India Considers ₹8,000 Crore Five-Year PLI Scheme for Khadi, Handloom and Handicrafts

India is considering an ₹8,000 crore, five-year production-linked incentive (PLI) programme to strengthen khadi, handloom and handicraft businesses under the Mahatma Gandhi Gram Swaraj Initiative. The proposal is intended to help traditional producers increase manufacturing capacity, improve product quality and build stronger connections with international markets.

The proposed programme could support around 10 million artisans and weavers across the country. It comes as India seeks to use recently negotiated free trade agreements, including its agreement with the UK, to expand textile exports. However, the scheme is still under consideration and should not be treated as an approved incentive package.

What Is the Proposed ₹8,000 Crore PLI Scheme?

The Centre is considering an outlay of ₹8,000 crore over five years for a programme focused on khadi, handloom and handicraft production.

The initiative is expected to operate under the Mahatma Gandhi Gram Swaraj Initiative, which was announced in the Union Budget for 2026-27.

According to a report by Mint, citing two people familiar with preliminary discussions, the programme could be structured as a production-linked incentive scheme. The objective would be to encourage traditional manufacturing businesses to expand production while improving their ability to compete in domestic and international markets.

The proposed support would focus on several areas:

• Increasing production capacity among artisan and weaving businesses.
• Improving product quality and manufacturing processes.
• Strengthening branding and marketing.
• Expanding access to international buyers.
• Providing training and skill development.
• Connecting traditional production clusters with larger commercial markets.

Unlike conventional large-scale manufacturing incentives, the proposed initiative is aimed at a highly fragmented sector made up of artisans, small enterprises, cooperatives and village-based production units.

Government Targets 10 Million Artisans and Weavers

One of the main objectives is to improve opportunities for approximately 10 million artisans and weavers working across India’s traditional industries.

These businesses play an important role in rural employment, particularly for women and communities that depend on household-based manufacturing.

Many artisans work through small production units or depend on intermediaries who provide raw materials, arrange production and sell finished products. This structure can limit the income artisans receive and restrict their direct access to customers.

The proposed programme is expected to address some of these challenges by improving infrastructure, providing training and strengthening marketing networks.

A.K. Jha, former chief executive of the Khadi and Village Industries Commission, said the initiative could help improve production capacity, modernise infrastructure, introduce better technology and strengthen marketing networks.

The wider objective is to make traditional crafts commercially sustainable without losing the regional identities and production techniques that distinguish them.

Why India Is Planning a New Support Programme

India’s traditional textile and handicraft industries have substantial export potential, but their international performance has remained relatively modest.

According to data cited by Mint, combined exports of handloom and handicrafts increased only 0.6% in FY26, following growth of 1.2% in FY25.

This indicates that improved access to international markets has not yet translated into strong export expansion.

The government is therefore looking at ways to improve production scale, product competitiveness and international distribution.

India has several established traditional products with global recognition, including:

• Kanchipuram silk from Tamil Nadu.
• Bhadohi carpets from Uttar Pradesh.
• Madhubani paintings from Bihar.
• Bhuj textiles and traditional crafts from Gujarat.
• Regional handwoven cotton and silk products from different parts of the country.

However, many producers face challenges involving modern equipment, working capital, product standardisation, packaging and access to overseas buyers.

The proposed incentive programme is intended to address these structural limitations.

UK and EU Trade Deals Create Export Opportunities

India’s recent trade agreements are another important reason behind the proposed initiative.

The India-UK free trade agreement came into force in July 2026, while the India-European Union agreement is expected to become operational in early 2027, according to the report.

These agreements are expected to improve market access for Indian textile and garment exporters.

The UK and EU together represent major overseas markets for India’s textile industry. Greater access could create opportunities for traditional manufacturers, provided they can meet international requirements related to quality, pricing, delivery schedules and production capacity.

The government has also highlighted the wider export opportunity available through India’s existing trade agreements.

India’s 15 free trade agreements provide access to textile markets estimated at approximately $199 billion, while Indian textile exports to these markets were around $11.5 billion, according to figures cited by Mint.

India aims to increase its overall textiles and garment exports to $100 billion by 2030.

For khadi, handloom and handicraft businesses, the opportunity will depend on whether smaller producers can connect with international retailers, distributors and digital marketplaces.

Existing Textile PLI Scheme Focuses on Different Products

India already operates a PLI scheme for the textile industry, but its primary focus is different from the proposed programme.

The existing textile PLI scheme was launched in September 2021 with an approved outlay of ₹10,683 crore.

It mainly targets:

• Man-made fibre-based apparel.
• Man-made fibre fabrics.
• Selected technical textile products.

The programme was designed to encourage large-scale manufacturing, attract investment and improve the competitiveness of India’s textile industry.

The proposed ₹8,000 crore initiative would complement this existing programme by focusing more directly on traditional production segments such as khadi, handloom and handicrafts.

This distinction is important because traditional textile businesses often operate on a smaller scale and have different infrastructure, financing and marketing requirements compared with large industrial manufacturers.

A Separate ₹9,000 Crore Support Plan Is Also Under Consideration

The proposed ₹8,000 crore PLI programme is not the only government initiative being considered for the traditional textile sector.

Mint previously reported a separate proposed ₹9,000 crore package over five years for handloom and handicraft businesses.

That programme is intended to help artisans and weavers improve production capabilities, access markets and preserve traditional crafts.

The two proposals should be distinguished rather than treated as a single approved allocation. Their final structure, funding arrangements and possible overlap will depend on government decisions.

Separately, the Ministry of Micro, Small and Medium Enterprises has sought ₹6,000 crore to continue the Khadi Gramodyog Vikas Yojana for five years through March 2031.

This existing scheme supports khadi and village industries through infrastructure, technology modernisation, training and other interventions.

Together, these developments indicate that the government is considering several funding and policy measures to strengthen traditional manufacturing and rural livelihoods.

Khadi Sales Show Growth Despite Export Challenges

Domestic demand for khadi products has shown stronger growth than the export performance of the broader handloom and handicraft sector.

According to figures cited in Mint’s report, khadi sales increased 10% in FY26 to ₹7,869 crore, compared with ₹7,145 crore in FY25.

The Khadi and Village Industries Commission has also reported that sales of khadi and village-industry products reached ₹1.87 lakh crore in FY26, up 20% from ₹1.55 lakh crore in the previous year.

These figures indicate that traditional products continue to have a significant domestic market.

However, expanding exports will require more than increasing production. Businesses will need better product design, consistent quality, modern packaging, competitive pricing and reliable delivery systems.

The Bigger Picture

The proposed ₹8,000 crore initiative reflects India’s attempt to connect traditional manufacturing with modern industrial policy. Rather than focusing exclusively on large factories, the government is considering support for smaller producers whose businesses are closely connected to rural employment and regional craftsmanship.

The challenge will be ensuring that financial support reaches artisans and weavers rather than being concentrated among intermediaries or larger businesses. Better access to credit, direct connections with buyers, modern production facilities and stronger branding will be important if the programme is to create lasting economic benefits.

The opportunity is also linked to India’s export ambitions. Trade agreements can reduce barriers to international markets, but traditional manufacturers must still meet global standards and compete with established suppliers. Building those capabilities will be essential to turning improved market access into higher exports and better artisan incomes.

Looking Ahead

The next important step will be the government’s decision on the proposed programme’s final structure, eligibility conditions, funding allocation and implementation timeline. Until the proposal receives formal approval, details such as the precise incentive mechanism and distribution of funds remain subject to change. The relationship between the proposed ₹8,000 crore initiative and the separate ₹9,000 crore support package will also need clarification.

For India’s traditional textile and handicraft businesses, the potential benefits will depend on how effectively the programme addresses long-standing problems involving production scale, financing and market access. If implemented with a strong focus on artisans, the initiative could help connect regional craftsmanship with larger domestic and international markets. Its success will ultimately be measured by sustainable exports, stronger rural livelihoods and improved earnings for the people producing these goods.