Gujarat’s textile industry, which accounts for nearly a quarter of India’s spinning capacity and one-third of the country’s raw cotton production, is facing mounting margin pressure as shrinking cotton supplies, rising input costs, power-related challenges and the United States’ Section 301 tariff regime converge to strain the sector.

The current supply crunch stems largely from the agricultural sector. Gujarat’s cotton acreage declined to 23.62 lakh hectares from 26.79 lakh hectares in the previous season, as farmers increasingly shifted to crops such as groundnut and oilseeds. The move was driven by erratic monsoon conditions, weak farm-gate prices and rising cultivation costs.

Consequently, cotton production has also declined. According to the Cotton Association of India (CAI), Gujarat’s cotton pressings dropped to 76 lakh bales, placing the state behind Maharashtra, which recorded 85 lakh bales. Lower national cotton yields have further tightened the availability of raw cotton for domestic manufacturers.

As raw material supplies tightened, input costs for spinning and textile manufacturers increased sharply. Raw cotton prices rose by around 13%, climbing from Rs 54,000 per candy to more than Rs 61,000 per candy, while cotton yarn prices increased by nearly 12%, from Rs 1,260 per bundle to around Rs 1,415 per bundle.

However, finished fabric prices have increased by only about 1%, leaving manufacturers unable to fully pass on higher production costs to buyers and compressing operating margins.

The impact has been particularly severe in Surat, India’s largest hub for synthetic, blended and woven fabrics. Industry bodies estimate cumulative losses of Rs 2,500 crore-Rs 3,000 crore across processing and weaving units. In response, several manufacturers have reduced production shifts by nearly 50% or introduced two-day weekly shutdowns to manage inventory and control costs.