India’s readymade garment (RMG) exports fell 11.2 per cent year-on-year to $7.882 billion in the first half of 2026, from $8.880 billion a year earlier, as Western retailers cut inventories and shortened forward order commitments.

Yet the sharper signal lies in the composition of exports. Woven garments accounted for 55.76 per cent of export receipts, while cotton-dominant products generated $4.686 billion, or 59.45 per cent of the total basket. The figures underline India’s continued dependence on natural-fibre apparel even as global buyers increasingly shift toward polyester, nylon, elastane and other technical blends.

Shirts remained the largest category at $1.430 billion, despite a 13.8 per cent decline. T-shirts and singlets followed at $1.148 billion, down 11.6 per cent, while dresses and gowns generated $1.138 billion, a 10.4 per cent contraction. Trousers, bibs and shorts proved the most resilient major category, falling only 4.8 per cent to $885 million.

Table: H1 2026 garment exports drop across key product lines

Cotton concentration

The HS-code mix reinforces the problem. Traditional cotton wovens under Chapter 62 dominate India’s exports, with men’s shirts under HS 6205, women’s blouses under HS 6206, women’s trousers under HS 6204 and men’s trousers under HS 6203 among the leading lines.

Within Chapter 61, cotton jersey T-shirts under HS 6109 and knitted dresses under HS 6104 remain major products. But their falling average realisations point to mounting price competition. The mismatch is becoming more significant as international retailers increase sourcing of polyester-spandex performance wear, nylon outerwear, moisture-wicking garments and technical fleece. India’s export share in synthetic-intensive categories remains below 10 per cent.

Basic segments are particularly exposed. Babywear exports under HS 6111 and 6209 fell 15.6 per cent, with mass-market volumes increasingly flowing to Bangladesh, Cambodia and Vietnam, where integrated knitwear ecosystems and preferential tariff access strengthen their competitive position.

Buyers tighten orders

Exporters across Tirupur, Bengaluru, Noida and Gurugram also faced a change in procurement behaviour during early 2026. US and European importers reduced forward commitments from roughly 120 days to leaner 45-day replenishment cycles, seeking to limit inventory risk. Maritime rerouting around the Cape of Good Hope added 15-20 days to European transit schedules and increased container costs, particularly affecting heavier woven shipments. “International sourcing offices are requiring vendors to take on higher inventory carrying costs and agree to smaller, split-batch delivery runs without conceding unit prices,” explains Sanjay Rastogi, Partner, International Apparel Sourcing Advisors.

Indian manufacturers retain advantage in complex garment dyeing, collar construction and structured woven bottoms, Rastogi say, but mass-market products face sustained margin pressure from suppliers operating under preferential trade arrangements.

Domestic cost pressures add to the squeeze. Shankar-6 cotton lint has traded at a premium to ICE cotton futures, raising costs for spinning mills and downstream garment manufacturers. At the same time, EU ecodesign requirements and wastewater traceability audits are increasing compliance costs across wet-processing operations.

Synthetic push

The response is visible in capital allocation. Exporters are investing in MMF spinning, performance-fabric knitting, automated cutting and vertically integrated production to reduce dependence on cotton.

PM MITRA textile parks and the Production Linked Incentive (PLI) scheme are intended to boost this transition by bringing synthetic yarn preparation, fabric processing and garment manufacturing closer together. Faster production cycles and greater control over fabric sourcing could help Indian exporters compete more effectively for shorter replenishment programmes.

Gokaldas Exports is an example of this shift. The Bengaluru-based manufacturer has increased capacity in technical outerwear, polyester-stretch bottoms and synthetic athletic shirts, helping it maintain an operating EBITDA margin above 10 per cent despite weaker Western retail demand. The company is also investing in automation, synthetic-fabric capabilities and overseas manufacturing bases. Established in 1979, Gokaldas Exports operates more than 20 facilities and supplies formal shirts, outerwear, trousers and activewear to North American and European brands. Its transition reflects a broader industry imperative: move from volume-led cotton manufacturing towards higher-value, technically differentiated apparel.

FTAs become critical

For the Apparel Export Promotion Council (AEPC), diversification into synthetic-rich Chapter 61 and 62 categories is essential if India is to materially expand its global apparel footprint. But product diversification alone will not close the competitiveness gap. India still faces an 8-12% tariff disadvantage in several major markets, making bilateral trade agreements a crucial component of the export strategy.

The immediate challenge, therefore, is twofold: diversify the fibre and product portfolio while securing preferential market access. India’s $7.88-billion H1 export basket shows that its traditional cotton-woven base remains commercially important. But the 11.2 per cent decline also makes it clear that the next phase of apparel growth will depend on how quickly exporters move beyond it.