Multi-Pronged Strategy Will Be Key To Sail Through Challenging Times For T&A Industry
Amid trade disruption caused by Trump’s tariff imposition, the Indian Textiles & Apparel sector is gearing up to revisit its strategy in order to reset its goals going forward. The exporters as well as manufacturers have started recalibrating trade strategies amid these global uncertainties. The companies are devising strategies to adapt to evolving market dynamics, with majority of them shifting their focus toward domestic clients, prioritizing local customer needs to ensure stability.
The domestic T&A market is currently pegged at around US$ 135 billion, while the industry exports T&A goods worth around US$ 37 billion. Experts firmly believe that given the strong domestic market, even an additional growth of 7–8% in the domestic market can significantly offset the US$ 10–11 billion worth of exports to the US. Moreover, in the next two months or so, the festive season will help boost the demand in the domestic demand. The recent GST reforms by the government will also further push the demand surge. India primarily exports cotton-based textile products to the US, predominantly home textiles and apparel, which together accounted for around 90% of Indian textile exports to the US in CY24.
Moreover, multiple efforts are being initiated to mitigate the setback in the US market, which accounts for a significant share (~28-29%) of India’s global exports. While exporters are consciously scouting for other markets like the EU, Middle East, Canada and Australia, in the short run, they are also trying to hold on to the existing buyers in the US through mutual negotiations where the stakeholders are looking to soften the tariff consequences by sharing the hit among themselves.
They view that that it would be a futile proposition to completely lose their buyer base in the US in one go and hence they are making all possible negotiations with their US buyers, hoping that the present impasse could be short term in nature. There are large textiles players which are also contemplating temporarily shifting a part of their manufacturing (maybe through contract manufacturing) to other overseas locations which enjoy lower US tariffs.
Trade observers are also of the opinion that over-dependency on any one or two markets is something that is making the industry prone to market vagaries and hence there is need for concerted efforts to diversify the export basket to newer markets, more so when the global trade order has become quite dynamic in nature. They view that multilateral trade arrangements may lose some of their sheen, while bilateral trade agreements will get more prominence driving the global trade in future.
India’s bilateral trade deals already signed and those in the pipeline will help the industry diversify into other markets. The recent India-UK FTA could be a game changer for India’s RMG and home textile sectors, creating a level-playing field vis-à-vis key competing nations for accessing the nearly US$ 23 billion UK import market. Now negotiations with the EU are going on and any breakthrough here will go a long way in accessing the much bigger market. FTAs with Qatar and Gulf Cooperation Council (GCC) are in the pipeline. Discussions with Chile, Peru and New Zealand for bilateral trade agreements are also on.
Care Ratings in its latest report says that the expected decline in exports to the US is likely to be compensated by increase in exports to UK aided by India-UK FTA, and ongoing FTA negotiations with the EU.
“This would mean players will have to realign trade with other major export destinations—the EU, UK and UAE, which together form around 45% of India’s exports for fiscal 2025. The recently signed FTA with the UK is also likely to result in higher exports to that country from end of this fiscal, providing some relief to the industry,” states Crisil Ratings.
Taking cognizance of all these recent developments and to prepare the domestic industry to surmount the challenges going forward, the Union government is also gearing up. Giriraj Singh, Union Minister for Textiles, along with the Minister of State for Textiles and the Secretary, Ministry of Textiles, GOI, recently chaired a high-level meeting with leading stakeholders from the textiles and apparel industry to review the evolving global trade situation, including the recent announcement of tariffs by the US, and to chart a confident, future-oriented strategy for the sector.
The Union Textile Minister also underscored the need to diversify the export basket, enhance product competitiveness and tap into new and under-served markets. India has signed 15 FTAs with partner countries whose combined textile import demand stands at US$ 198.9 billion. The minister urged exporters to actively explore the EU market, which collectively imports textiles worth US$ 268.8 billion, more than twice the size of the US market. India is actively engaged in FTA negotiations with EU.
The union minister has announced the constitution of four committees, comprising industry representatives, to submit time-bound recommendations on diversification into new markets, fiscal and ease of doing business measures, structural reforms in the textile value chain and enhancing cost competitiveness and innovation.
Rahul Mehta, Chief Mentor of the CMAI
“The recent escalation of tariff by the US against Indian exports is a wake-up call for the domestic T&A sector which all these years has been heavily dependent on two major markets – US and EU. It is high time that the industry, along with policy makers, gears up and takes all possible measures to diversify its exports basket with inclusion of other non-traditional destinations. No doubt, it won’t be an easy task in the short term, but has to be done over a period of time. Most importantly, we have a significantly large domestic market which can act as a cushion in any adverse situation. All said and done, we will have to prepare a distinct roadmap and subsequent action plans to sail through these challenging events,” says Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India (CMAI).
Chandrima Chatterjee, Secretary General, CITI
“The US and EU have been our two biggest markets all these years. In the past, we have tried to diversify into other markets as well. But somehow, we have not been able to achieve the desired results, primarily because both these markets so far have been easy entry points for our exports. However, now, in this changed scenario, we don’t have any option but to make conscious efforts to get into other markets and suitably derisk ourselves from the vagaries of market,” stated Chandrima Chatterjee, Secretary General, Confederation of Indian Textile Industry (CITI).
Meanwhile, the industry is also seeking a comprehensive package of export incentives and financial incentives in order to surmount the challenging situation arising due to the US tariff imposition. Experts are of the opinion that going forward a slew of policy and related interventions and initiatives will have to be put in place to deal with the disruption caused by the Trump’s tariff war. In the short run, these should be aimed at helping the industry tide over the ongoing headwinds, on the other, these should help the industry put a more robust and resilient textile value chain which should be globally competitive.
Sanjay Jain, MD, TT Ltd.
“The Indian T&A industry has already been faced with a whole lot of inherent headwinds ranging from not-so-seamless availability of raw material to lack of scale and higher transaction cost due to fragmented supply chains, complex customs procedures and inadequate infrastructure. What we need are holistic reforms (like the recent GST reforms) to address these issues which have been adversely impacting our competitive edge in the global market. While external factors are not within our control, we can always address the issues which are within our purview. All in all, we will be needing a multi-pronged approach to deal with the current scenario,” says Sanjay Jain, MD, TT Ltd.
Observers believe that the policy makers along with industry players will have to work in a more cohesive manner to eliminate the inherent anomalies that are bogging down the textile value chain and derailing all efforts to put up a robust and competitive T&A production base. On one hand, the industry is desperately urging for rationalisation of duties on multiple fronts, on the other, it is often struggling to source its basic raw material. Towards this end, the government’s recent move to suspend the 11% import duty on cotton till December 31, 2025 is being viewed as a right beginning to addresses these issues. Many such interventions are called for going ahead to make the industry more robust and resilience in order to not only face any uncalled for adverse conditions (as being faced currently) more effectively, but also produce goods at a more competitive pricing.
S K Sundararaman, Chairman, SIMA.
“Exempting cotton from the import duty during off-season is vital to create a win-win strategy, both for the cotton farmers and the industry to have a level playing field and gain global competitiveness and thus help it enhance its exports share. The predominantly MSME and fragmented nature of the industry would need imported cotton to cater to the nominated business and also meet the long-term contracts both in the domestic and export markets,” says S K Sundararaman, Chairman, SIMA.
“Raw material accounts for a major portion of the cost of final product. At present, our raw materials are not cost-competitive globally. Today, our raw materials are expensive to the tune of 15-30% than our competing countries. Further, while our competing countries have free access to such raw materials, same is restricted in India by QCOs and import duty. In order to improve cost competitiveness of our T&A products, it is necessary to ensure raw material availability at internationally competitive prices through the rationalization of duties and removal of any types of non-tariff barriers,” states the CITI Secretary General.
Meanwhile, in another move to support the industry, the Department of Chemicals and Petrochemicals has extended the export obligation period for QCOs under AA from 6 months to 18 months. This will allow companies to import cheaper raw materials (polyester fibres and yarns) which are otherwise prohibited, with more time to fulfill export obligations.
CITI has urged the government to continue with key export support schemes. One of such schemes is Interest Equalization, which was critical for the industry, especially the MSMEs in accessing affordable credit and was very useful in improving cost competitiveness of our products by offsetting higher interest rates in India relative to competing countries. However, the scheme expired on December 31, 2024 and hence the industry body has requested the government to announce revival of the scheme which will help exporters in easing down capital pressure and help managing rising costs, thus helping them to compete in international markets.
Currently, the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme is valid until 30 September 2025 and Rebate of State and Central Taxes and Levies (RoSCTL) scheme until 31 March 2026. Given that order booking in the T&A industry occurs several months in advance, exporters require early clarity on the applicability and rates under these schemes to quote competitive prices and secure long-term orders. It is therefore urged that the government announce extensions well in advance for both RoDTEP and RoSCTL, enabling exporters to plan confidently, mitigate market uncertainty, and safeguard India’s share in key export markets.
To facilitate swift industry response to changing trade dynamics, CITI has recommended strengthening of platforms such as the National Committee on Textiles and Clothing (NCTC), enabling unified industry representation and timely policy dialogue.
