India’s textile industry may find itself in a stronger position within the global marketplace, driven by increasing labor costs in Vietnam and ongoing political turmoil in Bangladesh, both of which are significant competitors in the export arena. A recent report from Systematix Research indicates that while these developments could benefit India, the immediate outlook for the sector remains fraught with challenges.
Tariff-related uncertainties are expected to compel exporters to absorb some of the additional costs, thereby squeezing their profit margins. Companies are likely to transfer a substantial part of these costs to consumers, which may result in higher prices for textiles and apparel. Such increases could subsequently dampen demand from crucial markets like the United States.
The report notes that broader macroeconomic trends are beginning to align in India’s favor. With Bangladesh experiencing political unrest and Vietnam facing rising labor expenses, India is anticipated to emerge as a more appealing sourcing hub for international retailers.
“India’s textile industry appears robust as channel inventories are normalizing at the global retail level, the likelihood of the U.S. increasing tariffs on China, rising labor costs in Vietnam, and political turmoil in Bangladesh all contribute to this situation,” the report stated. Despite these long-term advantages, Indian textile firms reported subdued performance in the fourth quarter of FY25.
Amidst tariff uncertainty, company revenues increased by 5% year-on-year (YoY), while EBITDA fell by 3%, and profit after tax (PAT) saw a modest 3% growth YoY, primarily due to weak sales volumes and persistent tariff-related uncertainties. “Textile companies experienced muted revenue, EBITDA, and PAT performance of +5%, -3%, and +3% YoY respectively, attributed to sluggish volumes in the face of tariff uncertainty,” the report highlighted.
On a brighter note, spinning companies achieved marginal improvements in gross margins, aided by a 10% YoY decrease and a 2% quarter-on-quarter (QoQ) decline in cotton prices, alongside stable yarn prices, which have dropped by 3% YoY while remaining flat QoQ. The garment segment demonstrated a strong rebound, with normalizing retailer inventories leading to a 10% YoY and a remarkable 20% QoQ increase in sales volumes. Conversely, the home textiles sector continued to struggle with weak demand, experiencing a decline of 9% YoY and 6% QoQ in volumes.
Nevertheless, stable cotton prices, favorable foreign exchange rates, and a sustained emphasis on operational efficiency are likely to bolster profitability for Indian textile firms moving forward.
