New Delhi: India’s decision to eliminate import duty on raw cotton was driven by urgent supply, quality, and competitiveness concerns in the textile value chain.
It is a strategic move initiated to address raw material shortages, reduce input costs for textile mills, curb inflationary pressures, and uphold India’s competitive edge in global textile trade.
Textile and apparel exports account for a significant share of India’s foreign earnings. Duty-free access to premium cotton allows domestic producers to offer high-quality yarns and fabrics at globally competitive price points, reinforcing the “Make in India” brand and helping retain market share in key destinations such as Europe and North America.
In terms of global trade, India is the sixth largest exporter of textiles, with a 3.91 per cent share in world textile exports. According to the Textile Ministry, the sector provides direct employment to over 45 million people, making it the second largest employment generator in the country, next only to agriculture.
However, the country’s cotton production fell from about 35 million bales in 2020-21 to some 31 million bales in 2024-25 due to adverse weather conditions and pest attacks.
The Department of Agriculture said in a recent statement that as of August 15, total cultivation area for cotton has reduced, with acreage falling by 3.24 lakh hectares in (2025-26) compared to the previous year (2024-25).
The government’s duty waiver stems from concerns about cotton shortages. Industry groups had warned about higher yarn prices, leading to an increase in textile prices ahead of the festival season.
Duty-free access to premium cotton allows domestic producers to offer high-quality yarns and fabrics at globally competitive price points.
India’s 2024-25 cotton crop was dominated by medium-staple varieties, while many spinning mills require long and extra-long staple fibres to meet higher-end yarn specifications.
Various spinning mills usually stockpile lower-grade domestic cotton to blend with imports, tying up substantial working capital. Industry estimates suggest that duty relief can cut raw-material financing needs by 15-20 per cent, immediately improving cash flows, especially for small and medium-sized spinning units grappling with post-pandemic demand volatility.
Thus, allowing duty-free imports plugs this quality and quantity shortfall immediately, ensuring uninterrupted production for value-added textile units.
Removal of import duty would ease the pressure on domestic textile mills by stabilising raw material costs ahead of the festive season when garments are in high demand.
Concerns over farmers being affected are addressed through the minimum support price (MSP) mechanism. For the marketing season 2025-26, growers get Rs. 7,710 per quintal for medium staple variety, while for long staple, it is Rs. 8,110 per quintal.
The Cotton Corporation of India continues to procure unsold crops at MSP levels, with any losses on stock clearances financed via the federal budget, ensuring farmers are insulated from market fluctuations.
Meanwhile, the calibrated relief measure can defuse trade tensions with Washington, which is pushing for broader market access in bilateral trade.
It may signal India’s willingness to use targeted tariff relief as a bargaining chip in broader agricultural and industrial talks.
(IANS)
