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New Labour Codes Set To Reshape India’s Garment Sector, Says CMAI’s Rahul Mehta

• By  Textile Excellence
• November 30, 2025

India’s garment industry is preparing for a significant shift as the newly implemented Labour Codes begin to influence hiring practices, compliance systems and workforce structures across the sector. Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India, shared a detailed assessment of the industry wide implications, noting that the impact will be mixed for the country’s micro and small garment units.

The sector is dominated by enterprises employing fewer than 300 workers, and these units are expected to benefit from the removal of the requirement for prior government approval for layoffs or retrenchments. Industry representatives believe this flexibility may help small manufacturers respond faster to volatile export orders and shifting demand cycles. India exported garments worth over US$ 14.5 billion in 2024 and continues to face intense price competition from Vietnam and Bangladesh.

Concerns remain over the restriction on using contract labour for core activities. Most small units depend heavily on contract and piece rate workers for stitching, checking and finishing. Entrepreneurs fear that new compliance obligations may increase labour costs and complicate production planning for order heavy months.

Mehta noted that the Codes offer a positive outcome for workers as they are expected to promote formalization, strengthen social security coverage and provide a clearer safety net for the garment workforce.

The sector is dominated by enterprises employing fewer than 300 workers, and these units are expected to benefit from the removal of the requirement for prior government approval for layoffs or retrenchments. Industry representatives believe this flexibility may help small manufacturers respond faster to volatile export orders and shifting demand cycles. India exported garments worth over US$ 14.5 billion in 2024 and continues to face intense price competition from Vietnam and Bangladesh.