India Extends Cotton Import Duty Waiver Through Year-End - Major Trade Policy Shift

New Delhi pushes duty-free cotton imports until December 31st—textile mills breathe sigh of relief as domestic supply gaps loom.

Market Impact: Cheaper raw materials inbound

Zero tariffs mean global cotton floods Indian markets, cutting costs for struggling textile manufacturers. Domestic growers? Not so thrilled—price pressures mounting as international competition gets tariff-free access.

Policy Calculus: Balancing act between industry and agriculture

The government walks tightrope—supporting massive textile sector while facing farmer backlash. Extended waiver signals priority: keep factories running, exports competitive.

Global traders pounce—shipping orders surge as arbitrage window stays open. Another reminder: when governments pick winners, someone always loses. Classic trade policy—subsidizing efficiency with someone else's margins.

Small exporters and jobs at risk in India

The new tariffs threaten thousands of small exporters and jobs across India, including in Prime Minister Narendra Modi’s home state of Gujarat. Economists said the hit could slow momentum in what has been the world’s fastest-growing major economy.

There was no sign of fresh negotiations between Washington and New Delhi on Wednesday. Five earlier rounds of talks did not produce a deal to roll U.S. tariffs back toward about 15%, similar to arrangements the United States has with Japan, South Korea, and the European Union. Officials on both sides described the talks as marred by misjudgments and missed signals.

In 2024, the U.S. was India’s biggest destination for apparel and jewellery, buying close to $22 billion. As per Reuters, India holds about 5.8% of the U.S. clothing market, trailing China, Vietnam, and Bangladesh.

Duty-free cotton expected to ease costs for mills

“With the duty-free extension, imports could hit a record 4.2 million bales this year. Strong imports are likely to continue into the first quarter of next year as well,” said Atul Ganatra, president of the Cotton Association of India.

The cotton marketing season in India runs from October through September.

A New Delhi-based trader at a global house said the earlier cutoff in September was too tight because shipments from key suppliers often take more than a month at sea. With more time, mills can book larger volumes for arrival after the voyage.

A Mumbai-based trader said the landed price of imported cotton is about 5% to 7% below local fibre, and quality is typically better. Most shipments will arrive in the December quarter, just as the local harvest comes in, which could push prices down.

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