Govt Extends Duty-Free Cotton Imports Until December 31 to Support Exporters

New Delhi, August 28 – The government has extended the free import of cotton up to December 31, 2025, in an effort to insulate the textile sector from the effects of high U.S. tariffs. The exemption, previously set to expire on September 30, eliminates the 11 per cent charge on the import of cotton by exempting the 5% Basic Customs Duty, 5% Agriculture Infrastructure and Development Cess, and 10% Social Welfare Surcharge.

Relief to Textile Sector

The move would help stabilize the prices of raw cotton, bring down input costs, and give relief to manufacturers along the entire value chain of the textile sector, including fabric, yarn, garments, and home textiles, officials said. The step would also benefit Small and Medium Enterprises (SMEs), which dominate Indian exports of textiles, and check inflationary pressure on the finished product.

U.S. Tariffs Put Pressure

The extension is opportune as exporters are facing a new wave of trade hurdles following the United States’ imposition of 50% tariffs on Indian products effective August 27. The increased duties pertain to labor-intensive industries like textiles, gems and jewelry, leather, carpets, and furniture, which account for almost two-thirds of India’s U.S.-bound exports worth between $48 billion and $90 billion a year.

Industry Impact

Industry insiders caution that the U.S. move will hard hit profits. Ratings agency Crisil has estimated that India’s ready-made garment industry’s revenue growth could get halved this year from 2024. In Uttar Pradesh, the industry that produces handmade carpets and exports goods worth approximately ₹9,600 crore to the U.S. has already witnessed 85 per cent of orders being suspended, raising concerns of employment losses. Gujarat, which contributes to nearly 30 per cent of India’s textile exports, has asked the Centre to explore other relief measures like export incentives and concessional loans.

Diversifying Export Markets

To cushion the effect, the government is considering diversification of the market. The officials stated that India is accelerating outreach in more than 40 nations, including the UK, Germany, Japan, and Australia, in a bid to cut back reliance on America. The textile exporters have also urged accelerated free trade talks with major partners in order to gain tariff-free access.

Breathing Space, But Challenges Remain

Meanwhile, the expansion of duty-free cotton imports provides relief for the industry during a period of international headwinds. Trade commentators indicated that the move would not completely mitigate the effect of U.S. tariffs but would enable manufacturers to reduce their costs and remain competitive in other markets. India’s textile and apparel industry, which has more than 45 million employees, is still one of the most exposed to the current tariff standoff.

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