India suspends raw cotton import duties until September 2025

The Indian government has temporarily exempted all customs duties on raw cotton imports, effective from August 19 to September 30, 2025. The exemption removes an 11 percent import duty, which included a 5 percent basic customs duty, a 5 percent agriculture infrastructure and development cess, and a 10 percent social welfare surcharge. This decision is aimed at stabilising domestic cotton prices, lowering input costs for the textile industry, and supporting India's export competitiveness.

This move directly benefits American exporters, who have been seeking easier market access in India after the U.S. imposed tariffs on Indian products earlier this year. The decision is seen as a sign of flexibility from New Delhi in ongoing bilateral trade talks with Washington, particularly on sensitive sectors like agriculture and dairy.

Notably, the U.S. has canceled its planned visit to New Delhi for the sixth round of trade talks, with no new date announced. The decision to exempt the cotton import duty comes after U.S. President Donald Trump's reciprocal 25 percent tariffs on Indian exports took effect on August 7, which may double to 50 percent on August 27 due to new tariffs related to India's oil trade with Russia.

India exempts duties on raw cotton imports

India’s textile sector is highly dependent on cotton, with the cotton value chain directly employing nearly 35 million people and accounting for approximately 80 percent of the country’s total textile exports. The government’s action is also a response to tight domestic supply and rising prices, which have led to concerns about cost pressures in the textile industry.

By allowing duty-free imports, the government aims to stabilise raw material prices ahead of the festival season, when demand for garments typically increases. India's cotton imports have surged, reaching 2.71 million bales in fiscal year 2025, up from 1.52 million bales in fiscal year 2024 and 1.46 million bales in fiscal year 2023. This is in contrast to the country’s domestic cotton output, which has been declining, falling from 33.7 million bales in FY23 to an estimated 30.7 million bales in FY25.

India imports cotton mainly from key suppliers like the U.S., which has become an important source, especially after China imposed extra duties on American cotton. Other significant suppliers include Brazil, Egypt, and some African countries like Benin, Tanzania, and Mali, which provide specialized varieties of cotton not widely grown in India. Australia also contributes to India's cotton imports.

Indian textile stocks rally after the announcement

Following the government's announcement, Indian textile stocks rallied sharply, with some climbing as much as 8 percent on Tuesday. Stocks that rallied included Vardhman Textiles, Vardhman Spinning, Arvind, Nahar Spinning, KPR Mill, and Trident. Vardhman Textiles saw its shares surge by 9.3 percent, while Ambika Cotton Mills rose by 7.6 percent and Welspun Living jumped 6.5 percent.

This temporary relief is seen as a crucial step to help India remain competitive against other textile-producing nations like Bangladesh and Vietnam, who face lower import costs.This market reaction reflects investor optimism that the duty removal will ease cost pressures on the garment industry and support the overall health of the textile and apparel sector, a significant contributor to India's employment and exports.