Synopsis:- India’s textile sector, contributing 2.3% to GDP and employing 45 million people, faced pressure after a 50% cut in export incentives. With US$9.40 billion quarterly exports and apparel at 45% share, rising costs and tariff uncertainty may impact margins by 4–6%.
India’s textile industry continues to be one of the strongest pillars of the economy. It contributes around 2.3% to the country’s GDP and provides jobs to more than 45 million people. The sector also accounts for nearly 13% of India’s total industrial output. Despite global challenges, the industry remains a key export driver, balancing traditional craftsmanship with modern manufacturing practices.
In the first quarter of FY26 (April–June 2025), textile exports stood at US$9.40 billion. Apparel contributed nearly 45% of this total, showing that finished garments remain India’s strength in global markets. However, overall exports saw a slight dip due to weak global demand and economic uncertainty in key markets like the US and Europe.
50% Cut in RoDTEP Hits Sentiment
On February 24, textile stocks came under pressure after the Directorate General of Foreign Trade (DGFT) announced a 50% reduction in the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme across all lines with immediate effect. This decision directly impacts exporters who rely on these benefits to stay price-competitive globally.
RoDTEP helps exporters recover taxes and duties that are not refunded under other schemes. A sharp cut means exporters will now receive lower reimbursements, increasing their overall cost.
Fear of Further Cuts in RoSCTL
Market analysts believe that this move could be followed by a reduction in the Rebate of State and Central Taxes and Levies (RoSCTL) scheme as well. The Union Budget on February 1 had already indicated a 50% reduction in the absolute budget allocation for both RoDTEP and RoSCTL, which increased concerns among investors.
If RoSCTL rates are also reduced, exporters may face additional cost pressure. Yarn and fabric are primary raw materials for value-added textile products. Any increase in cost at this stage impacts the entire value chain, from spinning mills to garment exporters.
Impact on Yarn and Fabric Exporters
According to Elara Capital, yarn and fabric manufacturers operate in a highly competitive and price-sensitive global market. If export benefits are reduced, companies may have to raise prices of new orders to protect profit margins. However, passing on higher costs to customers may not be easy in the current environment.
Elara noted that companies like Vardhman Textiles and Arvind have significant exposure to yarn and fabric exports, making them vulnerable to policy changes. If companies fail to pass on the increased cost, their Earnings Per Share (EPS) could decline by 4% to 6% in FY27 and FY28. Nitin Spinners also faces similar risks due to its export-heavy product mix.
Global Tariff Uncertainty Adds Pressure
The sector is also facing uncertainty from global trade developments. After the US Supreme Court ruled against the Trump administration’s earlier tariff policy, Donald Trump announced a new 10% universal tariff, later increasing it to 15%, with a warning of further hikes. Such tariff changes create unpredictability for exporters and affect order flows.
Despite the weak sentiment, some stocks showed partial recovery during the day. Vardhman Textiles trimmed losses to 2.5%, Arvind was down 5.5%, and Gokaldas Exports remained 5% lower. Interestingly, Nitin Spinners managed to recover from early losses and was trading 1.2% higher.
| Company name | CMP/Movement |
|---|---|
| Arvind Ltd | 361.20 / (-4%) |
| Gokaldas Exports Ltd | 710.90 / (-5%) |
| Vardhman Textiles Ltd | 527.45 / (-1.16%) |
| KPR Mill Ltd | 906.35 / (-2%) |
| Trident Ltd | 25.82 / (3%) |
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