Textile Manufacturing in India: FDI, PLI Scheme & Supply Chain Setup

India's Textile Sector: Scale, Growth, and the Foreign Investor Opportunity

India's textile and apparel industry is the world's second-largest employer in the country after agriculture, directly employing over 45 million people and contributing approximately 2% of GDP and 11% of manufacturing Gross Value Added. The domestic market is valued at USD 225 billion in 2025, growing at 10-12% CAGR, with a target of USD 350 billion by 2030.

Textile exports currently stand at USD 35.14 billion (Rs. 3 lakh crore), with the government targeting USD 100 billion by 2030. In FY26 (April-June 2025), Ready Made Garments led exports at USD 4,193 million (45% share), followed by Cotton Textiles at USD 2,860 million (30%) and Man-Made Textiles at USD 1,167 million (12%). Foreign investment in Indian textile manufacturing rose 45% in 2025, led by companies from Vietnam, South Korea, and Germany — a strong signal that global supply chains are diversifying into India.

For foreign manufacturers evaluating entry, India offers something no other textile market provides at this scale: a complete 5F value chain — Farm to Fibre to Factory to Fashion to Foreign — within a single country, supported by 100% FDI under the automatic route, direct cash incentives, and government-built industrial infrastructure.

FDI Framework for Textile Manufacturing

100% Automatic Route: No Conditions, No Caps

India permits 100% FDI in the textile sector through the automatic route. This means:

• No prior approval from the RBI or central government
• No mandatory joint venture partner or local equity requirement
• No minimum investment threshold (unlike some PLI categories)
• No technology transfer conditions
• Full repatriation of profits and capital permitted under FEMA regulations

A foreign company can set up a wholly owned subsidiary in India for textile manufacturing and report the investment post-facto through FC-GPR filing within 30 days of share allotment. The process is standardized — incorporate via SPICe+ form, allot shares, file FC-GPR, and begin operations.

Cumulative FDI Performance

Total FDI inflows in the textiles sector reached Rs. 43,363 crore (USD 4.8 billion) between April 2000 and June 2025. While this is modest compared to sectors like IT services or automotive, the trajectory is accelerating — FDI in textile manufacturing rose 45% in 2025 alone, driven by the China+1 diversification strategy and India's improved manufacturing infrastructure.

Entity Structure Options

Foreign textile manufacturers typically choose between three entity structures:

PLI Scheme for Textiles: Structure, Eligibility, and Recent Amendments

Scheme Overview

The PLI Scheme for Textiles, notified on September 24, 2021, targets production of Man-Made Fibre (MMF) Apparel and Fabrics and products of Technical Textiles. The scheme is designed to incentivize manufacturing of segments where India has historically been weak — India dominates in cotton textiles but trails China, South Korea, and Taiwan in synthetic and technical textiles.

Incentive Structure

The PLI scheme provides cash incentives based on incremental turnover over a defined base. From FY 2025-26 onwards, applicants must demonstrate a minimum of 10% incremental turnover over the previous year to qualify for incentives from Year 2 onwards.

Key August 2025 Amendments

The Ministry of Textiles notified major amendments effective August 1, 2025 that significantly improve the scheme's accessibility for foreign investors:

• Halved investment thresholds: Minimum investment reduced from Rs. 300 crore to Rs. 150 crore (Part 1) and Rs. 100 crore to Rs. 50 crore (Part 2)
• Extended application deadline: New applications accepted until March 31, 2026
• Incremental turnover gate: 10% minimum incremental turnover required from Year 2 to ensure genuine production growth
• Focus on advanced products: Incentives specifically target MMF and technical textiles where India trails global competitors

PLI Scheme Performance

As of October 2025:

• 74 companies approved under the textile PLI scheme
• INR 287.11 billion (USD 3.23 billion) in committed investments
• Estimated turnover generation of INR 2.16 trillion (USD 24.3 billion)
• Expected employment creation of over 259,000 people

PM MITRA Parks: Integrated Textile Infrastructure

What Are PM MITRA Parks?

PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks are the government's flagship infrastructure initiative for the textile sector — seven mega parks designed to create a complete, one-location textile value chain with world-class infrastructure. The initiative is backed by Rs. 4,445 crore in central government funding over six years through 2027-28, with total expected investment of Rs. 1.44 lakh crore across all seven parks.

Park Locations and Status

What PM MITRA Parks Offer Foreign Investors

• Plug-and-play infrastructure: Pre-built factory shells, power supply, water treatment, effluent treatment, warehousing, and logistics connectivity
• Complete value chain co-location: Spinning, weaving, dyeing, printing, garment manufacturing, and packaging within a single park — eliminating logistics inefficiencies
• Common infrastructure: Design centres, testing laboratories, skills training centres, and worker housing
• Incentive stacking: PM MITRA tenants can simultaneously avail PLI scheme incentives, making the effective cost of manufacturing significantly lower
• Each park targets 300,000 jobs (direct and indirect) across the textile value chain

Technical Textiles: The High-Growth Segment

Technical textiles — used in automotive, medical, agricultural, construction, and protective applications — represent India's fastest-growing textile segment. The sector is valued at USD 29 billion in 2024 and is projected to reach USD 45 billion by 2026 and USD 123 billion by 2035.

Foreign investors bringing technical textile technology to India benefit from:

• PLI coverage: Technical textiles are explicitly covered under the textile PLI scheme
• Import substitution demand: India currently imports significant volumes of geotextiles, medical textiles, and protective textiles — domestic manufacturing can capture this demand
• Government procurement: Mandatory use of geotextiles in highway construction and agro-textiles in agricultural programs creates guaranteed demand
• R&D incentives: Weighted deduction of 200% on R&D expenditure (now reduced to 100% under new tax regime) for development of new technical textile products

Supply Chain Setup: Step-by-Step Process

Phase 1: Entity and Regulatory Setup (Weeks 1-8)

1. Incorporate entity: Register a private limited company via SPICe+ (7-15 business days)
2. FDI reporting: File FC-GPR within 30 days of share allotment
3. Obtain PAN, TAN, and GST registration: 5-10 business days each
4. IEC Code: Required for import of machinery, raw materials, and export of finished textiles. Online application through DGFT portal (2-3 business days)
5. Factory license: Apply under the Factories Act with the state labour department
6. Environmental clearance: For dyeing and processing units, environmental clearance and SPCB consents are mandatory

Phase 2: Location Selection and Infrastructure (Weeks 4-16)

• PM MITRA Park allocation: Apply to the Special Purpose Vehicle (SPV) managing the selected park. Allocation based on investment commitment, employment generation, and technology profile
• Alternative: State textile parks under the Scheme for Integrated Textile Parks (SITP) offer pre-built infrastructure at lower cost than standalone setup
• Land acquisition: For standalone facilities, state industrial development corporations offer pre-acquired industrial plots with title clearance. Avoid private land purchases due to complex land records and litigation risk
• Power and water: Textile dyeing and processing require significant water supply (200-300 kilolitres per day for a medium dyeing unit). Ensure water availability before site finalization

Phase 3: Manufacturing Setup (Weeks 12-30)

• Machinery import: Textile machinery imports attract basic customs duty of 5-7.5% (reduced rates for specified machinery under notifications). Claim ITC on GST paid at import
• Manpower recruitment: India has a vast textile workforce, but skilled machine operators for modern looms, knitting machines, and technical textile equipment require training. PM MITRA parks offer skill development centres
• Raw material sourcing: Cotton (India is the world's largest cotton producer), polyester staple fibre, and viscose are domestically available. Specialty fibres (aramid, UHMWPE, carbon fibre) may require import
• Transfer pricing structuring: If importing raw materials from related parties or exporting to the parent, establish arm's length pricing documentation from inception

Phase 4: Compliance and Operations (Ongoing)

• Labour law compliance: India's four consolidated Labour Codes (effective dates pending) will replace 29 existing labour laws. Key compliance areas include PF, ESI, gratuity, minimum wages, and working hours
• Environmental compliance: Zero liquid discharge (ZLD) is increasingly mandated for dyeing and processing units. Budget Rs. 3-5 crore for a medium-capacity ZLD plant
• FLA Return: Annual return to RBI by July 15 for all companies with FDI
• Annual compliance: ROC filings (AOC-4, MGT-7), statutory audit, income tax return, GST returns, transfer pricing report (Form 3CEB)

Cost Structure: Setting Up a Medium-Scale Textile Unit

Labour and Workforce Considerations

Workforce Availability and Cost

India's textile workforce is one of its strongest competitive advantages. The country has approximately 45 million workers in the textile value chain, with significant concentrations in Tamil Nadu (Tiruppur, Coimbatore, Salem), Gujarat (Surat, Ahmedabad), Maharashtra (Mumbai, Ichalkaranji), Uttar Pradesh (Varanasi, Lucknow), and Rajasthan (Jaipur, Jodhpur). Average monthly wages for textile workers range from INR 12,000-18,000 for semi-skilled operators to INR 25,000-40,000 for skilled machine operators and technicians — significantly lower than comparable labor costs in China (approximately 3x higher) and only marginally above Vietnam and Bangladesh.

Key labour considerations for foreign manufacturers:

• Minimum wages: Set by each state government and revised periodically. Tamil Nadu, Gujarat, and Maharashtra have textile-specific minimum wage schedules. As of 2025-26, minimum wages for textile workers range from INR 350-550 per day depending on the state and skill category
• Contract labour: Permitted for non-core activities under the Contract Labour (Regulation and Abolition) Act. Many textile units use contract labour for packaging, loading, and housekeeping. The new Labour Codes (when implemented) will rationalize contract labour provisions
• Shift operations: Textile factories typically run 2-3 shifts (8 hours each). Overtime beyond 48 hours per week attracts double the normal wage rate under the Factories Act
• EPF and ESI: Mandatory for establishments with 20+ employees (EPF) and 10+ employees (ESI in notified areas). Combined employer contribution is approximately 17-18% of basic salary

Skill Development and Training

The government's SAMARTH scheme provides funded skill development for textile workers, training over 10 lakh workers since inception. PM MITRA parks include dedicated skill development centres. Foreign manufacturers can also leverage the National Skill Development Corporation (NSDC) ecosystem for customized training programs. The Textiles Committee (Ministry of Textiles) offers specialized training in quality testing, dyeing chemistry, and technical textile applications.

Compliance and Regulatory Framework

Environmental Compliance for Textile Units

Textile manufacturing — particularly dyeing, printing, and processing — is classified as a polluting industry by the Central Pollution Control Board. Key environmental requirements:

• Zero Liquid Discharge (ZLD): Increasingly mandated for dyeing and processing units in water-stressed regions. States like Tamil Nadu, Gujarat, and Rajasthan have implemented ZLD requirements for new textile processing units. A medium-capacity ZLD plant costs INR 3-5 crore with annual operating costs of INR 50-80 lakh
• Common Effluent Treatment Plants (CETPs): Available in textile clusters like Tiruppur, Surat, and Pali. CETP membership reduces individual unit compliance costs but requires adherence to inlet standards for effluent quality
• Air emissions: Coal-fired boilers (common in textile processing for steam generation) must comply with stack emission standards. Many manufacturers are transitioning to biomass briquettes or natural gas to reduce emissions and comply with National Ambient Air Quality Standards
• Hazardous waste management: Dyeing chemicals, expired dyes, and process sludge from ETP/ZLD systems are classified as hazardous waste under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. Authorized disposal through TSDF (Treatment, Storage, and Disposal Facility) is mandatory

Quality and Standards Compliance

Textile products manufactured in India for domestic sale and export must comply with:

• BIS standards: Certain textile products (flame-retardant fabrics, protective clothing) require mandatory BIS certification under Quality Control Orders
• Textile Labelling Orders: The Textile (Consumer Protection) Regulations require accurate labelling of fibre content, care instructions, and country of origin
• OEKO-TEX and GOTS certifications: While not legally mandatory in India, these certifications are essential for export to European and US markets. Many Indian textile units hold OEKO-TEX Standard 100 and GOTS (Global Organic Textile Standard) certifications
• REACH compliance: For exports to the EU, textile products must comply with EU REACH regulations restricting certain chemical substances in textiles

Export Opportunities and Free Trade Agreements

India's textile exports benefit from several existing and upcoming free trade agreements:

• India-ASEAN FTA: Reduced or zero customs duties on textile products exported to ASEAN member states. The upgraded India-ASEAN FTA is expected to further liberalize textile trade
• India-UAE CEPA: Zero customs duty on Indian textiles exported to the UAE, effective since May 2022. The UAE is India's third-largest textile export market
• India-Australia ECTA: Preferential tariff treatment for Indian textiles exported to Australia, with immediate tariff elimination on over 95% of Australian tariff lines
• India-EU FTA (under negotiation): If concluded, this agreement could significantly boost Indian textile exports to the EU — currently India's largest textile export destination. The EU currently applies 9-12% customs duty on Indian textile imports
• India-UK CETA (under negotiation): Expected to provide preferential market access for Indian textiles in the UK market

India's competitive advantage in textile exports is further supported by the Rebate of State and Central Taxes and Levies (RoSCTL) scheme, which reimburses state and central taxes embedded in textile exports that are not refundable through other mechanisms. The RoSCTL rates range from 3.2% to 6.05% of FOB value depending on the product category, making Indian textile exports significantly more price-competitive in global markets.

Foreign manufacturers setting up in India can leverage these FTA networks to serve global markets with preferential tariff treatment — a significant advantage over manufacturing in non-FTA countries. The RoDTEP scheme (Remission of Duties and Taxes on Exported Products) provides additional rebates of 0.5-4.3% on FOB value of textile exports, compensating for embedded taxes not otherwise refunded.

Key Government Initiatives Supporting the Sector

• Bharat Tex 2026: The world's largest integrated textile value chain event, scheduled for July 14-17, 2026 at Bharat Mandapam, New Delhi. Expecting 3,500+ exhibitors, 7,000 international buyers from 140+ countries, and 1.3 lakh visitors. An ideal platform for foreign companies to evaluate India entry.
• Amended Technology Upgradation Fund Scheme (ATUFS): Capital subsidy for technology upgradation in textile manufacturing
• SAMARTH: Government-funded skill development programme for the textile sector, training over 10 lakh workers. The programme covers machine operation, quality control, textile testing, and supervisory skills across 18 states
• National Technical Textiles Mission (NTTM): Rs. 1,480 crore mission for research, development, and promotion of technical textiles, focusing on import substitution in geotextiles, agrotextiles, protective textiles, and medical textiles
• Scheme for Integrated Textile Parks (SITP): Government co-funded textile parks providing common infrastructure — 74 parks sanctioned with central government contribution of up to 40% of project cost (capped at Rs. 40 crore per park)
• Amended Technology Upgradation Fund Scheme (ATUFS): Capital subsidy of 15% for technology upgradation in garment manufacturing and 10% for other textile segments, supporting modernization of spinning, weaving, processing, and garmenting machinery

Key Takeaways

• 100% FDI under automatic route with no conditions, caps, or mandatory local partners — making India one of the most open textile FDI destinations globally.
• PLI investment thresholds halved in August 2025 (Rs. 150 crore for Part 1, Rs. 50 crore for Part 2) with the application window extended to March 31, 2026. Apply now to lock in 5 years of incentives.
• PM MITRA parks eliminate infrastructure risk. Seven parks across India offer plug-and-play manufacturing facilities with complete value chain co-location — avoid standalone setup headaches.
• Technical textiles are the high-margin play. Valued at USD 29 billion and growing to USD 123 billion by 2035, this is where foreign technology and Indian scale create the strongest competitive moat.
• Budget USD 5.8-10.6 million for a medium-scale textile manufacturing operation including land, building, machinery, ZLD, and six months of working capital.