Garment industry revenue could grow in double digits in FY26: ICRA

India’s garment industry could double-digit revenue growth in the 2026 financial year, driven by increasing exports and the ongoing shift towards the China Plus One sourcing strategy, according to a report by ratings agency ICRA.

Indian apparel exports grew by 11.6% from April to January 2025, benefiting from retailer-level inventory liquidation and improved demand from key markets, Apparel Resources India reported. The trend is projected to continue in the medium term, although challenges such as inflationary pressures, slow economic growth in major consumer markets, and uncertainty over US trade policies remain, according to ICRA’s report.

The global apparel trade stabilised in 2024 after a 7% year-on-year decline in 2023, with US and EU imports accounting for approximately 55% of the total market. Indian garment exports to the US rose 13.8% year-on-year in the first nine months of FY 2025, while exports to the EU (including the UK) increased by 11.0%. A weaker rupee also boosted exports in rupee terms.

ICRA projects that the Indian garment industry’s revenue will grow by 12% to 14% in the 2025 financial year and by 9% to 11% in the 2026 financial year, excluding the impact of acquisitions. However, rising labour costs and inflation in operational expenses are expected to reduce operating margins by between 50 and 75 basis points. With Bangladesh set to exit its least developed country classification in 2026, Indian exporters are likely to increase capital investments to strengthen their position in the global market.