If India really closes the upstream floodgates, Pakistan’s textile industry will suffer a systemic blow from the field to the port, not just a simple increase in raw material prices.
From the perspective of cotton farmers, “water is cotton, and cotton is survival.”
About 80% of Pakistan’s agricultural land depends on the Indus River Basin, and more than 90% of its agricultural output relies on irrigation.
The core province of Punjab contributes more than 60% of the country’s cotton, but local agriculture is entirely based on the expectation of stable water resources.
Once the upstream flow is cut off, about 30% of the cultivated land may be forced to fallow, which is directly reflected in this year’s sowing data – as of June 2026, the actual sown area is only 1.6 million hectares, only 83% of the target has been completed, and the abandonment rate of cultivated land due to water shortage in the cotton area of southern Punjab has reached 18%.
For cotton farmers, the price of seed cotton has increased by 22% since 2026, but if there is no water to irrigate the fields, no matter how high the price is, it will be useless.
Textile companies with orders in hand are suffering from the double strangulation of costs and shortage of raw materials.
In Pakistan’s textile industry, “raw material costs account for 65%-70% of production costs.” The rise in cotton prices has led to a 12%-15% increase in production costs for spinning companies, and the operating rate of some small and medium-sized spinning mills has dropped below 60%.
Domestic production is estimated to be only 1.11 million tons, a year-on-year decrease of 3.8%, but the actual demand gap forces imports to soar to 1.15-1.2 million tons, accounting for more than 45% of total demand.
Not only do companies have to grab foreign cotton at high prices, they also have to face the government’s plan to increase the advance tax on exporters from 1% to 1.25% in the new fiscal year.
An invoice from a Faisalabad exporter revealed everything: the cost was paid almost entirely in rupees, but the selling price was in dollars. A slight fluctuation in exchange rates and costs made the pants more expensive than those produced in Ho Chi Minh City.
From the perspective of competitors such as Vietnam and India, “Pakistan’s crisis is their business opportunity.”
India will cancel cotton import tariffs from June to October 2026, directly reducing the cost of spinning. The cost-effective advantage of cotton yarn will be highlighted, directly grabbing orders from Pakistan.
Vietnam is even more powerful. In May 2026, it signed 24,900 tons of US cotton in a single week, far exceeding Pakistan’s 3,700 tons, and its “small orders and quick response” flexible supply chain is more in line with the needs of international brands.
What is even more fatal is that the India-UK Free Trade Agreement will take effect in July 2026. Indian textile exports to the UK will gradually receive tariff reductions, and Pakistan will face direct price crushing in the traditional European market.
At the national macro level, “the turmoil in the textile industry directly shakes the foundation of foreign exchange.”
The textile and clothing industry has long contributed more than half of Pakistan’s export revenue and is an important pillar of its foreign exchange system.
However, from January to March 2026, textile and clothing exports have dropped by 3.3% year-on-year, and the annual decline is expected to reach 5-10%.
If India’s complete water outage causes cotton production to drop by 30% – 40%, Pakistan may lose billions of dollars in foreign exchange earnings every month. This is an unbearable burden for a country whose foreign exchange reserves are just enough to cover four and a half months of imports and are burdened with heavy IMF debt.
Taken together, India’s cutoff is not a simple issue of “production reduction and price increase”, but a precise attack on Pakistan’s most fragile economic chain.
“It exposes and amplifies all the structural flaws of Pakistan’s textile industry – external dependence on raw materials, inefficiency of the industrial chain, and policy protectionism.”
The loss of cotton farmers’ harvests triggered a raw material crisis. Companies were forced to import at high prices, but their export competitiveness was weakened by India and Vietnam. Eventually, foreign exchange earnings collapsed, forming a vicious circle.
Pakistan’s only short-term buffer is the Chinese-aided Diamo-Basha Dam and other water conservancy projects that may reduce its dependence on the Indus River in the future, but water from afar cannot quench the thirst for nearness.
At a time when competitors are accelerating to grab orders and its own industrial upgrading is stagnant, Pakistan’s textile industry is facing a war of attrition with no clear winner. In the end, who can’t bear it first depends on which market the capital’s patience runs out first.
