India Removes Cotton Duty | Modi Government Counters America’s 50% Tariff | Relief for Indian Textile Industry
New Delhi, August 19: In a landmark decision, the Government of India has announced the removal of import duty on cotton (referred to locally as chotton) from 19th August to 30th September. This temporary waiver comes at a crucial moment when India’s textile industry is grappling with high input costs and a challenging international trade environment, especially after the United States imposed a 50% tariff on several Indian textile products.
By scrapping import duty, Prime Minister Narendra Modi’s administration has not only provided immediate relief to textile manufacturers but also sent a strong signal that India will actively protect its domestic industries while simultaneously pushing for global trade competitiveness.
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Why Did India Remove Cotton Import Duty?
Cotton is the lifeline of India’s textile and apparel sector, which employs over 45 million people directly and 60 million indirectly. Despite being the largest producer of cotton, India has often faced short-term shortages due to erratic monsoons, pest attacks, and fluctuating yields. In such times, the textile industry depends heavily on imports to maintain consistent supply for yarn, fabric, and apparel production.
However, the presence of import duty on cotton makes raw material costlier, reducing competitiveness in the global market. With the U.S. slapping 50% tariffs on Indian textiles, the cost burden further increased. The decision to remove cotton duty is, therefore, a strategic countermeasure to offset American tariffs and stabilize the domestic industry.
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Impact of America’s 50% Tariff on Indian Textiles
The U.S. is one of the largest buyers of Indian textiles and garments, accounting for nearly 30% of India’s total textile exports. When Washington imposed a steep 50% tariff, it sent shockwaves across the Indian textile belt, particularly in states like Gujarat, Maharashtra, Tamil Nadu, and Punjab.
Export Decline: Industry experts estimate that India could lose $3–5 billion in textile exports annually if tariffs continue.
Rising Competition: Countries like Bangladesh, Vietnam, and Cambodia, which enjoy better trade agreements with the U.S., stand to benefit at India’s cost.
Pressure on MSMEs: Small and medium textile units, especially handloom and powerloom sectors, are the hardest hit due to thinner profit margins.
By cutting cotton import duties, the Modi government aims to reduce production costs and give exporters some breathing space to survive in the highly competitive U.S. market.
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How the Duty Removal Helps the Textile Industry
1. Lower Raw Material Costs
Importing cotton without duty makes it cheaper for mills and fabric producers, directly reducing yarn prices.
2. Boost for Exporters
With lower production costs, exporters can offer more competitive prices to foreign buyers, offsetting some of the U.S. tariff impact.
3. Relief for Domestic Industry
Indian mills, especially in Tiruppur, Surat, Ludhiana, and Panipat, will benefit from easier access to imported cotton during peak demand season.
4. Employment Stability
By sustaining textile production, millions of jobs in spinning, weaving, dyeing, and garmenting are protected.
5. Support for “Make in India”
The decision aligns with the “Make in India” and “Atmanirbhar Bharat” vision by ensuring that the textile industry remains globally competitive.
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Is the Cotton Duty Removal Temporary or Permanent?
Currently, the duty waiver is effective only till 30th September. However, trade analysts believe that the government may extend this relief if:
Cotton prices remain volatile in the global market.
The U.S. continues its 50% tariff pressure.
Indian exporters demand further cost competitiveness.
The Modi government is likely to review the situation post-September and decide whether to make the policy long-term.
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How This Move Supports “Make in India”
The “Make in India” initiative, launched in 2014, aims to make India a global manufacturing hub. The textile sector is one of the key pillars of this campaign. By lowering cotton input costs, India can:
Attract more global buyers who are seeking cheaper yet high-quality alternatives to Chinese textiles.
Encourage foreign investment in textile parks and integrated manufacturing hubs.
Strengthen the cotton-to-clothing value chain, ensuring that every stage of textile production remains cost-effective.
This proactive step helps “Make in India” survive external trade shocks, especially those triggered by American tariffs.
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Reactions from the Textile Industry
The announcement has been welcomed by industry associations:
The Confederation of Indian Textile Industry (CITI) said that the move would “revive the sector at a critical juncture.”
The Tiruppur Exporters’ Association hailed it as a “timely relief” that would help exporters honor international contracts.
Small spinners and weavers expressed hope that this decision would prevent closures and layoffs.
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International Trade & Diplomatic Angle
Experts see India’s cotton duty removal not just as an economic decision, but also as a strategic diplomatic message to the U.S. By making domestic industry more resilient, New Delhi is showing Washington that unilateral tariffs will not weaken India’s trade position.
At the same time, India is also strengthening its trade ties with other regions like the EU, Middle East, and Africa, diversifying export destinations so that dependence on the U.S. reduces gradually.
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Future Outlook
Short Term: The duty cut will bring immediate relief, stabilize yarn prices, and protect export orders.
Medium Term: If extended, the policy could help India capture new markets, especially in Europe where buyers are shifting away from China.
Long Term: India must negotiate better trade deals with the U.S. and EU to secure tariff-free access for its textiles, just like Bangladesh and Vietnam enjoy.
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Conclusion
India’s decision to remove cotton import duty is a bold and necessary counter to America’s 50% tariff on Indian textiles. It demonstrates the Modi government’s commitment to protecting domestic industries, safeguarding millions of jobs, and ensuring that the Indian textile sector remains globally competitive.
While the move is currently temporary, its strategic importance cannot be understated. It not only shields Indian exporters from immediate trade shocks but also strengthens the broader mission of “Make in India”.
Whether this relief becomes permanent will depend on global cotton trends and U.S. trade policies. For now, India’s textile industry has a much-needed breather and an opportunity to fight back in the global market.
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