India’s textile industry began the financial year with hopes of recovery. However, rising geopolitical tensions and the ongoing Iran conflict have created fresh challenges for manufacturers. Higher energy prices, freight charges and raw material costs are adding pressure. Meanwhile, global demand remains uncertain.
Raw Material and Freight Costs Continue to Rise
The conflict has pushed up costs across the textile value chain. Polyester prices, which closely follow petroleum prices, have reportedly increased by over 40% since tensions escalated. Cotton yarn prices have also risen by nearly 20%.
Dyes and chemicals used in textile processing have become more expensive too. Their prices have climbed by around 40%. In addition, shipping disruptions and rerouted trade routes have raised freight costs by as much as 80–100% on some corridors. These changes have extended delivery times by nearly two weeks.
Textile and Apparel Production Records a Decline
Higher input costs are affecting manufacturing activity. Industry data shows that textile manufacturing declined by 3.6% year-on-year. Apparel production also fell by 14.6%.
India’s textile and apparel exports stood at approximately $35.8 billion in FY2025-26. This marked a 2.21% decline compared with the previous financial year.
Energy remains one of the biggest expenses for manufacturers. It accounts for nearly 15–20% of production costs across spinning, weaving, dyeing and finishing. Indian manufacturers also face competition from countries such as Bangladesh and Vietnam, where labour and energy costs remain comparatively lower.
Uncertain Global Demand Adds to Industry Pressure
Global demand uncertainty has created further challenges. Many international buyers are delaying orders or reducing their forward commitments.
As a result, delayed shipments and changing delivery schedules are affecting manufacturers. Fashion and seasonal apparel categories face particular pressure because delivery timing plays a key role in these markets.
The situation is also creating working capital challenges, especially for MSMEs. Higher raw material costs and delayed payments from buyers are tying up funds. This leaves manufacturers with less liquidity for daily operations.
Manufacturers Focus on Efficiency and Technology
Despite these pressures, some manufacturers are taking steps to manage costs. They are adopting lean manufacturing practices and reducing their dependence on large inventories.
Companies are also investing in technology-led supply chain systems. These include real-time inventory tracking, demand forecasting tools and diversified sourcing strategies. Such measures can help manufacturers respond more quickly to market changes.
Buyers Look Beyond Low-Cost Manufacturing
International brands are also changing their sourcing priorities. Buyers now place greater focus on faster replenishment, flexible production and smaller order quantities. Supply chain reliability has become another important factor.
Therefore, manufacturers that offer speed, agility and operational flexibility may gain an advantage as sourcing needs evolve.
Long-Term Growth Opportunities Remain
Despite the near-term challenges, India’s long-term textile growth prospects remain. The China-plus-one sourcing strategy continues to create opportunities for Indian exporters. Trade agreements with markets such as the UK and UAE may also support export growth.
Government initiatives are expected to provide further support. These include PM MITRA parks and the Production Linked Incentive (PLI) scheme for man-made fibres and technical textiles.
Industry experts believe the current disruption could speed up changes across India’s textile manufacturing ecosystem. It may encourage manufacturers to improve efficiency, strengthen supply chains and adopt more technology. These steps could help the sector build greater resilience over the long term.
