India’s textile sector, one of the world’s largest exporters with exports over USD 41.5 billion (≈₹3.45 lakh crore) in FY2024–25, with employment closer to 45–47 million, including allied sectors. As global buyers increasingly mandate adherence to Environmental, Social, and Governance (ESG) criteria, the Indian textile industry must align with stringent international standards to maintain and enhance market access and competitiveness.
Growing Importance of ESG for Textile Exporters
Global climate frameworks like the EU Green Deal, Carbon Border Adjustment Mechanism (CBAM), and evolving North American and Japanese ESG regulations impose rising non-tariff barriers tied to sustainability compliance. For India, compliance with these frameworks is not optional but essential for maintaining trade relations with major textile importers in the US, EU, and Japan, which together absorb nearly 49% of India’s textile exports.
India’s Ministry of Textiles formed a dedicated ESG Task Force in 2023, consisting of government officials, industry leaders, and sustainability experts, to design sector-specific roadmaps for ESG compliance. This task force focuses on:
• Resource and energy efficiency
• Circular economy and waste reduction
• Worker welfare and social equity
• Transparent governance and traceability mechanisms.
Government-Initiated Policies and Support
The FY25-26 Union Budget and associated policies have provided significant support to enable exporters in ESG transition:
• Technology Upgradation Fund Scheme (TUFS 2.0)
As per Invest India, the Amended TUFS (ATUFS) received an allocation of ₹635 crore in FY25-26, up nearly 48% from the previous year. The scheme offers credit-linked subsidies for modern machinery, promoting energy efficiency, productivity, and waste reduction in textile manufacturing. Since its inception, TUFS and its earlier versions have supported modernisation projects worth over ₹69,000 crore, advancing the Make in India vision of “zero effect and zero defect.”
• PM MITRA Parks Initiative
The PM Mega Integrated Textile Region and Apparel (PM MITRA) initiative aims to establish seven integrated textile parks with world-class, sustainable infrastructure. Expected to attract ₹8,000+ crore in investments, the parks will foster green jobs, enhance export competitiveness, and promote ESG-aligned practices through renewable energy use and circular economy models.
• In addition to the above initiatives, funding programs supporting clean cotton production, sustainable processing, and the adoption of environmentally friendly technologies across textile clusters.
• Incentives and duty exemptions on modern looms and green manufacturing equipment to reduce energy consumption and improve product traceability.
• Collaboration with international bodies for capacity building and audit frameworks, helping MSMEs, especially, access global markets via ESG certifications.
Financial Implications for Companies
Investing in energy-efficient technologies, sustainable raw material sourcing, water and waste management systems, and digital traceability is becoming a strategic priority for companies, with large players like Trident Group earmarking over ₹1,000 crore in FY26 for sustainability-driven modernisation.
As outlined in its FY24-25 sustainability roadmap, Arvind Ltd has achieved a 31% reduction in Scope 1 and 2 emissions toward its 40% reduction target by 2025 (base year 2015). Its SBTi-validated net-zero goal targets climate neutrality by 2050. The company is advancing renewable energy adoption (66+ MW hybrid wind-solar), biomass integration, and energy efficiency initiatives like condensate and waste heat recovery.
Similarly, Welspun India’s FY24-25 disclosures highlight carbon neutrality goals, green manufacturing investments, and water recycling initiatives aligned with India’s climate objectives, underscoring its role as a parallel sustainability leader in the textile sector.
While these upfront investments can exert short-term pressure on EBITDA margins, the medium-term benefits are significant energy savings, waste reduction, and the ability to command higher-value ESG-compliant products can materially enhance profitability. Energy-efficient processing units report ~12–15% reduction in energy costs and 5–8% improvement in EBITDA margins within 2–3 years as per CRISIL Textiles ESG Benchmark, 2024.
Moreover, strong ESG alignment reduces regulatory, trade, and compliance risks, safeguarding revenue streams and ensuring smoother market access. It also facilitates access to green financing instruments, including sustainability-linked loans and green bonds, while boosting investor confidence, enhancing brand reputation, and positively influencing company valuation and cost of capital. Collectively, these factors demonstrate that sustainability investments are not just a compliance requirement but a strategic lever for long-term financial performance and resilience.
Market Outlook
According to the CRISIL Textiles Outlook 2025, the sector is projected to grow at a CAGR of 6–8%, with the market size expected to reach USD 60–62 billion by FY26 and aiming for $100 billion over the next five years. This growth is contingent on swift and broad-spectrum ESG compliance to mitigate risks from rising non-tariff barriers and to capture market share from geopolitical shifts like China+1 sourcing strategies.
Successfully navigating global ESG standards is not just a regulatory requirement but a strategic lever for India’s textile exporters. Government initiatives, industry collaboration, and investment in green technologies reinforce the sector’s transformation toward sustainability.
This evolving landscape offers Indian firms an opportunity to enhance their global reputation, secure premium markets, and improve financial performance by adopting robust ESG frameworks, making sustainability integral to India’s textile export growth story in FY25-26 and beyond.
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