The ambitious $100-billion textile export target by 2030 is at risk for India as geopolitical factors (including evolving trade policy changes), Donald Trump’s tariffs and the current conflict in Iran have resulted in a double whammy to exporters within the textile/garment industries.
Moreover, escalating input prices for materials, increasing shipping costs and falling demand in other major international markets are all creating significant threats to one of the largest employment sectors in India — an industry supporting more than 45 million workers in total across the country.
The textile industry currently accounts for over 20% of India’s total workforce. So, the overall slowdown of the textile and garment sectors could put additional strain on other sectors of the economy.
Tariffs Deliver the First Blow
The United States put a significant obstacle in India’s path as an exporter last year when steep taxes were applied to Indian goods.
As a result of this tariff, which was at least 50% for many products exported from India to the United States, Indian manufacturers’ products in the United States became significantly more costly than other countries’ products.
Many ready-made garment manufacturers in India were no longer able to secure new customer orders, and many of the customers were pressured to provide substantial discounts in order to remain competitive with other countries.
Even though there was some relief to the previous tariffs when they were reduced to lower levels earlier this year, that was, unfortunately, short-lived.
Less than a month later, there was another geopolitical crisis as tensions in the Middle East escalated to the military conflict involving Iran.
Iran War Disrupts Global Supply Chains
Global shipping routes have been greatly affected by the war, which started on February 28 after strikes by both the United States and Israel against the nation of Iran.
The instability in and around the Strait of Hormuz, where a significant percentage of the world’s oil shipments transit, is one of the major contributing factors to the disruption of shipping.
Additionally, the disruption has caused a rapid increase in energy and freight rates, which are essential components of textile manufacturing and export logistics.
As shipping rates continue to rise, it will become increasingly difficult for manufacturers to maintain profitability.
According to industry leaders, a combination of tariffs and war-related inflation has formed a “perfect storm” for exporters.
Rising Costs Hit Manufacturers Hard
The ongoing war has led to increased prices for many of the raw materials used in making textiles.
A prime example is polyester, which typically has a strong correlation to the cost of oil.
Industry members have said that the price of polyester has risen by approximately 40% since the beginning of the conflict, creating challenges for manufacturers when trying to transfer higher costs to their customers.
Mr Madhu Sudhan Bhageria, Chairman of Filatex India Limited, commented on the rising costs, saying, “Manufacturers are having difficulty passing these higher costs on to the customers. Demand for our products is down as buyers are hesitant to purchase due to these rising prices.”
Many exporters are now faced with two potentially bad decisions: (1) absorb the increased cost or (2) risk losing orders.
Worker Shortages Add to Industry Struggles
Textile companies have faced a number of issues with their workforce as a result of the COVID-19 pandemic.
Many of the workers who make the clothes that you wear rely on Liquefied Petroleum Gas (LPG) to cook their meals.
Unfortunately, due to the ongoing coronavirus pandemic, energy supplies have been interrupted and fuel prices have increased.
According to industry leaders, many workers are struggling to obtain cooking gas, which has contributed to some workers returning to their home towns.
As a result, there is a labour shortage in some manufacturing clusters with significantly sized populations of textile workers – like Tiruppur.
Disruptions and loss of workforce will create an additional burden on production at the same time many businesses are already dealing with reduced demand.
Export Numbers Show Warning Signs
Official trade statistics indicate that growth in the textile industry is slowing down already. Exports of cotton yarns, fabric, man-made fibre and ready-made garments from India declined from $29.8 billion to $29.5 billion during the first 10 months of this fiscal year (April 2025 to February 2026).
The decline appears small, but experts believe this reflects an unsettling trend. India was targeting annual export growth of 12% to 15%, but representatives of the industry note that the industry is only growing at 9% a year. The level of demand growth from companies supplying retailers like JCPenney, Macy’s and Walmart has been less than expected, according to officials at Pearl Global Industries.
Production Cuts Already Begin
Some businesses have started cutting back on producing items due to decreasing orders or increasing manufacturing costs. Filatex India’s executives stated that the company has reduced its production by approximately 25% while it waits for the marketplace to stabilise.
Manufacturers are also concerned that if there is a sudden end to the war, resulting in lower oil prices, they will be left with obsolete high-priced inventory acquired during the period of rapid purchasing. Because of this uncertainty, businesses are being careful before expanding their businesses.
Demand Concerns in the U.S.
Indian clothing will always be relied on by the US, and therefore, the US economy is essential to Indian export success.
Industry experts estimate that if crude oil prices keep rising, US consumers will spend less.
This is what happened when the Russia/Ukraine war occurred: the store shelves filled up, and there was a big drop in retail sales in the US.
Retailers had no choice but to greatly reduce their prices as well as reduce their orders from manufacturers around the world.
As a result, all textile exporters fear the same situation will occur if the world continues to face geopolitical conflicts.
Fragile Ceasefire Offers Limited Relief
Tensions between Iran and the US lessened in recent days because of a temporary ceasefire agreement between the two countries. The ceasefire permits passage of vessels through the Strait of Hormuz for a limited time, which has helped restore stability to oil markets. Since the onset of the conflict, crude oil prices have fallen below $100 a barrel but continue to be significantly higher than what they were prior to the war.
Industry experts say that the ceasefire is a short-term solution to the crisis but that the ultimate resolution of the problem will only occur if the conflict ceases to exist.
A Critical Test for India’s Textile Ambitions
India’s textile sector has been counting on new trade agreements with partners such as the United Kingdom, the European Union, and the United States to drive future export growth.
However, the combination of tariffs, war-driven inflation and uncertain demand has created a difficult environment.
Without sustained peace and stable trade policies, industry experts warn that India’s textile exporters may spend the next year focusing on survival rather than growth.
For a sector that supports millions of workers and aims to become a global powerhouse, the stakes could not be higher.
