India Textile Production Contracts 3.6% in March Amid Rising Input Costs, Iran War Disruptions

New Delhi: India's textile sector production frayed in March across key segments such as readymade garments, blended fabric and cotton-based goods amid increasing input costs and crude oil prices in the wake of the Iran war. Textile manufacturing contracted 3.6% year-on-year during the month, while apparel production plunged 14.6%.

Manufacturers said raw material costs rose in the past one month, with cotton yarn prices up 20%, polymers used in packaging costlier by 50%, paper prices up 10% and dyes and chemicals prices rising 40%.

"West Asia is a big sector for India and many shipments were held up last month. Moreover, there is huge inflation in raw material, besides a shortage in gas. The whole chain has slowed down because of that," said Sanjay K Jain, chairman, ICC National Textile Committee.

Ranjan Sharma, senior director, CareEdge Ratings, said the conflict is impacting the sector through logistics disruptions, higher freight and war-risk insurance costs, and rising oil-linked input prices, all of which have increased landed costs and tightened working capital.

The textile and apparel industry contributes 2.3% to India's gross domestic product (GDP) and 13% to industrial production.

"Shipping issues because of the war impacted exports of most segments of textile and apparel industry," an official said on condition of anonymity, adding that stakeholder consultations are on to understand and deal with the impact of the crisis.

Volatile crude prices amid geopolitical tensions are likely to keep margins under pressure and constrain output.

"If the conflict persists, the sector could face a double squeeze from weaker domestic discretionary consumption and softer export demand, alongside rising input, conversion and freight costs. Accordingly, the near-term outlook remains cautious," said Sharma.

Within the textile segment, polyester/viscose blended fabric production contracted 13.1% in March. Cotton-based categories also recorded a decline, with woven cotton fabric output falling 4.2% and knitted cotton fabrics down 4%. The home textile segment, led by terry towels, recorded a drop of 6.1%. Output of readymade garments (not knitted) fell 14.9%, while that of knitted garments decreased 11%.