Budget 2025 Proposals To Boost Indian T&A Sector And Enhance Global Competitiveness

The domestic textiles and apparel (T&A) sector has applauded the growth-focused measures announced by Union Finance Minister Nirmala Sitharaman in the Budget 2025. Welcoming the progressive budgetary steps aimed at infusing the much-needed momentum, the apex industry body, Confederation of Indian Textile Industry (CITI) says that Budget reflects the government’s commitment to strengthening India’s T&A sector. The Budget has witnessed the textile allocation increased significantly by 57.7 per cent for 2025-26 compared to the revised budget of 2024-25. It is majorly due to increased allocation of Rs 1,148 crore under the PLI scheme for the current year.

Rakesh Mehra, Chairman, CITI, has thanked the government for considering the long-pending demand of the industry and announcing the Mission for Cotton Productivity, which he believes will facilitate significant improvements in productivity and sustainability of cotton farming and promote extra-long staple cotton (ELS) varieties. “It will not only address the industry’s concern of declining cotton productivity but will also reduce our dependency on imports for specialized varieties of cotton like ELS,” he added.

He has also commended the government’s approach and said that the Budget is aimed creating a globally competitive and technology-driven textile sector. The various other government initiatives like the revision of tariff items on knitted fabric categories to boost domestic industry, exemption of two more shuttleless looms from basic customs duty to support technical textile industry and setting up of Export Promotion Mission will accelerate the sector’s growth towards a $350-billion market size by 2030.

“It is heartening to note that the government has a special focus on MSMEs, which account for more than 45 per cent of our exports. The Indian T&A industry is majorly MSME-driven. The enhanced credit availability with guaranteed cover for MSMEs will definitely boost the confidence of MSMEs. However, the textile industry has been requesting a mix of an upfront capital subsidy and performance-based incentive scheme, especially for the MSME and such a scheme is needed for the targeted growth in this sector,” states Mehra.

The introduction of a new tax regime is expected to increase disposable income, thereby enhancing domestic consumption of T&A. The CITI chief avers that higher purchasing power will drive demand across various textile segments, benefiting both small and large industry players. He remains optimistic that import-related relaxations, particularly the extended timelines for end-use compliance, will also be extended to products covered under Quality Control Orders (QCOs). This will help streamline supply chains and improve operational efficiency for the textile value chain.

“The announcement of Rs 600 crore to improve productivity and sustainability of cotton, promote ELS cotton and best of science and technology to cotton farmers on a mission mode approach giving thrust for high yielding seeds to align with 5F vision of the PM, is a step in the right direction,” says S K Sundararaman, Chairman, The Southern India Mills’ Association (SIMA).

SIMA chief believes that the predominantly MSME nature of textile industry would be benefited from the upward revision of MSME sales turnover criteria by two times the investment limit by 2.5 times and thereby become eligible to avail the various fiscal and non-fiscal supports extended for the MSMEs. He added that the levy of 20 per cent import duty or Rs 115 per kg, whichever is higher, on knitted fabrics would curb the cheaper imports from China and other countries and increase the demand for fibres, yarns and fabrics produced indigenously. He has welcomed the extension of customs duty exemption on shuttleless looms, knitting, non-woven and garmenting machines, including their parts, spares and accessories till 31.3.2027 from 31.3.2025.

Sundararaman has also welcomed the Export Promotion Mission facilitating easy access to export credit, cross border factoring support and support to tackle non-tariff measures such as sustainability and climate certifications, which would greatly benefit the MSMEs in particular. He has also applauded various other announcements pertaining to credit guarantee scheme for MSMEs and the new mechanism for facilitating continuation of bank credit to MSMEs during their stress period, skill development initiatives, infrastructure development schemes including maritime, non-conventional energy, power sector, etc.

Commenting on the Union Budget, Rajeev Gupta, CEO, RSWM Ltd, says that the budget introduces key reforms to promote domestic production of technical textile products such as agro textiles, geo textiles and medical textiles at competitive prices. The inclusion of two more shuttleless looms in the list of fully-exempted textile machinery is a progressive step toward expanding production capacity in textile manufacturing.

“The government’s emphasis on Atmanirbharta through increased indigenous textile production aligns well with the proposed revision of the basic customs duty rate on knitted fabrics across nine tariff lines—from 10 per cent or 20 per cent to 20 per cent or Rs 104 per kg, whichever is higher. The government’s commitment to providing technical and R&D support for cotton farmers under the five yeas mission is a welcome move. This initiative is expected to improve cotton farming efficiency and promote diverse cotton varieties,” adds Gupta.

“India is suffering from a very low yield of cotton (436 kg per hectare) much below even the world average (750 kg per hectare). A much-needed Mission for Cotton Productivity has been announced in the Budget. The 5-year mission will increase productivity and sustainability of cotton farming. The emphasis on growing ELS cotton is another positive announcement. This will help in making India self-sufficient in superfine high quality fabrics as presently such cottons get imported,” says GV Aras, Independent Director and Strategic Advisor.

Sanjay Jain, Group CEO of PDS Ltd has commended the government’s focus on national manufacturing for small, medium, and large industries, aligning with India’s ‘Make in India’ and ‘Viksit Bharat’ programmes. He expressed confidence that the five-year mission to boost ELS cotton productivity would improve raw material quality, support textile exports and reduce import dependency. “We hope that the new reforms towards boosting national manufacturing spotlights India’s capabilities as an international manufacturing hub. At PDS, we are equally committed to the Make in India initiative and advancing the future of sustainable manufacturing,” states Jain.

“India has long been a global textile hub, and this Budget takes a positive step toward driving long-term growth in the industry. With the government’s focus on strengthening domestic manufacturing, the proposed Cotton Technology Mission will improve yield quality and availability of cotton, including long staple cotton, and is a very positive step. With cotton-based products forming a significant part of Sutlej Textiles’ portfolio, this initiative will enhance quality, efficiency and sustainability in our operations. These measures will not only benefit manufacturers but also boost exports and reinforce India’s leadership in the global textile market,” says S K Khandelia, Advisor to the Chairman, Sutlej Textiles and Industries.

Sanjay K Jain, Chairman, ICC National Textiles Committee, and MD, TT Ltd, is of the view that the Cotton Productivity Mission of 5 years announced in the Budget to boost productivity and production is a big boost to cotton-based industry.  Today India has no surplus in cotton and has one of the lowest yields of 450kgs/hectare against global average of 800 kgs plus. Hence, there is a need for some concerted effort. Further, flat 20 per cent or Rs 115/kg import duty, whichever is higher, imposed on all knitted fabric HS codes, means no scope for leakages and any fabric below Rs 575/kg would attract import duty of Rs 115/kg and thus will stop entry of undervalued fabrics into the country, a plus for the local MMF-based industry.

“The Cotton Productivity Mission is a vital initiative to improve cotton yield in India from the current 450-500 kg per hectare to 1,000 kg per hectare. This five-year, time-bound mission, driven by advanced technology and scientific support, aims to boost farmer income and ensure raw material security for the Indian textile and apparel sector. Moreover, revisions in income tax slabs and exemptions are a positive step to boost consumption and economic growth. These measures, along with potential RBI rate cuts, will strengthen spending power and drive demand further,” avers Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF), Coimbatore.

Santosh Katariya, President of The Clothing Manufacturers Association of India (CMAI) feels that the Cotton Mission and MSME-focused reforms is a key positive for the textile industry. He notes that raising investment and turnover limits for MSMEs and reducing customs duty on textile machinery would strengthen manufacturing. On the consumption side, income tax relief and TDS/TCS revisions are expected to increase disposable income, thereby boosting demand for textiles and apparel. However, he cautions that any increase in GST rates could offset these benefits.

According to Sudhir Sekhri, Chairman, Apparel Export Promotion Council, the Budget seeks to create a foundation for robust export growth, encouraging innovation and competitiveness, particularly for the MSME sector. The measures announced will help the apparel sector compete globally by promoting Five F vision and ‘Make in India, Make for the World’ initiative.

“The enhancement of MSME investment and turnover limits is a game-changer for India’s manufacturing and export-driven growth. With MSMEs contributing 37 per cent to manufacturing and 45 per cent to exports, this move will unlock greater access to credit, drive job creation and boost global competitiveness. By encouraging scale without fear of losing incentives, it will strengthen supply chains, formalize businesses and accelerate India’s journey as a global manufacturing powerhouse” says Atul Pandey, Partner, Khaitan & Co.

Bhadresh Dodhia, Chairman, Manmade and Technical Textiles Export Promotion Council, states that the increased fund allocation for key government schemes such as RoDTEP (Remission of Duties and Taxes on Exported Goods), RoSCTL (Rebate on State and Central Taxes and Levies) and Production-Linked Incentive scheme for textiles will boost the export potential of manmade fibre textiles and technical textiles.

Meanwhile, the domestic T&A industry has been facing the challenge of higher raw material prices, which have been blunting the edge in the global market. While competitors like Bangladesh and Vietnam have free access to such raw materials, India has imposed QCO on MMF fibre/yarn, which is acting as a non-tariff barrier on the imports of such raw materials and thus affecting their free flow. It has resulted in a shortage of some specialized fibre/yarn varieties and has also impacted domestic prices.

Industry experts are of the view that the expensive raw material is severely affecting the cost competitiveness of the downstream textile products. Since the downstream segment has the highest employment elasticity in the entire value chain, it is endangering the livelihoods of millions of people employed in the sector.

As India aims to achieve its ambitious target of US$ 350 billion textile market by 2030, including US$ 100 billion in exports, it is crucial for the government to ensure ample availability of all raw materials at globally competitive prices. To support this, the government should consider liberalizing import policies and reducing the basic customs duty (BCD) on all MMF fibres, filaments and essential chemicals like PTA and MEG, which are critical in the production of these raw materials.

Indian cotton industry is importing specialized varieties of cotton such as contamination-free organic cotton, sustainable cotton, etc. which are not available domestically. These are being imported under nominated businesses to meet the quality requirements of foreign clients. In India, cotton is predominantly grown majorly by small and marginal farmers who sell their cotton during the peak season. Due to the working capital constraints, the industry also can keep only limited inventory with them and the industry has to rely on traders for the supply of the cotton during the off-season.

Such traders, during off-season, often supply cotton on the basis of import price parity, thus making domestic cotton more expensive than international cotton.  During the year, Indian cotton fibre prices were largely expensive by 15-20 per cent as compared to international cotton prices, which affected the cost competitiveness of the downstream value-added cotton-based textile products.

The import duty that was imposed to safeguard the interest of farmers is not serving its intended purpose, rather it is hurting the domestic cotton textile value chain. The government has excluded cotton of staple length exceeding 32.0 mm from the scope of import duty. However, it accounts for only about 37 per cent of the total cotton imports by India, and the import duty still affects about 63 per cent of the imported cotton. To ensure the availability of cotton at internationally competitive prices, the government should remove BCD from all cotton varieties.

At present the textile mills are able to avail working capital only for three months from the banks due to which mills usually procure 3 months of cotton stock at the start of the season when the cotton prices are usually cheaper. For the remaining months, the mills source cotton from the traders and CCI, whose cotton prices vary according to the market conditions, thus it becomes difficult for the mills to plan their production schedule effectively. To enable the industry to overcome this issue of price volatility, the government should consider coming up with a Cotton Price Stabilization Fund Scheme.

Presently, the government announces a Minimum Support Price (MSP) for cotton every year and in case the prevailing market prices fall below the MSP prices, the Cotton Corporation of India (CCI) intervenes in the market and procures cotton directly from farmers at the MSP rate. Such procurement is carried out at different MSP procurement centres and once procured, CCI stores the cotton in warehouses and sells the same through open market or auctions.

However, the industry has urged the government to come up with a Direct Benefit Transfer (DBT) scheme wherein a farmer can sell his cotton in the open market at the prevailing market prices and if the selling prices are lower than MSP, then the difference between the prices can be transferred into the bank account of the concerned farmer through DBT mode.

Such a scheme will bring more liquidity for the cotton farmers as they will be able to sell their cotton at prevailing market prices without waiting for government procurement to start. Moreover, it will also reduce the burden and carrying charges for CCI and thus will be beneficial for all the stakeholders.

Moreover, the government through the Cotton Corporation of India (CCI) should ensure enough availability of cotton at international prices (when domestic prices rule higher than international prices).