India's Index of Industrial Production (IIP), newly released by the Ministry of Statistics and Programme Implementation (MoSPI), shows that India's industrial output grew 8% year-on-year in August 2026, up from 6.7% in July, driven mainly by manufacturing; however, apparel manufacturing contracted 7.4% over the same period, a clear outlier in the overall data.

Key Points

  • In August 2026, India's apparel manufacturing contracted 7.4% year-on-year, with a cumulative decline of 5.6% for the fiscal year to date (April-August); over the same period, the textile industry grew 13.1%, with cumulative growth of 11.9%.
  • From April to August of fiscal year 2026-27, India's apparel exports fell 9.1% year-on-year, though the pace of decline has slowed in recent months.
  • In August, 18 of the 23 industry groups in manufacturing posted positive growth, and overall industrial output growth rose from 6.7% in July to 8%.

Divergence: Hot Upstream, Cold Downstream

Explaining this divergence, A Sakthivel, Chairman of the Apparel Export Promotion Council (AEPC), noted that the two indices cover different production stages, so it is not surprising that they move out of step with overall industrial output. Textile manufacturing is concentrated in upstream segments such as yarn and fabric, and is affected by raw material prices, inventory levels and intermediate demand—for example, yarn prices have recently risen sharply; apparel, by contrast, is the final value-added segment and is more directly tied to export orders, buyer inventories and global retail sentiment—against the backdrop of geopolitical and trade uncertainty, apparel production reacts faster and more sharply to changes in external demand.

Apparel Manufacturing Swings Sharply Within the Year

IIP data show that apparel manufacturing has risen and fallen many times over the past year: down 2% last September, down 7.3% in October, up 6.7% in November, up 17% in December; down 8.6% this January, down 3.4% in February, up 4.8% in March, down more than 10% in April, up 3.6% in May, up 2.3% in June, down 2.3% in July, and down 7.2% in August. By contrast, textile output has been steadier, with notable declines only in January (-5.7%) and February (-24.2%) this year, then surging 48% in March and holding up through August.

Export Pressure Persists but Decline Narrows

From April to August of fiscal year 2026-27, India's apparel exports fell 9.1%, reflecting the challenges of the global trade environment, though the pace of decline has slowed in recent months. Sakthivel said the industry is leveraging new free trade agreements (FTAs) and broader market access to diversify markets, and the upcoming festive season is expected to support demand. Sharad Saraf, a Mumbai exporter and Chairman of Technocraft Industries, said manufacturing growth is currently slow but cyclical, and is expected to accelerate in the next two to three months; his company is placing orders now. He has a textile plant in Amravati, Maharashtra, and noted that manufacturing units need a stable, long-term skilled workforce while also hiring temporary workers based on order flows.

Domestic Demand Accounts for 80%, Export Target to Double

Although India's textile and apparel industry is export-oriented, its domestic demand base is also large. A 2024 national household survey by India's Ministry of Textiles shows the overall textile market is estimated at 14.95 trillion rupees, of which domestic sales account for 12.02 trillion rupees, or about 80%. India plans to raise apparel exports from about US$16 billion currently to US$40 billion by 2030. Over the past three years, the textile and apparel industry has contributed an average of about 2% of national GDP and 11% of total manufacturing gross value added (GVA).

For this round of divergence—"hot yarn, cold apparel"—domestic second-hand clothing and used-clothing traders may read two signals: first, rising yarn and fabric prices will feed into the cost of new clothing, indirectly affecting the relative price advantage of second-hand clothing; second, India's apparel exports are under pressure but the decline is narrowing, and once the festive season and FTA benefits kick in, the upstream yarn market may recover ahead of apparel orders.

Source: India's textile mills are selling yarn like crazy, but clothing makers have no work to do—this business is backwards · Originally published 2026-10-05