The Indian textile sector, a key driver of the country’s manufacturing economy and major employment generator for over 45 million people, is undergoing a decisive shift towards sustainability. With the government’s increased focus on climate action and environmental responsibility, significant policy reforms introduced in FY25-26 aim to embed sustainability deeply into the textile value chain, boosting efficiency, circularity, and global competitiveness.
Strategic Policy Initiatives
The Union Budget 2025-26 marked a milestone with enhanced budget allocations exceeding ₹5,272 crore to empower the Ministry of Textiles for sustainable growth and export promotion. Key interventions launched include:
• A five-year Cotton Mission, with ₹600 crore funding, focusing on enhancing the productivity of extra-long staple (ELS) cotton through advanced agronomy, hybrid seeds, and precision farming techniques. This initiative promotes clean cotton production, reducing import dependency and ensuring high-quality raw materials for sustainable textiles.
• Customs duty exemptions for shuttle-less looms (Rapier and Air Jet looms), eliminating duties to modernise domestic fabric production and encourage adoption of high-efficiency, low-waste machinery catering especially to technical textiles like agro-textiles, medical textiles, and geo-textiles.
• Revised Basic Customs Duty (BCD) on knitted fabrics (increased to 20% or ₹115/kg, whichever is higher) aimed at protecting domestic fabric manufacturers from cheap imports, supporting local sustainability-driven manufacturing hubs like Surat and Ludhiana.
Sustainability and Circular Economy Focus
In alignment with India’s commitment to environmental sustainability, the textile policy roadmap emphasises:
• Resource efficiency and innovation in materials and processes, including substitution toward recycled fibres and elimination of hazardous substances.
• Promotion of a circular economy approach with localised textile-to-textile recycling clusters, waste management micro-clusters, and advanced recycling technologies to minimise textile waste.
• Strengthening the Extended Producer Responsibility (EPR) framework, encouraging producers to take accountability for their products throughout their lifecycle, and fostering reuse and repair services.
• Strong focus on social sustainability, emphasising worker safety, ethical labour practices, and inclusivity, particularly enhancing women’s participation in green jobs across the sector.
Export Promotion and Green Growth
India’s textile exports have surged past ₹3 lakh crore, and the government targets to triple this figure by 2030 through export-friendly policies and sustainability certifications tied to rising international demand for eco-compliant textiles. The Production Linked Incentive (PLI) scheme, supported by an allocation of ₹1,148 crore for FY24-25, incentivises integration of sustainable manufacturing and value addition.
India’s policy framework under FY25-26 robustly supports the textile sector’s transition towards environmental sustainability and circularity. With focused interventions covering raw material sustainability, technology modernisation, waste reduction, social equity, and export-driven growth, the textile ecosystem is poised to contribute meaningfully to India’s climate goals while enhancing global competitiveness.
The integrated effect of government-led sustainability policies and private-sector capex is expected to materially transform the Indian textile sector’s financial landscape in FY25-26. While large upfront investments weigh on near-term capital budgets, the payoff emerges via improved EBITDA margins from lower energy costs, operational efficiencies, premium export contracts, and reduced risk exposure. This financial outlook reinforces the strategic value of sustainability-driven modernisation for textile companies aiming for resilient and profitable growth.
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