Why in news?
The Government of India has extended the import duty exemption on cotton until December 31, 2025, providing relief for the textile sector and exporters amid global trade challenges, particularly increased US tariffs.

Rationale for Extension

• The move comes as Indian apparel exporters face steep new US tariffs, with overall duties now exceeding 60% on garments and related sectors.
• Industry bodies had demanded removal of the import duty to mitigate volatile cotton prices and ensure global competitiveness, especially as the US is India's largest export market for ready-made garments.
• Extending duty-free imports is expected to stabilise cotton and textile prices domestically, lowering input costs and supporting small and medium enterprises.

Impact on Sector

• Textile industry leaders anticipate this action will aid exporters in adapting to shifting market conditions and safeguard employment across the cotton value chain, which involves around 35 million people in India.
• Imports could potentially reach a record 4.2 million bales in 2025, with strong demand into early next year.

Key Exporter’s key benefits
Lower Raw Material Costs

• Removal of the 11% import duty (covering BCD, AIDC, and surcharge) allows mills and exporters to access cheaper international cotton, reducing input costs for yarn, fabric, and garments.
• This is especially valuable now, as US tariffs on Indian textile goods have climbed to over 60%, squeezing margins for exporters.

Improved Global Competitiveness

• More affordable, duty-free cotton helps Indian exporters match or undercut international rivals, such as Bangladesh and Vietnam, in global markets.
• Higher quality, contamination-free imported cotton supports the manufacture of products that meet demanding international standards.

Larger, Longer-Term Orders and Better Planning

• Extending the window until December 31, 2025, gives manufacturers and exporters time to place and receive large-volume cotton orders, avoiding supply shocks or price volatility.
• The previous short window only allowed "in-transit" cotton to benefit; now, full-scale planning and contracting can take place, stabilizing the supply chain.

Industry and Employment Relief

• The extension mitigates risks of job losses and plant shutdowns, which were a top concern after the US tariff hike.
• It helps protect the livelihoods of millions employed across the textile value chain, a sector responsible for roughly one-third of India's total exports.

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