The Indian textile sector is showing positive demand prospects, according to a report by Systematix Institutional Equities Research. Despite domestic cotton prices remaining higher than international prices, the sector is expected to recover and improve profitability in the coming quarters due to factors such as stable cotton prices, favorable foreign exchange rates, and operational efficiency.
Several factors are contributing to the strong demand outlook for the Indian textile industry:
- Global retailer inventories are normalizing, creating new demand.
- The US may impose higher tariffs on Chinese textile imports, leading to a shift in demand.
- Rising labor costs in Vietnam and political instability in Bangladesh could push more textile orders to India.
However, the report highlights concerns about capacity constraints among Indian garment manufacturers, which may limit their ability to fully capitalize on the increased demand.
Indian textile companies have recorded impressive growth with an 11% year-on-year (YoY) revenue increase, 11% EBITDA growth, and 28% profit after tax growth. Stable cotton and yarn prices contributed to the sector’s improved margins. The Indian government has also raised its allocation for the textile sector in the Union Budget 2025-26 to Rs 52.7 billion, up from Rs 44.2 billion in the previous year, signaling strong support for the industry.
Further support is provided through initiatives such as the Productivity Linked Incentive (PLI) scheme, efforts to improve cotton productivity, and a focus on the technical textile market. Additionally, increased customs duties on imported fabrics are expected to benefit India’s domestic technical textile producers.
Despite a lowered cotton production forecast by the Cotton Association of India (CAI) for the 2024-25 season, the ICAR-Central Institute of Cotton Research (CICR) offers a more optimistic estimate, projecting higher production at 32.0 million bales. International cotton prices have declined, currently hovering around USD 0.67-0.68 per pound, while Indian cotton prices have slightly firmed up but remain predictable, ensuring stable input costs in the near future.
