India may take middle path, unlikely to remove import duty on cotton

India is unlikely to eliminate the 11% import duty on raw cotton entirely, but is considering a "middle path" — either a seasonal zero-duty import window in ...

What Happened

India is unlikely to eliminate the 11% import duty on raw cotton entirely, but is considering a "middle path" — either a seasonal zero-duty import window in September–October 2026 when domestic stocks are adequate, or a partial reduction to 6–7%.
The current 11% duty (comprising 10% basic customs duty and 1% cess) was reinstated from January 1, 2026, after being waived between August and December 2025 to support the textile sector amid global trade pressures.
Since the duty's reinstatement, textile production has declined by approximately 4% and apparel production by 10% year-on-year, intensifying industry demands for relief.
US lawmakers have formally urged India to eliminate the 11% duty on American raw cotton imports as part of ongoing bilateral trade negotiations; the February 2026 India-US trade framework reduced tariffs on Indian apparel from 50% to 18%.
The zero-tariff benefit for Indian garment exporters under the US deal is conditional on use of US-origin cotton or man-made fibres, creating a structural incentive for spinners to import rather than source domestically.
Farmer organisations and the Cotton Corporation of India (CCI) are resisting a full duty waiver, arguing it would depress domestic cotton prices and undercut the MSP framework.

Static Topic Bridges

Import Duty on Agricultural Commodities

India levies customs duties on agricultural imports primarily to protect domestic farmers from cheap foreign competition. Duties are set under the Customs Tariff Act, 1975, and the rates can be modified by the central government through notifications under the Finance Act. For cotton, the basic customs duty is 10% and an agricultural infrastructure development cess of 1% applies, totalling 11%.

India is a signatory to the WTO's Agreement on Agriculture, which sets bound tariff rates — the maximum duty a country can legally charge. India's bound rate on cotton is 100%, far above the applied 11%, giving the government flexibility to reduce duties without violating WTO obligations.
Duty waivers can be granted temporarily under Section 25 of the Customs Act for specific policy purposes such as ensuring raw material availability for export-oriented industries.

Connection to this news: The government is using this flexibility to explore a partial or seasonal reduction in cotton import duty, balancing competing demands of the textile industry (lower raw material cost) and cotton farmers (price support).

Minimum Support Price (MSP) for Cotton

The MSP is the floor price announced by the government at which it commits to purchase agricultural produce through designated agencies, shielding farmers from market price volatility. The Commission for Agricultural Costs and Prices (CACP) recommends MSPs based on cost of production, demand-supply conditions, and parity with other crops.

MSP for cotton (medium staple) for the 2025–26 kharif season is ₹7,121 per quintal; for long-staple cotton it is ₹7,521 per quintal — revised upward significantly from previous years.
The Cotton Corporation of India (CCI) is the nodal procurement agency for cotton under the price support scheme.
MSP is not legally guaranteed; its effectiveness depends on government procurement operations in years of market price distress.

Connection to this news: Allowing unrestricted cheap imports of cotton would push domestic market prices below MSP, nullifying the price support mechanism for millions of cotton farmers in states like Gujarat, Maharashtra, and Telangana.

India's Cotton Value Chain

India is the world's second-largest cotton producer and a major textile exporter. The value chain runs from raw cotton cultivation → ginning and pressing → spinning (yarn) → weaving/knitting (fabric) → dyeing-processing → garment manufacturing → retail and export. Each stage adds value and employs a distinct workforce.

India has approximately 24 million cotton-growing farm households, concentrated in Maharashtra, Gujarat, Telangana, Andhra Pradesh, and Punjab.
The spinning and weaving sectors are the primary consumers of raw cotton; they compete globally on yarn and fabric exports.
India's textile and apparel exports are approximately $36–40 billion annually, making the sector a key employment generator (employing over 45 million people directly).

Connection to this news: Any change in cotton import duty directly affects the cost competitiveness of spinning mills (who want cheaper imports) versus the income of cotton farmers (who need domestic prices to stay near MSP), making this a classic multi-stakeholder trade policy dilemma.

Key Facts & Data

Current cotton import duty: 11% (10% basic + 1% cess), reinstated January 1, 2026
MSP for long-staple cotton (kharif 2025-26): ₹7,521 per quintal
Textile and apparel production declined ~4% and ~10% respectively after duty reinstatement
India-US bilateral trade framework (Feb 2026): Indian apparel tariffs reduced from 50% to 18% in the US market
India's bound WTO tariff rate on cotton: 100% (applied rate of 11% is well within WTO limits)
Cotton is grown by approximately 24 million farm households across India
India's textile and apparel sector employs over 45 million people directly
Options under consideration: seasonal zero-duty window (Sept–Oct) or reduction to 6–7%