Union Budget 2025-26: Textile Industry Gets Major Boost with Increased Allocation and New Initiatives
On Saturday, February 1st, Finance Minister Nirmala Sitharaman presented the Union Budget for FY 2025-26, offering substantial support to the textile industry. A 19% increase in budget allocation was announced, with Rs 5,272 crore earmarked for the Ministry of Textiles compared to Rs 4,417.03 crore in FY 2024-25.
Five-Year Cotton Mission to Address Productivity Challenges
A major highlight for the sector was the announcement of a five-year Cotton Mission, aimed at boosting cotton production and tackling stagnant productivity, particularly for extra-long staple varieties. This initiative will equip farmers with scientific and technological support, ensuring a steady supply of high-quality cotton while increasing their incomes. Currently, India produces 450 kilograms of cotton per hectare, far below the global average of 800+ kilograms.
Focus on Technology Upgradation
Out of the Rs 5,272 crore budget, Rs 635 crore has been allocated for technological upgrades under the Amended Technology Upgradation Fund Scheme (ATUFS). Additionally, the government has exempted certain machinery and looms used in textile production, providing another boost to the industry.
The ATUFS, launched in 2016, is also known by other names, including the Modified Technology Upgradation Fund Scheme (MTUFS). The program aligns with the ‘Make in India’ initiative, promoting exports, job creation—especially for women—and improved manufacturing with zero effect and zero defect goals. It also aims to reduce reliance on imports while enhancing the quality of textile processing.
India Gains Amid Bangladesh Crisis
India’s textile sector is set to benefit from the ongoing political and economic crisis in neighboring Bangladesh. Once the second-largest garment exporter, Bangladesh’s garment industry has been hit hard by political instability, financial challenges, power shortages, and violence since the fall of the Sheikh Hasina-led government.
This turmoil has prompted importing countries like the US, UK, France, and others to seek alternative suppliers. As a result, India has emerged as a key beneficiary, experiencing significant growth in exports. Between January and November 2024, India’s garment exports to the US rose by 4.25% to $4.4 billion, while Bangladesh’s exports to the US declined by 0.46% to $6.7 billion.
India’s Strength in Textile Exports
The Union government is actively working to strengthen the textile sector. Measures include financial support, reduced tariffs on raw materials and machinery, and incentives for local production. According to the Economic Survey released on February 1st, India is the sixth-largest exporter of textiles and apparel globally, accounting for a significant portion of GDP, industrial production, and exports.
In 2023, India’s textile exports were valued at $34 billion, with apparel making up 42% of the export basket, followed by raw and semi-finished materials at 34%, and finished non-apparel goods at 30%. Key export destinations included the US and Europe, which consumed nearly 66% of apparel exports and 58% of finished goods. Other markets included the UK (8%) and the UAE (7%). Notably, India’s textile exports remained resilient during the COVID-19 pandemic (2020-2022).
By 2030, the Indian textile industry is expected to grow to $350 billion and create 3.5 crore jobs, as per government projections.
A Budget Benefiting Multiple Sectors
The Union Budget 2025-26 aims to cater to the middle class while prioritizing sectors such as agriculture, health, education, infrastructure, and business development. With a strong focus on addressing challenges and seizing opportunities, the Indian textile industry appears poised for significant growth in the years ahead.
