Budget Emphasis on Manufacturing and Exports Bodes Well for Brands and Retailers in India

Customs duty reductions and their impact on fashion and footwear brands: To further enhance the competitiveness of Indian exports, the budget has proposed several customs duty reductions that directly impact the leather and textile industries: 

Customs duty on wet white, crust, and finished leather used in garment, footwear, and leather goods manufacturing has been reduced from 10% to zero. This move will significantly lower raw material costs for brands producing leather apparel, accessories, and footwear, making Indian products more price-competitive in global markets

The import duty on methylene diphenyl diisocyanate (MDI)—a key raw material in textile and footwear manufacturing—has been reduced from 7.5% to 5%. Additionally, new tariff lines have been introduced for technical textiles, which is expected to streamline imports of advanced textile materials

For brands specialising in leather and footwear, such as Bata India, Woodland, Metro Brands, and Clarks, the elimination of the 10% customs duty on leather imports will reduce costs and improve profitability. By making high-quality leather more accessible, these brands can introduce premium and luxury products at competitive prices, expanding their consumer base. 

Similarly, for textile brands, the reduction in MDI import duties will help manufacturers develop high-performance synthetic fabrics, enhancing innovation in sportswear, outerwear, and workwear

Government support for cotton production and its effect on retail: The government has launched a six-year programme to boost cotton production, focusing on research and development (R&D) to enhance yields, particularly for extra-long staple (ELS) cotton

For Indian fashion brands that rely heavily on cotton, such as FabIndia, Raymond, and Aditya Birla Fashion, this initiative is expected to: 

• Reduce reliance on cotton imports, thereby stabilising costs
• Ensure better quality raw material for premium cotton-based products
• Promote sustainability, as higher domestic production reduces the carbon footprint of imported cotton

By strengthening the domestic supply of high-quality cotton, the government is enabling Indian brands to compete with international labels that source ELS cotton for premium apparel. This is particularly beneficial for brands selling handloom, organic, and luxury cotton-based products in both domestic and global markets

Impact on consumer spending and fashion retail: Beyond direct support for manufacturing and exports, the Union Budget 2025-26 also emphasises increasing disposable incomes by raising income tax thresholds. This move is expected to stimulate consumer spending, directly benefiting fashion and footwear retailers.

Key impacts on retailers and brands:

1. Higher consumer spending power → More demand for premium and branded apparel
2. Positive stock market reaction → Fashion and retail brands such as Bata India and Metro Brands have already seen an uptick in stock prices post-budget
3. Expansion of middle-class consumption → Growth in demand for fast fashion, casual wear, and affordable luxury segments

Retailers with a strong presence in malls, high streets, and e-commerce platforms are likely to experience higher sales volumes, particularly in segments such as: 

• Workwear and formalwear as urban professionals increase discretionary spending.
• Fast fashion and affordable luxury, driven by aspirational middle-class consumers
• Footwear and accessories, as brands introduce more premium and functional products

Positive outlook for fashion brands and retailers: The Union Budget 2025–26 presents a strategic push toward strengthening India’s textile, leather, and fashion industries. The combination of higher budget allocations, reduced import duties, incentives for MMF and technical textiles, and support for cotton production creates a favourable environment for Indian and international brands operating in the country.

With lower production costs, improved raw material access, and higher consumer spending, fashion brands and retailers can expect strong growth in both domestic and export markets.

As companies align their strategies with these budgetary provisions, the coming years could mark a significant expansion phase for India's fashion and retail sectors, making the country a more dominant player in the global apparel and footwear industries.