Did India just hand a massive economic advantage to the US? The recent cotton duty waiver has sparked debate, with experts pointing to significant gains for American suppliers. What does this mean for India’s textile industry and its farmers? The implications are far-reaching!
India’s recent decision to completely waive customs duty and the Agriculture Infrastructure and Development Cess (AIDC) on raw cotton imports has set the stage for a significant shift in global trade dynamics, with the United States emerging as a primary beneficiary, according to the Global Trade Research Initiative (GTRI). This pivotal policy change, initially announced earlier this month, is poised to reshape India’s cotton trade landscape and influence the textile sector.
The GTRI’s latest analysis highlights that while existing agreements, such as the India-Australia ECTA, already facilitate duty-free cotton imports up to 51,000 metric tonnes, the US cotton imports are now positioned for unprecedented growth. Historically, cotton attracted an 11 per cent import duty, a measure in place since February 2021, making this waiver a substantial economic incentive for international suppliers.
The government’s notification clarified that this comprehensive duty waiver is a short-term strategic measure, slated to remain in effect until December 2025. Its core objectives are to bolster India’s textile industry and apparel exporters, thereby enhancing their global competitiveness without negatively impacting domestic farmers. This move is designed to offer immediate access to superior global supplies for high-end garment manufacturers.
Data underscores the escalating demand for imported cotton in India, with figures more than doubling to USD 1.20 billion in FY2025 from USD 579.2 million in FY2024. Major contributing nations to these imports last year included Australia, the United States, Brazil, and Egypt, underscoring the diverse global sourcing strategies employed by Indian businesses.
Crucially, the GTRI note emphasized that this waiver is unlikely to adversely affect local Indian farmers. Approximately 99 per cent of these elevated imports consist of longer staple cotton, specifically 28 mm and above, a variety not produced in sufficient quantities within India. This ensures that farmers primarily engaged in cultivating medium and short-staple cotton remain insulated from direct competition.
Despite the stated economic benefits, the agricultural policy shift has not been without its critics. Former Delhi Chief Minister and Aam Aadmi Party convenor Arvind Kejriwal publicly condemned the Union Government, alleging that the decision represented a betrayal of Indian cotton farmers, potentially influenced by pressure from US President Donald Trump. Such political reactions highlight the complex interplay of trade and domestic considerations.
The direct duty-free access to global markets promises to offer immediate advantages to firms specializing in high-quality garments, allowing them to procure superior fibers more efficiently. This strategic import duty waiver is expected to refine supply chains and production costs for a significant segment of the textile sector, driving forward its competitive edge on an international scale. The broader economic impact of this waiver will continue to be a focal point for analysis.
