Strong Recovery in India's Textile Sector; Cotton Prices Pose a Challenge
India's textile sector is moving towards a strong recovery. According to a report by 360 ONE Capital, improved domestic raw material availability and greater sourcing flexibility are expected to support the industry's margins and spreads. However, the sustainability of this recovery will depend on how effectively the increased cost of cotton is passed on through yarn prices.
The report indicates that the recent period has been favorable for cotton spinning. Strong demand, better capacity utilization, and improved yarn spreads have benefited the industry. The supply-demand balance has also improved due to capacity closures and limited additions to new capacity.
Increased demand from China has been a significant positive factor for the Indian yarn industry. Higher cotton prices in China have made importing Indian yarn economically attractive. Consequently, monthly exports of Indian yarn have risen from approximately 95–97 million kilograms to around 110 million kilograms.
However, a sharp rise in cotton prices during the second quarter has increased risks for spinning margins. If yarn prices do not rise in tandem with the increased cost of raw materials, the recent improvement in spreads could come under pressure.
There are also signs of improvement in downstream segments. Garment companies are benefiting from better orders, while the home textile industry is seeing strong demand from the US.
According to government data, India's textile and apparel exports stood at ₹3,25,339 crore in 2025–26, marking a 1.8 percent increase over the ₹3,19,573.2 crore recorded in 2024–25.
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