The Indian government has exempted cotton imports from customs duty for five months starting 1 June. This is the second such exemption in recent times, following a similar duty waiver that initially ran from 19 August to 30 September 2025 before being extended until the end of that year.
The government said the exemption aims to ensure the textile industry has enough high-quality fibre and to boost the global competitiveness of Indian exports, following a decline in dollar-denominated textile shipments during FY26. While overall textile and apparel exports dropped 2.2% to $35.7 billion in FY26 from $36.6 billion in FY25, a weaker rupee actually boosted earnings in local currency. In rupee terms, exports grew 2.1% to ₹3.16 trillion from ₹3.10 trillion the previous year.
Mint explains why the government’s latest move is crucial for the textile sector and whether it may affect cotton farmers preparing for sowing, which usually begins in June.
What’s the current duty and reason for the waiver?
Raw cotton imports currently attract an effective duty of 10.5%, comprising 5% basic customs duty, 5% agriculture infrastructure and development cess, and 0.5% social welfare surcharge on the customs duty component.
The move follows the 5 May approval of the ₹5,659-crore Cotton Productivity Mission (Kapas Kanti). This five-year initiative aims to revive India’s cotton sector as the industry grapples with stagnant production, rising imports, and fierce global competition.
While the move has raised concerns among several stakeholders, particularly farmers and farmer advocacy groups, it has been welcomed by industry players, who have been seeking such a measure for several months. The government and industry believe that zero duty on cotton imports will help India's textile and apparel exporters better leverage opportunities emerging from free trade agreements (FTAs).
Why does India need to import cotton?
India's textile sector, one of the country's largest employers and export earners, relies heavily on a steady supply of quality cotton. Indian textile products, particularly premium yarns and fabrics, require extra-long staple (ELS) cotton, but domestic supply of this high-quality fibre is insufficient to meet demand. As Indian farmers are protected by the minimum support price (MSP), domestic cotton prices are often higher than global benchmarks, making it difficult for mills to compete with rivals in countries such as Vietnam, Bangladesh and Pakistan.
Lower yields, pest attacks, weather-related disruptions and quality concerns have also constrained domestic availability in recent years. India mainly imports cotton from major producers overseas such as the US, Brazil and Australia.
Why is the move significant now?
The duty waiver comes at a time when India is simultaneously trying to boost domestic cotton production and strengthen textile exports. While the Cotton Productivity Mission aims to increase domestic output over the medium term, the textile industry requires immediate access to competitively priced cotton to meet export demand and take advantage of opportunities arising from FTAs.
The move reflects the government's attempt to balance the interests of cotton farmers with those of the textile value chain. The sector employs over 45 million people and contributes about 2.3% to GDP, 13% to industrial production, and 12% to exports.
Which regions stand to gain?
The impact is likely to be most visible in major textile manufacturing clusters.
- Tamil Nadu, which accounts for a large share of India's spinning capacity, is expected to be among the biggest beneficiaries.
- Gujarat, India's largest textile- and cotton-processing state, could also benefit through increased trading, processing and export activity.
- Maharashtra, Punjab and parts of Rajasthan, which have large spinning and textile operations, may similarly see improved availability of raw materials.
- The apparel manufacturing hubs of Tiruppur, Ludhiana, Surat and Bengaluru could also gain indirectly through lower input costs for yarn and fabric production.
What does this mean for cotton farmers?
The decision may raise concerns among some cotton growers, particularly if increased imports put downward pressure on domestic prices during the marketing season. The timing of the move is crucial as the cotton sowing season begins in June. The duty exemption could discourage farmers from expanding cotton acreage, which has already been declining in recent years. In fact, the Cotton Productivity Mission was launched to address concerns about declining output and mounting stress in the textile sector.
What’s the demand-supply imbalance?
According to agriculture ministry data, cotton production stood at 31.11 million bales in FY22 and rose to 33.66 million bales in FY23. It then slipped to 32.52 million bales in FY24, 29.72 million bales in FY25 and an estimated 29.1 million bales in FY26. (1 bale = 170 kg)
Meanwhile, demand has continued to rise as India expands its textile manufacturing base. An industry report estimated cotton consumption at 32.8 million bales in FY26, implying a deficit of around 3.7 million bales.
The government aims to increase cotton production to 49.8 million bales by FY31 from an estimated 29.1 million bales in FY26. Domestic demand is projected to rise to nearly 45 million bales by then.
India's dependence on cotton imports has increased sharply in recent years, jumping from $579.21 million in FY24 to $1.2 billion in FY25 and $1.86 billion in FY26. In contrast, cotton exports fell 34% to $436.35 million in FY26 from $660.4 million in FY25.
What do experts say?
Ashwin Chandran, chairman of the Confederation of Indian Textile Industry (CITI), said, “Cotton imports are largely quality and specification-driven, catering to specialised requirements and back-to-back export orders. They do not displace domestic cotton.”
Manish Daga, president of the All India Cotton FPO Association and popularly known as ‘Cotton Guru’, said removing cotton import duty now may deliver short-term relief to mills, but could hurt farmer confidence at a crucial time. “If prices improve and the market is cooled through cheaper imports, farmers, ginners and the broader rural cotton economy will bear the cost,” he added.
Prabhu Dhamodharan, convenor of the Indian Texpreneurs Federation (ITF), a textile entrepreneurs body based in Coimbatore, said, “We hope this is supported by a stable long-term policy. A non-seasonal import duty waiver from April to October each year for the next five years would provide the industry with greater predictability and confidence for export planning.”
“We are already witnessing strong interest from the UK and European buyers following the landmark FTAs, and such policy stability could help India expand significantly, and potentially double its apparel exports to these markets over time,” he added.