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The United States (US) will emerge as the biggest beneficiary of the complete waiver of customs duty and Agriculture Infrastructure and Development Cess (AIDC) on the import of raw cotton, which was announced by the Centre this month according to the Global Trade Research Initiative (GTRI).
"Under the India-Australia ECTA, 51,000 MT of such cotton already comes duty-free, but the biggest gainer now will be the U.S., India's second-largest supplier," the GTRI said in its latest analysis note. Cotton normally attracts 11 per cent import duty (5 per cent BCD + 5 per cent AIDC), in place since February 2021. According to a government notification, a complete waiver of duty on the import of cotton is a short-term measure, only till December 2025, to support India's textile and apparel exporters, improve global competitiveness, and comes without any downside for Indian farmers. However, GTRI says direct duty-free imports give immediate access to global supplies, especially to firms making high-end garments using superior fibre. "The short duty-free window will ease raw material shortages for yarn and fabric exporters ahead of the festive season," the policy think tank added in its note. On August 19, while notifying the move, the Ministry of Finance said that the exemption will be applicable to cotton falling under heading 5201 of the Customs Tariff Act, 1975. The waiver will come into effect from August 19, 2025, and remain valid till September 30, 2025. However, the same was extended till December 31 on August 28, 2025. The Finance Ministry had said the decision was taken in the public interest to ease raw material costs for domestic manufacturers and exporters at a time when the textile sector has been facing price volatility and supply pressures. The note highlighted that India's cotton imports have more than doubled to USD 1.20 billion in FY2025 from USD 579.2 million in FY2024. Major suppliers last year were Australia (USD 258.2 million), the U.S. (USD 234.1 million), Brazil ( USD 180.8 million), and Egypt (USD 116.3 million). Nearly 99 per cent of these imports are of longer staple cotton (28 mm and above), which is not grown in India in sufficient quantity. GTRI note added that this means the waiver will not affect local farmers, who mainly produce medium- and short-staple cotton. The cotton import waiver has attracted criticism from the political parties too, as former Delhi Chief Minister and Aam Aadmi Party convenor Arvind Kejriwal on Thursday criticised the Union Government, alleging that it has betrayed Indian cotton farmers under pressure from US President Donald Trump. Kejriwal mentioned that due to the 11 per cent duty on US cotton, the cotton of Indian farmers used to sell easily in the Indian market. (ANI)
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