Facing 50% US tariff on garments, India waives cotton duty to shield exporters
The exemption follows demands from industry groups, including the CITI, which had pressed the government to withdraw duties to make the sector more competitive
- Aug 19, 2025,
- Updated Aug 19, 2025 12:34 PM IST
The Centre has suspended the 11% import duty on cotton from August 19 to September 30, a temporary measure aimed at supporting textile mills and exporters struggling with rising costs and steep tariffs in key markets.
The exemption follows demands from industry groups, including the Confederation of Indian Textile Industry (CITI), which had pressed the government to withdraw duties to make the sector more competitive. India’s garment industry faces a 50% tariff on exports to the United States, including an existing 25% levy and an additional 25% penalty due later this month over India’s purchases of Russian oil.
The effective U.S. tariff rate compares with 20% for Bangladesh and Vietnam, and 30% for China, making Indian exports less attractive to buyers. Industry officials expect the government to extend duty-free cotton imports beyond September.
India imposed the duty in February 2022, which reduced the share of U.S. cotton in India’s imports to 19% in fiscal 2024-25 from 40–50% earlier. Mills shifted to Brazilian cotton to compete with Bangladesh and Vietnam, which had continued access to cheaper U.S. supplies.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said the waiver provides short-term relief. "Since Feb. 2021, imports were subject to an 11% duty-5% Basic Customs Duty, and 5% Agriculture Infrastructure & Development Cess. The waiver is expected to help mills facing high input costs and support yarn and fabric exporters struggling with competitiveness, particularly ahead of India’s festival season," Srivastava said.
He noted the temporary nature of the move. "The government limited the relief to 40 days to avoid sustained downward pressure on domestic cotton prices, which could hurt farmers. The measure as a time-bound stopgap to stabilize markets before the new crop arrives," Srivastava said.
India's garment industry is already dealing with a labour shortage and limited production capacity, with exporters considering shifting production abroad. The government aims to expand the country’s textile industry to $350 billion by 2030, including $100 billion in exports, up from a current market size of $180 billion.
The sharp rise in U.S. tariffs comes as India was gaining traction with American buyers looking to diversify sourcing away from China and Bangladesh. Industry bodies have warned that sustained cost pressures could undermine this momentum at a critical time for India’s "Make in India" initiative.
The Centre has suspended the 11% import duty on cotton from August 19 to September 30, a temporary measure aimed at supporting textile mills and exporters struggling with rising costs and steep tariffs in key markets.
The exemption follows demands from industry groups, including the Confederation of Indian Textile Industry (CITI), which had pressed the government to withdraw duties to make the sector more competitive. India’s garment industry faces a 50% tariff on exports to the United States, including an existing 25% levy and an additional 25% penalty due later this month over India’s purchases of Russian oil.
The effective U.S. tariff rate compares with 20% for Bangladesh and Vietnam, and 30% for China, making Indian exports less attractive to buyers. Industry officials expect the government to extend duty-free cotton imports beyond September.
India imposed the duty in February 2022, which reduced the share of U.S. cotton in India’s imports to 19% in fiscal 2024-25 from 40–50% earlier. Mills shifted to Brazilian cotton to compete with Bangladesh and Vietnam, which had continued access to cheaper U.S. supplies.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said the waiver provides short-term relief. "Since Feb. 2021, imports were subject to an 11% duty-5% Basic Customs Duty, and 5% Agriculture Infrastructure & Development Cess. The waiver is expected to help mills facing high input costs and support yarn and fabric exporters struggling with competitiveness, particularly ahead of India’s festival season," Srivastava said.
He noted the temporary nature of the move. "The government limited the relief to 40 days to avoid sustained downward pressure on domestic cotton prices, which could hurt farmers. The measure as a time-bound stopgap to stabilize markets before the new crop arrives," Srivastava said.
India's garment industry is already dealing with a labour shortage and limited production capacity, with exporters considering shifting production abroad. The government aims to expand the country’s textile industry to $350 billion by 2030, including $100 billion in exports, up from a current market size of $180 billion.
The sharp rise in U.S. tariffs comes as India was gaining traction with American buyers looking to diversify sourcing away from China and Bangladesh. Industry bodies have warned that sustained cost pressures could undermine this momentum at a critical time for India’s "Make in India" initiative.