The Indian government has extended the exemption on import duties for cotton until December 31st. This decision is a significant boost for the domestic apparel sector, which has been struggling with the impact of a 50% tariff imposed by the United States on Indian exports. The exemption, initially set to end on September 30th, provides much-needed relief to manufacturers.
The apparel industry has been facing an adverse business environment, and the US tariffs have further squeezed profit margins. Representatives from the Apparel Export Promotion Council and the Tiruppur Exporters Association have welcomed the extension. They believe it will help stabilise cotton prices in India, making them competitive with international rates. The Southern India Mills’ Association stated that the move is a “timely relief” for the textile industry.
When the waiver was first announced on August 19th, the government cited persistent demands from the textile industry and supply constraints as reasons for the temporary tax break. The aim was to ease raw material shortages and protect small and medium-sized enterprises. The duty-free period is intended to help control inflation in finished garments as well.
India is a major cotton producer, ranking second globally. However, domestic prices have often been higher than international market rates. This has led to substantial cotton imports, primarily from the US and Australia. In the current fiscal year (2024-25), India’s cotton imports have increased significantly compared to the previous two years.
Despite the industry’s positive reaction, farmer groups have voiced concerns. They argue that cheaper cotton imports could harm domestic farmers, especially during a year with good rainfall and an expected strong harvest. The Samyukt Kisan Morcha, a prominent farmers’ organisation, has criticised the accelerated pace of inbound shipments. They claim that the US offers large subsidies to its cotton growers, enabling them to sell cotton at lower prices. The farmers’ group has demanded a reversal of the exemption and has threatened to launch an agitation.
The cotton sector is a crucial source of employment in India, providing livelihoods to over 30 million people and directly supporting around 50 million farmers. The government has ambitious plans to expand apparel exports, aiming to reach $100 billion by 2030. In the last fiscal year (2023-24), India’s textile and apparel exports, including handicrafts, were valued at $34.4 billion, with the US and the European Union being the largest markets, accounting for nearly half of these shipments.
Officials are closely monitoring the import trends. The government faces the challenge of balancing the interests of both the textile industry, which needs affordable raw materials to remain competitive globally, and the farming community, which expects fair prices for its produce. The temporary nature of the duty exemption highlights this balancing act.
The extension of the duty exemption is a critical policy measure that aims to support India’s vital textile and apparel export sector. While the industry sees it as a necessary step to navigate global economic challenges and trade policies, the concerns raised by farmer groups underscore the complex dynamics within the agricultural supply chain. The government’s approach suggests a strategy of providing temporary support while seeking sustainable solutions that benefit all stakeholders in the long run.