India’s Textile Sector Faces 20–25% Rise In Input Cost

India’s textile industry is feeling the strain again as rising crude oil prices and higher freight costs begin to bite. Manufacturers say raw material expenses have climbed 20–25% in recent weeks, tracking crude’s move past $100 per barrel.

At the same time, shipping rates have jumped as much as 80–90%. All of this is happening when the sector still leans heavily on exports. In 2023-24, the US and EU together accounted for nearly 47% of total shipments.

Why Are Input Costs Rising So Sharply?

The link is quite direct. A large part of India’s textile output depends on synthetic fibres like polyester and nylon, both tied to crude oil. When oil prices rise, fibre costs follow.

That is already visible. Polyester prices have gone up by about 20%, while nylon has seen a smaller increase of around 5%. On top of all this, the cost of dyes and chemicals has gone up, increasing by almost 20%. These have resulted in higher costs of processing, especially from the dyeing units, where costs have increased by almost 30%.

Put together, these increases are feeding into garment manufacturing, where overall costs have risen by 10–15%. For many firms, the speed of this increase has made it harder to adjust sourcing or pricing in time.

Margin Pressure Builds Across The Value Chain

Even with costs rising, most companies are not rushing to increase prices. The worry is that buyers, especially in export markets, may cut back if prices move up too quickly.

So for now, many are absorbing the hit. But this is more of a stopgap. Industry voices say that if the current trend continues for another couple of months, price hikes will be difficult to avoid.

Freight is making things worse. Shipping costs have shot up 80–90%, driven by supply chain disruptions and tensions in key routes. Exporters are therefore dealing with higher costs both at the factory level and while sending goods overseas.

The stress is not new. In Tiruppur, one of India’s largest knitwear hubs, earlier tariff-related disruptions had already led to order losses of around ₹15,000 crore. Production in the region had dropped by as much as 30% at one point, showing how quickly external shocks can ripple through the system.

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Structural Challenges Continue To Weigh On Growth

There is a question of what India should manufacture. The industry is still dominated by cotton, and yet the world is moving towards man-made fibres, athleisure, and blends. Countries such as Bangladesh and Vietnam have been more efficient in doing so and have gained scale in terms of what the world wants.

Efforts are being made to close this gap. Projects like the PM MITRA parks are aimed at creating larger, integrated manufacturing hubs. The production-linked incentive scheme is also pushing investment into man-made fibres and technical textiles.

Sources:

NDTV Profit

Policy Circle