Informist, Tuesday, Aug. 19, 2025

By Pallavi Singhal

NEW DELHI – In a move to protect India's textile industry against the recently imposed 50% US tariff, the government has suspended the 11% import duty on raw cotton till Sept. 30. The short-term waiver, notified by the Central Board of Indirect Taxes and Customs on Monday, is meant to stabilise domestic prices of cotton, relieve cost pressures on mills, and strengthen the competitiveness of textile exporters amidst fierce rivalry from Bangladesh, Vietnam, and China, according to experts.

New Delhi's decision comes against the backdrop of sharply rising import volumes. In 2024-25 (Apr-Mar), cotton imports soared 107.4% to $1.2 billion from $579.2 million the previous year. Australia remains the leading supplier of cotton, followed by the US, Brazil, and Egypt, Ajay Srivastava, founder of the Global Trade Research Initiative, said.

According to him, almost 99% of India's cotton imports this year comprise fibre staple lengths of 28 millimetres or above, a grade preferred by mills seeking high-quality inputs to produce yarn and fabric for premium exports. "Under the India-Australia ECTA, India already allows duty-free import of 51,000 tonnes of cotton of 28 millimetres fibre staple length or above, meaning, the largest beneficiary of the duty-free import will be US, the second largest supplier to India," he said.

The suspension of import duty is being widely seen as a response to Washington's intensifying push for India to lower agricultural barriers. The US currently accounts for about 29% of India's textile exports and recently ratcheted up import taxes on Indian goods to 50%, intensifying trade concerns. India competes with countries such as Bangladesh, Vietnam, and China when it comes to textile exports. While Bangladesh has been hit with a 35% tariff by the US, Vietnam will be levied 20% tariff. According to Srivastava, "The US stands to gain the most from the temporary duty cut, given ongoing US-India friction on agricultural access."

Deepak Pareek, an independent agriculture economist, also said that this is ultimately, a step taken to please the US administration than lowering cost. "Processors with export license were already importing cotton at concessional rates of 4.4%," he said.

Lower duties, rising demand, and high Indian cotton prices--10–12% higher than world market rates, are likely to push up imports in the cotton marketing year 2024-25 (Oct-Sept) past a record 3.9 million bales, according to Atul Ganatra, president of the Cotton Association of India.

The limited 40-day exemption, experts argue, is meant to avoid prolonged downward pressure on domestic prices that could harm Indian farmers. "The government wants to tide over immediate volatility before the fresh domestic crop arrives in October," Srivastava said. The arrivals of cotton in India begin from Oct. 1.

The Confederation of Indian Textile Industry and the Southern India Mills' Association have hailed the duty waiver as "essential" for keeping Indian exports viable in comparison to Bangladesh and Vietnam, both of whom already enjoy duty-free cotton imports. The Southern India Mills' Association, according to a press statement dated Aug. 14, has urged the government to "fix the inverted GST structure on man-made fibres by bringing them under the 5% slab alongside cotton," to deliver further relief.

However, despite the positive response from millers and traders, some exporters have flagged the narrow window's limitations. "With such a short time-window, only in-transit orders will benefit. We've asked the government for at least a three-month window, or to let contracts signed till the end of September to come in duty-free," a trader said on condition of anonymity. According to him, only about 400,000 tonnes of cotton is likely to be in transit, with total imports for the next year likely to be 3.7 million tonnes to 4.0 million tonnes.

On Tuesday, shares of Indian textile companies rallied on news of the import duty waiver, with Vardhman Textiles, Raymond Lifestyle, Welspun Living, and Alok Industries surging 2-7%.

A government official described the move as "necessary" in the broader public interest as production of cotton has fallen, emphasising its intention to "align domestic cotton prices with international levels" and offer cost relief throughout the textile value chain.

India's cotton production in 2024-25 (Oct-Sept) is estimated at 31.1 million bales (1 bale = 170 kg) by the Cotton Association of India. The production has been falling since 2013-14 when it stood at 39.4 million bales. In 2023-24, India's cotton production stood at 33.6 million bales. End

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.