The Indian textile and garment sector faced significant headwinds in the first two months of 2026, as exports to the United States experienced a sharp contraction. According to the latest data from the Confederation of Indian Textile Industry (CITI) and the US Office of Textiles and Apparel (OTEXA), combined shipments fell by 3.75 per cent in January 2026, with a more drastic 28.7 per cent Y-o-Y plunge recorded in February, totaling just $0.63 billion. This downturn, marking six consecutive months of decline, is primarily attributed to a combination of high legacy tariffs and a broader compression in American discretionary spending.

Comparative performance and competitive realignment

While India’s exports slumped, the competitive landscape shifted. Vietnam emerged as a primary beneficiary, maintaining 5 per cent growth in January and February, while China witnessed a staggering 56 per cent contraction in January shipments to the U.S. market. Despite the overall decline, India demonstrated relative resilience in the man-made fiber (MMF) segment, which grew by 1.01 per cent to $430.29 million in January. This highlights a critical structural shift as global buyers increasingly pivot toward synthetic and high-performance technical textiles, areas where India is aggressively scaling capacity through its Production Linked Incentive (PLI) schemes.

Tariff adjustments and the recovery outlook

The export slump was exacerbated by punitive tariffs that remained in force until February 7, 2026. Although the US Supreme Court subsequently struck down these duties - replacing them with a more competitive 10 per cent global tariff - recovery remains lagged due to missed seasonal order cycles.

Exporters are now looking toward the second half of 2026, banking on improved tariff parity and the potential ratification of the India-UK Free Trade Agreement to stabilize the trade balance.

The Indian textile industry is a $194 billion value chain contributing 8 per cent to the nation's total exports. It dominates the global cotton yarn trade while rapidly expanding into MMF and technical textiles. With a target of $100 billion in exports by 2030, the sector focuses on achieving vertical integration and net-zero manufacturing standards.