After two years of contraction, the Indian textile industry is projected to recover this financial year, as per a report by the Business Standard. This growth will be fueled by stable cotton prices, increased ready-made garment (RMG) exports, and consistent domestic demand, the report says.

The resurgence of RMG exports is particularly beneficial for small and medium enterprises (SMEs), which constitute 80 per cent of the textile supply chain. These SMEs were severely impacted in the previous fiscal year due to a 25 per cent decline in cotton prices and weakened RMG exports, despite steady domestic demand.

This year, while domestic demand for cotton yarn will decline slightly, stable prices will boost revenue growth. Conversely, cotton yarn exports are anticipated to decline as Chinese demand normalizes.

The primary growth driver for the industry will be RMG exports, forecasted to increase by 10-12 per cent this year, driven by restocking activities by Western retailers and robust discretionary spending in the US and EU.

Domestic RMG demand is expected to remain stable, with a projected growth of 3 -4 per cent, supported by a recovery in H2, FY25.However, garment prices are likely to remain flat or increase only marginally by 1 per cent.

On the supply side, domestic cotton prices are experiencing slight upward pressure due to reduced production, stable consumption, and an increase in the minimum support price. In contrast, international cotton prices are facing downward pressure due to increased global production. Consequently, domestic cotton prices are trading at a small premium to international prices, although they remain relatively stable compared to the previous year.

Export-oriented RMG clusters, such as Tirupur, Bengaluru, and Gurugram, are expected to see stronger revenue growth due to the revival of RMG exports. Conversely, clusters focused on domestic markets, like Kolkata, Kanchipuram, and Ludhiana, will likely experience slower growth.

The profitability of textile companies is also expected to improve this fiscal year, driven by stable cotton prices.

In the medium term, the RMG sector is poised for growth, supported by free trade agreements with key markets like Australia and the UAE, the establishment of PM Mega Integrated Textile Regions and Apparel Parks, and incentive programs such as the Production Linked Incentive and Rebate of State and Central Taxes and Levies, which will boost domestic manufacturing and exports.