Winning Bizness Desk

Mumbai. From August 27, the United States has imposed a 50 percent tariff on several Indian products, including textiles, gems and jewellery, and leather. This sudden increase in import duty has raised concerns across the Indian textile sector, which has traditionally depended heavily on the US market for exports.

Government extends duty-free cotton import till December

To protect the textile industry from the burden of these new tariffs, the Indian government has decided to extend duty-free import of cotton until December 31, 2025. Earlier, this exemption was valid only from August 19 to September 30. Now, textile traders can bring in cotton without paying import duty for three more months, giving them much-needed breathing space.

Import duty cut offers 11 percent relief

The relief package includes waiving of three major duties that together amount to 11 percent. These include 5 percent basic customs duty, 5 percent agriculture infrastructure and development cess, and 1 percent social welfare surcharge. By reducing the cost of raw cotton imports, the government hopes to lower input costs across the textile value chain, from yarn and fabrics to garments and made-ups. This move is expected to benefit both manufacturers and consumers.

Possible impact of American tariff on exports

In 2024, India exported textiles worth 10 billion dollars to the US, covering products from ready-made garments to cotton yarn and carpets. In the first quarter of this year, overall textile exports rose 10 percent to 4 billion dollars, with exports to the US increasing by 14 percent. However, with the new tariff in place, the price of nearly half of India’s textile products in the US may rise. As a result, demand is expected to fall by 20 to 25 percent, and India’s share in the US textile import market may shrink from 33 percent last year to about 20-25 percent this year.

Way forward for Indian textile industry

The government believes that duty-free cotton imports will help stabilise raw cotton prices at home and prevent shortages. This, in turn, will reduce inflationary pressure on finished textile products and improve India’s competitiveness abroad. Industry experts suggest that Indian textile companies must now diversify and focus more on the European Union, United Kingdom and United Arab Emirates, which together account for 45 percent of India’s textile exports. Additionally, removing cotton import duties could give India a stronger bargaining position in future trade talks with the US.

In a nutshell

• US imposes 50 percent tariff on Indian textiles
• Government extends duty-free cotton imports till December 31
• Traders get 11 percent total duty relief on cotton
• Move aims to cut input costs across textile value chain
• US tariffs may shrink India’s textile share in American market
• Domestic cotton prices to remain stable with no shortage expected
• Industry urged to diversify exports to EU, UK and UAE