Gujarat Textile Industry Faces Margin Pressure Amid Cotton Shortage and Rising Costs
Shrinking cotton availability, higher input costs and US tariff concerns weigh on textile manufacturers
Gujarat’s textile industry is experiencing increasing financial pressure as declining cotton production, rising raw material costs, power-related challenges and the United States’ Section 301 tariff regime combine to impact manufacturers across the state’s textile value chain.
Gujarat contributes nearly one-fourth of India’s spinning capacity and around one-third of the country’s raw cotton production. However, the industry is now facing a tightening supply of cotton, leading to higher production costs and reduced operating margins.
The supply shortage has been driven primarily by lower cotton cultivation. Farmers in Gujarat reduced cotton acreage to 23.62 lakh hectares, compared with 26.79 lakh hectares in the previous season, as many shifted towards crops such as groundnut and oilseeds. The change was influenced by erratic monsoon conditions, lower farm-gate cotton prices and increasing cultivation expenses.
The decline in acreage has translated into lower cotton production. According to the Cotton Association of India (CAI), Gujarat recorded 76 lakh cotton bales, placing it behind Maharashtra, which produced 85 lakh bales. Lower national cotton yields have further tightened the availability of raw cotton for domestic textile manufacturers.
The constrained supply has pushed up raw material prices across the industry. Raw cotton prices have increased by approximately 13%, rising from around Rs 54,000 per candy to over Rs 61,000 per candy. Cotton yarn prices have also climbed by nearly 12%, increasing from Rs 1,260 per bundle to approximately Rs 1,415 per bundle.
Despite the sharp increase in input costs, finished fabric prices have risen by only around 1%, limiting manufacturers’ ability to pass higher costs on to customers and placing significant pressure on profitability.
The impact has been particularly visible in Surat, India’s largest hub for synthetic, blended and woven fabrics. Industry estimates indicate cumulative losses of Rs 2,500 crore to Rs 3,000 crore across weaving and processing units. To manage inventories and reduce operating costs, several manufacturers have reportedly cut production shifts by nearly 50% or implemented two-day weekly shutdowns.
The industry is also monitoring external trade developments, including the United States’ Section 301 tariff framework, which has added further uncertainty for exporters already dealing with higher domestic production costs.
With cotton availability remaining tight and input prices elevated, textile manufacturers continue to focus on cost management while assessing production strategies amid evolving market conditions.
