Is India Removing Cotton Import Duty to Resolve Supply and Quality Issues?
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Synopsis
India’s recent abolition of the import duty on raw cotton aims to address critical supply and quality challenges within the textile sector. This strategic decision promises to stabilize costs and bolster competitiveness in the global market, all while safeguarding the interests of domestic farmers through effective support mechanisms.
Key Takeaways
- India abolishes import duty on raw cotton.
- Move aims to stabilize textile industry costs.
- Supports domestic production and global competitiveness.
- Farmers protected through MSP.
- May ease trade tensions with the US.
New Delhi, Sep 2 (NationPress) India’s choice to abolish import duty on raw cotton is a response to pressing issues related to supply, quality, and competitive positioning within the textile value chain.
This strategic initiative aims to tackle shortages of raw materials, lower input costs for textile manufacturers, mitigate inflationary trends, and maintain India’s competitive advantage in the international textile market.
Textile and apparel exports significantly contribute to India’s foreign revenue. By providing duty-free access to high-quality cotton, domestic manufacturers can produce superior yarns and fabrics at competitive prices, bolstering the “Make in India” initiative and helping sustain market presence in vital regions like Europe and North America.
Globally, India ranks as the sixth largest textile exporter, holding a 3.91% share in worldwide textile exports. The Textile Ministry reports that this sector directly employs over 45 million individuals, ranking as the second-largest job creator in the nation, following agriculture.
Nevertheless, cotton production in India has declined from approximately 35 million bales in 2020-21 to around 31 million bales in 2024-25, primarily due to adverse weather and pest issues.
According to the Department of Agriculture, as of August 15, the total area cultivated for cotton has decreased, with a reduction of 3.24 lakh hectares in (2025-26) compared to the previous year (2024-25).
The duty exemption is rooted in concerns over potential cotton shortages. Industry stakeholders have expressed worries about rising yarn prices, which could contribute to increased textile costs ahead of the festival season.
Offering duty-free access to premium cotton enables domestic manufacturers to provide high-quality yarns and fabrics at globally competitive prices.
In the 2024-25 season, India’s cotton crop was primarily composed of medium-staple varieties, while many spinning mills require long and extra-long staple fibers to fulfill higher-end yarn requirements.
Typically, various spinning mills stock lower-grade domestic cotton to blend with imports, which ties up significant working capital. Industry estimates indicate that the duty waiver may reduce raw material financing needs by 15-20%, greatly enhancing cash flow, particularly for small and medium-sized spinning enterprises dealing with post-pandemic demand fluctuations.
Consequently, facilitating duty-free imports immediately addresses this quality and quantity gap, ensuring seamless production for value-added textile manufacturers.
Eliminating the import duty will relieve pressure on domestic textile mills by stabilizing raw material costs before the festive season, a time of heightened garment demand.
Concerns regarding the impact on farmers are mitigated through the minimum support price (MSP) mechanism. For the marketing season 2025-26, growers receive Rs. 7,710 per quintal for medium staple variety and Rs. 8,110 per quintal for long staple.
The Cotton Corporation of India continues to purchase unsold crops at MSP levels, with any losses from stock clearances covered by the federal budget, protecting farmers from market volatility.
Meanwhile, this carefully considered relief measure could ease trade tensions with Washington, which seeks broader market access in bilateral trade.
It may also indicate India’s readiness to utilize targeted tariff relief as a strategic tool in wider agricultural and industrial discussions.
Point of View
It is my duty to highlight that India's removal of the import duty on cotton reflects a proactive approach to ensure the stability of the textile sector. This move not only addresses immediate supply and quality concerns but also positions India favorably in the international market. While it is essential to protect farmers, the government's measures through MSP provide a necessary safety net, ensuring a balanced approach that supports the industry and the agricultural community.
NationPress
02/09/2025
Frequently Asked Questions
Why did India remove the import duty on raw cotton?
India removed the import duty on raw cotton to address urgent supply and quality issues, stabilize prices, and maintain competitiveness in the global textile market.
How will this decision affect textile prices?
The elimination of import duties is expected to reduce input costs for textile mills, potentially leading to more stable prices for consumers, especially ahead of the festive season.
What impact will this have on farmers?
Farmers will be protected through the minimum support price (MSP) mechanism, ensuring they receive fair compensation for their crops, despite market fluctuations.
How does this move align with India's 'Make in India' initiative?
By allowing duty-free access to high-quality cotton, this move strengthens domestic production capabilities, aligning with the 'Make in India' initiative to boost local manufacturing.
What are the long-term implications of this policy?
In the long term, this policy may enhance India's position as a leading textile exporter, supporting job creation and economic growth while ensuring sustainability in the sector.
