Challenges Facing India's $174 Billion Textile Industry Amid Middle East Tensions
Impact of Middle East Conflicts on Indian Textiles
The escalating conflicts in the Middle East are presenting significant hurdles for India's burgeoning $174 billion textile sector. Key issues affecting the industry include rising crude oil prices, increased costs of raw materials, a slowdown in demand, and a new wave of worker migration. Initially, the sector was anticipated to reach a valuation of $350 billion by 2030, but the ongoing crisis is creating substantial challenges to this growth trajectory. The textile industry is a major employer in India, providing jobs to over 45 million individuals. As the conflict intensifies, many workers are reportedly returning to their home states due to rising LPG costs and fears of escalating fuel prices. Surat, known as the “Silk City” of India, is particularly feeling the pressure, with significant impacts on textile clusters like Navsari and Palsana. Surat hosts more than 400 textile processing units, responsible for nearly 40% of the nation’s synthetic fabric production. Since last month, there have been voluntary production reductions, leading to a 40% decrease in output within this textile hub. Additionally, the textile sector in Bhilwara, Rajasthan, is experiencing disruptions, with export orders stalled and trade interruptions affecting shipments valued between Rs 800 and Rs 1000 crore, as reported by various sources. The Indian textile industry aims to achieve $100 billion in exports by 2030, necessitating a focus on leveraging existing strengths while addressing the challenges posed by ongoing geopolitical tensions.
US Tariffs Affecting Textile Exports
US Tariff Dampened Textile Exports
The imposition of tariffs by the US has already hindered the growth of India's textile sector, with apparel exports witnessing a modest increase of just 1.5% year-on-year in dollar terms from April to December of FY2026. The tariffs enacted during Donald Trump's presidency have continued to suppress demand, although a weakening rupee has contributed to a more robust 5.8% growth in rupee terms. According to ICRA estimates, exports to the US fell by approximately 6% in dollar terms during this timeframe, highlighting the adverse effects of tariff pressures on demand. However, this decline was somewhat mitigated by increased shipments to other markets, including the UK and UAE. In FY2025, India's apparel exports reached around $16 billion, representing nearly 3% of global trade, with the US and Europe being significant markets, accounting for about 32-33% and 31-32% of the share, respectively. For FY2027, ICRA projects that revenues for apparel exporters will grow by 8-11% year-on-year, with operating margins expected to improve by approximately 200 basis points to around 9.5%.