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The initiative, approved by the Ministry of MSME two years ago, complements the development of a garment park already under way in Gorakhpur. Together, the projects are seen as positioning the city to emerge as a significant hub for India’s ready-made garment industry.

The recently approved Industrial Policy 2025 had laid the foundation for faster growth, and that this project would take the state a step closer to its economic and industrial goals.

Crisil anticipates a 200–250 basis point decline in industry-wide operating profitability this fiscal year, which will result in smaller cash accruals and worse credit metrics. The debt-to-Ebitda ratio may worsen to 2.4–2.6 from 1.9, while the interest coverage ratio is predicted to drop to about four times from 5.4 last year.

Palanisamy noted that GST 2.0 would further expand the scale of the sector but warned that the continued accumulation of GST at 18% on textile machinery remained a significant burden in the absence of the Technology Upgradation Scheme since 2022.

Bankers indicated that this shift towards the domestic market, along with supply chain realignments, is set to generate fresh working capital needs and incremental credit demand, particularly in MSME-heavy clusters.

Following US President Donald Trump's statement on Truth Social that trade talks with India are still ongoing, shares of textile businesses surged up to 7% on Wednesday.