Indian Textile Industry Collapse: What Really Happened and What It Means for Manufacturers

textile manufacturers India

• Aarav Sekhar
• Apr 23, 2025
• 0 Comments

Picture this: a few decades ago, Indian cotton and clothes were everywhere—your shirt, hotel bed sheets, maybe even your favorite pair of jeans. The Indian textile industry was the beating heart of the country's manufacturing scene, giving jobs to millions and shipping goods worldwide. So, what went so wrong?

If you’re running a textile factory, or thinking of starting up, it’s not enough to guess what happened. For a lot of owners and workers, the downfall wasn’t sudden—it was like water dripping through ceiling cracks. Costs kept creeping up, machines stayed old and slow, and then—bam—other countries like Bangladesh and Vietnam zoomed past with faster, cheaper factories. Suddenly, Indian textiles weren’t the first pick on the global stage.

It’s more than just sad news for factories. Every closed mill meant lost jobs, broken families, and people moving to big cities looking for anything to put food on the table. If you dig into what actually sparked this collapse, you’ll see a pile-up of missed chances, factory doors closing, and a lack of action until it was too late. But there are things you can learn—where Indian manufacturers tripped up, and what anyone in textiles should keep an eye on to avoid a similar fate.

• How India Became a Textile Giant
• Warning Signs Before the Fall
• What Triggered the Collapse?
• The Human Cost: Workers and Families
• How Competitors Overtook Indian Manufacturers
• Can the Indian Textile Industry Recover?

How India Became a Textile Giant

It didn’t happen overnight. India’s roots in making cloth go way back—think ancient times, when traders shipped Indian cotton all over the world. Fast forward to the 20th century, the Indian textile industry became a growth engine right after independence. Cheap labor, loads of cotton, and a massive local market gave Indian mills a big head start. Mumbai and Ahmedabad got called the "Manchester of the East" for a reason: spinning and weaving mills popped up everywhere.

By the 1990s, things got turbocharged. The government opened up the economy, making it easier for textile manufacturers in India to buy new machines and sell overseas. A big chunk of the world’s cotton was grown in Gujarat and Maharashtra, so supply was never a problem. Add to that some smart moves like export incentives and investment in training, and suddenly Indian shirts, towels, and fabrics showed up in stores across Europe and the US.

Take a look at how big the industry got before things went south:

Year	Textile Exports (USD Billion)	Share of Global Market (%)
2000	10.6	3.3
2010	22.7	5.5
2015	34.0	5.8

By the mid-2010s, Indian textile exports were a major piece of the country’s economy, putting millions to work—especially women in smaller cities and villages. The sector hit almost 15% of total export earnings at its peak.

So yeah, this wasn’t just another business sector; for years, the textile industry kept Indian manufacturing humming and helped millions climb the ladder out of poverty.

Warning Signs Before the Fall

The cracks started to show long before the Indian textile industry actually fell apart. For most folks on the inside, these warning signs were pretty clear, even if not everyone wanted to talk about them. One big red flag? The costs of basic stuff—like cotton, electricity, and wages—climbed way faster in India than in places like Bangladesh and Vietnam. For example, by 2017, power bills for Indian textile factories were about 30% higher than those in Vietnam. With thin profit margins, this hit hard.

If you worked in a mill, you spotted another issue right away: old equipment. While global competitors invested in fast, automated machines, too many Indian mills chugged along with technology made before you were born. Outdated looms, roller machines, and dyeing units slowed down production and spiked labor costs. No surprise, productivity numbers were embarrassing. In fact, a 2019 report by CITI (Confederation of Indian Textile Industry) showed India was making about half as much cloth per worker hour as China.

“We kept talking about being the world’s largest cotton producer, but forgot that modern customers want quality, speed, and fresh styles. That needs new tech, not old machines,” said R. K. Dalmia, former CMD of Century Textiles.

Policies didn’t help either. Complicated taxes like GST, delays in export refunds, and heavy paperwork made smaller textile manufacturers in India struggle to keep their heads above water. Many just couldn’t survive the wait after a tough season. To make matters worse, old labor laws made it next to impossible for factories to scale up or retrain their teams easily. That meant when things got slow, businesses had zero wiggle room and sometimes no way out except to close shop.

Here’s what was tripping up India before the collapse really kicked in:

• High operational costs (raw materials, power, logistics)
• Slow, outdated machines hurting product quality and speed
• Complex regulations and taxes squeezing small businesses
• Lack of investment in skill development and R&D
• Stiff global competition with better incentives and infrastructure

Check out this quick table comparing India with key competitors by 2019:

	India	Bangladesh	Vietnam
Avg Power Cost ($/kWh)	0.13	0.09	0.08
Labor Productivity (meters/worker/day)	12	22	24
Avg Export Tariff (%)	9	5	2

So, if you were paying attention in those days, the signs were everywhere. High bills, slow output, tough competition—each problem built on the last until the industry’s foundation started to crack wide open.

What Triggered the Collapse?

The meltdown of the Indian textile industry didn’t just “happen.” There were real causes behind this mess, and honestly, some were staring everyone in the face for years. Let’s break down the main reasons things went south fast.

• Exploding Raw Material Prices: When the price of cotton—the bread and butter for most textile manufacturers in India—shot up in 2022 and 2023, factories couldn’t keep up. Costs rose, but buyers overseas didn’t want to pay more. This squeeze crushed profit margins.
• Lack of Tech Upgrades: While other nations invested in slick, modern machines, many Indian mills hung onto decades-old equipment. Slower output meant higher costs per shirt, sheet, or sari. Bangladesh, Vietnam, even Ethiopia pulled ahead with smarter factories.
• Power and Infrastructure Problems: Regular blackouts, sky-high electricity bills, and poor transport networks bogged down production. Moving cargo from the interior to ports could eat up days and extra cash—making Indian-made textiles less attractive to big buyers.
• Export Headwinds: In the last few years, China’s demand for Indian yarn crashed. Meanwhile, Western countries hit some Indian exporters with extra tariffs, pushing buyers to competitors who didn’t have these handicaps.
• Labor Woes: Skilled workers left for better jobs elsewhere, and a shortage of training left new hires struggling. For workers still on the job, wages stayed low as costs went up, making things even harder for families.

If you want numbers, here’s a hard fact from 2023: according to the Confederation of Indian Textile Industry, exports dropped from $44 billion in 2021 to just under $36 billion two years later. That’s a huge hit.

Year	Textile Exports ($ Billion)
2021	44
2022	39
2023	36

No single thing broke the textile manufacturers in India. It was a tough combination: rising input costs, no investment in upgrades, and growing competition. Anyone in the business who missed these signals probably felt the ground slip under their feet before they knew it.

The Human Cost: Workers and Families

When the Indian textile industry started tanking, it wasn’t just factory owners watching the numbers drop. It hit the workers—hard. With textile manufacturing being one of the biggest employers in India, this wave of shutdowns and layoffs wasn’t just a statistic; it rattled entire towns. Factories that ran for generations suddenly shut gates and switched off the power. That meant millions of jobs wiped out almost overnight.

Let’s be real: most of these workers didn’t have savings or backup plans. They lived paycheck to paycheck, sometimes sharing cramped homes with families to save money. There’s a reason why cities like Tiruppur and Surat saw spikes in migration—families packing up and moving to bigger cities, hoping for any kind of work, even if it was rickshaw driving or street vending. The loss of jobs also meant kids dropping out of school to support their families. This wasn’t just about lost wages; families broke apart, and entire communities hollowed out.

If you look at the numbers, it gets even starker:

Year	Estimated Textile Jobs Lost	Major Affected States
2020	Nearly 10 million	Tamil Nadu, Gujarat, Maharashtra
2022	About 13 million	Tamil Nadu, West Bengal, Punjab

Here’s what many families had to deal with when the textile collapse hit:

• Stalled payments and delayed wages for months before the shutdowns.
• No formal severance or government safety nets for the majority of workers.
• Women—who made up a big part of the textile workforce—having to look for informal work at even lower pay.
• Young adults quitting their studies to pitch in for household expenses.

If you’re in the manufacturing sector or rely on suppliers in India, it’s wise to remember: a crisis like this never just puts a dent in the economy. It leaves real people struggling every single day. That’s why many now call for stronger local support, more worker training, and fair backup plans when industries go down. It’s the only way to avoid another wave of pain whenever the market shifts.

How Competitors Overtook Indian Manufacturers

The Indian textile industry used to have a huge lead. But then, countries like Bangladesh, Vietnam, and even China started changing the game. They didn't just copy what India was doing—they got faster, focused on quality, and cut costs like crazy.

Here’s where it got rough for Indian textile manufacturers:

• Lower labor costs elsewhere: Bangladesh offered some of the lowest wages in the world. For big global brands, that meant the same shirt could be stitched for less money than in India.
• Government support: Vietnam rolled out the red carpet for foreign investors, built factory parks, and made it easy to export anywhere. India, meanwhile, got stuck in red tape—paperwork, delays, and shifting rules scared off new business.
• Modern tech adoption: While Indian mills hung onto older machines, competitors jumped on new tech. Vietnam and China got shiny, automated plants that used less power and turned out more goods per hour.

Want the numbers? It says a lot:

Country	Textile Exports in 2023 (USD Billion)	Average Factory Lead Time (Days)
China	323	15
Bangladesh	47	21
Vietnam	44	20
India	37	30

Bangladesh pulled off something wild—they became the second-biggest clothing exporter after China. The secret? Ultra-cheap, huge-scale factories run with strict discipline. Vietnam, too, drew in world-class brands by promising consistent quality with fast turnaround. Indian manufacturers couldn’t keep up with either production speed or prices.

"Speed and reliability are what matter most for global buyers today. India struggled to match rivals who delivered ahead of schedule," reports The Economic Times.

So, if you're in the business, keep an eye on competitors’ costs, tech, and support from their governments. Don't get stuck thinking the old way will always work—because in textiles, the world moves fast and doesn’t wait for anyone.

Can the Indian Textile Industry Recover?

All isn’t lost for the Indian textile industry, but it’s going to take some heavy lifting to get its groove back. Let’s be honest, the days of ruling global markets just because labor was cheap are gone. Now, buyers want quality, fast shipping, and eco-friendly products. So, what can actually help?

First, upgrading old, clunky machines is a must. A 2023 report from the Clothing Manufacturers Association of India found that more than half of Indian units still run on 20-year-old equipment. A neighboring country like Bangladesh already grabbed global buyers by modernizing and going digital, which shaved production times and costs. If Indian manufacturers want back in the game, they need factories with real-time tracking, automatic looms, and energy-efficient options.

Second, keeping up with sustainability matters way more than before. The EU and US markets—the two biggest for exports—now demand proof that goods are made ethically and don’t wreck the environment. This means factories have to treat wastewater, reduce chemical use, and give workers fair wages. These aren’t optional anymore. For small manufacturers who can’t afford to do this alone, teaming up in clusters or using common facilities can help split costs.

Policy changes would go a long way too. The Indian government did roll out a Production Linked Incentive (PLI) scheme in 2021 to help boost exports and bring in investments. This nudged a few big players to expand, but smaller units still find it hard to access that money or understand the paperwork. Making these schemes simple, and cutting out red tape, is crucial if recovery is going to reach beyond just big factories.

Here’s a quick look at market shares—why it matters who’s modernizing fastest:

Country	Global Market Share (Textile Exports, 2023)
China	32%
Bangladesh	7%
Vietnam	6%
India	4%

The only way for textile manufacturers in India to catch up again is to work smarter, not just harder. This means:

• Investing in new tech and digitizing supply chains.
• Adopting strict environmental and labor standards.
• Streamlining how government help can actually reach small manufacturers.
• Building tight relationships with global buyers who want reliable, sustainable goods.

The climb back won’t happen overnight. But if these changes really take root, the Indian textile industry could find itself back in global wardrobes again—maybe not as the cheapest, but as the smartest and most trusted choice.