Call For PLI 2.0 As US Tariffs Threaten To Unravel Textile & Apparel Jobs

Talk of the performance linked incentive (PLI) scheme brings déjà vu of a time when the economy was hit and unemployment seemed inevitable: March 2020, the beginning of COVID-19 when PLI was first introduced. 

At that point there were waves of a pandemic and five years later there are waves of tariffs with projections of similar detrimental effects. US President Donald Trump had imposed an additional 25 per cent tariff on Indian exports, taking total tariffs to 50 per cent. 

Even though a federal appeals court in the US ruled, this weekend, that most of the tariffs imposed by Trump were illegal, they continue to wreak havoc especially on one of India’s largest job-creating industries i.e. textile and apparel manufacturing. This sector employs over 3 million people in the organised sector. 

There is now once again a need to boost manufacturing, reduce reliance on imports, safeguard jobs, and give a push to Make in India and Atmanirbhar Bharat.

No matter what d-word is used — derisking, decoupling, diversifying — the intent is to break-up with the US and pull the industry out of ‘survival mode’. 

Tariffs Bite Into Jobs 

Industry estimates suggest that between 15 and 20 lakh jobs are now at risk. From the textile belt in Tiruppur, Tamil Nadu, to the carpet city of Bhadohi in Uttar Pradesh, industry bodies are asking for special bailout packages. 

With tariffs at 50 per cent, Indian goods are more expensive than those from competitors like Bangladesh and Vietnam.

“Whether tariffs are at 50 or 250 per cent doesn’t matter,” an industry expert told The Secretariat. “Buyers are simply not willing to absorb the extra cost. At the end of the day, we are uncompetitive,” they said. 

Orders are shrinking, with an estimated US$ 2 billion already wiped off apparel shipments, according to the expert on exports. 

“The US alone accounts for US$ 5.3 billion in Indian apparel exports. Losing even a fraction of that has a ripple effect across small manufacturing units,” they said. 

And Indian textile and apparel manufacturing is predominantly made up of MSMEs (Micro, Small, and Medium Enterprises). 

PLI In First Gear?

The Ministry of Textiles reopened applications for the textile PLI scheme until 31 August, and then on Monday, further extended the application window till September 15, citing "strong and enthusiastic response received from industry stakeholders". 

The structure of the scheme remains unchanged. Experts say that for most small and medium enterprises (SMEs), the thresholds are simply too high, whether they are for investment or performance. 

PLI currently applies only to specific products and requires 25 per cent profit in just two years — targets exporters call unrealistic. “The scheme seems to be designed for big-ticket investors. But 90 per cent of units in India have 150-200 machines. Compare that with Bangladesh, where factories run on 2,000-2,500 machines. Scale is what global chains look for and that capacity is something we don’t have yet,” explained an industry source. 

Exporters are pushing for a “PLI 2.0”: One that expands to new product categories, lowers investment thresholds, and sets performance criteria in line with industry realities. Without such tweaks, they argue, the scheme will remain an underutilised policy tool.

A Window For Course Correction

Relief has started trickling in. The Directorate General of Foreign Trade has just extended the export obligation period for advance authorisations from six months to 18 months, giving textile exporters more breathing space to meet commitments. 

In parallel, duty-free imports of cotton have been extended until December 2025, a step that should ease input costs and help stabilise margins at a time when global orders are under pressure.

Diversification away from the US is easier said than done. Russia, Switzerland, Japan and South Africa are being explored, but market penetration requires time, compliance support and branding that most SMEs lack. 

According to industry sources, this is the time for broader reforms if India is to hold its ground. The UK and EU together account for nearly three-quarters of India’s apparel exports and industry leaders want the government to fast-track interim trade deals with both blocs rather than allow talks to drag on to offset American losses. 

While demands, negotiations, and back-channel talks are still ongoing according to sources, the tariff shock has exposed deeper structural problems: high production costs, lack of scale, and weak domestic demand. 

Tariffs may have triggered the crisis, but the vulnerabilities are homegrown. Unless PLI is reworked, FTAs expedited and fiscal relief extended, the sector risks sliding into prolonged decline. As one textile exporter put it, “Survival can’t be the new normal.”