India's apparel production falls 5.6% in H1 FY27 as weak US demand, high costs hit manufacturers

New Delhi: Apparel manufacturing in India contracted 5.6% year on year in the April-September period, weighed down by subdued demand, particularly in the US, and high input costs, even as textile production registered strong growth on robust demand for yarn and fabric.

Domestic textile production grew 17.4% year-on-year in September and 13.1% in the first half of FY27. In contrast, apparel production declined 5.2% in September and 5.6% in the April-September period, according to the latest Index of Industrial Production (IIP) data from the statistics ministry.

Shradha Saraogi, associate director, India Ratings and Research (Ind-Ra), noted that export market demand for apparel has declined slightly, especially in the US. She said the US imported less apparel in the first half of FY27, forcing Indian apparel makers to curtail production. Within the broader IIP basket, textile production carries a weight of 3.27%, while apparel accounts for 1.97%. Overall, IIP grew 6.7% year-on-year in September and 6.8% in the first half of FY27.


Apparel production has declined year-on-year for nine consecutive months. Shounak Chakravarty, director, Crisil Ratings, said higher cotton and polyester prices have pushed up garment costs, weighing on demand in the largely domestic-market-oriented apparel segment.

"The prices of yarn and fabric have gone up and are not being accepted by the final buyer, retail chain buyer or normal consumer, due to which it is not being passed on," said an industry representative. "Consumer buying for clothes has come down due to overall inflation, and payments are not coming the way they should. No one wants a loss, so people are trying to push price increases by curtailing production."

Yarn prices rose by around 15% in the April-September period. The textile industry's strong performance has been driven primarily by upstream segments, particularly cotton yarn, which recorded healthy double-digit export growth in the first half of FY27, said Chakravarty. The home textile segment, which is mostly export-oriented, has also rebounded following the removal of tariff-related disruptions, lending support to fabric and textile production, he said.

Saraogi attributed the improvement in yarn and fabric demand to higher supplies to China and Bangladesh, as well as stronger domestic demand for intermediate products. However, improving exports, wider market access through new trade agreements and signs of a pickup in apparel orders point to a gradual recovery in the coming months.

The outlook is beginning to improve, supported by expanding export opportunities and better order flows. Vijaykumar Agarwal, chairman of Mumbai-based textile manufacturing group Creative Group, said new FTAs were opening up opportunities to diversify export markets. "Improving export demand, particularly from the US, benefits from the India-UK FTA and festive-season demand should support a gradual recovery in apparel production in the medium term," noted Chakravarty.