprises both organised and unorganised segments, including handlooms, handicrafts, small-scale power looms, and large integrated mills. Recent growth has also been driven by technical textiles and synthetic fibre-based products, which are gaining global demand due to their use in industries such as healthcare, infrastructure, and defence.

Structure and Segments of the Industry

1. Raw Materials: India is a leading producer of natural fibres such as cotton, silk, and jute, while synthetic and blended fibres are increasingly important for global competitiveness.
2. Manufacturing Chain: The production structure spans from ginning and spinning of fibres into yarns, to weaving, dyeing, printing, and garment manufacturing. The sector is supported by small and medium enterprises and industrial clusters spread across states such as Gujarat, Tamil Nadu, Maharashtra, Punjab, and West Bengal.
3. Technical Textiles: This segment, involving geo-textiles, agro-textiles, medical textiles, and industrial fabrics, is emerging as a major growth driver, supported by dedicated government missions.
4. Export Orientation: Textile and apparel exports are a crucial source of foreign exchange. India competes globally with countries such as Bangladesh, Vietnam, and China in ready-made garments, home furnishings, and technical textiles.

Union Budget 2025–26: Key Announcements for the Textile Sector

The Union Budget 2025–26 underscored the strategic importance of textiles as part of India’s manufacturing and export growth vision. The following measures were highlighted for the sector:
1. Increased Budgetary Allocation: The Ministry of Textiles received an allocation of around ₹5,272 crore, reflecting a significant rise over the previous fiscal year. The enhanced outlay aims to strengthen infrastructure, modernisation, and employment generation.
2. National Cotton Mission: A five-year mission was announced to enhance the productivity and quality of cotton, particularly extra-long staple varieties, through scientific farming and technology-driven interventions.
3. Modernisation and Machinery Imports: Import duties on selected categories of shuttle-less looms and advanced textile machinery were reduced to zero to encourage technological upgradation and competitiveness.
4. Boost to Export Facilitation: Duty-free import provisions were extended for raw materials used in handicrafts and garment exports. The permissible period for export obligation was also increased to facilitate smoother trade operations.
5. Support for MSMEs: Recognising that small and medium enterprises constitute nearly 80 per cent of the textile ecosystem, the budget focused on improving credit access, common facility centres, and supply-chain linkages through targeted support measures.
6. Promotion of Technical Textiles and PLI Schemes: The Production Linked Incentive (PLI) scheme and the National Technical Textiles Mission received increased financial support to promote high-value and advanced manufacturing in the sector.

Implications for the Textile Industry

1. Raw Material Security: The Cotton Mission is expected to enhance domestic cotton availability, reduce dependence on imports, and stabilise prices.
2. Technological Advancement: The reduction of import duties on modern machinery encourages firms to adopt efficient, automated systems, reducing production costs and improving quality.
3. Export Competitiveness: Easier access to inputs, extended export deadlines, and tariff reductions are likely to boost India’s global competitiveness in garments, home textiles, and technical textiles.
4. MSME Strengthening: The emphasis on credit facilitation, digitalisation, and infrastructure will strengthen the operational capabilities of smaller manufacturers and improve employment generation.
5. Sustainability and Value Addition: Encouraging innovation in eco-friendly production and technical textiles supports India’s transition to sustainable manufacturing aligned with global standards.

Key Government Programmes and Policy Support

1. Production Linked Incentive (PLI) Scheme for Textiles: Aimed at promoting large-scale manufacturing of man-made fibre (MMF) fabrics, garments, and technical textiles to enhance global competitiveness.
2. National Technical Textiles Mission: Focuses on research, innovation, and skill development in emerging technical textile segments.
3. PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks: Intended to create integrated textile parks offering world-class infrastructure, logistics, and value-chain integration.
4. Interest Equalisation and Export Schemes: These initiatives support exporters through reduced interest rates and incentive structures under the Foreign Trade Policy.
5. Cluster Development and Skill Initiatives: Schemes such as the Integrated Skill Development Programme (ISDP) and Samarth Scheme continue to strengthen the skilled workforce base of the industry.

Challenges and Policy Priorities

While the Union Budget offers new opportunities, the sector continues to face structural challenges:

• Competition from Global Producers: Countries like Bangladesh and Vietnam have cost advantages and favourable trade agreements.
• Fragmentation and Technology Gap: The industry remains dominated by small-scale units with limited access to modern technology.
• Volatility in Raw Material Prices: Cotton and synthetic fibre price fluctuations affect profitability and export competitiveness.
• Environmental and Compliance Issues: Meeting global sustainability standards is critical for export markets.
• Infrastructure and Logistics: High costs in transport, warehousing, and energy impact competitiveness.

The success of budget initiatives depends on effective implementation, strong institutional coordination, and sustained support to innovation, skilling, and sustainable practices.

Broader Economic Impact

The textile sector is one of the most employment-intensive industries in India, especially for women and rural populations. Government investments in modernisation, cotton productivity, and MSME capacity building can have multiplier effects on income generation, rural development, and export growth. The push for technical textiles and advanced manufacturing can help India move up the global value chain, while the focus on sustainability aligns with international trade trends and environmental commitments.