Textiles & Apparel in India: Cotton, PLI, and the Export Opportunity

India's textile industry in context

India's textile and apparel industry was, as of the mid-2020s, one of the largest in the world — second only to China in several sub-categories. It was among India's largest manufacturing employers, with tens of millions of workers across the value chain. Textile exports were consistently among India's top merchandise export categories.

Yet the sector's performance in global garment trade — the most visible and value-accretive end of the chain — remained a source of underperformance relative to the country's potential. India was the world's largest cotton producer and a major yarn exporter, but its share of global garment exports was a fraction of Bangladesh's despite India having a far larger economy and industrial base. Understanding why requires a walk through the full value chain.

The cotton-to-garment value chain

Cotton farming

India was one of the world's largest cotton growers, with significant acreage concentrated in Maharashtra (Vidarbha), Gujarat, Telangana, and parts of Rajasthan and Punjab. Cotton farming in India was predominantly smallholder — millions of small farmers each cultivating a few acres. The introduction of Bt (Bacillus thuringiensis) cotton varieties in the early 2000s transformed productivity by controlling bollworm damage, dramatically increasing yields and reducing pesticide costs.

The government set a Minimum Support Price (MSP) for cotton each year, intended to provide a floor to protect farmers from price collapse in high-production years. The Cotton Corporation of India (CCI) intervened to procure cotton at MSP when market prices fell below this floor. In practice, the MSP mechanism affected planting decisions and the seasonal price cycle significantly.

Ginning

Raw cotton harvested from the field is called seed cotton or kapas. It must pass through ginning — the mechanical separation of cotton fibre (lint) from seeds — before the fibre can be spun into yarn. India had a large ginning industry clustered close to cotton growing regions. Ginning was a relatively low-value-add, capital-light step in the chain.

Spinning

Spinning converts cotton lint (or man-made fibre staple) into yarn — the continuous thread used in weaving and knitting. India had one of the world's largest spinning industries. The spinning sector was fragmented among hundreds of companies, with several large listed players alongside thousands of smaller mills.

The economics of spinning are fundamentally driven by the cotton-yarn spread — the difference between the cost of raw cotton input and the realisable price of yarn output. When this spread is wide (cotton cheap, yarn expensive), spinning is highly profitable; when the spread compresses (cotton expensive, yarn prices lagging), margins collapse. Spinning is therefore a cyclical, commodity-like business.

India was historically a significant exporter of cotton yarn, primarily to Bangladesh, China, and other Asian markets where yarn was woven or knitted into fabric for garment making. When domestic cotton prices were competitive relative to global levels, Indian yarn exports were attractive; when cotton prices ran ahead of global markets (due to government MSP or supply disruption), Indian yarn exporters became uncompetitive.

Weaving and knitting

Yarn is converted into fabric through weaving (interlacing warp and weft threads on a loom to create a woven structure) or knitting (interlocking loops of yarn into a flexible, stretchy fabric). India had significant weaving capacity — both in the organised mill sector and in the decentralised handloom and powerloom sector — but the powerloom sector was highly fragmented and often used older, less productive machinery relative to international competitors.

Knitting capacity was concentrated in hosiery clusters — particularly Tiruppur in Tamil Nadu, which was the country's largest cotton knitwear export hub, supplying T-shirts, underwear, and casual knitwear to global brands.

Processing: dyeing, printing, and finishing

Grey fabric (fabric in its natural, undyed state) undergoes processing — dyeing, printing, finishing — to become the coloured and treated fabric used in garments or home textiles. Processing is technically complex and environmentally intensive: dyeing requires chemicals and water, and wastewater management is a significant cost and compliance burden. Processing clusters in India were concentrated in Gujarat (Surat, Jetpur, Ahmedabad), Rajasthan (Sanganer, Bagru), Tamil Nadu, and parts of Maharashtra.

Garment manufacturing (CMT and full-package)

The final step in the value chain is cut-make-trim (CMT) — cutting fabric to pattern, stitching the pieces together, and applying trim (buttons, zippers, labels, embellishments) to produce a finished garment. In the full-package model, the manufacturer also sources the fabric and components, not just the labour.

This is where India historically underperformed relative to Bangladesh and Vietnam. Garment manufacturing is labour-intensive and requires high productivity per operator-hour. India's garment factories faced higher wage costs than Bangladeshi peers (on a per-unit basis), lower operator productivity due to fragmented and smaller factory units, and compliance complexity (state-specific labour laws, factory act requirements). The result was that India was not the first choice for most global apparel buyers when placing large, price-sensitive orders.

India vs Bangladesh vs Vietnam: competitive positioning

The three largest Asian garment exporters behind China each had distinct positioning:

• Bangladeshdominated volume garment exports — T-shirts, basic knitwear, denim jeans — to Western markets. Its advantages were very low wage costs, EU duty-free access (LDC preference), a dense manufacturing cluster that created supplier networks and logistics efficiency, and an industry that had invested heavily in productivity and compliance to meet buyer requirements. Bangladesh's Rana Plaza disaster in 2013 and its aftermath triggered a major compliance and structural upgrading of the industry that, paradoxically, strengthened the most compliant factories' positions as preferred suppliers to global brands.
• Vietnambenefited from foreign direct investment — particularly from South Korean and Taiwanese companies that relocated manufacturing from China — and from free trade agreements with the EU (EVFTA) and the US. Vietnam's productivity was generally higher than India's garment sector and its logistics infrastructure was more developed. Its weakness was dependence on imported fabric (Vietnam had limited domestic textile capacity), creating supply chain vulnerability.
• Indiacompeted better on differentiated and quality- sensitive products: embroidered and hand-crafted garments, luxury cotton, sustainable/organic cotton (where Indian certification credentials were strong), home textiles, and complex garments requiring specific fabric expertise. India also had a price advantage in certain synthetic fabric categories due to proximity to Surat's polyester weaving cluster. India's lack of FTAs with major apparel importing countries — notably the EU and the US — was a structural disadvantage relative to Bangladesh and Vietnam. FTA negotiations, particularly with the UK and EU, progressed with varying momentum through the early 2020s.

The PLI scheme for textiles

The Production Linked Incentive scheme for textiles was approved in September 2021, with an outlay of approximately ₹10,683 crore spread over five years. Unlike the PLI schemes in sectors like mobile manufacturing or pharmaceuticals — which focused on existing high- volume categories — the textile PLI was deliberately aimed at man-made fibre (MMF) fabrics and technical textiles, categories where India was historically weak.

India had historically been strong in cotton textiles but imported significant quantities of MMF fabrics — nylon, polyester, acrylic, viscose — and technical textiles (non-woven fabrics, industrial textiles, medical textiles) from China and other Asian suppliers. The PLI was designed to incentivise investment in these gaps. Eligible companies could receive incentives of 3%–15% on incremental revenue above a base year, conditional on making minimum capex investments.

Uptake was initially below expectations, with some eligible applicants struggling to meet investment targets within the compressed timeframes. The scheme was extended and its terms were modified in subsequent reviews. Whether it successfully catalysed a durable expansion in Indian MMF manufacturing capacity remained an open question as of the mid-2020s.

Key metrics for textile sector analysis

Revenue growth and export share

Revenue growth must be disaggregated between domestic and export segments, as the drivers are very different. Export revenue is linked to global apparel demand, currency movements (a weaker rupee benefits export realisations in rupee terms), and competitive dynamics against Bangladesh and Vietnam. Domestic revenue tracks Indian consumer spending on apparel and home textiles.

EBITDA margin and cotton-yarn spread

For spinning companies, the cotton-yarn spread is the primary determinant of EBITDA margin. For downstream garment and home textile companies, the relevant spread is fabric cost vs realisable product price. Margins for garment exporters are also affected by foreign exchange realisation — when the rupee depreciates, dollar-denominated export revenues translate into higher rupee revenues, benefiting margins. When the rupee appreciates, the opposite occurs.

Capacity utilisation

Spinning mills are highly fixed-cost intensive — once spindles are installed, the machinery depreciation and interest cost accrue regardless of utilisation. Companies running below 80%–85% capacity utilisation historically struggled to generate adequate ROCE even when the cotton-yarn spread was favourable. Capacity utilisation data is disclosed by some companies and can be triangulated from production and installed capacity disclosures.

Order book for exporters

Garment and home textile export companies working on buyer orders (as opposed to commodity spot market sales) maintain order books that provide near-term revenue visibility. A growing order book signalled that the company was successfully qualifying with new buyers or expanding volumes with existing customers. Order book disclosures are less standardised in textiles than in capital goods sectors, and many companies do not formally publish them.

Major segments and listed players

Yarn and spinning: Vardhman and Trident

Vardhman Textiles was among the largest integrated textile companies in India, with significant spinning capacity producing cotton yarn for both domestic fabric manufacturers and export markets. Vardhman also had fabric weaving and processing capacity, making it more vertically integrated than pure-spinning peers. Its scale and integration gave it cost advantages through operational efficiency and better raw material sourcing.

Trident Limited was a diversified company with operations in home textiles (bed linen and towels), yarn spinning, and paper. Its home textile business exported to major global retailers in the US and Europe and was among the larger listed players in the segment.

Home textiles: Welspun and Indo Count

India had developed a globally competitive home textiles export industry — primarily bed linen (sheets, duvet covers, pillowcases) and towels — with a major presence in the US and European retail channels.

Welspun Indiawas one of the world's largest manufacturers of home textiles, supplying major retailers including Walmart, IKEA, Bed Bath & Beyond, and UK supermarkets. Its manufacturing was vertically integrated from spinning through finished goods. Welspun had also invested in innovative products — branded innovation in towels (HygroCotton, ZeroTwist) and bedding — to differentiate beyond pure commodity supply and earn premium pricing.

Indo Count Industries was a focused bed linen manufacturer that grew rapidly through the 2010s and 2020s, exporting primarily to the US market. It was a leaner, more focused business than Welspun.

Branded apparel: Page Industries, Raymond, and Arvind

Page Industries was the licensee for the Jockey brand in India, Sri Lanka, Bangladesh, Nepal, the UAE, and several other markets. It manufactured and sold premium innerwear and leisurewear under the Jockey brand. Page was notable for its exceptionally high return on equity, asset-light model (relatively modest fixed assets relative to revenue), and consistent brand positioning. It operated in a market segment where brand trust and quality perception enabled premium pricing — the antithesis of the commodity spinning business.

Raymond Limitedwas a diversified textile and apparel company known for its suiting fabrics (the Raymond brand was synonymous with premium suiting in India), readymade apparel (Park Avenue), and retail network. Raymond's suiting fabric business served both a domestic branded market and industrial export clients. The company underwent significant corporate restructuring through the early 2020s, including demergers and real estate development activities.

Arvind Limitedwas a vertically integrated textile and apparel company with major businesses in denim fabric (supplying global brands like Wrangler, Gap, and H&M from its denim mills), woven fabric, and branded apparel (Flying Machine, Ruggers, and others through its ABFRL joint venture structure). Arvind went through a significant restructuring, separating its branded apparel and engineering businesses into distinct listed entities.

Organised vs unorganised: still a fragmented market

Despite the profile of the large listed companies, the Indian textile and apparel sector remained over 80% unorganised by most estimates. Millions of small tailors, home-based units, small powerloom operators, and job-work processors formed the backbone of the sector's employment. The informal sector was not formally captured in stock market listings but shaped the competitive landscape — providing a price floor on basic products and an extensive job-work network for larger companies.

GST implementation affected the unorganised sector: previously, much garment and fabric trading happened without formal invoicing. GST imposed documentation requirements that disadvantaged the least formal parts of the supply chain. This was expected to be a slow-moving structural tailwind for organised players but the pace of formalisation was gradual rather than sudden.

Sustainability and compliance: what buyers require

Global apparel brands — H&M, Zara (Inditex), PVH, Gap, M&S, NEXT, Walmart — have progressively raised the sustainability and compliance bar for their Indian suppliers. What was once a "nice to have" certification became, through the 2020s, a commercial prerequisite for significant volume from these buyers.

ZDHC: chemical compliance

The Zero Discharge of Hazardous Chemicals (ZDHC) initiative required supplier factories to demonstrate that they were not using substances on the ZDHC Manufacturing Restricted Substances List (MRSL). This required laboratory testing of chemicals in use, supplier declarations from chemical suppliers, and wastewater testing. Indian processing units — dye houses and finishing facilities — had to invest in testing infrastructure and, in some cases, switch to more expensive but compliant chemical formulations. Factories that could not demonstrate ZDHC compliance risked being delisted by major brands.

OEKO-TEX certification

OEKO-TEX Standard 100 certification — which certifies that a textile product has been tested for harmful substances and is harmless to health — became a baseline requirement for garments sold in European markets by major retailers. Indian manufacturers supplying these markets invested in getting their product lines OEKO-TEX certified, which required testing through accredited labs and the payment of annual certification fees.

Social compliance: SA8000 and buyer audits

Beyond chemical compliance, global buyers conducted regular social compliance audits — verifying working hours, wages, child labour absence, health and safety conditions, and worker grievance mechanisms. SA8000 (Social Accountability 8000) was one of the formal certification standards. Factories supplying major brands were audited at least annually, and audit results were used to make sourcing decisions. Indian garment manufacturers targeting premium export customers had to maintain dedicated compliance teams and continuously invest in factory condition upgrades.

The compliance cost was not trivial — for smaller manufacturers, it represented a meaningful overhead burden. The net effect was a consolidation of business toward larger, better-resourced suppliers who could absorb the compliance investment while remaining cost- competitive.

The cotton cycle and earnings volatility

A recurring pattern in the listed textile sector was the earnings volatility introduced by the cotton price cycle. Cotton prices — driven by Indian acreage decisions, monsoon performance, US crop conditions, Chinese demand cycles, and speculative positioning in futures markets — could move significantly within a single year.

The 2021–22 period was a dramatic example. Global cotton prices approximately doubled from their COVID-era lows as demand recovered strongly and supply was constrained. Indian spinning companies benefited initially as they passed through higher yarn prices. But garment and home textile companies — further down the chain — faced a cost spike that squeezed margins before they could pass it through to buyers on long-term contracts. Companies holding large raw cotton inventory when prices corrected in the second half of 2022 faced inventory write-downs.

Analysts reading textile company financials therefore paid close attention to raw material inventory levels, cotton purchase policies (how far ahead companies typically contracted cotton), and hedge positions — all disclosed to varying degrees in quarterly management commentary.

Nifty 500 companies in this sector

The textiles and apparel sector within the Nifty 500 universe included integrated textile companies, spinning mills, home textile exporters, and branded apparel manufacturers. Company profiles for individual Nifty 500 constituents — including historical financials, export share, margin trends, and capital structure — are available in our stock profiles section. The value chain context, competitive positioning, and metrics framework discussed in this primer provide the foundation for interpreting those profiles.

This article is educational only and does not constitute investment advice or a recommendation to buy, sell, or hold any security. All company descriptions and historical observations are illustrative and reflect past conditions; past performance is not indicative of future results. Stock markets involve risk, including the loss of principal. Please consult a SEBI-registered investment adviser before making any investment decision.