Govt extends import duty exemption on cotton till Dec 31 as 50% US tariffs come into effect

The import duty exemption on cotton has been a long-standing demand of the Indian industry, but the government has maintained an 11 per cent duty largely to protect small cotton farmers. Notably, cotton was among the four items that saw the sharpest increase in Minimum Support Price (MSP) by the government in May this year as cotton production has been declining over the years.

However, the exemption extended till December 31 would impact farmers as plucking of cotton starts from October and is offloaded in the market by March. The period between October and March is known as the peak season. While the elimination of duty is largely aimed at addressing the challenges faced by the industry—ranging from steep US tariffs to high cotton prices—it could also act as a signal to US negotiators that India may be willing to negotiate imports of cotton from Washington, an industry executive said.

In a letter to the Prime Minister Narendra Modi, Apparel Export Promotion Council (AEPC) chairman, Sudhir Sekhri, on Wednesday said that the recent tariff hike by the US, doubling the duties on the export of apparel and other goods to 50 percent, is indeed a “huge challenge for merchandise exporters”.

“However, we are of the firm belief that India’s principled and measured stand will ultimately benefit our nation’s economic interests in the long term. Your government’s commitment to safeguarding the nation’s progress and self-reliance is commendable. Our industry is already experiencing the effects of the tariff hike, with potential losses and order cancellations. We are exploring alternate markets and strategies to mitigate the impact of the US tariffs. We are also in active discussions with the Ministry of Commerce & Industry and have been assured of their best possible support,” the letter read.

New Delhi-based think tank Global Trade Research Initiative (GTRI) said that almost all of India’s $1.20 billion cotton imports in FY2025 were of staple length 28 mm or above, and that under the India–Australia ECTA, 51,000 MT of such cotton already enters duty-free. This means the biggest winner from India’s new duty-free window will be the US, GTRI said.

An analysis by the Confederation of Indian Textile Industry (CITI) said that US textile and apparel imports have begun surging from countries such as Vietnam and Bangladesh. “In June 2025, the USA’s textile and apparel (T&A) imports from Vietnam and Bangladesh surged significantly by 26.2 per cent and 44.6 per cent, respectively, over June 2024, reflecting strong momentum in sourcing from these countries,” CITI said.

India, after a promising performance in the first quarter of 2025, witnessed a notable slowdown in T&A exports to the USA. In June 2025, India’s exports grew by only 3.3 per cent compared to June 2024—much lower than its earlier growth trajectory and significantly below competitors such as Vietnam and Bangladesh, CITI said.

Meanwhile, China continued to see a sharp decline in June 2025, with imports from China dropping by 41 per cent compared to June 2024—extending the downward trend observed since April 2025, the industry body said.

India’s textile sector is dominated by cotton. The cotton value chain provides direct employment to nearly 35 million people and contributes around 80 per cent to India’s total textile exports. India aims to more than double textile and apparel exports to $100 billion by 2030.