Low-cost fast fashion, back door entry is killing India’s textile, retail sector: Vinod Kumar of India SME Forum
If low-cost imports are left unchecked, India risks hollowing out its textile sector, a backbone of employment and economic resilience, while deepening its trade deficit, writes Vinod Kumar, President, India SME Forum, and Member – Standing Advisory Committee on Flow of Institutional Credit to MSME Sector, Reserve Bank of India (RBI).
The influx of ultra-low-cost fast-fashion imports is quietly reshaping India’s textile and retail landscape. Flooded with inexpensive, mass-produced clothing—predominantly from China—India’s domestic manufacturers, small businesses, and artisans are fighting an uphill battle for survival. While these imports offer consumers access to trendy, affordable apparel, the hidden costs to the economy, employment, and industrial self-sufficiency are mounting. If left unchecked, India risks hollowing out its textile sector, a backbone of employment and economic resilience, while deepening its trade deficit. The challenge is to strike a balance: How can India protect its textile industry without compromising affordability for consumers or violating its trade commitments?
A Textile Powerhouse at Risk
India’s textile industry is one of the oldest and most critical sectors of the economy, employing over 45 million people and contributing significantly to GDP and exports. From handwoven Banarasi saris to large-scale garment factories in Tirupur, the industry is a tapestry of tradition and modern production. However, in the last decade, cheap foreign imports—often priced 50% lower than comparable Indian products— have gained a stronghold in the domestic market.
The consequences are stark. Power-loom factories and small garment units struggle to remain viable as retailers increasingly source from foreign suppliers. In many places in India, handloom weavers have been forced to abandon their trade, unable to compete with synthetic, machine-made imitations from China.
MSMEs that once thrived on supplying affordable, locally made clothing are now shuttering or scaling back, leading to widespread job losses in the textile hubs of Gujarat, Tamil Nadu, and West Bengal. The Clothing Manufacturers Association of India (CMAI) has highlighted a “serious threat to employment” from rising apparel imports. Moreover, a parliamentary panel noted in 2018 that unchecked Chinese imports (across toys, textiles, etc.) were pushing several retailers to shut shop, effectively turning India into “a country of importers and traders” instead of manufacturers.
The trade deficit tells a similar story. India’s apparel imports surged past $8.5 billion in 2023-24, with China alone accounting for nearly 40% of these imports. The irony is stark—while India remains one of the world’s top textile exporters, its domestic market is increasingly dominated by foreign goods. This reliance worsens India’s overall trade gap. In FY2023-24, India’s overall trade deficit with China hit a record $85 billion. Every dollar of cheap clothing imported is a dollar added to the deficit, exerting pressure on the rupee and forex reserves over time.
Also important to note that if Indian brands and manufacturers lose domestic market share to imports, they produce at lower scales, which raises per-unit costs and limits their ability to invest in new technologies. This, in turn, can hurt their export competitiveness.
Lessons from the World: Protecting Local Industry
Recognizing the dangers of unchecked fast fashion imports, several countries have implemented strategic measures to safeguard their domestic textile sectors. Turkey, for instance, imposes high import duties (30- 50%) on foreign garments, effectively encouraging local sourcing. The United States recently suspended tariff exemptions for Chinese e-commerce retailers like Shein, closing a loophole that allowed millions of cheap products to enter duty-free. EU is going even further, moving to prohibit products made with forced labour – a measure that would affect apparel made from Xinjiang cotton, for example. Such an import ban, once in force, would cut off some cheap Chinese textile supplies on ethical grounds. This would also indirectly benefit compliant producers (including those in India) who follow fair labour standards.
India has taken steps in this direction, but they remain insufficient. In 2018, the government doubled import duties on textiles from 10% to 20%, and in 2025, it imposed a ₹115/kg duty on knitted fabrics to discourage cheap imports. However, loopholes remain—for example, many imports arrive through FTA-exempt routes like Bangladesh, where Chinese-origin textiles are repackaged to bypass tariffs. Addressing these requires strict rules of origin and enhanced customs vigilance to ensure that tariff exemptions are not misused.
The Case for Smart Protectionism
While imposing outright bans or excessive tariffs may backfire, India must adopt a calibrated approach to shield its textile sector while remaining competitive in global trade.
Increase Import Duties on Finished Apparel: India should explore raising selective tariffs on imported garments, particularly in fast fashion categories where domestic players are struggling.
Enforce Stringent Quality Standards: Many fast fashion imports fail basic durability as well as environmental standards. Expanding mandatory Quality Control Orders (QCOs) for textile and apparel products, mandating that imports meet Indian standards (for example, colourfastness, fiber content, absence of hazardous dyes).
Close FTA Loopholes: Ensure strict Rules of Origin enforcement so that duty-free benefits are only extended to genuinely local manufacturers, not repackaged Chinese goods. Let here be on shine for Shein like backdoor entry in to India.
Support Domestic Fast Fashion: Retailers that source 50%+ locally should receive tax breaks, creating a financial incentive for domestic procurement.
As consumer awareness grows, the government and industry should promote the narrative of “Sustainable Indian Fashion.” Creating certification labels for eco-friendly and ethically made Indian clothing can carve a niche that ultra-cheap imports (often criticized for pollution and labor abuse) cannot easily fill.
The establishment of Textile Parks (MITRA), dedicated PLI and even infusion of technology are good starts, however cohesive efforts are requisite.
Protecting India’s textile industry is not about isolationism; it is about ensuring fair competition, preserving jobs, and maintaining self-sufficiency in a sector critical to the nation’s economy. If unethical fast fashion continues its unchecked dominance, India risks becoming just another consumer market for unreliable foreign goods. The time to act is now for truly realising Aatmanirbhar Bharat.
