India's apparel and textile industry, still recovering from years of structural and economic disruptions, including demonetisation, the implementation of the Goods and Services Tax (GST), the Covid-19 pandemic, tariff uncertainties and recurring geopolitical shocks, is now grappling with the fallout of the escalating West Asia crisis.
The sector directly employs around 45 million people and contributes approximately 2.3 per cent to India's gross domestic product (GDP), and remains heavily dependent on demand from export markets such as the US, Europe and the UK. India is among the world's top five textile and apparel exporters, and the industry accounts for around 12 per cent of the country's total merchandise export earnings, according to data from the Ministry of Textiles.
Industry executives told BW Businessworld that the latest geopolitical disruption is raising logistics and raw material costs, delaying shipments and creating uncertainty across the value chain at a time when global buyers are already cautious.
"The biggest impact is on the export sector, where containers have been stuck at ports with orders on hold. Because of the Strait of Hormuz fiasco, the ones that are getting delivered are taking more time as they have to go around Africa to reach the Western world. Thanks to this, orders have stopped or have been put on hold," said Rahul Khetan, Managing Director, Chavo Textile.
According to the Confederation of Indian Textile Industry (Citi), textile and apparel exports fell 14.02 per cent year-on-year to USD 2.91 billion in March 2026. Within that, apparel exports declined 18.99 per cent while textile exports fell 9.91 per cent, the sharpest monthly contraction in recent quarters. Whereas the export rose to USD 37.8 billion in FY2024-25, according to the Ministry of Textiles
According to experts, the conflict's impact is being felt unevenly but broadly across spinning, weaving, processing and garment manufacturing.
Sanjay K. Jain, Chairperson of the Indian Chamber of Commerce's National Expert Committee on Textiles and Managing Director, TT (formerly known as Tirupati Texknit), said the cost environment has deteriorated sharply. "The current West Asia situation has had a very bad impact. Raw cotton has gone up by 30 per cent, logistics costs have risen sharply and export demand has slowed due to high prices. So obviously, all mills have had a huge impact," he said.
The disruption centres on the Strait of Hormuz, through which approximately 20 per cent of global oil trade passes, according to the US Energy Information Administration (EIA). With vessels forced to reroute around the Cape of Good Hope, transit times to Europe and North America have extended by as much as 25 days, freight rates on key export routes have risen between 40 and 50 per cent according to Maritimes Gateway, and crude-linked input costs are climbing across the value chain, according to
“Due to the war, oil prices shot up, which caused the raw materials prices to go up, increasing the cost for basic products. Shortage of gas caused labourers to migrate back to their hometown for safety, causing a dip in the production line, increasing the cost there also,” Khetan added.
Garments, Polyester Bear Sharpest Stress
“Garments and synthetic polyester segments are bearing the highest stress, experiencing volume contractions in the 13 to 15 per cent range due to cooled discretionary retail spending in Western export markets…Polymers and packaging materials have been up by nearly 50 per cent, while processing dyes and specialised chemicals have risen by around 40 per cent,” said G. Sivasailam, Managing Director, Freudenberg Performance Materials India, a global provider of technical textiles and apparel interlinings, said the stress across segments is highly asymmetric.
The impact on individual segments varies significantly. Spinning mills have remained relatively stable, Jain said, because strong yarn demand from China and Bangladesh has supported prices, helping manufacturers maintain margins despite higher input and logistics costs. Domestic cotton availability has provided a further buffer.
"Weaving mills are in big trouble because yarn prices have gone up by 30 per cent, and end consumers are not ready to accept those prices. People who are doing polyester [manufacturing] are also in trouble because polyester fibre prices have gone up due to crude [oil price increases driven by the West Asia conflict], but they are not able to pass it on [to buyers]. And not only that, but dyeing costs, packaging costs, and labour costs have all gone up," Jain said.
The feedstock problem runs deeper than crude oil price movements alone. Key inputs for polyester production, monoethylene glycol (MEG) and purified terephthalic acid (PTA), are sourced significantly from West Asia, and supply disruptions in the region have pushed their prices higher independently of the broader crude spike. With dyeing, packaging and labour costs also climbing simultaneously, manufacturers find themselves squeezed from multiple directions with limited ability to pass on any of it downstream.
Looking ahead, he warned that conditions could worsen considerably if the current environment persists. "If macroeconomic headwinds, shipping delays and elevated crude prices continue over the next two to three quarters, the textile industry will face a definitive compounding effect across profitability and employment," he said.
That warning is reflected in ratings agency analysis. Crisil Ratings has estimated that prolonged supply-chain disruption, combined with crude averaging USD 110 per barrel, could reduce corporate operating profitability by nearly 200 basis points in FY27, with polyester textiles among the most exposed sectors given limited downstream pricing power.
The broader manufacturing picture reinforces the concern. India's Manufacturing Purchasing Managers' Index fell to a 45-month low in March 2026, according to data compiled by S&P Global, with survey respondents citing rising input costs, shipping delays and weakening new export orders as primary drivers of the decline.
India's crude oil import basket, which serves as a key benchmark for energy-linked input costs, rose from approximately USD 69 per barrel in February 2026 to over USD 85 per barrel by March, according to data from the Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas. Additionally, it is currently being traded at USD 1.9.31 per barrel following a fresh escalation in US-Iran tensions.
Export Competitiveness Under Pressure
The logistics crisis is amplifying a structural cost disadvantage that Indian textile exporters have flagged for years. Competing manufacturing hubs, particularly Bangladesh and Vietnam, benefit from zero or low import duties on raw materials, allowing them to source inputs at internationally competitive prices. Indian producers face duties on several key inputs, a disadvantage that becomes more consequential as global buyers grow increasingly price-sensitive.
"The textile industry has been requesting the government to slash import duties on raw materials to zero so that we get inputs at international parity prices, similar to competitors such as Bangladesh and Vietnam," Jain said.
The disruption's reach is also broader than bilateral trade data suggests. The UAE functions as a key redistribution hub for Indian textiles, with manufacturers shipping fabrics to Dubai's free zones from where they are re-exported to markets across Africa, the Gulf Cooperation Council (GCC), Central Asia and Europe, according to industry data compiled by Gulf News and trade consultancy Flyingcolour. Disruption to Gulf trade routes, therefore, ripples through a far wider network of buyers than India's direct export figures to the region would suggest.
According to media reports, exporters in Tiruppur, which accounts for 90 per cent of India's total cotton knitwear exports and 55 per cent of the nation's overall knitwear exports, with the cluster recording exports of Rs 39,618 crore in FY2024-25, according to the Tiruppur Exporters' Association (Tea) say delayed seasonal shipments are already affecting order flows, working capital cycles and, in some cases, triggering cancellations by international retailers.
Industry Calls For Structural Reform
Industry bodies and policy experts say the current crisis has once again exposed structural vulnerabilities in India's textile export ecosystem and that temporary relief measures alone will not resolve them.
Chandrima Chatterjee, Secretary General Citi, said in a recent post a few weeks earlier that the impact of the West Asia crisis is visible across raw material imports, input costs, shipment schedules, labour availability and overall business certainty. She noted that India retains structural advantages, a favourable export-to-import ratio, a relatively integrated domestic supply chain and a large home market that can absorb some of the external shock but argued that these advantages must be actively built upon.
"The key question now is how to build on these strengths by diversifying sourcing strategies, exploring alternate raw material supply channels and identifying new export markets that align with the changing geopolitical landscape," Chatterjee said.
The government has taken some steps to support exporters. In March 2026, it restored full benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, which had been partially rolled back in previous budget cycles, according to a notification issued by the Ministry of Finance. Customs duty exemptions on MEG and PTA were also extended until 30 June 2026, according to a Central Board of Indirect Taxes and Customs (CBIC) circular.
"The Ministry of Commerce and Industry should work with export promotion councils and industry bodies to estimate the rise in costs. The issue is not unique to textiles but affects exports more broadly," Arpita Mukherjee, Professor, Indian Council for Research on International Economic Relations (ICRIER) said, adding that policymakers must first establish the precise scale of the damage before designing further interventions.
"Subsidies cannot help reduce trade costs in a volatile geopolitical situation. We need a more structured and permanent solution based on our National Trade Facilitation Action Plan 3.0," Mukherjee said on structural solutions.
She specifically advocated greater adoption of renewable energy, particularly solar, in industrial clusters, and wider implementation of cross-border paperless trade systems aligned with United Nations frameworks on digital trade documentation, which she said would reduce customs clearance times and lower compliance costs for exporters.
India has made measurable progress on trade facilitation in recent years. The World Bank's Logistics Performance Index ranked India 38th globally in 2023, up from 44th in 2018, but industry representatives say the gains have not yet translated into meaningfully lower export transaction costs for small and mid-sized manufacturers.
“The recent West Asia-related disruptions have created a ripple effect across the textile industry, especially in exports, freight movement and overall supply chain planning. The Indian textile sector has always demonstrated resilience during uncertain times and I am confident the industry will emerge stronger,” said Mahesh Kudav, Chairman and Managing Director, Venus Safety and Health, adding that businesses are being forced to fundamentally reconsider their supply chain structures.
For India’s textile and apparel industry, the West Asia crisis is not merely another temporary external shock but a stress test of long-standing structural vulnerabilities across logistics, raw material dependence and export competitiveness. As freight costs rise, delivery timelines stretch and global demand weakens, industry leaders warn that without deeper trade facilitation reforms, diversified sourcing and lower input costs, one of India’s largest employment-generating sectors could face prolonged pressure on profitability, production and jobs. |
