loader2
Login Open ICICI 3-in-1 Account
Open ICICI 3-in-1 Account
  • Home
  • Research
  • Equity
  • Blogs
  • higher cotton output lower import duty and a 40 country outreach will help the textile sector

Open ICICI
3-in-1 Account

Manage your Savings, Demat and Trading Account conveniently at one place

+91

BLOG

Textile Sector – Higher cotton production, Lower Import Duty on cotton and 40-country outreach program to likely benefit the industry in mid to long term; Near-term tariff impacts to stay.

ICICIdirect Research 29 Aug 2025 DISCLAIMER

Top Textile importing markets across the globe are USA (15%), Germany (7.1%), France (4.2%), Japan (3.9%) and Italy (3.6%), UK (3.4%).
US Accounted for nearly 20% i.e. US $86.5bn of the India’s US $ 437bn worth of goods export.
The Indian Textile Exports stood at US $ 36.6 bn in FY25. Key contributors were Cotton Textiles exports (33%) which stood at US $12.1bn, MMF exports (13%) were valued US $4.8bn and RMG Exports (44%) stood at US $16.1bn.
The top 5 textile export destination of India as of 2024 is US (28%) at US $ 10.25bn, EU-27 (19%) Bangladesh (8%), UAE (6%), UK (6%)
India accounts for 23% of the world’s total cotton production and is the largest producer across the globe. As of 2024-25, India’s total production stood at 29.5mn bales.
With the abundant cotton production provides favourable input cost situation for the India cotton-based textile manufacturers. Additionally, the 11% import duty cut on cotton imports augurs well for manufacturers looking to import cotton at favourable prices.
With favourable cost of production, it is difficult to replace India in the supply chain of textile and apparels thereby opening up of opportunities for possible re-wiring of sourcing by various countries from India.
 
Mitigation Measures
The Export Promotion council is planning an outreach program to over 40 countries across ASEAN Bloc, CIS countries and also top textile importing countries to expand its reach and mitigate the US Tariff impact. These 40 countries collectively account for over US $590bn in textile and apparel imports which gives high headroom for India to grow.
India has already signed Free Trade Agreement (FTA) with UK which aligns them with peers such as Bangladesh who also have free access to the country.
Currently EU levies 12-16% tariffs on Indian textile import. India and EU are engaged in negotiations over a possible Free Trade Agreement. With the FTA coming in force, we can expect India to be pegged along with Vietnam and Bangladesh who have FTA with EU. The FTA is expected to be finalised by the end of 2025.
India and EU FTA can open up opportunities and access to European countries while it is also exploring trade opportunities in Japanese markets where the share of Indian imports is just over 1%.
India has also extended the 11% Import Duty cut on cotton to December 31st, 2025 to mitigate the impact of tariffs allowing manufacturers to procure cotton at lower cost thereby achieving competitiveness in the market in terms of price.
 
Outlook and view: Export Promotion scheme, cut on import duty on cotton and stable cotton prices will provide some support but will not fully mitigate the impact of 50% tariffs imposed by US on India. Hence textile companies FY26 earnings performance will be weak, which can be reflected in the underperformance of the textile companies stock prices.

Also explore more on Research page

Download ICICI Direct app

Invest, Track, and Manage your Portfolio Anytime, Anywhere

Play Store App Store
market app

Download ICICI Direct app

Invest, Track, and Manage your Portfolio Anytime, Anywhere

Play Store App Store
market app
✕
Application status