In response to Washington’s latest tariff escalation, India has temporarily removed its 11% cotton import duty, including the Agriculture Infrastructure Development Cess (AIDC). The move, effective from August 19 to September 30, 2025, is designed to give exporters a breather as they grapple with U.S. President Donald Trump’s steep 50% levy on Indian goods. While textile clusters in Tiruppur, Ludhiana, and Surat see this as timely relief, cotton farmers fear cheaper imports could undercut their harvest, setting up a fresh policy dilemma for New Delhi.
In a swift policy response to escalating U.S. trade pressures, the Indian government has temporarily exempted cotton imports from the existing 11% duty, including the Agriculture Infrastructure Development Cess (AIDC). The exemption, effective from August 19 to September 30, 2025, is aimed at cushioning the textile and apparel sector from the ripple effects of Washington’s latest tariff escalation.
The move comes just days after U.S. President Donald Trump announced a 50% tariff on Indian imports, citing New Delhi’s continued purchase of Russian oil. For India’s textile exporters who supply billions of dollars’ worth of garments and fabrics to global markets—this duty waiver is a much-needed lifeline in an already volatile trading environment.
The immediate winners are India’s apparel and textile manufacturers, especially clusters like Tiruppur, Ludhiana, and Surat, which rely heavily on cotton as their primary raw material. With U.S. tariffs squeezing margins, the removal of the import duty lowers input costs and helps exporters stay competitive in a price-sensitive market.
Industry groups such as the Confederation of Indian Textile Industry (CITI) and the Southern India Mills’ Association (SIMA) have welcomed the government’s decision, describing it as timely intervention that could prevent job losses and preserve export momentum.
However, cotton farmers are far less optimistic. With the new kharif harvest approaching, they fear cheaper overseas cotton could flood the market and depress domestic prices, adding pressure to an already strained rural economy. Balancing the interests of farmers and exporters will remain a policy tightrope.
The policy announcement sparked an immediate market reaction. Shares of leading textile companies, including Vardhman Textiles and Arvind Ltd., saw sharp gains, with Vardhman rising nearly 9% in intraday trade. The investor sentiment reflects expectations that reduced input costs will help safeguard profits, even under the weight of U.S. tariffs.
Yet, analysts caution against reading too much into short-term gains. The waiver is temporary, and without structural reforms, India’s cotton value chain could remain vulnerable to external shocks.
India has historically been one of the world’s largest cotton producers, but in recent years, its textile industry has become increasingly dependent on imports particularly of extra-long staple (ELS) cotton, essential for premium fabrics. Much of this comes from the United States itself, where consistent quality and supply attract Indian buyers.
By easing duties, India is not only providing relief to its domestic industry but also sending a subtle signal of flexibility toward Washington, even as it holds firm on its Russian oil policy. Some analysts view the step as a strategic olive branch, potentially opening the door for trade dialogue while safeguarding India’s long-term energy interests.
The exemption is clearly a stopgap measure. Exporters are already lobbying for an extension beyond September, arguing that tariffs and supply disruptions are unlikely to ease soon. On the other hand, farmer associations have urged the government to protect domestic cotton prices through procurement and support schemes.
This tension underscores a deeper policy dilemma: India’s textile industry is a major export earner and second only to agriculture in employment, but its fortunes are closely tied to cotton farmers. Policy that tilts too far in favor of one risks alienating the other.
As global trade grows more uncertain, India’s cotton and textile sector needs more than temporary relief. Long-term competitiveness will require diversifying raw material sources, investing in synthetic and blended fibers, and strengthening domestic supply chains. At the same time, farmer support programs will be crucial to prevent rural distress.
The government’s quick move to suspend duties has bought valuable time for exporters. The key question now is whether this breathing space will be used to strengthen resilience—or whether it simply postpones the next round of crisis when tariffs and market pressures resurface.
By suspending cotton import duties, India has given its textile exporters a fighting chance against U.S. tariff heat. But with farmers anxious and trade politics unpredictable, the real test will be how India balances global competitiveness with protecting its cotton growers.
FAQs
1. Why did India suspend the 11% cotton import duty in 2025?India suspended the duty to provide relief to its textile and apparel exporters after the US imposed a steep 50% tariff on Indian imports. The move lowers input costs and helps exporters remain competitive in global markets.
2. How long will the cotton duty exemption remain in place?The exemption is temporary, effective from August 19 to September 30, 2025. Exporters are lobbying for an extension, while farmer groups want safeguards for domestic prices.
3. Who benefits most from the cotton duty waiver?Textile exporters and manufacturers, especially clusters like Tiruppur, Ludhiana, and Surat, gain the most as their raw material costs fall, helping them offset the impact of US tariffs.
4. How does the duty waiver affect Indian cotton farmers?Farmers are concerned that cheaper imported cotton may flood the market and depress domestic prices, especially ahead of the kharif harvest. This creates tension between protecting exporters and supporting farmers.
5. What are the long-term solutions for India’s cotton and textile sector?Experts suggest diversifying raw material sources, investing in synthetic and blended fibers, strengthening domestic supply chains, and creating robust farmer support programs to reduce vulnerability to global trade shocks.
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