India has suspended the 11% import duty on cotton until September 30. This move is aimed towards reducing stress on its garment sector, signaling Washington that it is willing to address concerns over agricultural tariffs.
The announcement on Monday is set to aid US cotton suppliers while easing pressure on India’s apparel industry, which could soon face tariffs of nearly 60% on exports to America. Despite this, the US continues to be India’s biggest market for garment exports.
The decision comes after the trade negotiations between the two countries hit a roadblock. A planned visit from the American negotiators which was expected from August 25-29 was cancelled, resulting and delayed talk on bilateral trade agreement. This has also diminished the hopes for avoiding an additional 25% tariff on Indian goods from August 27.
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US president, Donald Trump doubled the tariffs on Indian exports up to 50%. The decision was taken by the US president in retaliation for India’s continued purchase of Russian oil. Previously, Indian goods faced 0-5% levies with textile duty ranging from 9-13%.
Exporters stated that there has been order cancellations and reduced competitiveness against Bangladesh, Vietnam, and China due to steep tariffs. India’s manual sectors such as textile and footwear industries are exploring alternative markets.
“The largest beneficiary of the duty free import will be the U.S., the second largest supplier to India,” said Ajay Srivastava, founder of the Global Trade Research Initiative.
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Cotton imports has risen to $1.2 billion in the 2024/25 fiscal year ending in March as compared to $579 million last year. Australia led with $258 million worth of exports to India while US, Brazil and Egypt follows According to Srivastava.
With limited production capacity and labour shortages, several Indian exporters have been considering relocating their operations abroad, raising concerns for ‘Make in India’ initiative. Experts expect that the government might extend duty free imports beyond September.
