Indian textile and apparel manufacturers are facing rising labour, cotton, yarn and petrochemical costs in FY27, prompting companies to absorb some inflation, selectively raise prices, automate operations and expand in lower-cost regions.
Higher labour costs, a sharp rise in cotton and yarn prices, and elevated petrochemical-linked costs in FY27 are forcing Indian textile and apparel manufacturers, including Arvind Ltd, Pearl Global Industries Ltd, and Gokaldas Exports Ltd, to absorb part of the inflation, pass on costs selectively, and step up automation and expansion in lower-cost regions.At Gurugram-based Pearl Global Industries, managing director Pallab Banerjee said worker availability was a challenge during the first quarter of FY27 due to the harvest season, school holidays, and the West Bengal elections, resulting in higher absenteeism. At the same time, minimum wages in Haryana and Noida rose by 38% and 21%, respectively, creating an additional ripple through the company’s cost structure.The impact was visible in Pearl Global’s India operations. Group CFO Sanjay Gandhi told investors recently that wage revision in Haryana --- where the company operates four factories --- had directly hit the profit and loss account and weighed on its standalone EBITDA margin. The margin fell to 6.6% in Q1 FY27 from 7.3% a year earlier, despite a 27.4% year-on-year increase in standalone revenue.Gokaldas absorbs higher wage costsThe pressure is not limited to Pearl Global. At Bengaluru-based Gokaldas Exports, vice-chairman and managing director Sivaramakrishnan Ganapathi said minimum wages increased by about 35% in Haryana and those at the company’s facility near Gurugram rose 25% from April 2026. Karnataka saw a more modest 5% wage increase. Ganapathi, however, pointed out that Gokaldas pays wages above the minimum. Consequently, the 35% increase in Haryana’s minimum wage translated into an overall wage increase of around 14-15% for the company. “In Q1 of this year, our India business saw a wage cost increase of ₹20 crore, and that has been absorbed in the system,” Ganapathi said.The company is responding through automation and efficiency improvements, which it sees as a continuous process to protect margins. While some of the higher costs are sought to be incorporated into customer pricing, Ganapathi said passing them through has become increasingly difficult.Cotton and yarn prices add to Arvind’s costsFor Ahmedabad-based textile major Arvind Ltd, the pressure has extended beyond labour costs to raw materials. Vice-chairman Punit Lalbhai said the company has already experienced nearly ₹100 crore in inflation in input costs this year, primarily from cotton and yarn, in addition to the impact of higher petrochemical-related chemical costs. The sharp increase happened within a relatively short period, making it important for the company to drive higher volumes to offset the pressure, Lalbhai told investors. “The raw material escalation that happened within a short period of time” has been particularly difficult because Arvind’s order books are typically filled three to four months in advance, with pricing fixed when orders are booked. Changing prices after orders have been secured is difficult, particularly when the company does not want to risk losing market share while it remains on a growth trajectory. As a result, Arvind has effectively traded some margin for growth.Lalbhai described the situation as temporary, saying the company has already started passing on price escalations and is in the process of passing on further increases. However, he cautioned that the environment remains uncertain as geopolitical conflicts continue to create volatility.Exporters struggle to pass on sudden costsFor garment exporters like Gokaldas Exports, not all input-cost increases can be passed through immediately. Ganapathi said that fabric costs are generally passed through to customers because they are factored into costing. But sudden increases in polyester prices and other ancillary expenses such as polybags, cartons and fuel can catch manufacturers by surprise after orders have already been priced. He said these costs were not fully factored into some Q1 orders priced in January or earlier.Going forward, Gokaldas plans to incorporate such costs into customer pricing. However, raw material prices remain difficult to predict: cotton yarn prices in India have peaked and may cool off, while polyester prices are likely to move in tandem with crude oil. The company therefore intends to pass these costs on to customers wherever possible.Textile makers shift expansion to lower-cost regionsThe increase in labour costs is also beginning to influence where India’s apparel manufacturers put their next rupee of capital. Gokaldas Exports plans to focus incremental growth on lower-cost regions of India, particularly Central India and rural areas, where government incentives can help offset some of the cost increases. The company’s focus is on running factories efficiently and maximising the value generated from every rupee spent on labour. Pearl Global is pursuing a similar diversification strategy. The company is expanding capacity in Bihar and Bangladesh and has completed land acquisition in Vietnam, while continuing to evaluate additional capacity.A weaker rupee is providing another cushion to India’s apparel exporters. Gokaldas’ Ganapathi said the company has already absorbed the wage impact from higher minimum wages and expects some relief from the weaker rupee, which supports exporters’ economics.Published on August 15, 2026
