Cost Under Fire

The West-Asia conflict has been a wake-up call for Indian textile industry, as the cost has gone up exposing vulnerabilities in fuel, raw materials, logistics, and export demand. Yet, Divya Shetty highlights opportunities for Indian to win diverted orders by improving speed, cost, and sustainability.

The ongoing conflict in West Asia has begun casting a long shadow over India’s textile and apparel industry, with the manmade fibre (MMF) segment facing the sharpest and most immediate disruptions. As global crude oil and gas markets turn volatile, Indian textile manufacturers are grappling with rising raw material costs, supply constraints, logistics delays, and a sharp decline in buying sentiment—both in domestic and export markets.

Industry leaders warn that while the full impact is still unfolding, the situation has already triggered a chain reaction across the textile value chain. From yarn manufacturers and fabric producers to processors and garment makers, businesses are struggling to protect margins as cost pressures rise and demand weakens.

“The MMF segment has been affected very quickly due to the conflict. Petroleum prices have risen sharply, and availability has also emerged as a major challenge,” said Madhu Sudhan Bhageria, Chairman & Managing Director, Filatex India.

Bhageria explained that the biggest issue facing the MMF industry is the steep rise in polymer prices, even though the government has taken steps such as reducing customs duty on key petrochemical inputs. “Polymer prices have increased significantly, even though the government has reduced customs duty. At the same time, buying activity has declined drastically, as market sentiment remains cautious,” he said.

US textile and apparel imports from India fell 28.7 per cent in February 2026 compared to February 2025 (see Table 1).This combination of price inflation and demand hesitation has created a difficult environment for manufacturers, who are caught between rising input costs and unwilling buyers. Many buyers, both domestic and overseas, are holding back on fresh procurement due to fears that prices may soften once the conflict subsides.

“Fabric and garments are products that consumers can postpone purchasing for a short period. Demand is unlikely to disappear entirely, but it is being deferred,” Bhageria noted.

Table 1: Month wise imports of Textiles & Apparel by ISA (US $billion)

Courtesy: CITI

Buyers delay, demand slows

The conflict has triggered a visible drop in buying activity, with many buyers adopting a wait-and-watch strategy. With uncertainty around how long the war will continue, and whether crude-linked prices will fall once the situation stabilises, buyers are unwilling to commit to large volumes.

“Buyers are hesitant because they fear that once the conflict ends, prices may fall, leaving them with high-value inventory,” Bhageria said.

He noted that while retail impact may be relatively limited for now, every stakeholder in the textile chain is worried about margin erosion. “Yarn manufacturers are worried about profitability, followed by fabric manufacturers, processors, and then retailers,” he said.

Another key challenge is the nature of textile consumption itself. Fabric and garments are not immediate necessities and are often postponed during uncertain times, particularly when consumers are already facing inflationary pressure in essential categories.

“In war-like situations, consumers tend to cut discretionary spending, and fabric and garments are among the categories that can be postponed easily,” Bhageria said.

The same sentiment was echoed by Suketu Shah, CEO, Vishal Fabrics, who argued that textiles tend to fall low on consumer priority lists during economic uncertainty.

“Fabric is the last priority for anybody. First is definitely food, grains, gas, power and transportation,” Shah said.

Shah also questioned claims of any meaningful surge in domestic demand, stating that while festival and occasion-based buying may help liquidate some existing inventories, it is not strong enough to drive fresh production cycles.

“There are certain segments where definitely there is still a movement because of the marriage season. Recently, Eid also went up. So those festival buying and occasion buying, that is there, but that would help out to liquidate the inventories at different places. I don’t think the new production would be taking place,” he said.

Similarly, Ashish Bhatnagar, CMO, LNJ Denim, RSWM, said demand has not collapsed yet but new order confirmations have slowed, especially on the export front.

“Whatever businesses were booked before the war, those are currently being supplied. But…the new orders are slightly on hold. The confirmations are not happening because the prices which we are demanding, the market is not able to absorb,” Bhatnagar said.

He added that if the situation continues into the next few months, the impact could become more visible during peak production months. “If this war continues further for two, three months, then we might have some impact maybe in June till May,” he said.

Energy costs surge

While raw material inflation is hitting MMF producers directly, rising energy costs are emerging as a major disruption affecting all textile segments. Textile manufacturing is highly energy-intensive, and cost escalation in fuel and power directly impacts profitability and global competitiveness.

According to Rajiv Ranjan, President, TAI Mumbai Unit, energy cost has become the single biggest war-driven disruption for Indian textiles.

“Among all the disruptions, rising energy cost has been the single biggest challenge for the textile industry,” Ranjan said.

He explained that energy accounts for 15 to 20 per cent of production cost across spinning, weaving, processing, and finishing. With crude oil and natural gas prices fluctuating sharply due to geopolitical instability, electricity, fuel, and transport costs have risen, affecting every stage of manufacturing.

“This increase affects every segment of the textile value chain, especially processing units, which require large amounts of steam and thermal energy,” Ranjan said.

Bhatnagar reinforced this concern from an operational standpoint, particularly in processes dependent on gas. He said polyester prices have risen sharply due to higher fuel costs, and the cost of gas has multiplied.

“The entire supply chain is impacted because of the increase in prices on fuel. Because of it, the polyester prices have increased,” he said.

Highlighting the severity of the issue, he added: “The costs have gone up by almost three to four times, talking about the gas prices.”

Bhatnagar noted that while his company has managed operations so far, the impact is already visible. “We had a half-day shutdown because of this,” he said.

Manufacturers are trying to negotiate with suppliers and customers to share the burden of higher costs, but the ability to pass on the full increase remains limited.

“We have been able to increase some prices, but still we are not able to realise the entire cost impact. We are taking a hit just to keep the momentum going on and keep the production going on,” Bhatnagar said.

Shah also pointed to the role of cost inflation in disrupting business planning, stressing that the biggest damage has come from unpredictability.

“The biggest impact is uncertainty… neither the raw material nor the selling portion of it,” Shah said.

He added that the cost increase has been significant in absolute terms. “The price rise which has happened is to the tune of almost…Rs 30 to 40 a meter,” he said.

Logistics disruption

Beyond cost inflation and demand uncertainty, exporters are also facing logistics disruptions. Shipping routes have been impacted due to geopolitical risk, leading to longer transit timelines, higher freight costs, and increased working capital pressure.

Ranjan said shipping disruptions have forced vessels to take longer alternative routes, significantly increasing delivery times.

“This has increased transit times by about 12 to 15 days in several cases,” he said.

Freight costs have also surged sharply. “Freight costs have also increased…in some cases by 80 to 100%,” Ranjan noted.

While many buyers recognise that these disruptions are beyond exporters’ control, the delays are still creating pressure, particularly in fashion and seasonal categories where timing is critical.

“More than penalties, the larger concern is maintaining buyer confidence and reliability,” Ranjan said.

Shah described the freight and insurance situation as a “heavy burden” for the industry, highlighting the uncertainty around goods in transit.

“It’s too heavy burden on the industries, and there is nobody who is telling the 100 per centguarantee about any goods in transit,” Shah said.

Policy measures

To ease the impact on the industry, the government has announced temporary relief measures, including customs duty exemptions on key petrochemical inputs. Industry leaders acknowledge that the duty reduction has provided some immediate relief, but argue that the time window is too short and structural issues remain unresolved.

Bhageria confirmed that duty benefits have reached downstream users.

“Yes, the benefit has been passed on. Producers have passed it on to us, and we have reduced our prices accordingly,” he said.

However, he warned that the government’s announcement of duty relief for only three months is insufficient for import-dependent industries, where procurement and shipment cycles take time.

“The measures taken by the government are positive, but they have been announced only for a three-month period. In import-dependent industries, three months is a very short timeframe,” Bhageria said.

He explained that by the time orders are placed and shipments arrive, nearly two months are already consumed, leaving little real benefit for industry players.

“This effectively leaves only one month of benefit,” he stated.

Bhageria argued that the duty relief should have been extended for at least nine months or the full financial year, allowing businesses to plan procurement and production more effectively.

“The government should have taken a longer-term view, at least for the full calendar year,” he said.

Boost domestic supply

A key lesson emerging from the crisis is the need for stronger domestic capacity in polyester raw material production. India’s dependence on imports, particularly for PTA and MEG-linked supply chains, has left it vulnerable to geopolitical disruptions.

Bhageria said multiple projects are already underway to expand domestic production.

“Yes, two or three plants are already under development. Once they become operational, the raw material issue should ease considerably,” he said.

He said one plant is being developed by GAIL, another by Indian Oil, and another project is expected from Reliance around early 2028.

If the duty relief period had been extended through the financial year, it would have aligned better with these capacity additions.

“If the customs duty benefit had been extended until the end of the financial year, it would have aligned well with these upcoming projects,” he said.

Bhageria also pointed out that MEG production remains structurally challenging because it is largely gas-based and not easily viable in India.

“MEG is largely produced from gas-based feedstocks, and its viability in India is limited. That is why it is primarily sourced from the Middle East,” he said.

Industry strategy

With uncertainty persisting, industry leaders believe textile companies must focus on internal resilience rather than relying solely on policy relief. Ranjan said the conflict has accelerated the need for companies to diversify sourcing and reduce energy dependence.

“If this war situation continues for next few months, what are the top three urgent actions Indian textile companies must take to remain globally competitive? Action 1: Diversify Supply Sources,” he said.

He added that companies must also invest in renewable energy and efficiency upgrades, since energy will remain a key determinant of competitiveness.

“With energy forming 15–20 per cent of production cost, companies should invest in renewable energy such as solar and wind, waste heat recovery systems, and alternative fuels like biomass,” Ranjan said.

He also stressed the importance of expanding export markets beyond traditional destinations like the US and Europe.

“Companies should actively explore newer markets in Africa, Latin America, and Southeast Asia,” he said.

Bhatnagar agreed that companies are focusing on cost optimisation but noted that weak demand makes it harder to invest aggressively.

“When demand is weak, the ability to invest or expand becomes constrained,” he said.

He also highlighted that many companies are avoiding long-term commitments on procurement due to uncertainty about price trends.

“Nobody is doing long-term contracts… Whatever is bare essential requirement to run the factories, that is what has been done,” he said.

Shah echoed the need for calm decision-making, suggesting that panic could lead to heavy losses.

“Stay back on this patience… If you panic, you are bound to make losses,” he said.

Export resilience

Even amid these challenges, the Indian textile and apparel industry has demonstrated resilience in recent years. Ashwin Chandran, Chairman, Confederation of Indian Textile Industry (CITI), said exporters managed to contain the decline in FY26 despite facing severe external pressures.

“Despite grappling with a steep 50 per centUS tariff for over five months in the previous fiscal year, it goes to the credit of India’s textiles and apparel exporters that the dip in exports was contained at 2.21 per centin the financial year 2025-26,” Chandran said.

He noted that the data reflects the strength of an MSME-driven sector that continues to operate under narrow margins. At the same time, he said the MMF segment is beginning to align better with global consumption patterns, while cotton textiles remain under stress.

“Simultaneously, the data for FY26 also highlights that the Manmade Fibre (MMF) segment is aligning better with global consumption patterns. However, traditional segments like Cotton textiles are undergoing stress,” Chandran said.

Chandran also flagged the sharp rise in cotton imports as a warning sign of domestic constraints and urged the government to remove import duty on cotton to support competitiveness.

“The sharp increase in cotton imports at 54.9 per centsignals domestic supply constraints and cost pressures, highlighting the urgent need to remove the import duty on cotton,” he said.

Looking ahead, Chandran said the industry is optimistic due to easing tariff pressures and the potential boost from free trade agreements.

“With the removal of the punitive US tariff and new opportunities emerging through free trade agreements (FTAs), the textile and apparel industry is optimistic about its prospects,” Chandran said, adding that hopes are linked to “the growing likelihood of an early easing of turbulence in West Asia.”

Testing the cost structure

The West Asia conflict has once again exposed the fragility of global supply chains and the vulnerability of import-dependent sectors. For India’s textile industry, the crisis is not only about rising costs but also about the uncertainty that has stalled buying decisions and weakened market sentiment.

From crude-linked polymer inflation and energy shocks to freight disruption and labour shortages, the industry is being tested on multiple fronts simultaneously. While temporary customs duty relief has provided some cushion, industry leaders believe the focus must shift towards longer-term structural solutions, including GST rationalisation, domestic raw material capacity expansion, and stronger energy efficiency investments.

At the same time, the sector’s resilience remains visible. Companies are collaborating across supply chains, buyers are largely accommodating unavoidable delays, and policymakers are responding with short-term relief measures.

For now, manufacturers remain on edge—hoping for a quick resolution, while preparing for prolonged uncertainty if geopolitical turbulence continues.

 

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