India’s textile sector enters recovery phase as US tariff uncertainty fades and export outlook improves – Firstpost

India’s textile sector appears to be moving towards a recovery phase after months of uncertainty, with improving global demand, easing US tariff concerns, and favourable trade agreements boosting industry sentiment, according to a report by Dolat Capital.

The brokerage said the “worst is behind” for the sector, highlighting stronger demand visibility, improving fundamentals and policy support that could help Indian textile exporters regain momentum.

“The sector, in our opinion, is now entering a phase of renewed optimism, supported by the resolution of US tariff-related uncertainties, improving demand visibility, and a series of strategic Free Trade Agreements (FTAs) that are strengthening India’s position in global sourcing chains,” the report noted.

A key relief for the industry came after US tariffs on Indian textile products were normalised to 10 per cent in February 2026, after previously rising as high as 50 per cent. The easing of tariff pressure has improved competitiveness and provided better visibility for exporters.

Dolat Capital said trade agreements with major markets, including the UK, EU and Australia, are expected to provide long-term structural support to the industry.
The report added that global buyers are increasingly looking to reduce dependence on duty-free sourcing destinations such as Bangladesh and Cambodia, creating an opportunity for India to emerge as a preferred alternative in global supply chains.

Demand conditions have also started improving, particularly in the US market. The brokerage said demand remained resilient in early Q1FY27 despite inflationary pressures and broader macroeconomic volatility. The yarn segment has also witnessed a revival, with stronger demand from both domestic and international markets.

However, the report cautioned that risks remain, including geopolitical disruptions, cotton price volatility, crude-linked input cost pressures, possible delays in capacity expansion, and any weakness in US retail demand.