India's Textile Sector Poised for Global Advantage Amid Regional Challenges

India's textile industry may gain a global edge as labor costs rise in Vietnam and Bangladesh faces political instability. While facing short-term challenges, the sector benefits from stable cotton prices, favorable forex rates, and improved global retailer inventories. However, tariff uncertainties and cost pressures remain concerns.

India's textile industry could emerge as a significant global player, capitalizing on rising labor costs in Vietnam and political instability in Bangladesh, two of its major competitors, according to a report by Systematix Research. Despite this opportunity, the immediate outlook for the sector remains difficult, with tariff uncertainties likely to squeeze exporter margins.

Additionally, companies may pass on some of these increased costs to consumers, potentially leading to higher prices for textiles and apparel. This increase could dampen demand in vital markets like the United States. Nevertheless, larger macroeconomic trends are beginning to tilt in India's favor, positioning it as a more appealing sourcing hub for global retailers.

The report suggests Indian textile's sturdiness, as global retailer inventories stabilize, and with the potential increase in US tariffs on China. However, Indian textile firms have reported a lackluster performance in the fourth quarter of FY25, with revenue, EBITDA, and PAT showing mixed results.

Revenue saw a modest 5% growth year-on-year, while EBITDA declined by 3%, and profit after tax only slightly increased by 3% YoY, primarily due to ongoing tariff uncertainties and weak sales volumes. Spinning companies experienced a slight improvement in gross margins because of falling cotton prices and steady yarn prices, while garments benefitted from normalized retailer inventories, boosting sales volumes.

In contrast, the home textiles segment continued to experience reduced demand, with significant volume declines when compared year-on-year and quarter-on-quarter. Nonetheless, stable cotton prices and favorable exchange rates, along with ongoing efforts to enhance operational efficiency, are expected to bolster profitability for Indian textile companies in the long run. (ANI)

(With inputs from agencies.)