Will India’s textile sector scale past $350 billion target as FTAs and tariff cuts fuel rebound 

India is among the top exporters of home textiles, bed and bath linen to the USA. After the free trade agreement with EU and UK, they may get a duty advantage over competition like Pakistan and Bangladesh. The recent push and changing global dynamics are also expected to boost the garment sector and increase fabric and yarn demand. 

Why is the textile set to see strong revival

In fact, the demand across the textile industry has started seeing an uptick on the back of easing inflation and lower tariffs globally. 

Domestic brokerage firm, Emkay expects the sector’s revenue to grow at a compound annual growth rate (CAGR) of 21% and profit to grow by 45% through FY28. “we believe India is at an inflection point to regain its lost glory,” Emkay noted. 

Motilal Oswal also highlighted that the textile sector faced a difficult period between FY22 and FY26 due to high inflation, weak consumer spending, retailer inventory corrections, high freight costs and tariff-related uncertainties after the post-Covid demand surge. “However, from CY25 onwards, demand has gradually started stabilising, supported by inventory normalisation, easing inflation, and lower tariffs, aiding recovery across major textile-exporting countries,” Motilal Oswal noted.

Here are three key factors driving bullish outlook on the sector. 

Upcoming FTAs to help Indian textile firms gain global market share

One of the key reasons behind brokerages’ optimism on the textile industry is the upcoming free trade agreements (FTAs) with the UK and the European Union.

Emkay believes the EU presents one of the largest opportunities for Indian exporters, as the country imports more apparel annually than the US. India’s share of apparel exports to the EU has already increased to around 30% from nearly 25% in FY22.

According to Emkay, the UK and EU agreements could eliminate import duties of around 12% on Indian textile and apparel products, placing Indian exporters on a more level playing field with competitors such as Bangladesh and Vietnam.

Lower US tariffs to drive the next growth phase

Motilal Oswal noted that India’s tariff position in the US market has also improved considerably.

The additional tariffs imposed by the US, which had risen sharply in 2025, have now fallen to around 10%, narrowing the gap with competing sourcing countries such as Bangladesh and Indonesia, which face tariffs of 19%, and Vietnam, which faces a 20% tariff. “This convergence has placed India on a broadly level playing field with its key competitors in the US market,” Motilal Oswal noted.

China+1 strategy strengthens India’s export opportunity

Motilal Oswal said India is well-positioned to benefit from ongoing supply chain diversification as global brands reduce their dependence on China and increasingly prefer large, compliant suppliers.

“With India accounting for only around 4–5% of global apparel trade, substantial market share opportunities remain as global brands diversify sourcing beyond China and increasingly prefer large-scale, compliant suppliers and consolidation with suppliers with lower audit complexity, benefiting major Indian textile exporters,” Motilal Oswal noted.

India’s large spinning capacity, strong cotton availability, low-cost labour and growing base of large exporters make it an attractive sourcing destination for global retailers.

Motilal Oswal also pointed out that restrictions imposed by the US and Europe on cotton sourced from China’s Xinjiang region have created opportunities for alternative sourcing hubs, including India.

Political instability in Bangladesh and Pakistan has further strengthened India’s position in the global textile supply chain, it added.

New investment cycle underway

The sector has entered a fresh capital expenditure cycle as companies expand capacities in garments, technical textiles, man-made fibres and other value-added products, Motilal Oswal noted.

Leading companies including Gokaldas Exports, Arvind, Pearl Global, KPR Mill, Welspun Living and Vardhman Textiles have announced expansion plans to capture rising global demand.

Government initiatives such as the PM MITRA scheme, Production Linked Incentive (PLI) scheme and ATUFS are also supporting investments across the sector.

Large exporters likely to gain market share

Motilal Oswal believes large exporters are likely to benefit as global brands increasingly consolidate sourcing with fewer suppliers to simplify compliance and audit processes.

The report noted that the market share of leading Indian apparel and home textile exporters has steadily increased over the past decade and expects the consolidation trend to continue.

With US retail inventories returning to normal levels and demand showing signs of recovery, Indian exporters are expected to see stronger order inflows, better capacity utilisation and improved profitability.

West Asia conflict to have short-term impact

Emkay also believes the ongoing West Asia crisis could have a short-term impact on margins due to higher energy and logistics costs. However, it expects margins to recover sharply once conditions normalize.

“Backed by a robust domestic market, favorable Dollar-Rupee rate, and strong balance sheet, we believe domestic players would be able to absorb future shocks too,” Emkay said.

Conclusion

According to brokerages, favourable trade agreements, improving tariff competitiveness in key export markets, and the China+1 sourcing shift are supporting a strong recovery in India’s textile industry.

Along with these tailwinds, government initiatives such as the Production Linked Incentive (PLI) scheme, PM MITRA parks, and export incentive programmes such as RoSCTL and RoDTEP are important growth catalysts.

The Indian rupee, which has depreciated by around 11% against the US dollar over the past year, has also improved export competitiveness and boosted earnings potential for export-oriented textile companies.