Yet this growth has not translated into a larger share of the global market. Bangladesh and Vietnam are expanding faster, while China continues to lead on scale and efficiency. This said, sustainability has emerged as a new factor which is now reshaping this contest. Global buyers increasingly weigh carbon footprint, water use and traceability alongside price, and this is steadily becoming a condition of market access rather than a marketing choice. For India, this shift need not be read only as a compliance burden. It could well become the basis of a fresh export strategy, one built on cleaner production, circularity and responsible sourcing rather than cost alone. The question worth asking is no longer whether sustainability matters to trade, but how fast India can turn it into an advantage.

 

The sector’s environmental record makes this a real challenge. Dyeing and processing are among the most resource-intensive industrial activities, and clusters such as Tiruppur, Surat and Panipat have seen groundwater depletion and river pollution linked to poorly treated effluent. Much of the industry still runs on coal-based power, and the shift to renewable energy and cleaner processing remains slow, held back by high capital costs and limited finance, particularly for smaller units. Social conditions add another layer of concern. Labour is largely informal, and wage variability, uneven safety standards and gaps in social protection remain common, even as the new Labour Codes aim to simplify compliance and strengthen worker welfare. Most Indian textile firms are MSMEs with limited technology, weak ESG reporting systems and high certification costs. As global buyers ask for more transparency on emissions and traceability, sustainability risks becoming another barrier for smaller firms rather than an opportunity, unless collective solutions are put in place.

 

On policy side, the ministry of textiles has moved beyond broad schemes towards measurable circularity targets. A government note released earlier this month set out fresh numbers behind this shift. India generates around 7.8 million tonnes of textile waste a year, of which over 70% is already recovered through recycling, upcycling or reuse, rising to nearly 95% at the pre-consumer stage. The recycling sector itself is projected to reach USD 3.5 billion by 2030 and could generate close to one lakh green jobs along the way. Alongside PM MITRA Parks, the PLI scheme and Common Effluent Treatment Plants, MSMEs now have access to targeted support through RAMP’s MSE-GIFT and MSE-SPICE schemes, offering interest subvention and capital subsidy for green and circular investments. Textiles have also been brought under the Carbon Credit Trading Scheme, requiring larger units to disclose their emissions, while the new Solid Waste Management Rules and the Eco-Mark Scheme push recycled content further down the value chain. Implementation, however, remains uneven, and MSMEs are yet to feel the full benefit.

 

India is well placed to turn this challenge into an advantage. It has strong upstream capacity, a large domestic cotton base and fewer geopolitical hurdles in Western markets compared with China. Unlike Bangladesh and Vietnam, India also controls much of its own value chain, from fibre to finished product. This gives it room to compete on quality, traceability and responsible manufacturing rather than price alone. India already recycles a large share of its pre-consumer cotton waste and has a well-established reuse economy, both genuine strengths in a world moving towards circular production. Clusters such as Panipat and informal markets like Mongolpuri’s Katran already move thousands of tonnes of textile waste back into production every day, proof that a working circular economy exists on the ground and largely needs formalising rather than building from scratch. With the right policy support and finance, sustainability could help India shift from a cost-driven exporter to a preferred, responsible sourcing destination.

 

A few steps could speed up this shift, building on what is already in motion rather than starting afresh. Policymakers in India should set clear, time-bound sustainability targets and independently assess how far schemes like PLI, PM MITRA, ZLD systems and the newer MSE-GIFT and MSE-SPICE support have actually reached the ground, not just how well they are designed on paper. During bilateral/multilateral trade negotiations, India should push for mutual recognition of India’s testing and certification systems with the EU and other partners, so that exporters are not forced into duplicate audits, and the emissions data already collected under the Carbon Credit Trading Scheme should be used to seek explicit recognition against any future carbon border measures.

 

The onus for shifting towards a sustainable textile production doesn’t lie only with policymakers. Large exporters should also extend sustainability financing, training and procurement standards to their smaller suppliers, as large firms like Indorama and Vardhman have already begun doing. Regulators can support this by keeping due diligence standards uniform while easing reporting requirements for smaller firms, on the lines of SEBI’s BRSR Lite. Green finance for textile MSMEs needs to be cheaper and more widely available; interest rates of 12% to 14% on sustainability linked capital are still too high for most small firms, despite the subvention on offer under MSE-GIFT. Investment in shared infrastructure, such as effluent treatment plants in established clusters, would help too. So, formalising informal recycling networks around Panipat and Delhi’s Katran market would probably be the fastest route to achieving the government projected USD 3.5 billion recycling sector and one lakh green jobs by 2030.

 

None of this is about chasing approval abroad. It is about recognising that the terms of textile trade are changing, and that India has real strengths to build on, from scale and upstream integration to a circular economy that already works informally. The choice before policymakers and industry is straightforward. India can wait for sustainability rules to be imposed from outside, or it can shape its own transition and turn a compliance cost into a lasting export advantage. The second path is harder, but it keeps India’s textile sector competitive for the next decade.