New Delhi’s defence is that textile and steel output should be judged against India’s population, low per-capita consumption and development needs—not only bilateral trade balances.
India has rejected U.S. allegations that it holds surplus manufacturing capacity in textiles and steel, pushing back against claims raised under a U.S. Trade Representative Section 301 investigation. Amitabh Kumar, India’s additional trade secretary and Director General of Trade Remedies, said Indian production levels are aligned with domestic requirements and should be assessed in relation to the country’s scale, consumption levels and growth trajectory.
Capacity or development demand?
The Indian position is that low per-capita consumption weakens the U.S. overcapacity argument. Kumar said India’s consumption of textiles and steel remains low by global standards, with room to grow in technical textiles and man-made fibres. He also argued that steel output is proportionate to India’s infrastructure and development needs.
That distinction matters. If textile capacity is framed as “surplus,” it can become a justification for tariff action. If it is framed as domestic industrial development, India can defend capacity expansion as necessary for a large, still-growing market.
Section 301 pressure widens
The dispute sits inside a broader U.S. trade probe. The USTR launched Section 301 investigations into 60 economies over alleged failure to prevent imports linked to forced labour, while also scrutinising overproduction and trade imbalances in sectors including textiles.
Reuters reported that the U.S. has linked its concerns to India’s $42 billion trade surplus in 2025. Analysts cited in the report suggested Washington may be using the investigation and tariff threat as leverage in negotiations, including efforts to open Indian markets to more U.S. goods, energy and defence exports.
Textile exporters face negotiation risk
For Indian textile and apparel exporters, the issue is not only legal; it is commercial. A Section 301 outcome that leads to additional tariffs could affect price competitiveness in the U.S. market, particularly if rival sourcing countries receive more favourable treatment.
India is still negotiating a trade agreement with Washington and hopes to conclude at least a first phase by mid-July. The next signal to watch is whether the U.S. treats India’s textile capacity as a trade-distorting threat or accepts New Delhi’s argument that production is demand-driven and development-linked.
