India’s textile industry, often regarded as one of the oldest and most employment-generating sectors in the country, is witnessing a recovery driven by external demand, government support, and a more favourable input cost environment. Although domestic cotton prices remain elevated in comparison to global rates, the broader operating landscape has improved — offering tailwinds to both manufacturers and investors keeping an eye on textile stocks.
A recent industry report points to strong demand recovery across export markets, with stabilising cotton prices, healthy margins for spinners, and favourable foreign exchange trends supporting this resurgence. However, the sector continues to face constraints in garmenting capacity, which could limit its ability to fully capture emerging global opportunities.
Signs of resilience despite price disparities
One of the key talking points in recent months has been the disparity between domestic and global cotton prices. Indian cotton continues to trade at a premium — currently around ₹54,000 to ₹55,000 per candy (roughly USD 0.80 per pound), compared to international prices of USD 0.67 to 0.68 per pound. Despite this gap, Indian textile exporters are holding steady, thanks in part to stable yarn pricing and increased demand from key international buyers.
According to Systematix Institutional Equities Research, global retailers are finally seeing normalised inventory levels, which bodes well for Indian exporters. Factors such as the potential increase in tariffs by the United States on Chinese goods, rising labour costs in Vietnam, and political instability in Bangladesh are also contributing to India’s relative advantage as a sourcing destination.
Operational and financial performance improves
Recent data reveals that Indian textile firms posted encouraging performance figures on a year-on-year basis. Revenue growth stood at 11%, with operating profit (EBITDA) rising by an equal margin. More notably, profit after tax (PAT) jumped by 28%, indicating that improved cost control and better forex management are playing a role in sustaining bottom-line growth.
Subdued cotton prices on a year-on-year basis — down approximately 10% — also supported this margin improvement, especially for spinning mills. Yarn prices have remained relatively steady, contributing to gross margin expansion for producers focusing on yarn and blended fabrics.
Government support adds to the momentum
Policy interventions have played a key part in cushioning the sector during times of volatility and laying the groundwork for long-term growth. The Union Budget 2025–26 reaffirmed the government’s commitment to the textile industry. Allocation to the sector was increased from ₹44,200 crore in FY 2024–25 to ₹52,700 crore this year, reflecting an intent to back both traditional and modern textile segments.
Importantly, the government raised customs duties on imported fabrics — a move welcomed by domestic manufacturers of technical textiles and synthetic blends. This is expected to reduce external competition and strengthen the viability of local production.
The Productivity Linked Incentive (PLI) scheme also continues to offer benefits, particularly in the man-made fibre segment. Combined with broader initiatives such as the five-year cotton productivity mission and efforts to promote sustainability in cotton farming, these measures aim to enhance both capacity and competitiveness.
Cotton production outlook remains mixed
The supply side of the industry is currently marked by a degree of uncertainty. The Cotton Association of India (CAI), in its January 2025 report, revised its production forecast for the 2024–25 season downward by 7.8%, bringing it to 30.17 million bales (each weighing 170 kg). This revision suggests tighter availability, which may keep prices firm in the coming months.
However, contrasting projections by the ICAR-Central Institute of Cotton Research (CICR) place the season’s output at 32 million bales — higher than most earlier estimates. Should the latter scenario hold true, it may offer some relief to mills reliant on domestic procurement. That said, demand continues to outstrip supply, with domestic consumption expected to remain at 31.5 million bales, leaving closing stock at just 2.59 million bales.
Export growth offers tailwinds
The improvement in global demand conditions is not confined to yarn or basic fabrics. There is growing interest in India’s garment and technical textile exports. With global brands looking to diversify away from China and reduce over-dependence on any single country, India is increasingly finding a place in sourcing strategies.
This is particularly important as the textile sector enters a seasonally stronger period. Autumn and winter orders, coupled with festival-related demand from both domestic and international markets, are expected to keep capacity utilisation high in the near term.
Challenges in garmenting capacity
Despite the generally positive outlook, there are structural issues that need addressing. Garment manufacturing in India continues to face capacity constraints — a point highlighted in the recent report. Labour-intensive segments require scale, training and support infrastructure, all of which are still catching up to the demands of global orders.
This mismatch between yarn and fabric availability and garmenting capacity can affect value addition. Until this bottleneck is resolved, Indian firms may find it difficult to move up the export value chain where margins are healthier.
F&O interest and sectoral outlook
As textile stocks gain ground, their presence in the F&O (Futures & Options) segment is drawing attention. Increased futures activity in prominent listed textile companies reflects growing investor interest, particularly as volatility in raw materials and global orders creates short-term trading opportunities.
Seasonality, budgetary announcements, and export orders often lead to sharp price movements — making select textile companies attractive for f&o strategies. This trend is expected to continue as more investors look to benefit from cyclical earnings and favourable policy shifts.
Conclusion: positioned for sustainable recovery
India’s textile sector appears to be at an inflection point. While cotton pricing remains firm and external competition persists, the combination of government support, improved export conditions, and margin stability is working in favour of domestic manufacturers. The sector’s ability to weather input cost volatility while maintaining profitability is encouraging, particularly for long-term investors.
The strong demand outlook, especially in exports, signals that companies with diversified product lines, sound forex strategies, and operational flexibility are likely to benefit. As policymakers double down on productivity initiatives and infrastructure support, the textile industry could gradually resolve its structural constraints and achieve more consistent growth.
For investors tracking textile stocks, the improving fundamentals, coupled with broader participation in the f&o space, suggest that the sector may offer attractive opportunities — both in the near term and over the longer horizon.
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