Indian textile and apparel makers are facing a broad cost squeeze in FY27, with wages, cotton, yarn and petrochemical-linked inputs all moving higher. Large exporters such as Pearl Global, Gokaldas Exports and Arvind are responding with automation, selective price increases and a shift towards lower-cost expansion locations.
Indian apparel and textile manufacturers are entering FY27 with a familiar but sharper problem: costs are rising faster than they can be passed on. Labour inflation, firmer cotton and yarn prices, and petrochemical-linked input costs are squeezing margins across the sector, according to reporting by The Hindu BusinessLine.
The pressure is being felt most acutely by exporters and large domestic manufacturers that book orders months in advance. That timing mismatch means a sudden jump in wages or raw materials often lands after prices have already been fixed, leaving companies to either absorb the hit or risk losing business.
Wages are becoming a bigger line item
At Pearl Global Industries, managing director Pallab Banerjee said worker availability was disrupted in the first quarter of FY27 because of the harvest season, school holidays and the West Bengal elections, which pushed up absenteeism. He also pointed to steep statutory wage increases in key operating markets, with minimum wages in Haryana rising 38 per cent and in Noida 21 per cent.
The cost impact was visible in the company’s India operations. Group chief financial officer Sanjay Gandhi told investors that the wage revision in Haryana, where Pearl Global runs four factories, flowed directly into the profit and loss account and compressed standalone EBITDA margin. The margin slipped to 6.6 per cent in Q1 FY27 from 7.3 per cent a year earlier, even as standalone revenue rose 27.4 per cent year on year.
For apparel exporters, labour is no longer a background variable. It is now one of the main determinants of where production is placed, how fast capacity can be added, and how much of the inflation can be shared with buyers. In a labour-intensive business, even a few percentage points of wage escalation can alter the economics of a factory cluster.
Factories are feeling the squeeze in different ways
Gokaldas Exports, based in Bengaluru, is facing a similar cost cycle. Vice-chairman and managing director Sivaramakrishnan Ganapathi said minimum wages in Haryana rose by about 35 per cent, while wages at the company’s facility near Gurugram increased 25 per cent from April 2026. Karnataka saw a smaller 5 per cent increase.
Ganapathi said Gokaldas already pays above the minimum wage, which softened the impact, but not enough to avoid a meaningful rise in the wage bill. He said the 35 per cent jump in Haryana minimum wages translated into an overall wage increase of roughly 14 per cent to 15 per cent for the company. In Q1 this year, India business wage costs rose by ₹20 crore and the increase was absorbed within the system, he said.
The response, according to Ganapathi, is twofold: more automation and better operating efficiency. Passing the entire burden to buyers has become harder, especially when global retail customers are under their own margin pressure and are less willing to accept sudden price resets.
Raw material inflation is adding a second layer of risk
If wages are tightening the labour side, raw materials are creating a separate challenge. Arvind Ltd, the Ahmedabad-based textile major, has seen nearly ₹100 crore of inflation in input costs this year, vice-chairman Punit Lalbhai told investors. The increase has been driven mainly by cotton and yarn, along with higher petrochemical-linked chemical costs.
Lalbhai said the rise came within a short period, which made it difficult to respond through pricing alone. Arvind’s order book is usually filled three to four months ahead, and prices are often locked when orders are accepted. That leaves little room to reprice once cotton or yarn costs move sharply.
Rather than sacrifice volumes, the company has chosen to absorb part of the pain and protect growth. Lalbhai said Arvind has effectively given up some margin to keep momentum intact, while beginning to pass on price increases where possible. He added that the company is still working through the latest round of escalation, although the broader environment remains unsettled because geopolitical tensions continue to drive volatility in commodities and supply chains.
That uncertainty matters because textile economics depend on timing as much as on absolute prices. A raw material spike that lasts only a few weeks can still hurt a quarterly number if it lands between order booking and shipment. For exporters, the lag is often the difference between a stable margin and a disappointing one.
Buyers are not absorbing every increase
Gokaldas Exports said fabric costs are usually passed through because they are built into the costing structure. The problem arises when polyester prices move suddenly or when ancillary expenses such as polybags, cartons and fuel rise after orders have already been priced.
Ganapathi said some of those costs were not fully captured in orders booked in January or earlier, leaving the company to absorb the difference in the first quarter. Going ahead, he expects more of these items to be folded into customer pricing. Even so, raw material visibility remains limited. Cotton yarn prices in India may have already peaked and could soften, while polyester is likely to track crude oil movements, making forecasting difficult.
For manufacturers, this means pricing discipline is becoming as important as production discipline. The companies that can rework contracts faster, improve inventory turns and manage vendor costs more tightly are likely to preserve more margin through the cycle.
Expansion plans are shifting to cheaper locations
The inflation shock is also changing where textile companies want to grow. Instead of adding capacity in expensive industrial belts, apparel makers are increasingly looking at regions where labour is cheaper and state incentives can offset some of the wage increase.
Gokaldas Exports plans to direct incremental growth towards lower-cost parts of India, particularly Central India and rural locations. The company sees factory efficiency as the key lever, with the goal of extracting more output from every rupee spent on labour. Lower-cost geographies can help, but only if productivity and logistics remain workable.
Pearl Global is pursuing a broader diversification strategy. The company is expanding capacity in Bihar and Bangladesh, and has completed land acquisition in Vietnam while continuing to evaluate further capacity additions. That spread gives it more flexibility to balance labour cost, policy support and buyer demand across markets.
The pattern is significant for India’s export manufacturing ambitions. If wage inflation persists faster than productivity gains, new investment will keep gravitating towards the cheapest viable locations, both within India and beyond its borders. That could help companies defend margins, but it also raises questions about how much value addition remains anchored in domestic clusters.
What could soften the blow
A weaker rupee is offering some relief to exporters, and Ganapathi said Gokaldas has already absorbed the wage shock from higher minimum wages. A softer currency improves realisations for overseas sales and can partially offset higher domestic costs, although it does not solve the underlying labour and input inflation.
For the sector as a whole, the next few quarters will test how much of this cost pressure can be passed through without denting orders. The answer will depend on buyer demand, commodity stability and how quickly companies can improve productivity through automation and operating redesign.
For now, India’s textile makers are managing the old manufacturing trade-off in a tougher setting: protect volumes, defend relationships with global buyers, and accept that margins may need to absorb more of the shock than before. That balancing act is likely to define FY27 for much of the sector, even as companies search for cheaper capacity, better efficiency and a more predictable cost base.