Moderation in revenue growth, margin looms for textile MSMEs: SME Tracker

The readymade garment sector (RMG), dominated by micro, small and medium enterprises (MSMEs), is set to see revenue growth slow a tad to 4-6 per cent this financial year (FY27), to ₹5.7 trillion, compared with a 6-8 per cent growth in FY26. Higher realisations and a rebound in RMG exports will support growth. 

However, the profit margin is likely to decline 100-150 basis points due to increased production costs and weak domestic demand, which make it difficult to pass on the higher costs to customers. 

RMG exports are likely to rise 6-8 per cent to ₹1.49 trillion this financial year — rebounding after a 3 per cent growth in FY26 — driven by the free-trade agreements signed recently with the United Kingdom and the European Union, a depreciating rupee, and the easing of higher tariffs by the United States. Though, the West Asia crisis and its impact on key export markets remain monitorable. 

On the domestic front, the segment faces headwinds due to the West Asia crisis, which may raise inflation and pull down demand for apparel. Demand for RMG, which had grown 8-10 per cent in FY26, is likely to rise 4-6 per cent in FY27. 

On the supply side, prices of domestic cotton are likely to increase due to higher international prices, surging fertiliser costs and rising minimum support price for cotton. Furthermore, the conflict has made domestic polyester more expensive.

MSMEs would face the brunt of the impact as they make up nearly 80 per cent of the textile production capacity. These small enterprises usually lack the financial cushion to absorb economic shocks. 

Export-oriented RMG clusters such as Tirupur and Bengaluru are likely to see better revenue growth than domestic-focused clusters such as Kolkata and Kanchipuram. 

Despite these challen­g­es, the RMG sector is poised for growth in the medium term due to free-trade agreements, the establishment of large textile parks, Production-Linked Incentive scheme benefits, and remission of state and central taxes and levies, which will boost do­m­estic manufacturing and exports. Crisil intelligence