Executive summary
India is a textile and apparel powerhouse. Recent policy shifts boost domestic consumption and accelerate the expansion of the polyester sector
- India’s cotton and polyester fiber sectors are of global significance, with production and processing second only to China. India has the third largest volume of fiber demand after China and the US. It is also a key exporter of textiles and apparel to the US and Europe.
- To drive growth in domestic and export markets, India is investing in logistics infrastructure. It is also adjusting its Goods and Service Tax (GST), reducing the tax impact on lower cost finished products and bringing the GST on manmade fiber products down in line with that for cotton.
- On 27 August 2025, the US raised tariffs on imports from India to 50%. The US market, India’s largest export market for textiles and apparel with a 29% share by value, is now at risk. Redirecting these exports to other destinations will be difficult in the short term. Other export markets, including the EU, are already under pressure from redirected trade from China and other countries subject to high US reciprocal tariffs.
- The current situation with US tariffs is an opportunity for India to develop a fully integrated polyester chain. This will reduce India’s dependence on relatively costly cotton product exports and enable it to penetrate alternative export markets.
- India is well aware of the importance of a strong domestic market for its textiles and apparel industry. As cotton volumes stagnate and cotton fiber costs rise to nearly double those of polyester, India is making available to the domestic market increasing volumes of lower cost polyester fibers. There is ample opportunity for India to accelerate the growth of its domestic market. At just 6.3 kgs, its per capita consumption is far below the world average of 14.5 kgs.
- India is investing upstream in the polyester chain, seeking self sufficiency in PTA and MEG. India will remain dependent on imported MEG but the implementation of antidumping duties on imports of MEG will lift domestic operating rates. Planned PTA projects of 5.4 Mtpa capacity by 2030 will lift India’s competitive position and are more than sufficient to supply the additional demand from polyester fibers.
- The recent removal of the Bureau of Indian Standards (BIS) certification requirement for certain polyester chain materials could provide additional volumes to the downstream textile sector. However, it also opens the entire industry to fierce competition from imported materials.
Fiber and downstream textile industry
India’s growing influence in the global polyester market
Expanding production capacity meets growing consumption potential
India emerges as a pivotal force in the global polyester market, representing both a manufacturing powerhouse and a consumption frontier with unprecedented growth potential.
From a supply perspective, India has already established itself as the world’s second-largest polyester fiber producer after China, commanding a 9% share of global production capacity in 2025. More remarkably, this share is projected to increase gradually to 13% by 2045, signaling India’s rapid ascension in the global polyester manufacturing landscape.
Global polyester fiber capacity by region
On the demand side, India’s market dynamics are equally compelling. As the world’s most populous nation, India is set to add another 115 million people over the next decade, creating an expanding consumer base. India’s per capita fiber consumption remains relatively low at 6 kg compared to developed markets like North America (43 kg) and Western Europe (28 kg), suggesting room for growth as the economy develops.
This combination of expanding production capabilities and consumption growth potential makes India an increasingly important market in the global polyester industry.
Good and services tax (GST) changes in India
India’s textile sector is poised for accelerated growth following the cuts to GST rates
GST reform benefits and challenges: The government’s decision to slash GST rates significantly benefit the textile industry by reducing tax rates on man-made fibers (from 18% to 5%) and synthetic yarns (from 12% to 5%), while expanding the finished textiles threshold for 5% GST from ₹1,000 to ₹2,500. These changes are expected to stimulate domestic consumption, particularly in Tier-2/3 cities and rural markets. However, challenges persist with the 18% GST rate on finished textiles above ₹2,500 and the inverted duty structure that continues to disadvantage raw materials including PTA and MEG.
Good and services tax rates
*Cess refers to Central Excise and Service Tax
Cess elimination streamlines the tax architecture: Removing compensation Cess, the Central Excise and Service Tax, reduces structural tax complexities, improving compliance and business navigation. The Cess previously imposed additional levies on select goods/services to compensate states for GST implementation revenue losses.
Cascading benefits strengthen competitive positioning: These reforms create positive ripple effects across the textile value chain, enhancing India’s competitiveness in domestic and export markets.
Competitiveness of polyester
GST reduction enhances polyester competitiveness versus cotton
Polyester market share gains: The GST reduction positions polyester fibers at the same rate as cotton. Since polyester staple fiber is already lower priced than cotton in the domestic market, the GST change will enhance polyester’s competitiveness, driving market share expansion beyond overall textile and apparel demand growth. Wood Mackenzie’s 2025 Global Fibers Strategic Planning Outlook identifies apparel as India’s largest domestic fiber consumption segment. Given apparel’s high price sensitivity, reduced polyester fiber costs should accelerate cotton-to-polyester substitution, with cotton currently commanding a 40% category share.
Raw material supply constraints: The anticipated increase in polyester demand from GST cuts creates upstream sourcing challenges. Polyester textile filament imports in 2023 were dampened by Bureau of Indian Standards (BIS) policies, while the Minimum Import Value policy also limits the imports of fabric. Several announced domestic polyester project expansions should add 5.4 Mtpa of PTA by 2030, more than enough for self sufficiency even after the additional demand from the adjustments to GST. However, there is a risk that import restrictions will elevate fiber costs, potentially offsetting the benefits of the GST reduction.
India PTF production, trade and capacity
India’s textile exports to the US
From market gains to tariff turmoil, uncertain path forward with potential policy changes
Pre-Tariff success story: During the first seven months of 2025, India achieved remarkable success in the US textile market, with exports growing significantly by square meter equivalent and market share increasing from 11% to 14% while China’s declined from 33% to 28%. India became the second-largest supplier to the US textile and apparel market, demonstrating particularly strong performance in knitted apparel, home textiles, and carpets.
Competitiveness of Indian exports
Tariff differentials reshape competitive landscape across major textile exporters to US
Tariff shock and immediate impact: The US tariff increase to 50% on Indian textiles (effective August 27, 2025) represents the steepest penalty among major exporters. We expect at least half of existing US orders to migrate to alternative suppliers, with India’s market share trajectory reversing from growth to contraction. This disruption creates a window for competitors – particularly Bangladesh and Vietnam – to capture displaced volumes. However, India remains difficult to ignore, offering diverse product categories, integrated supply chains, and an expanding presence in premium and luxury apparel markets.
Uncertain future and strategic crossroads: Ongoing negotiations around the 25% Russian oil penalty and a potential tariff reduction to 10-15% by November 30, 2025, create a binary outcome scenario for India’s textile sector. In 2024 and to July 2025, the US share of India’s exports of all fibers, textiles and apparel was around 29% by value. The next 60 days will determine whether current disruptions represent a temporary shock or signal a structural shift in India’s export competitiveness to the US market. While tariff relief remains possible, the industry must prepare for sustained higher costs while accelerating market diversification to reduce US dependency.
India’s trade diversification strategy following the 50% US tariff implementation
Cotton products target Bangladesh while synthetic fibers pivot to European and Middle Eastern markets
Following the implementation of a 50% US tariff, India is expected to pursue strategic market diversification to redirect orders originally intended for the US market. This diversification strategy encounters product-specific obstacles, especially concerning synthetic and polyester-based textile products. While cotton textiles can penetrate markets such as Bangladesh, synthetic fiber exports demand more targeted approaches focusing on European and Middle Eastern regions.
India fiber, textile and apparel exports by destinations
European countries, notably the UK, stand to be the primary potential target due to established trade partnerships and ongoing Free Trade Agreement negotiations that may grant preferential market access. The Middle East represents another opportunity, with India’s geographical advantage and existing trade frameworks such as the India-UAE Comprehensive Economic Partnership Agreement (CEPA) providing competitive benefits for regional market penetration.
However, given that the US accounts for around 29% of India’s exports, the diversification cannot fully compensate for the anticipated decline in the US market. Despite strategic efforts to alternative regions, the volume and value of US orders present a significant gap that will likely result in an overall reduction in India’s total export revenue in the short term.
Polyester feedstock markets
Key questions for the Indian polyester value chain
Can the Indian polyester value chain rise to the challenge of US import tariffs and import dependence on polyester raw materials?
Good and services tax (GST) reforms – The government of India eliminated two tax slabs (12% and 28%) – the objectives were to raise domestic consumption and to simplify the complex tax structure. The key changes are to reduce the tax burden on low cost finished textiles and apparel and on manmade fibers and yarns. Both changes will boost domestic demand for polyester fibers.
US tariff conundrum – The US is the largest export destination for Indian textile and apparel exports, by value, with a 29% share. These are largely (78%) cotton products. The 50% US tariff on imports from India will squeeze margins in the Indian textile sector in the short term. However, this is an opportunity for the Indian polyester chain to develop alternative export markets with lower cost polyester products.
PTA availability – India’s polyester fiber and PET demand are rising rapidly. Will the projected additional 5.4 Mtpa of PTA be sufficient for India to reach self sufficiency by 2030?
Antidumping duty (ADD) on MEG imports – India’s MEG production is deficient and the Directorate General of Trade Remedies (DGTR) has proposed an anti-dumping duty of US$102-173/t on MEG imported from major exporters to India. Can Indian polyester obtain enough MEG and from where?
Bureau of Indian Standards (BIS) certification – This certification applies to both domestic and imported products. It was first applied in 2021 to certain polyester fibers and then in 2023 to other polyester fibers and to polyester raw materials. The BIS certification requirement for many polyester chain products was rescinded on 12 November. This could threaten the projected growth rates for polyester raw materials and fibers but should support the continued substitution of cotton by polyester in India’s textile industry.
Indian economic drivers push growth in polyester chain
Government policies underpin a strong economy; RBI GDP forecast for FY 2025-26 revised upwards to 6.8%
Monetary policy support
India’s GDP growth in fiscal year 2024-25 was 6.5%, higher than our forecast of 6.3%. The Reserve Bank of India (RBI) has cut its policy rate by a total 100 basis points in three recent cuts. Lower interest rates are expected to boost investment and support economic growth in fiscal year 2025-26. As a result, the global economic slowdown driven by trade tensions will impact the Indian economy only marginally.
Tax reforms
The Indian government announced income tax cuts in March 2025 and new GST reductions applicable from 22 September 2025 to boost domestic consumption. This will raise disposable income and reduce prices of key necessities including textiles and apparel.
Major infrastructure initiatives
Projects such as Bharatmala, Sagarmala, and Gati Shakti are in progress to streamline transportation and minimize logistics costs. This will enhance India’s competitiveness in commodities markets.
Port turnaround time reduction
Investments and initiatives have improved the port turnaround time from four days to 0.9 days in 2025. This has boosted delivery speed and reduced inventory expenses.
MEG and PTA are the key raw materials for polyester production
Fiber production will remain the largest consumer of MEG and PTA in India
India MEG consumption by end use
India PTA consumption by end use
MEG in India
India domestic MEG faces cost disadvantage against imports, driving lower run rates and margins
India MEG capacity, production and imports
India MEG domestic prices are at a premium to imports
Third anti-dumping duty (ADD) investigation on imported MEG concluded
DGTR recommends ADD of US$102-173/t on MEG from Kuwait, Saudi Arabia and Singapore
MEG ADD can be a new barrier for downstream polyester: Indian downstream polyester producers imported 1.1 mt of MEG in 2024, as imported MEG prices remain lower than domestic prices. Imports from Kuwait (MEGlobal), Saudi Arabia (SABIC) and Singapore (Aster) accounted for all imports coming into India. However, this share has reduced to 90% in 2025 with 10% now coming from the US (MEGlobal and Nan Ya).
Directorate General of Trade Remedies (DGTR), an apex national authority that administers trade remedy measures in India, concluded its third ADD investigation. In its final findings, published on 23 September 2025, the authority recommended an ADD on major exporters in a range of US$102-173/t. The final implementation decision remains with the Ministry of Finance, which can decide against implementing ADD to protect the downstream textile industry from higher raw material cost.
Growth from GST reforms and implementation of ADD is expected to uplift domestic MEG operating rates. ADD implementation will also increase dependency on US MEG as margins for impacted exporters will diminish.
India MEG imports (2021-2025*)
*Note: Data last updated till July 2025
Impact of ADD implementation
ADD erodes significant margins for Middle Eastern plants and makes them less competitive against US plants
Weighted average PGCC of domestic MEG vs. DCC of imported MEG, 2025 – Before ADD
Weighted average PGCC of domestic MEG vs. DCC of imported MEG, 2025 – After ADD
PGCC refers to Plant Gate Cash Cost and DCC refers to Delivered Cash Cost
BIS – Bureau of Indian Standards, Plants exporting MEG to India require BIS certification
India eyes PTA self-sufficiency amid booming downstream demand
PTA industry undergoes restructuring with new domestic capacities and policy reforms in downstream
PTA manufacturers are accelerating investments to meet rising polyester demand. About 5.4 MMTPA of new PTA capacity is expected to come online in next three years: GAIL (1.2 MMTPA, H1 2026), IOCL (1.2 MMTPA, H2 2026), and Reliance (3 MMTPA, H1 2028).
India PTA production
India PTA net trade
Paraxylene – essential feedstock for PTA production faces capacity constraints
Rising PTA demand and limited PX import options push operating rates near capacity, underscoring the need for new domestic PX investments
India PX production
India PX net trade
India’s dependence on PX imports poses strategic risk to polyester industry growth
Limited growth in global PX supply drives India toward capacity additions despite lower asset competitiveness
India’s rising gasoline demand limits PX competitiveness as refineries prioritize gasoline blending over PX production. This creates an additional opportunity cost when manufacturers divert reformate from gasoline blending to PX production, raising overall feedstock costs and making Indian PX assets less competitive on the global cost curve. As a result, India still imports about 20% of its PX demand despite having sufficient installed capacity.
With new PTA plants starting up and limited global PX capacity additions, operating rates at existing Indian PX units are expected to improve as imports remain constrained. To meet growing polyester demand and achieve self-sufficiency across the value chain, India will need to commission new PX plants by the early 2030s.
Key takeaways
Policy shifts create new reality for India’s polyester industry
- GST reforms boost polyester competitiveness against cotton. The government’s decision to reduce GST rates on man-made fibers from 18% to 5% significantly enhances polyester’s market position. This tax restructuring creates positive ripple effects across the textile value chain, with polyester gaining market share as domestic consumption patterns shift towards synthetic alternatives.
- US tariff disruptions create strategic crossroads for textile exports. India’s textile exports to the US face unprecedented challenges, following the tariff increase to 50% on Indian products. This represents the steepest penalty among major exporters, forcing Indian manufacturers to diversify markets and potentially restructure supply chains to maintain competitiveness.
- India’s MEG sector faces cost disadvantage against imports, with domestic producers experiencing lower run rates. The DGTR’s recommendation for anti-dumping duties aims to level the playing field for domestic manufacturers. The increased MEG demand from downstream will be supplied through imports for a foreseeable future.
- India pursues strategic self-sufficiency in PTA production to reduce import dependency. Upcoming PTA facilities demonstrate competitive positioning on Wood Mackenzie’s global cost curve, with Indian assets ranking favorably for export opportunities. Existing domestic PX operating rates will reach optimal levels by 2028 as new PTA capacities starts production and PX import availability remains constrained. This vertical integration supports the country’s ambition to capture greater value across the polyester chain whilst meeting rising domestic consumption.
- Indian government initiatives aim to maintain a delicate balance between protecting domestic industry and allowing fair competition. The recent removal of the BIS certification requirement (12 November) for certain polyester raw materials, fibers and yarns provide much need support for raw material availability to the downstream. However, it also opens the entire industry to fierce competition from imported materials.
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