The Government of India has recently announced the suspension of import duty on cotton, a significant move aimed at stabilising domestic cotton prices and providing relief to the textile and apparel industry. This decision comes in response to a combination of rising cotton prices in India and lower domestic production, which together have created pressure on manufacturers who rely heavily on raw cotton for production.

Cotton is a critical raw material for India’s textile sector, which is one of the largest contributors to exports and employment in the country. Any disruption in supply or surge in prices directly impacts textile manufacturers and can make Indian products less competitive internationally. By suspending import duties, the government hopes to encourage cheaper cotton imports, thereby reducing input costs for textile companies and ensuring a steady supply of raw material.

Why Was the Import Duty Introduced Initially?

The basic customs duty on cotton was initially imposed to protect domestic farmers from cheap imports and to incentivize local cotton production. Over time, the duty rate has fluctuated based on the domestic production levels, international prices, and the requirements of the textile sector. In recent years, the duty was set at 10%, but in light of supply constraints and rising domestic prices, the government has temporarily suspended the levy in August 2025.

Decline in Domestic Cotton Production

One of the main reasons for the current duty suspension is the decline in cotton production across India. Several factors have contributed to this situation:

1. Climatic Factors: States like Maharashtra, Gujarat, and Telangana faced erratic rainfall and occasional heatwaves, which adversely affected cotton yields.

2. Shift to Alternative Crops: Some farmers have opted for more profitable crops than cotton, leading to a reduction in cultivated cotton acreage.

3. Supply-Demand Imbalance: The combination of lower production and growing demand from spinning mills has created a shortage in domestic availability, pushing up cotton prices.

These challenges have made it necessary for the government to allow imports without duty, enabling manufacturers to source raw cotton at competitive prices and avoid disruptions in production.

Impact on the Textile Industry

The suspension of cotton import duties is a welcome measure for the textile and apparel industry, which has been grappling with high input costs. By allowing duty-free imports, the government is aiming to:

• Reduce the cost burden on textile mills.

• Enhance the competitiveness of Indian textile exports in the global market.

• Ensure a steady flow of raw cotton for production, preventing potential slowdowns in the sector.

The textile industry is a significant employer and foreign exchange earner for India. Any rise in cotton prices can impact profitability and export performance. With the duty suspension, manufacturers are expected to maintain margins and continue producing competitively priced goods for international markets.

Role of the Government in Balancing Farmer Interests

While the import duty suspension supports industrial and export interests, the government also has to balance the concerns of domestic cotton farmers. Previously, the duty was aimed at protecting farmers from cheap international cotton. Now, with the suspension, the government is ensuring that industrial growth and employment are not compromised due to a temporary production shortfall.

Global Context

India is one of the largest cotton producers and exporters in the world. Internationally, cotton prices have been volatile due to factors such as climate impacts, global demand fluctuations, and trade policies. By suspending import duties, India can maintain a stable domestic supply, protect its textile sector from global market shocks, and continue fulfilling export commitments.

Conclusion

The suspension of cotton import duty in India is a strategic move to stabilize prices, secure raw material for textile mills, and support exports in the wake of declining domestic production. While the duty originally aimed to safeguard farmers, the current measure reflects the government’s focus on industrial growth and global competitiveness. The textile industry, which forms a backbone of Indian manufacturing and exports, is expected to benefit significantly from this policy adjustment.

This step also signals the government’s proactive approach in addressing supply-demand gaps and ensuring that the textile sector continues to contribute robustly to the country’s economy. Manufacturers can now access cotton at reasonable costs, continue production without disruption, and maintain India’s competitive edge in the global textile market.

In summary, the import duty suspension on cotton will:

• Ensure adequate availability of raw cotton for textile mills.

• Help stabilize domestic cotton prices and reduce input costs.

• Support exports and maintain the competitiveness of India’s textile industry.

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