India’s textile industry began the financial year expecting recovery, but escalating geopolitical tensions and the ongoing Iran conflict have created fresh challenges for manufacturers. Rising energy prices, higher freight costs, and increasing raw material expenses are putting significant pressure on the sector at a time when global demand remains uncertain.
Polyester prices, heavily linked to petroleum, have reportedly increased by over 40% since the conflict escalated, while cotton yarn costs have risen by nearly 20%. Essential dyes and chemicals used in textile processing have also become substantially more expensive, with prices climbing around 40%. In addition, shipping disruptions and rerouted trade routes have pushed freight costs up by as much as 80–100% on some corridors, extending delivery timelines by nearly two weeks.
The rising cost environment has directly impacted textile production. Industry data indicates textile manufacturing declined 3.6% year-on-year, while apparel production dropped 14.6%. Textile and apparel exports for FY2025-26 stood at approximately $35.8 billion, reflecting a 2.21% decline compared to the previous fiscal year.
Energy continues to remain one of the biggest cost components across spinning, weaving, dyeing, and finishing operations, accounting for nearly 15–20% of production costs. Indian manufacturers are also facing increased competition from countries such as Bangladesh and Vietnam, where labour and energy costs remain comparatively lower.
Global demand uncertainty has further complicated the situation, with many international buyers delaying orders or reducing forward commitments. Delayed shipments and fluctuating delivery schedules are especially affecting fashion and seasonal apparel categories, where timing plays a crucial role.
The current environment is also creating working capital stress for textile manufacturers, particularly MSMEs, as higher raw material costs and delayed buyer payments continue to lock up liquidity.
However, some manufacturers are adapting by implementing lean manufacturing practices, reducing inventory dependency, and investing in technology-driven supply chain management systems. Real-time inventory tracking, demand forecasting tools, and diversified sourcing strategies are increasingly becoming essential for operational resilience.
At the same time, international brands are shifting their sourcing priorities beyond low-cost manufacturing. Buyers are now focusing more on faster replenishment cycles, flexible production capabilities, smaller order quantities, and supply chain reliability. Manufacturers capable of delivering speed, agility, and operational flexibility are emerging as preferred sourcing partners.
Despite the near-term challenges, India’s long-term textile growth story remains intact. The China-plus-one sourcing strategy, along with trade agreements with markets such as the UK and UAE, continues to create opportunities for Indian exporters. Government initiatives including PM MITRA parks and the Production Linked Incentive (PLI) scheme for man-made fibres and technical textiles are also expected to support future growth.
Industry experts believe the current disruption could eventually accelerate the transformation of India’s textile manufacturing ecosystem, encouraging greater operational efficiency, supply chain resilience, and technology adoption across the sector.
