The Union Budget 2026–27 comes at a critical juncture for India’s textile and apparel sector, which is facing an unprecedented external shock from steep US import tariffs even as it remains one of the country’s largest employment generators. With over 45 million livelihoods dependent on the sector and exports already under strain, the Budget must prioritise competitiveness, liquidity and policy stability.

The additional 50% US tariffs imposed last August have significantly weakened India’s position vis-à-vis competing sourcing hubs such as Vietnam and Bangladesh, which enjoy far lower tariff rates. The impact is already visible in export numbers, with textiles, garments and made-ups witnessing a sharp contraction over recent months. The industry thus seeks both immediate relief and medium-term structural support.

A key expectation is the reintroduction of the interest equalisation scheme on pre- and post-shipment export credit, particularly for MSME exporters who operate on thin margins and face rising financing costs. Restoring this support would help stabilise working capital cycles at a time of global demand uncertainty. The industry is also pitching for the return of the concessional 15% corporate tax rate for new manufacturing units under Section 115 BAB to encourage fresh capacity creation and formalisation.

On the tax front, accelerated depreciation of capital assets over two years would improve cash flows without imposing a long-term fiscal burden, while rationalising IGCR provisions for duty-free import of trims and accessories, including for intermediate suppliers, would help reduce input costs. A reduction in GST on apparel to 5% could further stimulate domestic demand and improve price competitiveness.