The Indian fashion industry has long been a key contributor to the economy, but its environmental impact is undeniable

Byline: Amar Nagaram, Co-founder & CEO, VIRGIO

Sustainability is no longer a buzzword, it is the need of the hour. Being the second largest producer of textiles globally, India is marching towards becoming a manufacturing powerhouse under the ‘Make in India’ initiative. The fashion industry has a unique opportunity to redefine its approach to sustainability. With the recent announcement of the Union Budget 2025-26, the government’s approach towards innovation, MSME empowerment and circular economy incentives is increasing. With the market size projected to reach USD 350 billion by 2030, the future of sustainable fashion in India looks promising.

A Shift Towards Responsible Fashion
The Indian fashion industry has long been a key contributor to the economy, but its environmental impact is undeniable. Traditional production models have posed significant ecological challenges, from excessive water consumption to textile waste. However, recent budgetary allocations signal a transformative shift.

The Union Budget’s focus on fostering innovation, empowering MSMEs, and strengthening India’s digital economy is a step in the right direction. The Rs 500 crore allocation to deep-tech and AI innovation will be instrumental in driving AI-led advancements and data-driven solutions, enabling businesses to scale efficiently.

AI-powered supply chain management, predictive analytics, and on-demand production models will reduce waste and optimize raw material utilization, paving the way for a more responsible fashion industry.

Empowering MSME’s – The Backbone Of Sustainable Manufacturing
India’s Micro, Small and Medium Enterprises (MSMEs) form the backbone of the fashion ecosystem. From artisanal crafts to fabric innovation, these enterprises drive localized production and sustainable business models. The government’s Rs 20,000 crore investment in innovation, coupled with the Deep Tech Fund, will support the adoption of next-generation production technologies, giving MSMEs the tools to thrive sustainably.

Incentives for sustainable manufacturing, coupled with improved credit availability for start-ups, create a robust ecosystem where MSMEs can scale responsibly. The allocation of Rs 10 crore for MSME credit guarantee is expected to strengthen the industry’s growth and financial stability. When given the right technological and financial support, these businesses can integrate eco-friendly materials, ethical sourcing and transparent production processes, core elements of sustainable fashion.

The Five-year Mission For Cotton Productivity
One of the most promising aspects of the Union Budget is the five-year Mission for Cotton Productivity. India has historically been a global leader in cotton production and strengthening this supply chain will have a far-reaching impact on sustainable fashion. By enhancing cotton yield and promoting organic farming practices, the industry will benefit from a high-quality, pro-planet raw material base. This initiative is a game-changer for homegrown fashion brands looking to align with global sustainability benchmarks.

Circular Economy Is A Path To Zero-waste Fashion
Globally, the shift towards circular fashion where materials are reused, repurposed and recycled is gaining momentum. India too, is embracing this transition with increased government backing. Budgetary incentives for sustainable manufacturing and circular economy initiatives reaffirm the need for responsible production. Brands investing in biodegradable fabrics, zero-waste design processes and closed-loop recycling systems will not only minimize environmental impact but also set new industry standards.

The introduction of tax benefits and funding for R&D in sustainable materials can further propel this movement. Collaboration between fashion brands and textile innovators can accelerate the development of alternatives such as hemp, bamboo and lab-grown textiles, reducing reliance on resource-intensive materials.

Technology As The Catalyst For Conscious Consumption
Innovation and sustainability go hand in hand. AI and machine learning are already transforming the way fashion brands approach demand forecasting, inventory management and customer preferences. The Rs 500 crore allocation towards AI-led advancements will encourage data-driven production, ensuring minimal overproduction and reducing unsold inventory waste.

E-commerce platforms are also playing a vital role in pushing sustainability forward. By leveraging digital tools such as blockchain for supply chain transparency and virtual try-ons to reduce return rates, brands can significantly cut down their environmental footprint while offering consumers a seamless shopping experience.

India’s Role In The Global Sustainable Fashion Movement
India’s positioning in the global fashion supply chain has never been stronger. The convergence of ‘Make in India,’ sustainability-focused policies and MSME empowerment is setting the stage for India to emerge as a leader in responsible fashion.

A progressive policy framework that supports startups, sustainable innovation and ethical production practices will accelerate India’s journey to becoming a global hub for conscious consumption. With government-backed initiatives, a growing demand for eco-friendly fashion and technological disruption, Indian brands have a golden opportunity to lead the charge towards a greener and more sustainable future.

 The future of sustainable fashion in India is being written today. With strong government support, MSME empowerment and technology-led innovation, the industry is well-positioned to transform its environmental impact while driving economic growth. As we move forward, collaboration among policymakers, entrepreneurs and consumers will be key in shaping a fashion ecosystem that is both profitable and planet-friendly.

The question now is to the people, Are we ready to embrace this change? The answer lies in our collective commitment to making sustainability not just a goal, but the foundation of India’s fashion future.