The Centre has exempted import duty on cotton from August 19 to September 30, fulfilling the demand of industry groups who said exemptions would help make the sector more competitive.
The temporary suspension of the duty, announced in a government order late on Monday, is seen as a relief for the garment industry, which is reeling from a steep 50% tariff on shipments to the United States.
The U.S. tariff comprises an existing 25% levy and an additional 25% set to take effect later this month, imposed as a penalty for India’s purchases of Russian oil. The effective rate compares unfavourably with 20% for Bangladesh and Vietnam, and 30% for China.
Industry bodies such as the Confederation of Indian Textile Industry (CITI) had urged the government to scrap the cotton import duty to help make the sector more competitive. Before the exemption, cotton imports were subject to an 11% duty.
Industry officials now expect the government to extend duty-free cotton imports beyond September.
India’s garment sector was already grappling with a labour crunch and limited production capacity. The prospect of exporters relocating production abroad poses a further challenge to the government’s "Make in India" manufacturing drive.
India aims to increase textile exports to $100 billion by 2030.
The sharp rise in U.S. tariffs comes just as India was emerging as a strong alternative for American garment buyers, with Bangladesh facing political uncertainty and companies seeking to diversify supply chains beyond China.
India imposed import duty on cotton in February 2022. The share of the US in India's cotton imports has since reduced to an estimated 19% in fiscal 2024-25 from 40-50%. As duties made imported cotton expensive, India's textile industry had shifted to relatively cheaper Brazilian cotton to compete with Bangladesh and Vietnam, which had access to cheaper US cotton.
The Ministry of Textiles has a target to expand India's textile industry to $350 billion by 2030, including exports of $100 billion. The current market size is $180 billion.
(With agency inputs)
The temporary suspension of the duty, announced in a government order late on Monday, is seen as a relief for the garment industry, which is reeling from a steep 50% tariff on shipments to the United States.
The U.S. tariff comprises an existing 25% levy and an additional 25% set to take effect later this month, imposed as a penalty for India’s purchases of Russian oil. The effective rate compares unfavourably with 20% for Bangladesh and Vietnam, and 30% for China.
Industry bodies such as the Confederation of Indian Textile Industry (CITI) had urged the government to scrap the cotton import duty to help make the sector more competitive. Before the exemption, cotton imports were subject to an 11% duty.
Industry officials now expect the government to extend duty-free cotton imports beyond September.
India’s garment sector was already grappling with a labour crunch and limited production capacity. The prospect of exporters relocating production abroad poses a further challenge to the government’s "Make in India" manufacturing drive.
India aims to increase textile exports to $100 billion by 2030.
The sharp rise in U.S. tariffs comes just as India was emerging as a strong alternative for American garment buyers, with Bangladesh facing political uncertainty and companies seeking to diversify supply chains beyond China.
India imposed import duty on cotton in February 2022. The share of the US in India's cotton imports has since reduced to an estimated 19% in fiscal 2024-25 from 40-50%. As duties made imported cotton expensive, India's textile industry had shifted to relatively cheaper Brazilian cotton to compete with Bangladesh and Vietnam, which had access to cheaper US cotton.
The Ministry of Textiles has a target to expand India's textile industry to $350 billion by 2030, including exports of $100 billion. The current market size is $180 billion.
(With agency inputs)
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