Context
- The Union Budget 2026-27 places Textiles at the centre of growth strategy with focus on employment, exports, rural livelihoods and sustainable manufacturing.
- Push for scale and modern manufacturing through mega textile parks and support for MMF and technical textiles.
- MSMEs and artisans supported through liquidity measures, cluster modernisation and skilling initiatives.
- Policy direction emphasises scale, sustainability and competitiveness to strengthen India’s position in global textile value chains.
Union Budget 2026–27: Strengthening India’s Textile Value Chain
The Union Budget 2026–27 lays emphasis on scaling up manufacturing in strategic, frontier sectors including Textiles.
India’s textile sector is among the oldest and most varied industries in the country, with roots going back hundreds of years. The Union Budget 2026–27 places textiles at the centre of India’s growth strategy, highlighting its strategic importance for the economy. By giving priority to this labour-intensive sector, the Budget recognises textiles as a major source of employment generation, export earnings, rural income, and sustainable manufacturing.
The Indian textile industry also has strong natural advantages. India has the largest cotton cultivation area in the world, is the largest producer of jute, and the second-largest producer of silk and cotton. It is also a major global hub for man-made fibres (MMF) and the second-largest producer of polyester and viscose fibres.
How Budget 2026–27 Boosts India’s Textile Sector?
In the Union Budget 2026-27, a comprehensive and integrated policy framework has been declared to bolster the entire textile value chain- from fibre to fashion, from village industries to global markets.
Integrated Programme for the Textile Sector
With the objective of boosting competitiveness, fostering self-reliance and creating jobs, the Government has proposed an Integrated Programme for the textile sector, structured around five sub-components:
- National Fibre Scheme:
- This scheme focuses on making India self-reliant across the entire fibre range. It supports natural fibres like silk, wool, and jute, along with man-made fibres (MMF) and new-age fibres. By improving domestic fibre supply and promoting innovation in advanced textile materials, the scheme aims to reduce import dependence, move beyond over-reliance on cotton, and strengthen India’s capacity in high-performance and specialised textiles.
- Textile Expansion and Employment Scheme:
- This scheme concentrates on the modernisation of traditional textile clusters. It offers capital support for new machinery, technology upgrades, and the creation of common testing and certification centres. The objective is to raise productivity, improve quality standards, and generate large-scale employment.
- National Handloom and Handicraft Programme:
- Under this programme, existing handloom and handicraft schemes will be merged and strengthened into a single national framework. The aim is to provide focused support to weavers and artisans, increase their incomes, improve market access, and protect India’s rich textile traditions. In addition, the government is providing financial support to promote natural and vegetable dyes and to set up dye houses through two components—the Mega Cluster Development Programme and Need-based Special Infrastructural Projects.
- Tex-Eco Initiative:
- The Tex-Eco Initiative encourages globally competitive and environmentally sustainable textile and apparel (T&A) manufacturing. It helps align Indian production with international sustainability standards and supports entry into emerging green markets.
- Samarth 2.0:
- Samarth 2.0 is an upgraded skill development programme aimed at modernising the textile skill ecosystem. It promotes closer collaboration with industry and academic institutions to ensure a steady supply of industry-ready skilled workers across the entire textile value chain.
- Mega Textile Parks and Technical Textiles:
- The government has announced the creation of Mega Textile Parks through a competitive (challenge-based) process. These parks will offer integrated infrastructure, help firms achieve economies of scale, and promote value addition across the entire textile value chain. They are also expected to boost the growth of technical textiles, a fast-growing segment used in industry, healthcare, defence, and infrastructure.
- Mahatma Gandhi Gram Swaraj Initiative:
- This initiative is aimed at strengthening khadi, handloom, and handicrafts. It focuses on improving global market access, branding, training and skilling, quality standards, and modern production processes. The programme seeks to benefit weavers, village industries, and rural youth, while also supporting the One District One Product (ODOP) initiative.
- Export promotion measures for textiles and allied sectors:
- To encourage exports, the Budget has extended the export obligation period from six months to twelve months for exporters of textile garments, leather garments, leather or synthetic footwear, and other leather products made using duty-free imported inputs. This step is meant to give exporters more operational flexibility, make compliance easier, and improve working capital management.
What is TReDS?
- TReDS is an electronic platform that enables financing and discounting of trade receivables of MSMEs via multiple financiers. The receivables can be due from corporates, other buyers, including Government Departments, PSUs.
- Liquidity support for textile MSMEs through TReDS:
- To improve access to working capital for textile MSMEs, the government has announced steps to strengthen the Trade Receivables Discounting System (TReDS), through which transactions worth over ₹7 lakh crore have already been enabled.
Key steps include:
- Making it mandatory for CPSEs to use TReDS when procuring from MSMEs
- Providing credit guarantee support through CGTMSE for invoice discounting on TReDS
- Linking the Government e-Marketplace (GeM) with TReDS so that payments from government procurement can be financed faster and at lower cost
- Allowing TReDS receivables to be securitised as asset-backed securities, which will encourage secondary market participation and improve liquidity
- SME Growth Fund and Champion SMEs:
- A dedicated ₹10,000 crore SME Growth Fund has been launched to help nurture future “Champion SMEs.” The fund will support enterprises that meet selected performance and growth criteria.
- Textile sector as a driver of growth, exports, and employment:
- With an estimated size of USD 179 billion, India’s textile and apparel (T&A) industry contributes around 2% to GDP, about 11% to manufacturing gross value added (GVA), and 8.63% to total exports. This highlights the sector’s vital role in India’s overall economic structure.
- Exports maintain growth momentum:
- On the export side, India ranks as the 6th largest exporter of textiles and apparel (T&A) globally, with a share of about 4% of world exports in this sector.
- India’s T&A exports, including handicrafts, rose to USD 37.75 billion in FY25, compared to USD 35.87 billion in FY24. This growth came despite a weak global trade environment, showing the sector’s resilience, wide market reach, and strength in both value-added and labour-intensive products.
- In December 2025, export growth was seen across major segments. Handicrafts led with 7.2% growth, followed by ready-made garments (2.89%) and MMF yarn, fabrics, and made-ups (3.99%). These trends highlight India’s competitive edge in value-added manufacturing, traditional crafts, and employment-intensive industries, even as global demand fluctuates.
- Between January and November 2025, India’s textile exports grew across 118 countries and destinations, reflecting strong global outreach.
The year 2025 marked significant market diversification, covering both emerging and traditional markets such as the UAE, Egypt, Poland, Sudan, Japan, Nigeria, Argentina, Cameroon, and Uganda. At the same time, exports remained stable in major European markets including Spain, France, the Netherlands, Germany, and the UK.
Employment Generation
The textile sector is the second-largest employment generator in India, after agriculture. As per the Economic Survey 2026-27, textiles industry has a 9% share in employment across 8 major industry groups. The 2025 estimates show that the sector provides direct employment to 45 million+ people, including women and rural communities.
Growth Drivers of India’s Textile Sector
Over the years, India has developed the capacity to cater to a broad spectrum of demand- from affordable mass-market apparel to niche, high-value segments- across both domestic and international markets. To sustain this competitiveness and further attract investment, the Government has been actively supporting the sector through a range of targeted initiatives–
PM MITRA Scheme’s significant progress in 2025
- The Government approved setting up of 7 PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks in Greenfield/Brownfield sites with an outlay of ₹4445 crore for a period of 7 years up to 2027-28.
- Investment MoUs with expected investment potential of ₹27,434 crore+ have been signed.
- Infrastructure works worth ₹2590.99 crore have been started by all 7 State Governments.
- The scheme is expected to generate employment of 3 lakhs (1 lakh direct and 2 lakh in-direct) with an estimated investment of ₹10,000 crore per park.
PLI Scheme for Textiles
- The Production Linked Scheme (PLI) for Textiles, operational up to FY 2029-30 aims to promote production of MMF Apparel & Fabrics and products of Technical Textiles.
- It aims to help the industry achieve size and scale, become competitive, create employment opportunities and support creation of a viable enterprise and competitive industry.
Cotton Sector Reforms
- The cotton sector supports ~6 million farmers and 40–50 million people across value chains.
- To enhance transparency, the Kapas Kisan mobile app was launched, enabling farmer self-registration and slot booking.
- The ‘Kasturi Cotton Bharat’ Programme was launched, to enhance the global market acceptance of Indian cotton.
- Additionally, the Quality Control Order (QCO) 2023 for cotton bales has been deferred till August 2026.
Initiative to Promote Sustainability and Circularity
- A tripartite MoU was signed between Textiles Committee, GeM and Standing Conference of Public Enterprises (SCOPE), Circle Back campaign, National Handloom Development Programme, National Textile Sustainability Council to promote and mainstream the public procurement of upcycled products.
Labour Reforms
- The implementation of the new Labour Codes carries significant implications for the textile industry.
- By establishing a unified framework covering wages, employment conditions, workplace safety, social security and dispute resolution, the Codes streamline compliance while reinforcing worker welfare.
Goods & Service Tax 2.0 (GST)
- 2025’s Next-Gen GST rationalisation in textiles resulted in lower prices for consumers, relief for manufacturers and boosted exports and employment.
The sustained export momentum, broadening market footprint, and robust performance of value-added segments reaffirm India’s position as a reliable and resilient global sourcing hub for T&A. With continued emphasis on diversification, competitiveness, and MSME participation, the sector is well-placed to scale up exports and deepen its integration with global value chains in the period ahead.
Textile Sector Outlook
The recent policy push is towards scale and modernisation – integrated textile parks, support for MMF and technical textiles, investment incentives, and easing of raw-material constraints are all aimed at boosting competitiveness and value addition.
At the same time, the Ministry of Textiles has set an ambitious direction for exports, with current textile exports around ₹3 lakh crore and a Vision 2030 objective of expanding this to about ₹9 lakh crore through stronger domestic manufacturing and wider global outreach.
Trade developments add another layer to the outlook. A transformational trade deal for India’s T&A sector, the India-EU FTA offers zero duty access in textiles and clothing, covering all tariff lines and reduces tariffs by up to 12%. It lowers duties of up to 10.5% in Indian wooden, bamboo, and handcrafted furniture. The Commerce Minister Piyush Goyal recently said the India–EU FTA could significantly expand India’s textile and garment exports to the European market by improving duty conditions, particularly benefiting labour-intensive segments.
The Union Budget 2026-27 direction further emphasizes employment generation, inclusive growth, sustainability, and coordinated implementation led by the Ministry of Textiles in partnership with States, industry, MSMEs, artisans, and skilling institutions, reinforcing India’s position as a competitive, reliable, and forward-looking global textile and apparel hub.
Conclusion
India’s textile sector stands at a pivotal moment, supported by strong production fundamentals, rising exports and sustained policy backing.
The Union Budget 2026–27 reinforces this trajectory by strengthening the entire value chain, from fibre and manufacturing to skills, sustainability and market access.
Together with expanding trade partnerships and a clear push towards scale, technology and value addition, these measures position the sector to deepen its global integration while continuing to generate employment and support livelihoods across the country.
