The textile industry plays a significant role in the Indian economy. It contributes 4% to GDP and around 35% to gross foreign exchange earnings in merchandise trade. The Rs. 1,300 billion (US$ 25 billion) industry accounts for 20% of the country’s industrial output and provides direct employment to about 35 million people, the second largest after agriculture. It also an indirect source of employment to another 47 million people. Textile industry is providing one of the most basic needs of people and the holds importance; maintaining constant growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy.

Its vast potential for creation of employment opportunities in the agricultural, industrial, organised and decentralised sectors & rural and urban areas, particularly for women and the disadvantaged is remarkable.

India has 19% of World’s spindle age with 34 million spindles, 395,000 rotors and 2 million looms. In terms of output, India accounts for 10% of World’s cotton yarn production and 15% of cotton fabric. The powerloom sector with 428,600 units has 1.91 million looms. In terms of output, the powerloom sector contributes over 60% of all cloth produced in the country. The mill sector produces only 3% of cloth while the hosiery sector’s output accounts for 20% of total cloth production. The handloom sector with 3.89 million looms produces 13% of all cloths. Of the total cloth production in India, about 45% is made of cotton and only 13% in weaved with blended yarn. The rest, 40% is made up of 100% non-cotton yarn.

Although the development of textile sector was earlier taking place in terms of general policies, in recognition of the importance of this sector, for the first time a separate policy statement was made in 1985 in regard to development of textile sector. The textile policy of 2000 aims at attaining the target of textile and apparel exports of US $ 50 billion by 2010 of which the share of garments will be US $ 25 billion. The main markets for Indian textiles and apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh and Japan. The dominant markets for India’s textile and apparel exports are the US and EU, which together accounted for nearly 83 per cent of exports in 2003. Exports to US have further increased after the Multi Fibre Agreement (MFA) ceased - analysis of trade figures as made available by the US Census Bureau shows that post MFA imports from India into US have been nearly 27 per cent higher than the corresponding period last year.