by Introduction
In a significant policy shift, the Government of India has temporarily scrapped the 11% import duty on raw cotton, effective from August 19 to September 30, 2025. This bold move aims to support the textile and garment exporters facing mounting international pressures, particularly from newly imposed U.S. tariffs.
Why Was the Duty Suspended?
The duty suspension responds directly to a 50% tariff hike imposed by the United States on Indian exports. These steep tariffs threatened the competitiveness of Indian apparel globally—especially compared to Bangladesh (20%), Vietnam (20%), and China (30%). Exempting duties on cotton helps lower input costs and provides much-needed relief to the textile sector.
Extension Through December: What’s Next?
Recognizing the ongoing challenges, the government has extended the duty exemption until December 31, 2025. This extension, announced on August 28, 2025, provides a longer runway for exporters to secure cost-effective raw materials.
- The CBIC’s formal notification underscores its intent to stabilize the textile value chain—from yarn to garments.
- Industry leaders, including CITI, view it as a critical measure to sustain competitiveness and protect jobs.
Who Hats Benefit? Who’s Concerned?
Exporters & Textile Mills
- Immediate Relief: Firms can access cheaper raw cotton, lowering input costs and boosting margins. Cotton-linked stocks like Gokaldas Exports, KPR Mills, and Welspun Living responded positively in markets.
- Global Competitiveness: The move helps Indian exporters counteract U.S. tariffs and stay relevant in key export markets.
Cotton Farmers & Advocacy Groups
- Distress & Anger: Farmer unions, including BKU Charuni and the Samyukt Kisan Morcha (SKM), have condemned the move. They warn that cheaper imports could depress domestic prices, worsen debts, and deepen agrarian distress.
- Tragic Realities: In areas like Vidarbha—where cotton farming predominates—there are rising fears of further farmer suicides due to shrinking margins.
Context Matters: Long-Standing Sectoral Pressures
- Parliamentary Backdrop: India’s parliamentary panel had earlier recommended lowering raw material duties to align with finished goods tariffs—a key reform to resolve inverted duty structures.
- Industry Appeals: Even before this, textile associations had pushed for scrapping the cotton import duty to manage supply costs and negotiate trade terms effectively.
Why This Matters for Exporters
- Stabilised Margins: Lower raw material costs help exporters stay profitable and survive tariff shocks.
- Strategic Leverage: Duty-free imports build resilience, even as trade negotiations evolve.
- Industry Continuity: With labor shortages and limited domestic cotton availability, this relief ensures uninterrupted production runs and meeting export targets.
Potential Risks to Monitor
- Farmer Circle of Crisis: If imported cotton floods the market, local growers could see their incomes shrink—worsening the rural financial stress.
- Procurement Hurdles: Government procurement systems may need upgrades; otherwise, farmers may feel the pinch even more.
What’s Ahead?
- Exporters should act swiftly—lock in raw cotton inventories, manage supply chains carefully, and explore new markets.
- Policymakers must balance export support with farmer sustainability—perhaps by strengthening MSP procurement or offering targeted subsidies.
- Industry Stakeholders could advocate for longer-term reforms that both secure raw material access and protect agrarian livelihoods.
Conclusion
In essence, the government’s suspension—and subsequent extension—of the 11% raw cotton import duty reflects a high-stakes balancing act. For exporters, it’s a lifeline that brings cost relief and strategic agility amid global trade turbulences. For farmers, it carries the risk of intensified competition and economic hardship.
www.startexportindia.com will continue to monitor how this policy plays out, its impact on cotton value chains, and the broader implications for India’s textile export narrative.
