Empowering the Roots: Budget 2026 charts a growth map for India’s domestic fashion and artisan economy
01 February 2026, Mumbai
In a landmark move for India’s second-largest employer, the Union Budget 2026-27 has unveiled a comprehensive transformation roadmap aimed at revitalizing the domestic textile, apparel, and handicraft sectors. While the budget targets an ambitious $350 billion business size by 2030 , its strategic weight this year has shifted significantly toward bolstering the Indian domestic fashion landscape and the artisan economy.
Industry leaders characterize this as a "structural shift" to modernize traditional manufacturing while ensuring rural inclusion. Dr. A. Sakthivel, Chairman of the Apparel Export Promotion Council (AEPC), described the budget as balanced and forward-looking, reflecting a strong commitment to building a globally integrated yet domestically resilient sector.
Strategic Pillars: Strengthening the domestic value chain
The budget introduces several new missions to streamline the fragmented domestic sector, addressing the textile economy from the weaver's loom to the high-street retail store. Chandrima Chatterjee, Executive Director of the Confederation of Indian Textile Industry (CITI), noted that the budget lays out a comprehensive roadmap through the Integrated Programme for Textile Sector. This is echoed by the Clothing Manufacturers Association of India (CMAI), which stated that the package signals a clear intent to modernize the sector and strengthen livelihoods across the value chain.
Table: Domestic-Centric Budget Initiatives 2026-27
|
Initiative |
Primary Domestic Focus |
Strategic Objective |
|
Mahatma Gandhi Gram Swaraj |
Khadi, Handlooms, & Handicrafts |
Promoting inclusive growth and rural livelihoods through scaled production. |
|
National Handloom Programme |
Artisan Integration |
Integrating and scaling existing schemes to improve domestic market access. |
|
Mission for Cotton Productivity |
Raw Material Security |
Raising yields and promoting extra-long staple varieties for premium domestic apparel. |
|
Textile Expansion & Employment |
Cluster Modernization |
Capital support for machinery and common testing centers in MSME-dominated clusters. |
|
Samarth 2.0 |
Skill Development |
Equipping domestic workers with contemporary design and Industry 4.0 skills. |
Reviving traditional segments and artisan livelihoods
A central theme of the 2026 budget is the revival of legacy clusters to sustain millions of livelihoods. The Mahatma Gandhi Gram Swaraj Initiative is specifically designed to energize Khadi and Handlooms by promoting scale and modern market linkages. Chandrima Chatterjee pointed out that the revival of these traditional clusters, alongside the establishment of new Mega Textile Parks, will strengthen competitiveness and support large-scale employment.
CMAI further noted that the emphasis on skilling through Samarth 2.0 will enable productivity gains and faster adoption of modern technologies among local manufacturers. Mr. Durai Palanisamy, Chairman of The Southern India Mills’ Association (SIMA), emphasized that the Capital Support Scheme for Modernization is essential for attracting the $100 billion investment envisaged by 2030, particularly since previous schemes like TUFS were discontinued in 2022.
MSME Empowerment: The backbone of Indian fashion
Recognizing MSMEs as the backbone of the domestic apparel industry, the budget introduces robust financial reforms to enhance liquidity. Dr. Sakthivel stated that the focus on providing liquidity and credit guarantee support through CGTMSE will greatly enhance cash-flow stability for small producers. Key cross-cutting reforms highlighted by CMAI include:
● TReDS Strengthening: Mandatory onboarding of Central Public Sector Enterprises (CPSEs) to ensure faster payments to MSMEs.
● Entrepreneurial Support: Introduction of tailored credit cards for first-time entrepreneurs and enhanced credit availability for small businesses.
● Trade Facilitation: Recognition of trusted importers and reduced cargo verification to lower transaction costs for domestic units.
Sanjay K. Jain, Chairman of the ICC National Textiles Committee, emphasized that these capacity-building measures are critical because the industry currently has little spare capacity to capture the emerging opportunities in the global and high-end domestic markets.
Challenges: The cotton raw material crisis
Despite the overarching optimism, critical concerns persist regarding the cotton value chain, which remains the primary raw material for Indian domestic fashion.
SIMA Chairman Durai Palanisamy expressed that the budget should have removed the 11% import duty on cotton to meet quality shortages. He warned that domestic cotton prices are already 15% higher than Brazilian cotton, a gap that threatens the financial viability of the entire domestic value chain providing jobs to 35 million people.
Chandrima Chatterjee reinforced this, noting that the industry continues to face a consistent cost disadvantage due to raw material issues. R.K. Vij, President of the Textile Association (India) , noted that while the budget focused on Man-Made Fibres (MMF) for the first time, the trade was still expecting duty relief on cotton where local capacities are short.
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