India’s textile output shrinks in March as Iran war fuels input costs, hits

New Delhi: India's textile sector production frayed in March across key segments such as readymade garments, blended fabric and cotton-based goods amid increasing input costs and crude oil prices in the wake of the Iran war.

Textile manufacturing contracted 3.6% year-on-year during the month, while apparel production plunged 14.6%.

Also Read: Textiles see tariff scars, exports to US drop 29% in February; China hit most


Manufacturers said raw material costs rose in the past one month, with cotton yarn prices up 20%, polymers used in packaging costlier by 50%, paper prices up 10% and dyes and chemicals prices rising 40%.

"West Asia is a big sector for India and many shipments were held up last month. Moreover, there is huge inflation in raw material, besides a shortage in gas. The whole chain has slowed down because of that," said Sanjay K Jain, chairman, ICC National Textile Committee.

Ranjan Sharma, senior director, CareEdge Ratings, said the conflict is impacting the sector through logistics disruptions, higher freight and war-risk insurance costs, and rising oil-linked input prices, all of which have increased landed costs and tightened working capital.

The textile and apparel industry contributes 2.3% to India's gross domestic product (GDP) and 13% to industrial production.

"Shipping issues because of the war impacted exports of most segments of textile and apparel industry," an official said on condition of anonymity, adding that stakeholder consultations are on to understand and deal with the impact of the crisis.

Volatile crude prices amid geopolitical tensions are likely to keep margins under pressure and constrain output.

Also Read: Centre to expand product coverage under Rs 10,683 crore textile PLI, says Giriraj Singh

"If the conflict persists, the sector could face a double squeeze from weaker domestic discretionary consumption and softer export demand, alongside rising input, conversion and freight costs. Accordingly, the near-term outlook remains cautious," said Sharma.

Within the textile segment, polyester/viscose blended fabric production contracted 13.1% in March. Cotton-based categories also recorded a decline., with woven cotton fabric output falling 4.2% and knitted cotton fabrics down 4%. The home textile segment, led by terry towels, recorded a drop of 6.1%.

Output of readymade garments (not knitted) fell 14.9%, while that of knitted garments decreased 11.

Megha Arora, director - economics, India Ratings & Research, said the contraction in textiles and wearing apparel has persisted since July 2025 (except a few months), with the US imposing punitive tariffs on India with effect from August last year and the start of the US-Israel war against Iran on February 28 disrupting key trade and shipping routes,.

She added that increased demand for cheaper textiles from Vietnam and Bangladesh has also weighed on the sector.

The textile sector is a major source of employment, with 1.7 million people employed in 2023-24, accounting for 8.7% of the total industrial employment, according to the Annual Survey of Industries.