Indian textile manufacturers may be on the cusp of the most favourable trading conditions the sector has seen in a generation, as global apparel buyers continue redirecting orders away from China.
Brokerage house Nuvama Institutional Equities suggests that a combination of tariff parity across competing supplier nations, expanding trade agreements and supportive government policy could allow Indian producers to claim a meaningfully larger slice of world apparel sourcing.
Nuvama’s analysts note that, unlike in earlier decades, India is no longer entering this competition burdened by the same structural disadvantages that previously held it back.
Putting the opportunity in context, Nuvama pointed out that the worldwide textile industry—worth roughly USD 1.6 trillion—is a mature sector expanding at a modest 2.5–3.5% a year.
As such, India’s upside will come less from overall demand growth and more from winning business redirected from other suppliers.
China’s proportion of US apparel imports has fallen by half over the last ten years, leaving close to a fifth of the American market up for grabs among rival exporters such as India, Bangladesh, Vietnam, Pakistan and Indonesia.
The brokerage observed that, tariff-wise, every major apparel-producing nation aside from China now competes on broadly equal terms, while India’s own trade positioning continues to strengthen.
The India-UK Comprehensive Economic and Trade Agreement, effective from 15 July, is anticipated to widen access to the British market, and a prospective India-EU free trade pact could unlock further gains.
Nuvama highlighted that India has held a static roughly 3% share of EU apparel imports for the past decade, dwarfed by Bangladesh’s 16.7%—implying substantial headroom should trade barriers ease.
Separately, the firm flagged a recovery in US retail stock levels. American retail turnover climbed from US$ 5.3 trillion in fiscal 2019 to $7.2 trillion in fiscal 2024FY24—a 6% CAGR even as retailers trimmed excess inventory.
With stock-to-sales ratios now back to normal, restocking orders have picked up again, a trend likely to benefit textile exporters.
That said, Nuvama cautioned that India’s path forward is not without obstacles. Despite commanding a substantial cotton harvest and one of the world’s largest spinning capacities, the country remains overly reliant on cotton at a time when global fibre demand is tilting towards man-made fibres.
India’s garment-making segment has also historically underperformed due to elevated labour costs, weaker trade concessions and a fragmented production base.
Government schemes such as the PM MITRA textile parks are designed to address these gaps by driving consolidation and scale, while targeted support for garments, man-made fibres and technical textiles could help India progress further up the value chain, Nuvama added.
Looking at potential downside risks, the brokerage cited a possible unwinding of current US tariff structures, delays in finalising the EU trade deal, volatility in cotton prices, Chinese man-made fibre overcapacity circumventing trade restrictions, and execution risk tied to the substantial capital expenditure already announced across the sector.
Image courtesy: The Hindu
