What’s Driving the Divergence in India’s Textile and Apparel Production?

Industrial Output Shows Mixed Signals

New Delhi: Recent data on industrial output from the government indicates a significant growth in August, primarily driven by the manufacturing sector. However, the apparel production sector continues to face a persistent downturn, contrasting with the strong performance of the upstream textile industry.

The Index of Industrial Production (IIP) released by the Ministry of Statistics last week revealed an overall growth rate of 8% in August 2026, up from 6.7% in July.

Within the manufacturing sector, 18 out of 23 industry groups reported positive growth in August 2026 compared to the same month last year, according to the Ministry of Statistics and Programme Implementation (MoSPI).

Wearing apparel, a key segment of India's manufacturing and a significant contributor to exports, experienced a contraction of 7.4% in August, leading to a cumulative decline of 5.6% from April to August in the current financial year.

Conversely, the textile industry, which supplies materials for apparel production, saw a robust growth of 13.1% in August and an overall increase of 11.9% for the fiscal year to date.

In the broader IIP framework, textile production contributes 3.27 points, while wearing apparel accounts for 1.97 points on a scale of 100, which includes 76 points designated for 'Manufacturing'. Other sectors like 'Mining & Quarrying', 'Electricity & Gas Supply', and 'Water Supply, Sewerage & Waste Management' make up the remaining 24 points.

The widening gap between upstream raw material production and downstream apparel manufacturing persists, influenced by geopolitical factors, tariff uncertainties, and global economic conditions.

A Sakthivel, Chairman of the Apparel Export Promotion Council, explained that the two indices reflect different production stages and thus do not necessarily align with overall industrial output.

He noted that textile manufacturing primarily involves upstream processes like yarn and fabric production, which are affected by raw material costs, inventory levels, and intermediate demand. For instance, yarn prices have recently surged.

In contrast, wearing apparel represents the final value-added stage, closely tied to export orders, inventory levels, and global retail demand. Given the current geopolitical climate and trade uncertainties, apparel production is more susceptible to fluctuations in external demand.

India's textile and apparel sector benefits from a strong domestic market alongside its export focus. The Ministry of Textiles' National Household Survey 2024 estimates the total textile market at Rs 14.95 lakh crore, with the domestic market comprising Rs 12.02 lakh crore, or about 80%.

India aims to boost its apparel exports to USD 40 billion by 2030, up from approximately USD 16 billion currently.

Fluctuations in Apparel Manufacturing

Fluctuations in Apparel Manufacturing:

The data indicates that apparel manufacturing experienced a 2% decline in September last year, followed by a drop of over 7.3% in October. However, it rebounded with a 6.7% increase in November and over 17% in December. This year, the index fell sharply by 8.6% in January, followed by a 3.4% decline in February.

Notably, a month after the onset of the US-Iran conflict, the index rose by 4.8% in March but plummeted by over 10% in April. Growth was recorded in May and June at 3.6% and 2.3%, respectively, but it contracted again in July and August by 2.3% and 7.2%.

In contrast, textile production maintained steady month-on-month growth from August to December last year, with only a single drop of 7.7% in October 2025. This year, textile production faced a significant decline only in January (5.7%) and February (24.2%), but rebounded sharply by 48% in March, sustaining that level until August despite ongoing geopolitical tensions and global trade disruptions through the Strait of Hormuz.

Economic Implications

Broader Economic Impact:

According to the National Accounts Statistics 2025, the textile and apparel sector contributes approximately 2% to India's GDP and 11% to manufacturing GVA (Gross Value Added) on average over the past three years.

A sustained decline in apparel manufacturing could have adverse effects on manufacturing, value addition, exports, investment, and employment, ultimately impacting overall economic activity, Sakthivel warned.

Despite the challenges, industry stakeholders believe the apparel sector remains resilient. Apparel exports fell by 9.1% during April-August 2026–27, reflecting a tough global environment, but the rate of decline has slowed in recent months.

The industry is actively pursuing market diversification through new free trade agreements (FTAs) and expanding market access. The upcoming festive season is anticipated to bolster demand. Therefore, while the current IIP figures warrant careful observation, they should be interpreted as an adjustment of a globally integrated, value-added industry to evolving market conditions rather than a widespread downturn in the sector.

Manufacturers and exporters are optimistic about the upcoming festive demand from international markets, expecting sales to rise in the coming months.

Experts suggest that new FTAs and enhanced market access are creating opportunities for diversification, while India's substantial domestic market, particularly during the festive season, offers additional support.

With the industry's adaptability to shifting global conditions, apparel manufacturing is projected to regain momentum and positively contribute to India's growth trajectory.

Sharad Saraf, a Mumbai-based exporter and CMD of Technocraft Industries, remarked, 'Manufacturing growth is slow, but it is cyclical. We expect growth to accelerate in the next two to three months as we are currently processing Christmas orders.' He emphasized the need for a skilled workforce in manufacturing units, which may require hiring additional workers based on order volumes.