India Temporarily Removes Import Duty on Raw Cotton to Boost Textile Industry India has decided to remove import duty on raw cotton, aiming to address challenges in the textile sector. This move is designed to ensure enough supply, improve product quality, and keep Indian textiles competitive in the global market. Why did India make this change? The country faced cotton shortages partly due to bad weather and pest attacks, which lowered domestic cotton production from about 35 million bales in 2020-21 to around 31 million bales recently. To help textile mills run smoothly and keep prices stable, the government has waived import tariffs on raw cotton. This allows mills to buy high-quality cotton from abroad without extra taxes, reducing costs and avoiding price hikes, especially during the busy festival season. India is a major player in global textiles, ranking sixth worldwide with a 3.91% share in exports. The textile industry is a key source of jobs, employing over 45 million people, making it the second-largest employer after agriculture. The shortage of quality cotton has affected the industry, especially since Indian farmers produce mainly medium-staple cotton. Many spinning mills that need long or extra-long staple cotton have had to stockpile lower-grade cotton, tying up cash and increasing costs. The duty-free cotton imports will help mills access better quality fiber quickly, supporting smoother production and higher-quality yarns and fabrics. Additionally, the move will help stabilize raw material costs ahead of upcoming festivals, which see a spike in clothing demand. The government has also reassured farmers by maintaining minimum support prices (MSP), ensuring they get fair prices for their crops. For the upcoming season, medium-staple cotton is priced at Rs. 7,710 per quintal and long-staple at Rs. 8,110 per quintal. The Cotton Corporation of India continues to buy up unsold crops at MSP, shielding farmers from market ups and downs. This move not only benefits Indian textile producers but could also improve trade relations with the United States, which is seeking broader access to Indian markets. By easing tariffs on cotton, India shows openness to using tariff relief tactically in trade negotiations, balancing industry needs with diplomatic ties. Overall, removing import duties on raw cotton is a strategic step to support India’s vibrant textile industry, keep costs down, and enhance the country’s position in global trade.
