India’s textile industry is navigating one of its most chal lenging business environments in recent years as rising raw mater ial costs, declining cotton production, higher energy expenses, and new US tariffs converge to squeeze profitability across the entire value chain. From cotton cultivation and ginning to spinning, weaving, processing, and garment manufacturing, businesses are facing signifi cant pressure as production costs continue to rise while selling prices remain largely stagnant. At the centre of this challenge is Gujarat, India’s largest textile manufacturing state, which accounts for nearly one-fourth of the country’s spinning capacity and about one-third of its cotton production. Any disruption in Gujarat’s cotton economy has far-reaching implications for both domestic supply and export competitiveness. The difficulties begin at the farm level. Cotton cultivation in Gujarat has declined sharply, with acreage falling from 2.679 million hectares in the previous season to 2.362 million hectares, a reduction of nearly 12%. Farmers are increasingly shifting to alternative crops such as groundnut and oilseeds, driven by volatile cotton prices, unpredictable weather conditions, and recurring pest attacks. This change in cropping patterns has significantly reduced cotton availability for the textile industry. According to the Cotton Association of India (CAI), Gujarat’s cotton production declined to 7.6 million bales, allowing Maharashtra to overtake it as India’s largest cotton-producing state with 8.5 million bales. The reduced INDIAN LACES & FABRICS MFRS. OF SCHIFFLI & NET FABRICS Deals on: All Type of Laces,Woven Narrow Fabric, Nylon Net, Ribbons & All Fashionable Accessoies. supply has tightened the domestic cotton market, resulting in a sharp increase in raw material prices. Raw cotton prices have risen by approximately 13%, increasing from around Rs. 54,000 per candy to over Rs. 61,000 per candy. Cotton yarn prices have also increased by nearly 12%, climbing from Rs. 1,260 per bundle to approximately Rs. 1,415 per bundle. While spinning mills have managed to pass on some of these higher costs to yarn buyers, downstream fabric manufacturers have been unable to do so because finished fabric prices have remained largely unchanged. This widening gap between input costs and selling prices has significantly eroded margins for weaving, processing, and fabric manufacturing units. The impact is particularly severe in Surat, India’s largest hub for man-made and blended fabrics. Industry estimates indicate that weaving and processing units have collectively incurred losses ranging between Rs. 2,500 crore and Rs. 3,000 crore. To contain mounting losses, many factories have reduced production by as much as 50%, while others have introduced temporary weekly shutdowns to manage inventories and reduce operating costs. Adding to the industry’s difficulties are rising energy costs. Textile clusters in Rajkot, Ahmedabad, and Kadi are facing restrictions on access to captive renewable power, compelling manufacturers to depend more heavily on expensive commercial grid electricity. The resulting increase in electricity costs has further inflated manufacturing expenses at a time when mills are already struggling with elevated raw material prices. Export competitiveness has also come under pressure following changes in US trade policy. Effective 24 July 2026, the United States replaced its temporary Section 122 surcharge with a permanent Section 301 tariff framework, imposing an additional 10% tariff on imports of Indian textiles, yarn, and apparel. Although India retains a modest competitive advantage over major exporting countries such as China, Vietnam, Thailand, Türkiye, and the UAE, which face 12.5% tariffs, the benefit remains limited. After including the normal US import duty of around 5.5% to 6%, Indian textile and apparel exports effectively face total tariffs of approximately 15.5% to 16%, reducing their price competitiveness in the US market. Industry bodies, including the Spinners’ Association of Gujarat (SAG), the Federation of Gujarat Weavers Association (FOGWA), and the Southern Gujarat Chamber of Commerce and Industry (SGCCI), have urged the government to implement immediate support measures. Their recommendations include ensuring stable cotton supplies through the Cotton Corporation of India (CCI), reducing industrial electricity costs, providing interest subvention for manufacturers, and expediting negotiations for an India–US Bilateral Trade Agreement to strengthen long-term export competitiveness. Despite these challenges, India’s textile industry remains fundamentally strong due to its integrated supply chain, diversified manufacturing base, and global market presence. However, restoring profitability will require coordinated policy support, improved raw material availability, lower input costs, and enhanced market access to ensure the sector remains competitive in an increasingly challenging global environment.