Indian textile industry, a mainstay of the economy of the country, is confronted with two challenges: the downtrend in Industry 4.0 technology adoption and the need to compete with countries moving toward Industry 5.0. Digital transformation, though holding out possibilities for sustainability, innovation and growth, is still being constrained by structural, finance and policy hurdles. This article discovers Industry 4.0 adoption barriers, analyses India’s preparedness for Industry 5.0 and offers competitive strategy advice for global competitiveness. Based on qualitative, descriptive methods and a systematic review of ten seminal studies, the analysis proposes avenues for combining intelligent, human-focused and sustainable textile production.