India’s textile industry is entering a period of recovery and renewed growth prospects as uncertainty surrounding US tariffs eases, global demand improves and new trade agreements strengthen the country’s competitive position, according to a report by Dolat Capital.

The brokerage stated that the sector appears to have moved beyond its most challenging phase, citing improving industry fundamentals, greater demand visibility and favourable policy developments as key drivers of optimism.

Dolat Capital noted that the removal of reciprocal and penalty tariffs had normalised trading conditions and contributed to the stabilisation of export volumes. The elimination of punitive duties, which had previously pushed total charges on Indian garment exports to between 65% and 69%, had restored the competitiveness of Indian products in global markets and released pent-up demand from US buyers.

A marked improvement in industry fundamentals was also highlighted. This was attributed to capacity consolidation within the spinning sector, the restoration of cotton cost competitiveness and a sharp recovery in yarn spreads, all of which have contributed to stronger profitability across the textile value chain.

International buyers are increasingly seeking to diversify supply chains away from an overreliance on duty-free sourcing destinations such as Bangladesh and Cambodia. This trend positions India as an attractive long-term sourcing alternative.

On the demand front, the US market has demonstrated resilience despite inflationary pressures and broader macroeconomic uncertainty. Demand had stabilised by the first quarter of FY ’27 and continued to show encouraging strength.

The yarn segment has also experienced a significant improvement, with the report citing a strong resurgence in demand across both domestic and export markets.

Looking ahead, the textile industry is well positioned for sustainable growth, supported by strong domestic consumption, disciplined capital allocation and ongoing deleveraging efforts by companies across the sector.