The Union Budget 2026-27 introduces multiple measures to modernise and sustain the Indian textile industry.
Key initiatives include the National Fibre Scheme, Tex-Eco Initiative, and Samarth 2.0.
These aim to enhance self-reliance, support artisans and promote sustainable practices.
Targeted support mechanisms needed to achieve environmental sustainability in SME industries.
The Union Budget 2026–27 signalled renewed support for the Indian Textile sector, promoting market expansion, modernisation, upgrading skills and sustainability.
The slew of initiatives announced include a National Fibre Scheme to promote self-reliance in natural and new industrial fibres, and a textile expansion and employment scheme focused on modernising traditional clusters through capital support, technology upgrades and common testing facilities. A National Handloom and Handicraft programme will integrate existing schemes to support artisans. Additionally, the Tex-Eco Initiative and Samarth 2.0 aim to promote sustainable textiles and modernise skilling through industry–academia collaboration.
Textiles, which encompass fibres, yarns, fabrics and apparel, are a major contributor to the Indian Economy. It is estimated to account for 2.3 per cent of the country’s GDP, 13 per cent of industrial output and 12 per cent of exports.
The sector provides direct and indirect employment to over 45 million people. It is expected to see a compound annual growth rate of 10 per cent per annum, to reach $350 billion market value by 2030, with exports potential of $100 billion.
However, with the rise in climate change, worsening environmental issues and changing world order, the sector faces multi-faceted challenges. Some are legacy issues while others are emerging as the world transforms towards a greener economy.
One of the biggest challenges is to make financial support accessible to the large number of small- and medium-scale textile enterprises (SME), which even include households. A few are are registered in defined industrial areas while some fall outside the legal purview.
Apart from the legality, the other major challenge is environmental. Different processes in the sector have various impacts on the environment. The dyeing process, also known as wet processing, is an energy- and water-intensive method.
At present, the process generates heat, usually through coal or other emission-intensive fuels, contributing to both air and water pollution. The process of dyeing alone consumes 43 per cent of the total energy required in textile industry. SMEs use small or baby boilers that are not efficient and are installed in large numbers.
An effective solution to the problem is the installation of centralised or common boilers for steam generation at every textile cluster.
With use of refused derived fuel (RDF) from municipal and textile waste, common boilers were found to have fuel efficiency of 80-85 per cent, compared to 65-70 per cent in traditional baby boilers.
Even as new textile parks are being developed in India, it is essential that these new developments are planned with common facilities like common boilers and common effluent treatment plants.
Estimates suggest that the textile and apparel industry in India emits 49-65 tonnes of carbon dioxide per year, representing around 2 per cent of National greenhouse gas emissions. The country's textile sector produces over 7.8 million tonnes of waste per annum. Around 17 per cent of the waste ends up in landfills, releasing microplastics and chemical pollutants into the environment.
In January 2026, the government of Indian brought the textile sector under the Carbon Credit Trading Scheme (CCTS). Textile units will very soon be required to meet assigned emission reduction targets. This will be an additional goal that the obligated textile industries across the country will have to meet in the coming time.
In addition to the CCTS targets, emerging global regulations on circularity, such as European Union’s Ecodesign for Sustainable Products Regulation, will also make things challenging for the sector.
The 2026-27 Budget lays a strong foundation for the sector’s future. However, the structural integration of climate-focused fiscal incentives will be the major expectation from the announced policy initiatives.
Policymakers and industry leaders must go beyond broad allocations and establish targeted support mechanisms to achieve environmental sustainability in the important SME sector.