India's Textile Sector: Opportunity Amidst Execution Challenges

India's textile sector is entering a multi-year structural upcycle, supported by China+1 sourcing, global supply-chain diversification and improving market access through trade agreements, but converting this opportunity into sustained export and market-share gains will depend on execution, productivity and manufacturing competitiveness, according to a research report by 360 One Capital.

The domestic brokerage firm said companies with scalable garmenting, integrated manufacturing, strong customer relationships and disciplined execution are likely to emerge as the biggest beneficiaries.

Global brands are increasingly seeking alternatives to concentrated sourcing from China amid geopolitical diversification and the need for more resilient supply chains. However, the report cautioned that favourable trade policies alone may not be sufficient to drive sustained growth, noting that India has failed to fully capitalise on similar opportunities in the past.

"The central question is therefore no longer whether the opportunity exists. It is whether Indian manufacturers can build sufficient scale, productivity, technical capability, compliance and delivery reliability to capture the incremental sourcing volumes becoming available," the report said.

The report noted that India's share of global apparel trade has remained around 3 per cent, compared with a rise in Bangladesh's share to around 9-10 per cent and Vietnam's to around 6-7 per cent over the past two decades. It said India's competitive challenge is increasingly shifting from labour costs to ecosystem competitiveness, with buyers evaluating suppliers on manufacturing scale, product capabilities, lead times, logistics, compliance, sustainability and supply-chain resilience.

Garmenting remains the biggest structural gap and opportunity for India, as fragmented and sub-scale production limits value capture and the ability to service large global programmes. The report said future competitiveness would depend on output per worker, factory execution, automation and delivery reliability rather than wage rates alone.

The sector also needs to diversify beyond cotton, with global demand increasingly shifting towards man-made fibres, performance apparel and technical textiles. India will need to develop advanced fibre and yarn capabilities while improving cotton productivity, fibre quality and traceability.

Trade agreements, including the recently implemented India-UK FTA, could improve India's sourcing economics, but the report said operational readiness would determine whether tariff advantages translate into recurring orders. "The industry therefore needs multiple trade agreements alongside meaningful expansion in garmenting capacity, technical capabilities, compliance and new labour-rich manufacturing clusters," it said.

Going ahead, automation, sustainability and traceability are expected to become key competitive differentiators. The report said India's textile opportunity is significant, but the biggest gains are likely to accrue to companies that combine scale, integration, productivity, product innovation and disciplined capital allocation rather than those relying solely on favourable trade policies or lower labour costs.