Companies are also expected to pass on a significant portion of these costs to consumers, which could lead to higher textile and apparel prices and potentially reduce demand from key markets like the US

India's textile sector may gain a competitive edge in the global market due to rising labour costs in Vietnam and ongoing political instability in Bangladesh, two of its key export rivals, according to a report by Systematix Research. The report, however, highlighted that the near-term outlook for the sector remains challenging. Tariff-related uncertainties may force exporters to absorb part of the additional costs, putting pressure on margins.

Companies are also expected to pass on a significant portion of these costs to consumers, which could lead to higher textile and apparel prices and potentially reduce demand from key markets like the US. The report pointed out that global macroeconomic shifts are gradually working in India's favour. With Bangladesh facing political instability and Vietnam seeing a rise in labour costs, India is expected to become a more attractive sourcing destination for global retailers.

It said "India's textile industry seem strong, as channel inventories seem to be normalising at the global retailer level, there is a likelihood of the US raising tariffs for China, labour costs are rising in Vietnam and Bangladesh is seeing political instability". Despite these long-term positives, Indian textile companies reported a muted performance in the fourth quarter of FY25.

Amid tariff uncertainty, the revenue of the companies rose by 5 per cent year-on-year (YoY), EBITDA declined by 3 per cent and profit after tax (PAT) grew by only 3 per cent YoY, mainly due to weak volumes and ongoing uncertainty around tariffs. "Textile companies reported muted revenue/EBITDA/PAT performance of +5 per cent/-3 per cent/+3 per cent YoY, respectively, due to tepid volumes, amid tariff uncertainty," the report stated.

Spinning companies, however, saw a marginal improvement in gross margins, supported by a 10 per cent YoY and 2 per cent quarter-on-quarter (QoQ) drop in cotton prices, and stable yarn prices, which were down 3 per cent YoY and flat QoQ. Garments showed strong recovery, with normalising retailer inventories pushing up sales volumes by 10 per cent YoY and 20 per cent QoQ. On the other hand, home textiles continued to witness weak demand, with volumes falling by 9 per cent YoY and 6 per cent QoQ. Nevertheless, stable cotton prices, favourable forex rates and a continued focus on operational efficiency are likely to support profitability for Indian textile firms.