Despite domestic cotton prices remaining higher than
international prices, the Indian textile sector is witnessing
an improvement in demand, according to a recent
report by Systematix Institutional Equities Research.
The report highlights key global and domestic factors that
are shaping the industry’s outlook.
The demand scenario appears strong, driven by multiple
factors, including normalising inventories at global
retailers, a potential tariff hike by the US on Chinese
imports, rising labour costs in Vietnam, and ongoing
political instability in Bangladesh. These factors position
Indian textile manufacturers favourably in the global
market.However, the report raises concerns about the
capacity constraints of Indian garment manufacturers,
which may limit their ability to fully capitalize on the rising
demand.Despite this challenge, Indian textile companies
are expected to improve profitability in the coming
quarters, aided by stable cotton prices, favorable foreign
exchange rates, and enhanced operational efficiency.
Indian textile firms reported a healthy year-on-year (YoY)
performance, with an 11 per cent revenue increase, 11 per
cent EBITDA growth, and a notable 28 per cent rise in
profit after tax (PAT).
The decline in cotton prices by 10 per cent YoY and stable
yarn prices contributed to gross margin expansion for
spinners.The Union Budget 2025-26 aims to strengthen the
textile sector with initiatives focused on cotton productivity,
duty restructuring on fabrics, and incentives for domestic
manufacturing.
The government’s allocation for the textile sector increased
to Rs 52.7 billion from Rs 44.2 billion in the previous
budget, further supporting growth through the Productivity
Linked Incentive (PLI) scheme and sustainability
initiatives.
Meanwhile, the Cotton Association of India (CAI) revised
its cotton production forecast for the 2024-25 season
downward by 7.8 per cent to 30.17 million bales, while the
ICAR-Central Institute of Cotton Research (CICR)
estimates a higher production of 32.0 million bales.
Although international cotton prices have declined to USD
0.67-0.68 per pound, Indian cotton prices have firmed up to
Rs 54,000-55,000 per candy.
The expected stable cotton crop is likely to keep prices
within a predictable range, ensuring cost stability for
textile manufacturers.
With an improving demand outlook and supportive policy
measures, the Indian textile industry is poised for steady
growth in the coming quarters.
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