^{Photo: The Daily Guardian}

India’s textile industry, a cornerstone of its export economy, is facing mounting pressure as geopolitical tensions and trade barriers converge at a critical moment. The sector, which had been positioning itself for rapid expansion, is now grappling with rising costs, slowing demand, and policy uncertainty that could derail its ambitious goal of reaching $100 billion in annual exports.

With global dynamics shifting rapidly, industry leaders warn that the current environment may force companies to prioritize survival over growth in the near term.

Tariffs and Geopolitics Create a Double Shock

The challenges began with steep tariffs imposed by the United States, which significantly reduced the competitiveness of Indian textile exports in one of its largest markets. While a temporary reduction in tariffs earlier this year provided some relief, that momentum was quickly undermined by the outbreak of conflict involving Iran.

The war has had a cascading effect on global supply chains, particularly through disruptions in key shipping routes such as the Strait of Hormuz. As a result, freight costs, insurance premiums, and delivery timelines have all been negatively impacted.

For an industry heavily reliant on timely exports and cost efficiency, these disruptions have translated into shrinking margins and increased operational complexity.

Rising Costs Squeeze Manufacturers

One of the most immediate impacts has been the sharp rise in raw material and production costs. Polyester, a key input derived from petroleum, has seen price increases of more than 40 percent since the conflict began. Packaging, transportation, and energy costs have also surged in parallel.

These increases have put manufacturers in a difficult position. Passing higher costs onto buyers risks losing orders, especially in price-sensitive markets like the United States. Absorbing the costs, on the other hand, erodes already thin profit margins.

As a result, many companies are scaling back production. Some manufacturers have already reduced output by as much as 25 percent, waiting for clearer demand signals before ramping up again.

Export Growth Losing Momentum

The latest trade data reflects the strain on the industry. Between April 2025 and February 2026, India exported textiles and garments worth approximately $29.5 billion, slightly lower than the $29.8 billion recorded during the same period a year earlier.

While the decline may appear modest, it marks a reversal in momentum at a time when the industry was targeting double-digit annual growth rates of 12 to 15 percent. Current growth projections have been revised downward to around 9 percent, signaling a more subdued trajectory.

This slowdown raises concerns about the feasibility of achieving the long-term $100 billion export target, which was predicated on stable global demand and favorable trade conditions.

Demand Risks in Key Markets

The outlook is further complicated by weakening consumer sentiment in major export destinations, particularly the United States. Rising oil prices, driven by geopolitical tensions, are increasing living costs for consumers, which could lead to reduced discretionary spending on apparel.

Retailers in the U.S. are already showing signs of caution, managing inventory more tightly and placing fewer large orders. Industry executives fear a repeat of the demand slowdown seen during the early stages of the Russia-Ukraine conflict, when high inflation and economic uncertainty led to excess inventory and discount-driven sales cycles.

Even though some cost increases are being passed on to buyers, there is a limit to how much consumers are willing to absorb before demand begins to decline.

Workforce and Operational Challenges

Beyond financial pressures, the industry is also facing workforce-related challenges. Textile manufacturing employs more than 45 million people in India, making it the country’s second-largest employer after agriculture.

Rising fuel costs have created unexpected difficulties for workers, particularly migrant laborers who rely on liquefied petroleum gas for daily needs. In some cases, shortages and higher costs have forced workers to return to their hometowns, disrupting factory operations and reducing productivity.

This adds another layer of complexity for manufacturers already dealing with supply chain disruptions and fluctuating demand.

Ceasefire Offers Temporary Relief

A recent ceasefire between the United States and Iran has provided some short-term stability, allowing limited resumption of shipping activity through key النفط routes. Oil prices have eased below $100 per barrel, offering a degree of cost relief.

However, industry experts caution that this is only a temporary reprieve. Prices remain significantly higher than pre-conflict levels, and uncertainty persists over whether the ceasefire will hold.

Without a sustained de-escalation, companies remain hesitant to increase production or build inventory, fearing sudden price reversals or renewed disruptions.

A Critical Moment for the Industry

India’s textile sector stands at a crossroads. On one hand, long-term fundamentals — including a large labor force, expanding manufacturing capacity, and growing trade partnerships — remain strong. On the other, short-term challenges are intensifying, threatening to slow progress toward strategic goals.

To navigate this environment, companies will need to focus on cost efficiency, supply chain diversification, and market adaptability. Policymakers may also need to step in with supportive measures to maintain competitiveness in global markets.

For now, the path forward is uncertain. Until geopolitical tensions ease and demand stabilizes, India’s textile exporters are likely to face continued headwinds, with growth ambitions taking a backseat to resilience and risk management.

‍