Centre Lifts Cotton Import Duty Until September 30 to Support Textile Industry

India’s government has temporarily lifted its 11% import duty on cotton, a move designed to give much-needed support to the textile industry as it struggles with record US tariffs, as per the news reports. Announced by the finance ministry, the waiver applies from August 19 for a period of 42 days, ending on September 30.

Temporary Relief Across the Textile Chain

Through a notification from the Central Board of Indirect Taxes and Customs, both the basic import duty and the Agriculture Infrastructure and Development Cess on cotton have been set aside for the exemption window. This step, praised by industry groups and particularly by the Confederation of Indian Textile Industry, is expected to benefit players throughout the textile ecosystem, including yarn, fabric, garment and made-up manufacturers, as well as consumers. The sector has regularly called for duty removal, citing the urgent need for high-quality, contamination-free cotton to compete internationally.

“CITI has long been requesting that the import duty on cotton be removed to help domestic cotton prices align with international prices. We, therefore, greatly welcome this measure taken by the authorities, even though the relief is only available temporarily,” remarked Chandrima Chatterjee, Secretary at CITI, as per reports.

Export Pressures and Market Context

As per the reports, the immediate financial gain may be limited, but industry voices are hopeful that the exemption could be extended further. This policy tweak arrives at a crucial time, instilling confidence as exporters face a daunting 50% tariff on US-bound goods. Exporters are currently pausing shipments or selling at a loss as retailers such as Walmart, Target, Amazon, TJX Companies, Kohl’s, Gap Inc., and H&M instruct Indian suppliers to delay consignments until the tariff situation stabilises.

India has set a $100 billion textile export goal for 2030, but faces a substantial tariff disadvantage in the US market: India is charged 50%, compared with 20% for Bangladesh and Vietnam, 19% for Indonesia and Cambodia, and 30% for China.

India’s Changing Export Fortunes

As per the reports, the US remains India’s largest destination for textile and apparel exports. For the first half of 2024, India’s shipments to the US grew 12% to $5.36 billion, according to CITI, ranking India third behind Vietnam at $8.54 billion (up 19%) and China at $9.34 billion (down 16%). Bangladesh, which saw a sharp turnaround after recent political turbulence, jumped 24% to $4.36 billion.

Also Read: India May Ease Curbs on Chinese Investments to Boost FDI and Trade!

Conclusion

The government’s decision to suspend cotton import duties offers vital, if short-term, relief to India’s embattled textile sector. Whether this window is extended or becomes a pathway to deeper reforms could prove decisive in helping India secure its share of global textile trade amidst tough international headwinds.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.