Indian Textile Sector at the Cross Roads with Promising Hopes

War, Tarif s, a Weak Rupee, and the Fight to Stay Competitive 

By Dr Vidhu Sekhar P, Assistant Professor, Department of Fashion Management Studies, National Institute of Fashion Technology, Ministry of Textiles, Govt of India. Daman Campus 

India's textile and apparel industry, the country's second-largest employment generator, finds itself navigating one of the most complex external environments in recent history. Three forces are converging simultaneously. A shooting war in West Asia that has disrupted critical trade corridors and raw material pipelines, a historically weak rupee hovering at ₹93.86 to the dollar, and an aggressive surge in Chinese imports threatening to flood the domestic market with artificially cheap man-made fibres. Against this backdrop, the Union government has moved very quickly to shore up exporters through the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. Expecting that these interventions are sufficient for a short term in defining the questions that are confronting the industry today. 

RoDTE, a relief restored 

On Monday, March 23, 2026, the Directorate General of Foreign Trade (DGFT) issued a notification that superseded an order that had relieved the export community by slashing RoDTEP benefit rates by 50% across the board. The new notification restores full RoDTEP benefits retrospectively from February 23 to March 31, 2026. The restoration covers all 10,780 products and applies to exporters in the Domestic Tariff Area, Export Oriented Units, Advance Authorisation holders, and Special Economic Zones alike. 

RoDTEP, launched in January 2021, is not a subsidy in the conventional sense. It is a reimbursement mechanism that refunds embedded central, state, and local taxes that includes electricity duty and VAT on fuel that exporters have already paid during the manufacture and distribution of goods but which are not refunded under any other existing mechanism. Refund rates typically range from 0.3% to 3.9% of the value of exported products and are issued as transferable duty credit scrips, which exporters can use to pay import duties or sell in the open market. 

While the restoration is no doubt a warm welcome and characterised it as a timely intervention, however a significant cloud hangs over the post-March 31 period. The RoDTEP scheme's current authorisation expires on March 31, 2026. Exporters are hesitant to sign forward contracts, as they are unsure about factoring RoDTEP benefits into their pricing. With the rates post-April 1 still unclear, they are playing it safe. Industry hopes that this doubt will be cleared quickly and demands that RoDTEP rates be locked in for a five-year horizon. 

The West Asia crisis, a wound in the Supply Chain

The RoDTEP cut stems from the U.S.-Israel-Iran conflict, disrupting West Asia's maritime corridor and Gulf region, directly impacting our textile sector. West Asia represents a significant share of textile and apparel export destinations. Disruptions to shipping lanes in the Red Sea and the Persian Gulf have pushed up freight costs substantially, defaulting on delivery timelines, and injected enormous uncertainty into supply commitments. The war has hit not just end-market demand from the region but also the inbound pipeline of petrochemical-based inputs like polyester fibres, dyes, synthetic yarns, that travel through the same corridors. 

The textile clusters of Tiruppur, Surat, Ludhiana, and Coimbatore are energy-intensive. Industry predicted a year-on-year decline in goods exports to the Middle East in March alone, with 16% of India's total exports directed to that region. The damage is not hypothetical, it is already registering in order books and shipment data. 

The Rupee Paradox, a Competitive Edge with a Catch 

With the rupee at a record low of ₹93.86 to the dollar, the instinctive reading is that Indian exporters gain a price advantage in dollar-denominated global markets. The reality is more nuanced and sector-specific. 

Almost 60% of India's goods trade is denominated in dollars, which means depreciation structurally improves price realisation for export-oriented sectors. Textiles and leather have relatively low import dependency that poised to benefit. A weaker rupee mechanically lowers the dollar cost of Indian goods for foreign buyers, potentially improving market share in price-sensitive markets. 

However, this advantage is reciprocal and neutralised by elevated import costs. In the textile context, the relevant pressure points are synthetic yarn intermediates, dyes and chemicals, and petroleum-derived inputs. Industry estimates suggest that only about 15% of exporters are unhedged and thus stand to gain fully from the depreciation. The remaining 85% have hedged their exposure, muting the benefit considerably. 

The overall verdict from industry observers is that the weak rupee is mildly positive in the short term and it can support margins or market share in competitive markets, but is not a structural game-changer. 

The Chinese Threat: Anti-Dumping Action on Rayon Yarn 

While the RoDTEP restoration and rupee dynamics dominate headlines, a quieter but strategically significant development is unfolding on the import-protection front. India's Directorate General of Trade Remedies (DGTR) has recommended anti-dumping duties ranging from $386 to $1,071 per metric ton on imports of viscose rayon filament yarn above 75 deniers from China. 

The duty recommendation varies by Chinese exporter: $386 per metric ton for Xinxiang Chemical Fibre Co Ltd; $667 for Jilin Chemical Fiber Co Ltd; $518 for Yibin Hiest Fibre Limited Corporation and related exporters; and $1,071 for all other producers. The investigation revealed that dumped imports had risen, lowering domestic prices and hurting Indian producers. If the Finance Ministry approves, duties may be imposed for 5 years.

Viscose rayon filament yarn is a man-made fibre extensively used in apparel, home textiles, and industrial fabric production. Its artificial cheapening through dumping distorts procurement decisions by downstream manufacturers and erodes the commercial viability of domestic spinning units. China's structural subsidies to its textile value chain — cheap power, cheap credit, and direct production support — give Chinese producers the ability to price below cost in export markets while remaining profitable at home. India's anti-dumping regime, while reactive by nature, is a necessary safeguard for a sector where Indian producers can and do compete on merit. 

A Structural View of industry demand 

The industry's true picture is taking shape as competent and globally competitive. The RoDTEP saga illustrates that the textile industry does not merely need a high rate of support but it needs a reliable one. A five-year lock-in of RoDTEP rates, would allow exporters to embed refund expectations into contract pricing and capital investment plans. 

Sufficient budget allocation for RoDTEP is crucial. critical structural blind spot is that apparel, garments, and made-up textiles — the highest-employment, highest-value-added segments of the entire textile chain — fall outside RoDTEP entirely and are covered instead by the Rebate of State and Central Taxes and Levies (RoSCTL) scheme. Ensuring adequate, timely funding for RoSCTL deserves equal urgency and policy attention. 

The concentration of India's textile export exposure in West Asia — while commercially rational given proximity and historical ties — creates structural vulnerability to precisely the kind of geopolitical disruption currently underway. A deliberate policy effort to open new market corridors in Africa, Southeast Asia, and Latin America would reduce this systemic risk. 

The timeline from initiation of an anti-dumping investigation to imposition of duties typically spans 12 to 18 months in India. In fast-moving global commodity markets, this lag can be commercially devastating for domestic producers. Streamlining investigation timelines — particularly for sectors facing chronic Chinese overcapacity — should be a legislative priority. 

Conclusion 

The government's restoration of full RoDTEP benefits is welcome and should be acknowledged as such. It reflects both the industry's capacity to articulate its concerns effectively and the government's responsiveness under pressure. The deeper challenges — the underfunding of export support schemes, the post-March 31 uncertainty, the supply chain wounds inflicted by the West Asia conflict, the ongoing threat from Chinese dumping — remain structurally unresolved. The rupee's weakness offers a fleeting tailwind that underlying headwinds will quickly absorb. 

India's textile industry stands at a crossroads that is familiar in form but urgent in intensity. The country has the production capacity, the labour force, the design capability, and the institutional knowledge to be a dominant global textile exporter. What it requires now is not crisis management, but a durable, well-funded, and predictable policy framework that allows industry to plan, invest, and compete on a five-year horizon.