India Ratings and Research (Ind-Ra) has kept its outlook on the textile industry as a whole neutral for FY ’26, anticipating a sustained year-over-year increase in export volumes driven by rising demand in major importing countries as restocking takes up, particularly from 3Q FY ’25.
Ind-Ra anticipates further government support measures to upgrade India’s infrastructure in FY ’26 in order to increase investments in downstream capabilities and competitiveness in the global market, even though the growth in domestic demand will continue.
Due to lower output, steady consumption, and rising export demand, cotton prices are supported at their current levels despite the anticipated cotton shortage for the current season. In June 2024, the government raised the minimum support price for cotton by 7 per cent to 8 per cent for the current season (2024–25). Additionally, in order to maintain prices, the Cotton Corporation of India (CCI) is buying a lot of cotton this season. If there is a deficit, they may sell this inventory on the open market later in the season to keep domestic prices from rising too much.
Increased cotton imports during the current season could potentially result from the domestic cotton deficit. Since worldwide cotton prices are predicted to fall year over year due to the anticipated excess crop, imports may be possible even with the 11 per cent import levy on raw cotton.
During FY ’26, Ind-Ra anticipates that domestic demand growth would continue to expand at a rate of 9 per cent–10 per cent year over year, driven mostly by the 7 per cent annual growth in private final consumption spending in India. Nonetheless, there will be partial demand substitution for MMF textiles due to the high gaps between cotton and MMF. According to Ind-Ra, industry participants would see better gross margins than FY ’26 due to the recovery in export demand and greater realisations, even if the cotton market will be in deficit during the 2024–2025 cotton season.
In line with Ind-Ra’s FY ’25 Textile Outlook, export demand is increasing year over year, particularly from 3Q FY ’25 onwards. Given the anticipated growth in demand in major importing countries throughout 2025, particularly the US, UK, and EU, Ind-Ra anticipates that the momentum in textile exports will continue throughout FY ’26.
Since the increasing export volumes, particularly from 3Q FY ’25, will be bolstered by sustained growth in domestic demand, Ind-Ra has kept its rating outlook stable for FY ’26. Better gross margins and higher capacity utilisation, bolstered by probably stable raw material prices, might lead to an improvement in EBITDA margins year over year in FY ’26.
