India’s cotton import duty cuts: Boon for industry and a message to the US

The Indian Express had reported on August 7 that the industry had suggested a duty cut on US cotton as one of the measures to sweeten the trade deal. Notably, Bangladesh had offered a similar concession to the US to enter into an agreement.

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 also acts as a signal to US negotiators that India could be willing to negotiate imports of cotton from Washington, an industry executive said.

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 Economic Cooperation and Trade Agreement, 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.

Import duty cut won’t impact fresh orders

Industry executives said the duty cut, a step that had been resisted for years, was announced during the off-peak season so that it does not impact Indian 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 welcoming the relief, exporters said that the import of raw cotton would only affect in-transit shipments, since the period of relief is too short to influence fresh orders. Seeking an extension, exporters argued that the measure could help India to retain other markets such as the UK and EU, but not the US.

An analysis by the Confederation of Indian Textile Industry (CITI) said US textile and apparel imports have begun surging from countries such as Vietnam and Bangladesh.

“In June 2025, the US’ 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 US. 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 US 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.