Dear Friends,

Since early 2026, global cotton textile trade has seen evolving dynamics with trade flows gaining some momentum after a softer 2024–25, supported by stronger consumption projections and rising imports in key markets. Meanwhile, new trade agreements — such as the US–Bangladesh reciprocal trade deal that reduces tariffs and offers zero-duty access on select garments — are reshaping competitiveness among exporters, especially in the ready-made garment sector. At the same time, moves to secure similar duty benefits for other major exporters like India are underway, reflecting how policy shifts are influencing cotton and textile export patterns early in 2026.

The global cotton textile trade in 2026 is in a gradual recovery phase after weaker demand in 2024–25, with production still slightly exceeding consumption and keeping prices under pressure. Major exporters such as Brazil and the United States dominate raw cotton shipments, while key importers like Bangladesh, Vietnam, and China drive textile manufacturing demand. Trade flows are increasingly shifting toward Asian production hubs, influenced by tariff changes, competitive labor costs, and growing competition from man-made fibers, shaping a more price-sensitive and regionally concentrated market.

Free Trade Agreements

India-EU FTA

The European Union and India have signed a landmark Free Trade Agreement (FTA) on 27 January 2026. The India–European Union Free Trade Agreement (FTA) is a comprehensive pact that aims to eliminate or sharply reduce tariffs on the vast majority of goods and services traded between India and the 27-member EU, covering about 97% of tariff lines and roughly 99.5% of trade by value including significant opportunities for cotton textile and apparel exports — once ratified by both sides.  Under the agreement, India will grant the EU tariff reductions unprecedented for any bilateral partner, while the EU will provide zero-duty or reduced-duty access for key Indian exports, including textiles, apparel, leather, footwear, gems and jewellery, and marine products, removing EU tariffs (previously 12–17%) that had eroded competitiveness relative to other Asian producers. It also includes provisions on services, investment, intellectual property, and sustainable development cooperation, and is expected to deepen economic integration and expand market access once ratified by both sides.  

India-USA FTA

India and the United States have moved towards a formal trade partnership with a newly agreed interim trade framework that paves the way for a broader Bilateral Trade Agreement (BTA). Under this framework, the U.S. has agreed to cut reciprocal tariffs on Indian exports — including textiles and apparel — to around 18 % from previously punitive levels, helping restore competitiveness in the U.S. market. India, in return, will reduce or eliminate duties on a wide range of U.S. industrial and agricultural goods, and both sides are working on addressing non-tariff barriers and supply-chain cooperation; provisions also include concessional or duty-free access for garments/ Home Textiles & other Cotton Textiles items made along with U.S. cotton/yarn under specified conditions similar to the U.S.–Bangladesh deal. These steps are designed to broaden market access and deepen economic ties while negotiations continue toward a full FTA.

Union Budget 2026-2027

In the Union Budget 2026–27, the Government of India announced a comprehensive push for the textile sector, focusing on strengthening the entire value chain from fibre to finished products. Key measures include a National Fibre Scheme to promote natural and man-made fibres, modernization support for textile clusters, expansion of Mega Textile Parks, and initiatives for sustainable production under the Tex-Eco framework. The budget also enhances skilling through Samarth 2.0 and supports handloom, handicrafts, and village industries, aiming to boost employment, exports, competitiveness, and overall growth of India’s textile industry.
 
Besides textiles, India’s Union Budget 2026–27, presented by Smt. Nirmala Sitharaman, Hon’ble Finance Minister focuses on infrastructure-led growth with record capital expenditure aimed at boosting railways, roads, and logistics networks. It strengthens manufacturing through support for semiconductors, electronics, and biopharma, while maintaining fiscal discipline with a deficit target of around 4.3% of GDP. The budget introduces selective tax and compliance reforms without major changes to income-tax slabs, balancing growth with stability. Overall, it aligns with the long-term vision of Viksit Bharat 2047, aiming to drive sustainable development, job creation, and economic resilience.

Trade Data

According to quick estimates released by the Ministry of Commerce & Industry, exports of cotton yarn, fabrics, made-ups, and handloom products declined by (-) 3.96% in December 2025. However, on a cumulative basis, exports of cotton textiles during April–December 2025 declined by (-) 3.35%, reflecting the impact of muted global consumption, trade frictions, and pricing pressures over much of the year.

For the period April–December 2025, textile exports declined by 2.19%, while apparel exports increased by 2.36%.

Trade Promotion

As part of export promotion initiatives for the current fiscal year, the Council participated in Colombiatex 2026 and Heimtextil events in Colombia and Germany respectively. Detailed reports have been featured in the Trade Promotion section of the Newsletter.

Kasturi Cotton Bharat

Under the national branding initiative Kasturi Cotton Bharat, the Council continues to strengthen India’s premium cotton identity through focused outreach and awareness programmes in major Cotton growing areas and clusters.

Detailed accounts of these initiatives have been featured in the Newsletter.

I earnestly encourage the user industry to actively embrace and promote the Kasturi Cotton brand across the value chain, thereby enhancing the global brand equity of India’s cotton textiles.

Way Forward

India’s textile industry lies in moving up the value chain by focusing on high-value garments, technical textiles, and branded products instead of low-margin raw exports. Embracing sustainability through eco-friendly production, renewable energy, and circular practices will be crucial to meet global standards. Greater adoption of advanced technology, automation, and digital supply chains can improve productivity and competitiveness. Strengthening the raw material base, promoting man-made fibres, upgrading workforce skills, and supporting MSMEs through cluster development and easier credit will further enhance growth. Expanding exports through new markets and trade agreements while preserving traditional handloom and handicraft sectors will ensure balanced and sustainable development.

Cotton textile exporters should focus on improving quality standards, consistency, and timely delivery to remain competitive in global markets. Embracing sustainable practices such as organic cotton sourcing, water-efficient processing, and eco-friendly dyes can enhance demand from environmentally conscious buyers. Diversifying export destinations and leveraging free trade agreements will help reduce market dependency risks. Investing in branding, value-added products, and compliance with international certifications can further strengthen India’s position in the global cotton textile trade.

:: TEXPROCIL ::