India currently levies a 5% basic customs duty on raw cotton imports. The government had temporarily waived this duty between 19 August and 30 September 2025, and later extended this exemption to 31 December 2025.
Addressing the media on the supply-chain scenario amid the war in West Asia, Bipin Menon, trade advisor in the textiles ministry, said on Tuesday that discussions were ongoing with the ministry of agriculture and the department of revenue on reducing or eliminating customs duty on cotton. India’s cotton exports declined from $972.17 million in FY24 to $660.40 million in FY25, while imports increased from $579.21 million in FY24 to $1.2 billion in FY25.
Mint explains the rationale behind the government’s proposal and its potential impact on the textile industry.
Why is this being considered?
The textile sector has been facing pressure from high raw-material costs and uneven domestic cotton supply. While India is largely self-sufficient in cotton, mills depend on imports, especially long-staple cotton, when domestic availability tightens or prices rise.
Prabhu Dhamodharan, convenor of the Indian Texpreneurs Federation (ITF), a textile entrepreneurs’ body based in Coimbatore, said, “In India, farmers are well protected through MSP (minimum support price) and CCI (Cotton Corporation of India) procurement. At this juncture, removing the import duty on cotton will enable access to globally competitive raw material.” India’s textile industry mostly uses domestic cotton, but also imports long-staple varieties, primarily from the US, Egypt and Australia, and some from Brazil.
Would duty relief help the sector?
India’s textile and apparel sector has handled tariff challenges well, with clear green shoots emerging. With the India-UK free trade agreement (FTA) nearing its rollout and US buyers increasing their sourcing from India, exports are poised for 10% growth this year.
However, manufacturers believe duty relief is essential to bridge the current domestic supply gap. With local cotton availability limited, a resulting price surge would force garment makers to align with higher international rates, potentially eroding their competitive edge.
Raja M. Shanmugam, former president of the Tirupur Exporters’ Association (TEA), said, “So once this is done, it will create a level playing field. Uniform prices would help the manufacturing sector in many ways to compete in the global market more easily. Otherwise, the price difference would be a hurdle for Indian manufacturers in addressing the global market.”
How would it affect exports?
Lower input costs improve the global competitiveness of Indian textiles, including yarn, fabrics and garments. This is crucial at a time when demand in key export markets remains weak and buyers are highly price-sensitive. Industry experts said this would help increase monthly exports, with fabrics and made-ups rising from $550 million to $650 million, and garments from $1.34 billion to $1.5 billion.
However, while global supply chains are pivoting toward India, buyers have made it clear that their business depends on competitive pricing. Meanwhile, China remains a formidable rival, sustaining its market share through agile sourcing and superior crop yields that keep its volumes high despite tariff pressures.
“With this support, the industry is well positioned to deliver assured export growth in the current year,” said Dhamodharan.
Amid weak global demand and pricing pressures, India's exports of readymade garments fell to $15.77 billion in FY26 from $15.99 billion the previous year. India’s textile and apparel sector is one of the country’s largest export earners, accounting for around 8-10% of total merchandise exports. Textile exports are currently valued around $35-40 billion annually, and the government aims to increase this to $100 billion by 2030.
How would it affect farmers?
Cheaper imports could put pressure on domestic cotton prices, which would hit farmers. The government is therefore weighing the move carefully to balance industry needs with farmer interests.
However, industry leaders claimed reducing or removing the duty would not affect Indian farmers as they are already protected by the MSP. “In case there are concerns that imports may affect Indian cotton farmers, the CCI can procure cotton from farmers at MSP and build up a buffer stock to a certain extent, as China has done in the past,” Shanmugam said, adding that CCI could create a buffer of six months to a year. “In this way, they can diffuse the unhealthy price hike on the cotton front, benefiting the industry and farmers,” he said.
What’s the current MSP and cotton production trend?
The government has fixed the MSP for the 2025–26 cotton season at ₹7,710 per quintal for medium-staple cotton and ₹8,110 per quintal for long-staple cotton. This represents an increase of ₹589 per quintal over the 2024-25 season, designed to offer at least a 50% return over the cost of production.
According to data from the agriculture ministry, cotton production has fluctuated but declined overall in recent years. It rose from 31.11 million bales (1 bale equals 170 kg) in FY22 to 33.66 million in FY23, before slipping to 32.52 million in FY24, 29.72 million in FY25, and 29 million in FY26.