What Happened
- India's total textile and apparel exports for FY2025-26 stood at USD 35.16 billion, a degrowth of 2.22% compared to USD 35.96 billion in FY2024-25, according to official government data.
- Textile shipments declined by 2.86% while apparel (garments) slipped by 1.36% compared to the previous fiscal year.
- This reverses the strong growth trajectory of FY25, when textile and apparel exports had grown 6.32% to USD 36.61 billion, driven by a 10.03% jump in apparel exports.
- The decline is primarily attributed to the imposition of US reciprocal tariffs on Indian goods from mid-2025, which reduced export competitiveness in India's largest market for garments.
- The early months of FY26 (April-June 2025) had shown 3.37% growth, but subsequent quarters saw the tariff impact bite, compressing the full-year figure into negative territory.
Static Topic Bridges
India's Textile and Apparel Industry — Structure and Significance
The textile and apparel sector is one of India's oldest and largest industries, contributing approximately 2.3% to GDP, over 12% to total merchandise exports, and providing employment to around 45 million people directly and 100 million indirectly.
- India is the world's second-largest textile producer and sixth-largest apparel exporter
- Major sub-sectors: Cotton yarn/fabric, man-made fibre (MMF), silk, wool, readymade garments
- Key export clusters: Tiruppur (knitwear), Surat (synthetic fabric), Ludhiana (hosiery), Bengaluru (garments)
- Government schemes: Production Linked Incentive (PLI) for MMF and technical textiles; PM MITRA (Mega Integrated Textile Region and Apparel) Parks
- Target: USD 100 billion in textile exports by 2030 (current: ~USD 35 billion)
Connection to this news: The FY26 degrowth underscores the challenge of achieving the USD 100 billion export target, with US tariff uncertainty being the dominant near-term constraint.
US Reciprocal Tariffs and India's Textile Trade
From 2025, the US imposed reciprocal tariffs on imports from multiple countries. India faced an effective tariff increase on textile and apparel goods, which reduced competitiveness against rivals like Bangladesh, Vietnam, and China in the US market — India's single largest garment export destination.
- US tariff on Indian textile/apparel (post-deal): reduced to ~18% from 25% earlier
- US-Bangladesh deal: Bangladesh tariffs reduced from 20% to 19%, with provisions for zero-tariff on certain categories tied to US-origin inputs (cotton, man-made fibre)
- India-US tariff differential on apparel narrowed from 2% to ~1% after the deal
- India's apparel exports to the US fell ~6% in USD terms during the first 10 months of FY26
- Bangladesh is the world's second-largest garment manufacturer and India's key competitor in the US market
Connection to this news: The US tariff pressure was the primary driver of the overall FY26 degrowth, particularly as Q3 and Q4 data reversed the positive start seen in Q1 FY26.
Rules of Origin and Trade Agreements in Textiles
Rules of Origin (RoO) determine whether a product qualifies for preferential tariff treatment under a Free Trade Agreement (FTA) or preferential deal. In textiles, the "yarn-forward" rule is common, requiring the product to be made from locally spun yarn to qualify for preferences.
- "Yarn-forward" rule: used in US trade agreements (e.g., USMCA/NAFTA) — requires yarn to be of domestic origin
- WTO textile trade governed under Agreement on Textiles and Clothing (ATC), which replaced the Multi-Fibre Arrangement (MFA) in 2005
- India's FTA partners: UAE (CEPA signed 2022), Australia (interim ECTA), UK (under negotiation), EU (under negotiation)
- India-UK FTA: textile and apparel is a sensitive sector for both sides; RoO negotiations ongoing
- PLI for textiles: incentivizes production of man-made fibres and technical textiles; not limited to cotton
Connection to this news: As India negotiates FTAs with the EU and UK, securing competitive RoO for garments will be critical to prevent a repeat of the US-tariff-driven degrowth in new markets.
Key Facts & Data
- India T&A exports FY26: USD 35.16 billion (degrowth of 2.22%)
- India T&A exports FY25: USD 35.96 billion (growth of 6.32%)
- India T&A exports FY25 (earlier estimate): USD 36.61 billion (per Fibre2Fashion)
- Textile shipments decline FY26: -2.86%
- Apparel shipments decline FY26: -1.36%
- Apparel growth in FY25: +10.03%
- Q1 FY26 (Apr–Jun 2025) T&A exports: USD 9.082 billion (+3.37% YoY)
- Apparel exports to US: -6% YoY during 10 months FY26
- US tariff on Indian apparel (post-deal): ~18% (down from 25%)
- India's T&A export target by 2030: USD 100 billion
- Total employment in sector: ~45 million direct, ~100 million indirect