New Delhi [India], August 26 (ANI): India's textile sector is entering a stronger phase as improving domestic raw-material availability and greater sourcing flexibility are expected to support industry spreads, but the sustainability of the recovery will depend on how well higher cotton costs are passed through to yarn prices, according to a report by 360 ONE Capital.

'The textile operating environment has improved meaningfully, although the strength and sustainability of the recovery differ across the value chain,' the report said, adding that the ability to pass higher cotton costs into yarn realisations remains the 'key monitorable' for sustaining spreads.

The report said cotton spinning had one of its better quarters in the last 2-2.5 years, supported by healthy demand, high utilisation and materially improved yarn spreads. India's earlier disadvantage on cotton prices compared with international markets has also narrowed, while capacity closures and limited additions have improved the industry's demand-supply balance.

The outlook for Indian textiles has also benefited from stronger demand from China. The report said relatively high domestic cotton prices in China have improved the economics of importing Indian yarn, making the country an important additional demand source.

Indian yarn exports rose from around 95-97 million kg per month to around 110 million kg, largely led by China, with demand expected to sustain, the report said.

However, cotton prices have risen materially through the second quarter, making raw-material costs a key risk to the recent improvement in spinning margins. If yarn prices do not keep pace with higher cotton costs, the recent expansion in spreads could come under pressure.

The report said downstream segments were also showing signs of recovery, with garmenting companies reporting healthy order visibility and home textiles benefiting from stronger US demand, better utilisation and improved product mix.

For the broader sector, the report expects improving domestic raw-material availability and greater sourcing flexibility to provide a more supportive backdrop for textile spreads.

'Demand sustainability and the ability to absorb higher cotton costs will remain crucial,' the report said, pointing to the key factors that will determine whether the current improvement develops into a more durable recovery.

As per the official data, India's exports of textiles and apparel, including handicrafts, stood at Rs 3,25,339.0 crore in 2025-26, registering a growth of 1.8 per cent over Rs 3,19,573.2 crore in 2024-25, despite fluctuations in global demand, variations in input costs and other trade-related challenges.

India's exports of textiles and apparel, including handicrafts, recorded growth in more than 100 export destinations during 2025-26 compared with the previous year. (ANI)