India’s 2025 Budget: 20% Import Duty on Knitting Fabrics to Curb Cheap Imports

India’s Union Budget 2025 has brought significant changes to the textile sector, particularly with the announcement of a 20% import duty on knitting fabrics. This move, aimed at protecting domestic manufacturers from the influx of cheap imports—especially from countries like China and Bangladesh—has triggered discussions across the industry. This article explores the rationale behind this decision, its expected impact on the Indian textile ecosystem, and the broader implications for stakeholders.

1. Government’s Rationale Behind the Import Duty

• The textile industry, one of India’s largest employment generators, has faced rising competition from imported knitting fabrics.
• Low-cost imports have undercut local manufacturers, leading to reduced production and job losses in certain regions.
• The government’s 20% import duty aims to level the playing field, ensuring that domestic fabric producers can remain competitive.
• It is also part of the broader "Atmanirbhar Bharat" (Self-Reliant India) initiative to strengthen local industries.

2. Protecting Domestic Knitting Fabric Manufacturers

• Indian knitwear hubs like Tiruppur, Ludhiana, and Kolkata have long complained about the dumping of cheaper fabrics into the Indian market.
• The new import duty is expected to provide a protective shield for these units, encouraging increased production and investment.
• Smaller and medium-scale units will benefit the most, as they often lack the resources to compete with mass-produced, low-priced imports.

3. Impact on the Garment Manufacturing Sector

• While fabric producers may benefit, garment exporters who rely on imported knitting fabrics might see a rise in input costs.
• Export-oriented units (EOUs) may demand exemptions or alternative schemes like duty drawback to offset the additional burden.
• Some players in the value chain are concerned that this could temporarily impact India’s price competitiveness in the global apparel market.

4. Encouragement for Local Yarn and Fabric Production

• The duty is expected to boost demand for locally produced yarns and knitting fabrics, encouraging upstream investments.
• It can create opportunities for spinning and knitting mills to scale up and modernize operations.
• Domestic textile players may receive a stronger incentive to innovate in terms of fabric quality, variety, and sustainability.

5. Reducing India’s Dependence on Textile Imports

• Despite having a robust textile ecosystem, India has imported significant volumes of knitting fabrics over the past decade.
• The 20% import duty is a step toward reducing this dependency and making the domestic supply chain more self-sufficient.
• By encouraging import substitution, India can strengthen its textile value chain and improve its trade balance.

6. Potential for Job Creation in the Domestic Sector

• Increased demand for domestic knitting fabrics could lead to more jobs in spinning, dyeing, knitting, and finishing segments.
• Regions with existing textile infrastructure may witness a rise in employment, especially for skilled and semi-skilled workers.
• The policy may also attract fresh investments in machinery, automation, and skill development initiatives.

7. Challenges for the Export-Driven Segments

• Exporters using imported specialty fabrics for global clients may find it difficult to maintain margins in the short term.
• There could be a learning curve and adjustment period as the domestic industry ramps up production to match quality expectations.
• The government might need to provide targeted support such as PLI (Production Linked Incentive) schemes or R&D funding.

8. Industry Reactions and Outlook

• Textile associations have largely welcomed the move, citing long-standing issues of under-invoiced imports hurting local mills.
• However, garment exporters have voiced concerns and are pushing for special dispensations or policy flexibility.
• Industry experts believe that while the impact might be mixed initially, the long-term outlook is positive for local manufacturing and capacity building.

9. Aligning with India’s Textile Growth Vision

• India aims to become a global textile and apparel hub with a focus on quality, innovation, and sustainability.
• Policies like the import duty reinforce the commitment to developing a fully integrated textile value chain.
• With continued government support, India can attract global buyers seeking reliable and ethical sourcing alternatives.

10. Final Thoughts and Strategic Implications

• The 20% import duty on knitting fabrics marks a bold policy move toward self-reliance and domestic empowerment.
• While it brings immediate challenges for some segments, it also opens the door for growth, innovation, and reduced dependency on foreign markets.
• Businesses will need to adapt strategically—balancing cost, quality, and agility—to thrive under the new regime.

Conclusion

The Indian government’s imposition of a 20% import duty on knitting fabrics in the 2025 Budget is a decisive step aimed at revitalizing the domestic textile industry. While it may pose short-term hurdles for certain stakeholders, the long-term benefits—such as reduced import dependence, job creation, and strengthened local capacity—are poised to redefine the landscape of Indian textile manufacturing. With the right support mechanisms in place, this policy could catalyze a new era of growth, innovation, and self-reliance in India's textile sector.