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Bangladesh’s ready-made garment (RMG) industry is undergoing a fundamental structural transition as Man-Made Fiber (MMF) products emerge as the primary driver of export resilience. According to the latest data from the Export Promotion Bureau (EPB) for the first half of FY2025–26 (July–December), total RMG exports reached $19.36 billion, a 2.63 per cent contraction compared to the previous year. However, MMF-based garments significantly bucked the downward trend, recording a 14.1 per cent growth to reach $3.68 billion. This shift highlights a strategic move away from cotton-centric production toward high-value, functional apparel like polyester-rich activewear and recycled PET-based outerwear.
Fiscal incentives driving functional apparel
The government has solidified this transition through targeted fiscal measures in the FY2026 budget. To reduce input costs for technical textiles, import duties on polypropylene yarn were slashed from 10 per cent to 5 per cent, while supplementary duties on specialized fabrics were halved to 10 per cent. These adjustments are designed to improve the competitiveness of Bangladeshi sportswear and medical textiles, areas previously dominated by regional rivals. MMF garments now command higher unit prices due to stringent performance and sustainability compliance, allowing manufacturers to improve margins in a volume-saturated market.
Structural hurdles and energy volatility
Despite the MMF boom, the sector faces significant structural gaps, with 80 per cent of specialized synthetic yarns still imported from China and India. This dependence is compounded by a severe energy crisis; gas pressure in key industrial hubs has plummeted to 0–2 PSI, far below the 10–15 PSI required for continuous dyeing and spinning. These shortages, alongside a 30–40 per cent spike in production costs, threaten to stall the momentum. Industry analysts warn that securing deep backward linkages is now a mandatory requirement for Bangladesh to defend its market share as it prepares for LDC graduation in 2026 and the subsequent loss of preferential EU trade benefits.
The Bangladesh MMF segment focuses on high-performance apparel like athleisure and weather-resistant outerwear for the EU and US. Following its 1970s cotton-roots, the industry is now scaling synthetic production to reach a $100 billion export goal by 2030, supported by new 1.5 per cent – 3 per cent cash incentives and 230+ LEED-certified green factories.
India’s apparel sector is undergoing a profound structural shift as the mid-premium segment achieves a staggering 25 per cent CAGR as of early 2026. This ‘premiumization’ trend marks a departure from volume-led, price-sensitive buying toward intentional, quality-driven consumption. According to the Deloitte India 2026 Fashion Report, ‘accessible premium’—products offering superior craftsmanship and brand trust without luxury price tags—is redefining the domestic market. This transition is further fueled by the Union Budget 2026–27, which introduced the National Fiber Scheme to enhance the availability of high-grade natural and man-made fibers, ensuring manufacturers can meet the rising demand for durable, high-performance textiles.
Fiscal catalysts and infrastructure modernization
To capitalize on this $194 billion opportunity, the government has launched the Tex-Eco Initiative, a strategic framework designed to align Indian textile manufacturing with international ESG (Environmental, Social, and Governance) standards. By integrating the Textile Expansion and Employment Scheme, the budget provides capital support for machinery upgrades in traditional clusters, aiming to bridge the 30 per cent productivity gap currently seen in mid-tier manufacturing. Industry analysts suggest that these policy interventions, combined with the India-EU Free Trade Agreement, will allow Indian apparel to transition from basic commodities to high-value, design-led exports.
Domestic resilience amid global volatility
While global apparel markets face stagnation, India’s domestic consumption remains a critical stabilizer, contributing nearly 80 per cent of total industry revenue. The rise of accessible premium has pushed the Average Selling Price (ASP) in urban centers by 18 per cent Y-o-Y as consumers prioritize longevity over fast-fashion cycles. The Indian consumer is no longer chasing fashion for visibility but for meaning and confidence, stated Anand Ramanathan, Partner, Deloitte India. With the PM MITRA Mega Textile Parks now focusing on higher-margin technical textiles, the industry is well-positioned to reach its ambitious $250 billion domestic market target by 2030.
Spearheaded by organized retailers, India’s mid-premium apparel segment focuses on high-quality ethnic and Western wear. Key growth plans include expanding into Tier-II and Tier-III cities through omnichannel strategies. With a projected 25 per cent CAGR, the segment is the primary driver of the $115 billion domestic apparel market, supported by new 2026 textile-specific skilling programs.
On January 29, 2026, the United States and El Salvador formalized a landmark agreement on reciprocal trade, a move designed to insulate the Western Hemisphere’s textile ecosystem from Asian market volatility. Signed by Jamieson Greer, US Trade Representative and María Luisa Hayem, Economy Minister, Salvadore, the accord effectively builds upon the CAFTA-DR framework by eliminating reciprocal tariffs on eligible apparel and textile exports. This development is projected to reverse a 4.6 per cent contraction in Salvadoran textile revenues recorded in late 2025, with industry analysts now forecasting a growth recovery of 2 per cent to 3 per cent for FY26.
Strengthening the co-production model
The agreement specifically targets the ‘yarn-forward’ co-production model, which integrates US fiber and yarn exports with Salvadoran garment manufacturing. By streamlining regulatory authorizations and removing non-tariff barriers, the pact reduces the administrative friction that has historically hampered rapid-response logistics. Kim Glas, CEO, National Council of Textile Organizations (NCTO), noted, the agreement fortifies a critical export market for US textile workers while offering US brands a geopolitically resilient alternative to Trans-Pacific sourcing. For El Salvador, which sends 65 per cent of its textile output to the US, the deal provides the legal certainty needed to attract fresh foreign direct investment into specialized niches like performance wear and synthetic fiber blends.
Sustainability as a nearshoring catalyst
Beyond tariff relief, the pact emphasizes environmental enforcement and digital trade facilitation, aligning Salvadoran factories with the growing demand for ‘green-certified’ production. El Salvador currently operates 19 free trade zones equipped with advanced water-recycling and energy-efficient systems, positioning the nation as a leader in sustainable nearshoring. As U.S. retailers reassess their inventory strategies in light of global shipping disruptions, El Salvador’s proximity - offering lead times of under three weeks - combined with this new reciprocal status, establishes a high-tech manufacturing lab for the Americas. This strategic alignment is expected to safeguard over 60,000 direct jobs while enhancing the transparency of the regional apparel value chain.
As the pillar of El Salvador’s economy, this sector generates 30 per cent of total national exports. Historically focused on basic cotton apparel, the industry is transitioning into high-value technical textiles and athleisure for the North American market. With revenues exceeding $2.1 billion, the sector aims to regain its 2022 performance levels through enhanced automation and US trade reciprocity.
Algeria is rapidly transforming its industrial landscape, positioning itself as a strategic nearshoring destination for global fashion giants. Following a series of legislative reforms initiated in 2020, the North African nation is now seeing a surge in localized production through the ‘Made in DZ’ initiative. Minister of Foreign Trade and Export Promotion, Kamel Rezig, recently confirmed that dozens of international clothing brands have established local manufacturing bases, utilizing Algerian raw materials and labor to supply European and American markets. This shift is part of a broader national strategy to replace apparel imports with domestic output, bolstered by the 2026 Finance Act, which offers full coverage of participation fees for exporters in international business events and simplified tax procedures.
Fiscal incentives and export expansion
The Algerian government’s push is backed by substantial fiscal catalysts aimed at reducing the nation's 90 per cent dependency on hydrocarbon exports. The new investment framework provides tax exemptions for businesses involved in micro-importation and establishes a reduced 5 per cent customs duty rate for essential manufacturing inputs. By leveraging its proximity to Europe - Algeria’s primary trade partner—the textile sector is targeting a significant increase in non-hydrocarbon revenue. Major vertically integrated plants, such as the Tayal SPA complex, are already operational, boasting a production capacity of 30 million ready-to-wear items annually. These facilities bridge the gap from cotton fiber to finished garments, ensuring high-quality standards that meet international compliance for global retail.
Strategic localization and regional trade
The entry of global brands is the greatest proof that Algerian industry has made significant strides, stated Minister Rezig during the International Brands Exhibition. The initiative is not solely focused on Western markets; Algeria is increasingly eyeing the African Continental Free Trade Area (AfCFTA) to become a regional textile hub. By guaranteeing favorable investment conditions and an attractive climate, public authorities aim to foster deep backward linkages in the supply chain. This enables local manufacturers to move beyond simple assembly into high-value design and fabric engineering, effectively competing with established Mediterranean textile hubs like Turkey and Egypt.
Spearheaded by the Ministry of Foreign Trade, the Algerian textile initiative focuses on localizing international brands and expanding exports to EU and African markets. Key categories include high-fashion apparel and technical textiles. Growth plans involve reaching full production capacity at major hubs like Tayal by late 2026, aiming to diversify the economy beyond oil and gas.
Dubai Fashion Week A/W 2026/27 commenced at the Dubai Design District (d3), marking a pivotal transition for the UAE’s apparel sector. Co-founded by d3 and the Arab Fashion Council, the event opened with Italian luminary Alberta Ferretti, signifying a strategic shift toward established international prestige. As the UAE luxury goods market is projected to reach $8.98 billion in 2026, the week serves as more than a creative showcase; it is a commercial engine driving the region’s 5.7 per cent CAGR in luxury fashion.
Cross-continental synergies and market access
The return of Indian couturier Manish Malhotra as the closing designer highlights a deepening ‘East-West’ trade corridor. Malhotra’s presence underscores the commercial importance of the ‘World Collection: Dubai,’ specifically tailored for a Middle Eastern clientele that demands high-craftsmanship, regionally resonant silhouettes. Meanwhile, the inclusion of Victor Weinsanto - supported by the French Fédération de la Haute Couture et de la Mode - reinforces DFW’s official status on the global fashion calendar. These collaborations are facilitated by an expanded International Buyers Program, which now integrates major retail groups from the US, UK, and Italy to capitalize on Dubai's high-disposable-income demographic.
Digital transformation and sustainable retail
With the UAE’s online fashion market expected to hit $3.3 billion by 2032, the current edition integrates advanced retail technologies to reduce return rates and enhance personalization. The ‘Threads Talks’ by Meta and the adoption of AI-driven styling tools by regional giants illustrate a sector-wide move toward high-tech retail solutions. Furthermore, as consumers increasingly prioritize ESG (Environmental, Social, and Governance) values, the focus on "green-certified" production - represented by sustainable labels like Molato - is becoming a non-negotiable entry requirement. This dual focus on digital agility and ecological responsibility is securing Dubai’s reputation as a future-ready fashion capital.
Co-founded by Dubai Design District (d3) and the Arab Fashion Council, DFW is the region’s official fashion platform. It serves the MENA, Asian, and European luxury markets, aiming to cement Dubai as a global creative capital. Since its inception, DFW has contributed over AED 587 million to the UAE economy, focusing on high-end couture and luxury ready-to-wear.
Long the preferred near-shoring partner for the European Union, the Turkish textile industry currently faces a critical inflection point as Brussels aggressively expands its free trade network. Recent projections suggest, the impending EU-India FTA could erode Turkey’s competitive edge by eliminating tariffs on over 90 per cent of Indian goods. While Turkey currently enjoys a privileged position within the Customs Union, the lack of modernization in this 30-year-old framework is increasingly viewed as a liability. Market analysts note, India’s lower labor costs, combined with newly leveled trade barriers, threaten Turkey’s status as the EU’s second-largest textile supplier.
Strategic integration versus tariff equalization
To maintain its dominance, the Turkish apparel sector is shifting its value proposition from cost-efficiency to high-speed supply chain integration. Industry leaders emphasize, Turkey’s proximity allows for ‘ultra-fast fashion’ cycles that Asian competitors cannot match. However, Dirk Vantyghem, Director General, Euratex has signaled, the Customs Union must be updated to address contemporary market surveillance and digital trade standards. Without these reforms, Turkey risks being sidelined by the EU’s broader diversification strategy, which now includes the Mercosur bloc and revitalized ties with South Asian manufacturing hubs.
Sustainability as the new competitive frontier
The European Green Deal and the Circular Economy Action Plan are redefining the entry requirements for the EU market. Turkish manufacturers are responding by investing in water-recycling technologies and traceable organic cotton to align with the EU’s stringent sustainability mandates. This transition is not merely environmental but defensive; as the EU grants preferential access to new partners, Turkey’s ability to offer ‘green-certified’ production serves as a crucial differentiator. The sector's survival now hinges on whether it can successfully trade its traditional tariff advantages for a role as Europe’s sustainable, high-tech manufacturing lab.
Established as a post-war industrial backbone, Turkey’s textile sector remains a top-three global player in knitwear and denim. Focused on the EU and UK markets, the industry is currently transitioning toward technical textiles and high-end branding. Despite inflationary pressures, exporters target a $20 billion annual revenue benchmark through increased automation.
Gokaldas Exports has demonstrated operational resilience in Q3, FY26, reporting a consolidated total income of Rs 998 crore. While the top line remained steady Y-o-Y, the quarter represented a critical test as the company absorbed the first full impact of the 50 per cent reciprocal US tariffs imposed in late 2025. Despite this significant headwind, the firm’s domestic India operations outperformed the broader market, delivering an 8 per cent revenue growth even as national apparel exports remained largely stagnant. This domestic strength helped offset a 26 per cent decline in consolidated EBITDA, which settled at Rs 96 crore with a narrowed margin of 9.7 per cent.
Managing Africa disruptions and trade renewals
The company’s African business faced a volatile quarter characterized by supply-chain delays and persistent uncertainty surrounding the African Growth and Opportunity Act (AGOA). However, management highlighted a sequential recovery in the region, with a robust order pipeline linked to the potential renewal of AGOA trade preferences. Our productivity gains and diligent cost management have been instrumental in absorbing the US tariff rebates, noted Sivaramakrishnan Ganapathi, Vice Chairman and Managing Director. The strategic focus is now shifting toward the newly ratified India-EU Free Trade Agreement, which provides a hedge against US market volatility and is expected to drive EU revenue share from 16 per cent to 20 per cent within the next year.
Capitalizing on budgetary support and amalgamations
To strengthen its vertical integration, Gokaldas has approved an amalgamation scheme with BRFL Textiles (BTPL), aiming to enhance fabric processing capabilities. This move aligns with the Union Budget 2026–27, which introduced customs duty cuts on critical inputs and capital support for machinery modernization. These fiscal measures are designed to reduce working-capital stress and support the industry’s transition into high-value, sustainable apparel. With a current market capitalization of approximately Rs 40.33 billion and a strong order book, Gokaldas is positioning its diversified manufacturing base across India and Kenya to capture emerging opportunities in non-US markets.
Global apparel manufacturing leadership
Gokaldas Exports is a premier Indian garment producer, operating over 30 units with an annual capacity of 87 million pieces. Serving 50+ countries, it specializes in high-fashion outerwear and activewear. The firm is currently expanding its African footprint and integrating fabric processing to achieve a $100 billion sectoral export vision.
The Union Budget 2026–27 has formally introduced the Tex-Eco Initiative, a strategic pivot designed to safeguard India’s textile exports against the European Union’s tightening environmental mandates. With the EU’s Ecodesign for Sustainable Products Regulation (ESPR) enforcing a ban on the destruction of unsold textiles starting July 2026, Indian manufacturers are facing a rigorous ‘green’ transition. The Tex-Eco program provides the necessary fiscal framework for MSMEs to adopt circular manufacturing, focusing on durability, recyclability, and the integration of Digital Product Passports. Industry leaders suggest this alignment is critical to maintaining access to a European fashion market valued at €376 billion, which now demands verified sustainability data for every imported garment.
Strengthening fiber security and cluster modernization
To support this ecological shift, the government has integrated the Tex-Eco push with the National Fiber Scheme, targeting domestic self-reliance in natural, man-made, and ‘new-age’ technical fibers. By reducing import dependence on raw materials, the initiative aims to lower the overall carbon footprint of the value chain. Furthermore, the Textile Expansion and Employment Scheme will modernize traditional clusters with capital support for zero-liquid discharge (ZLD) systems and advanced certification labs. These measures are designed to bridge the productivity gap - currently estimated at 20–40 per cent behind competitors like Vietnam—while positioning India to reach a $100 billion export target by 2030.
Strategic market advantage
Sustainability is no longer a corporate choice but a trade requirement for the EU market, noted Sanjay K. Jain, Chairperson, ICC National Textile Committee. The timing of the Tex-Eco launch coincides with the finalized India-EU Free Trade Agreement, which grants zero-duty access to Indian apparel. By leveraging this tax advantage alongside high ESG compliance, Indian exporters can effectively compete with traditional low-cost hubs. The initiative ensures that Indian-made fabrics satisfy the EU’s limit on microfiber shedding (0.5g/kg per wash), turning a potential regulatory barrier into a competitive edge for premium sustainable exports.
The Tex-Eco Initiative is a core component of India's 2026 Integrated Textile Program. It focuses on aligning domestic manufacturing with global green standards, particularly the EU's ESPR and Digital Product Passports. The initiative aims to drive 20 per cent annual export growth through cleaner production, targeting global markets like the EU, UK, and Australia.
Bangladesh’s textile and apparel sector has entered a phase of calculated procurement as raw material inflows moderate. In 2025, the country recorded a 3.20 per cent dip in fabric and yarn imports, a development that signifies a departure from the double-digit growth previously seen. While ready-made garment (RMG) exports grew by 8.84 per cent in the fiscal year ending June 2025 to reach $39.35 billion, the contraction in raw material imports highlights a strategic pivot toward inventory optimization and more cautious buying cycles.
Operational volatility dampens mill productivity
The primary catalyst for this procurement slowdown is a persistent domestic energy deficit. Gas pressure in key industrial hubs like Gazipur and Narayanganj frequently falls below 2 PSI, far short of the 10–15 PSI required for continuous spinning and dyeing. The energy volatility has become a direct commercial liability, forcing mid-tier exporters to operate at 30 per cent to 50 per cent capacity, noted an industry analyst. This manufacturing friction, compounded by a 19.1 per cent drop in capital machinery imports, suggests that firms are prioritizing short-term liquidity over long-term expansion as high bank interest rates exceed 11 per cent.
Sustainability as a shield against trade shocks
Despite these structural hurdles, Bangladesh is leveraging its environmental credentials to retain high-value orders from the EU and US. Boasting over 240 LEED-certified factories - the highest globally - manufacturers are increasingly integrating solar power and waste-heat recovery systems to mitigate fuel costs. As the industry faces the ‘LDC graduation tariff cliff’ and rising competition from India and Vietnam, these green investments serve as a defensive buffer, ensuring that the country remains a ‘preferred vendor’ in a supply chain increasingly defined by carbon transparency rather than just cost.
Bangladesh textile and apparel sector accounts for over 80 per cent of national export earnings, primarily serving the European and North American fashion markets. Currently, the industry is shifting from basic cotton knits to synthetic fibers and value-added woven wear. While targeting $100 billion in exports by 2030, current performance focuses on maintaining its $40 billion baseline amid political and energy transitions.
In a landmark move for India’s second-largest employer, the Union Budget 2026-27 has unveiled a comprehensive transformation roadmap for the textile, apparel, and handicraft sectors. The budget focuses on scale, sustainability, and global competitiveness to propel the industry toward an ambitious target of a $350 billion business size by 2030. Industry leaders have characterized the announcement as a strategic pivot toward modernizing India's "fibre-to-fashion" value chain, with Dr. A. Sakthivel, Chairman of the Apparel Export Promotion Council (AEPC), describing the budget as forward-looking, growth-oriented, and balanced, reflecting a strong commitment to a globally integrated sector.
Strategic pillars of the Budget 2026
The budget introduces several new missions to streamline the fragmented sector, addressing the textile economy from farm-to-factory linkages to high-value exports. Chandrima Chatterjee, Executive Director of the Confederation of Indian Textile Industry (CITI), noted that the budget lays out a comprehensive roadmap through the Integrated Programme for Textile Sector, which encompasses fibres, clusters, handlooms, sustainability, and skilling. These pillars are structured to ensure raw material security and modernized manufacturing, an intent echoed by the Clothing Manufacturers Association of India (CMAI), which stated that the package signals a clear, outcomes-oriented intent to modernize the sector, strengthen livelihoods across the value chain, and accelerate India’s competitiveness in domestic and global markets.
Initiative Primary Focus Objective National Fibre Scheme Raw Material Security Strengthening availability and self-reliance in silk, wool, jute, and MMF. National Handloom & Handicrafts Programme Artisan Integration Integrating and scaling existing schemes to improve market access for small producers. Tex-Eco Initiative Sustainability Promoting globally competitive and environmentally responsible fashion. Samarth 2.0 Skill Development Modernizing the skilling ecosystem through industry-academic collaboration. Mission for Cotton Productivity Agricultural Yield Raising yields, promoting extra-long staple (ELS) varieties, and tech support for farmers.
Sanjay K. Jain, Chairman of the ICC National Textiles Committee, emphasized that these specific announcements become even more significant given the global shifts of the last six months, as the industry needs to build capacity to capture opportunities opening in the global market. He stated that the focus on sustainability, skilling, and capacity scaling is perfectly in tune with building for the future. R.K. Vij, President of the Textile Association (India), echoed this sentiment, highlighting that the budget's focus on capacity building in textiles and technical textiles marks the first time a budget has specifically prioritized Man-Made Fibre (MMF), natural, and new-age fibres.
Modernization and the revival of traditional segments
The budget places a high priority on infrastructure and rural inclusion through the planned establishment of new Mega Textile Parks in mission mode, which aim to attract investment, improve compliance, and create integrated hubs for scale and exports. This is complemented by the Mahatma Gandhi Gram Swaraj Initiative, which is designed to energize khadi, handloom, and handicrafts by promoting inclusive growth and rural livelihoods. Chandrima Chatterjee pointed out that the revival of legacy clusters and these new parks will strengthen competitiveness and support large-scale employment. Furthermore, the Textile Expansion and Employment Scheme aims to modernize traditional clusters through capital support for machinery and common testing centers, which AEPC suggests will greatly enhance productivity in MSME-dominated clusters.
CMAI further noted that the emphasis on skilling through Samarth 2.0 and the broader ecosystem commitments will equip workers with contemporary manufacturing and design skills, enabling productivity gains and faster adoption of Industry 4.0 technologies. Durai Palanisamy, Chairman of The Southern India Mills’ Association (SIMA), pointed out that the announcement of a Capital Support Scheme for Modernization is essential, given that the previous Technology Upgradation Fund Scheme (TUFS) had attracted around ₹4 lakh crore in investment before being discontinued in 2022. He believes this dedicated support will enable the sector to attract the envisaged investment of $100 billion by 2030.
Empowering MSMEs and enhancing liquidity
Recognizing MSMEs as the backbone of exports, the budget introduces robust financial and trade reforms. Dr. Sakthivel stated that the emphasis on liquidity and ease of exports through customs-related reforms will reduce transaction costs and enhance efficiency for exporters. Liquidity is further addressed through the strengthening of the Trade Receivables Discounting System (TReDS), which now includes mandatory onboarding of Central Public Sector Enterprises (CPSEs) and credit guarantee support through the CGTMSE. CMAI highlighted that beyond sector-specific measures, cross-cutting reforms such as tailored credit cards for first-time entrepreneurs and the National Manufacturing Mission will further "Make in India" objectives.
Trade facilitation measures such as the recognition of trusted importers, reduced cargo verification, and factory-to-port clearance using electronic sealing are expected to significantly reduce logistics costs. Chandrima Chatterjee added that measures such as extending export realization timelines and enabling SEZ units to access the domestic market will significantly enhance export efficiency. However, she also cautioned that the industry was looking for a stronger investment incentivisation scheme specifically for sustainable technologies and supply chain logistics to fully leverage future Free Trade Agreements (FTAs).
Sectoral challenges and the cotton crisis
Despite the overarching optimism, the industry has raised critical concerns regarding the cotton value chain. SIMA Chairman Durai Palanisamy expressed that the Budget could have considered the removal of the 11% import duty on cotton, which he deems essential to meet quality cotton shortages and export commitments. He warned that domestic cotton prices have already increased by 5% compared to international prices, a gap that could widen and threaten the financial viability of the entire value chain.
CMAI observed that the Budget appears oriented towards strengthening long-term supply-side and structural interventions rather than catalysing an immediate spurt in consumption. Chandrima Chatterjee reinforced this by stating that the industry was looking forward to specific support for the cotton value chain to address the consistent cost disadvantage it faces due to raw material issues. While the government has already allocated ₹5,900 crores under the Mission for Cotton Productivity, many in the trade, including TAI President R.K. Vij, noted that the industry was expecting changes in custom duties where local capacities are currently short.
