India's economy grew 7.8% year-on-year in Q1 of fiscal year 2026-27; merchandise exports rose 26.1% year-on-year in August 2026, the trade deficit narrowed from $32 billion in July to $26.9 billion, and imports grew 14.1%. But in the same month, exports of ready-made garments (RMG) across all textiles fell 2.7% year-on-year, showing that India's apparel exports remain under pressure.

Key points

  • India's Q1 FY2026-27 GDP grew 7.8% year-on-year; August merchandise exports rose 26.1% year-on-year, with the deficit narrowing to $26.9 billion
  • August RMG exports fell 2.7% year-on-year; exports to the US rose 21.8% and to China 52.4%, while exports to West Asia continued to contract
  • August CPI inflation rose to 4.8%; as of September 18, foreign exchange reserves reached a record high of $765.9 billion

The data released by the Reserve Bank of India (RBI) paints a picture of uneven fortunes: at the macro level, domestic consumption and investment support internal demand, and merchandise exports remain strong, providing manufacturers and sourcing companies with a relatively stable macro environment; but the decline in apparel exports reminds the industry that the textile and apparel sector still faces real difficulties.

By export destination, India achieved growth in 17 of its 20 major markets in August, with exports to the US up 21.8% and to China up 52.4%, while exports to West Asia continued to contract.

Inflation and cost pressures are another main thread. India's headline CPI inflation rose to 4.8% in August, driven mainly by higher food and beverage categories as well as fuel and core inflation. The RBI bulletin noted that global geopolitical tensions, trade fragmentation, energy supply disruptions and broader cost pressures continue to weigh on financial markets and business confidence. Renewed conflict in West Asia has pushed up energy prices, raising inflation concerns simultaneously in developed and emerging market economies; in September, financial markets also became more volatile amid geopolitical tensions and rising oil prices, drawing greater attention to the balance between growth and inflation.

On the external front, India's current account deficit remained moderate in Q1 FY2026-27, with strong foreign direct investment (FDI) inflows. Net FDI rose in July to its highest monthly level in five years, and net inflows under non-resident deposits also increased substantially. As of September 18, India's foreign exchange reserves reached a record high of $765.9 billion, providing additional support for the external sector.

For this industry, the implication of this set of data is that India's macro fundamentals as a textile and apparel sourcing destination have not yet deteriorated, and domestic demand and overall exports remain resilient, but continued pressure on RMG exports, high inflation and energy costs, and spillover geopolitical risks are still adding uncertainty to global textile and apparel sourcing and order allocation.

Source: India's economy grows 7.8% in Q1 as exports strengthen: RBI - Fibre2Fashion · Originally published on 2026-09-29