Cotton duty or competitiveness? The bigger challenge facing India’s $190 billion textile industry

The government’s temporary custom duty exemption on cotton is expected to ease cost pressures on textile manufacturers. Industry officials and sector experts, however, argue that the measure reveals deeper challanges confronting India’s $190 billion textile and apparel industry. They point to persistent challenges in productivity, quality, and global competitiveness that require structural reforms instead of temporary tariff interventions.

Notably, the government on May 30, 2026, announced a temporary exemption on customs duties on cotton imports between June 1 and October 31, 2026. The measure aims to ensure adequate cotton availability for the textile industry, support MSMEs, moderate input costs, and strengthen the competitiveness of Indian textiles while safeguarding farmers’ interests.

Union Textiles Minister Giriraj Singh told The Economic Times Digital that the temporary duty exemption, applicable during the cotton off-season, is intended to support the entire cotton value chain by easing input cost pressures, strengthening textile exports, and maintaining stability in the domestic market.



Immediate relief for exporters
Industry stakeholders believe that the government decision comes at a time when textile exporters are facing multiple pressures. Lingering geopolitical tensions in West Asia have added fresh uncertainty to global trade flows, freight rates remain volatile, and manufacturers are grappling with fluctuating input costs, as they seek to capitalise on opportunities presented by free trade agreements (FTAs) and changing global sourcing patterns.

For exporters, the immediate benefit of the duty waiver is clear.

Anant Srivastava, President of the Home Textile Welfare Association (HEWA), says the removal of import duty could help correct cotton prices by as much as 6% and bring much-needed stability to a market that has been under pressure in recent months.

According to him, cotton prices have risen nearly 15% over the past 90 days, hurting both existing and future export orders, particularly in value-added categories such as garments, towels, bed sheets and home furnishings. The situation has been aggravated by a sharp increase in packaging costs and highly unstable freight rates. Buyers are increasingly reluctant to make large or long-term commitments, leading to a decline in orders across several value-added textile segments, he says.

Not everyone, however, views the issue merely through the lens of textile competitiveness.

Aditya Sesh, Member of the Expert Committee on eNWRS, an initiative under the Ministry of Agriculture & Farmers’ Welfare, says the debate reflects the competing interests of farmers and manufacturers within the same value chain. Sesh believes that lower import duties can help stabilise raw material prices for textile mills and exporters, and they may also exert downward pressure on domestic cotton prices.

He describes the issue as a “catch-22 situation” for policymakers attempting to balance farmer incomes with the textile industry’s competitiveness. “If I look at it as a cotton farmer, it can be a concern. If I look at it from the perspective of the textile industry and the broader economy, the logic is different,” Sesh explains.

For many in the industry, however, the latest duty waiver addresses only a symptom rather than the underlying problem. For them, it has once again revived a long-running question within the textile sector: why does one of the world’s largest cotton-producing countries repeatedly find itself seeking relief on cotton imports?


Why India still needs cotton imports
Industry stakeholders trace the recurring debate over cotton imports to a set of structural issues that have been building for years, from stagnant yields and quality concerns to a widening competitiveness gap with rival textile-producing countries. The Confederation of Indian Textile Industry (CITI), which had been seeking removal of the duty, argues that cotton imports are neither large enough nor disruptive enough to threaten domestic growers.

Cotton imports have averaged around 20 lakh bales annually over the past decade, accounting for roughly 7% of domestic production, as per CII data. These imports are largely driven by quality specifications and export commitments rather than replacing domestic cotton.

Textile manufacturers also point to a policy disadvantage vis-à-vis competing export nations.

Most major textile-exporting countries, including Bangladesh, Vietnam, Indonesia, and Pakistan, allow duty-free imports of cotton. This enables their spinning industries to source raw materials at globally competitive prices. Indian manufacturers, by contrast, have periodically faced one of the highest tariff burdens among major cotton-importing textile economies, according to the WTO tariff database.

Industry stakeholders say this cost disadvantage has increasingly been reflected in export performance. India’s share in global cotton yarn exports has declined from around 38% in 2015 to roughly 28% in 2024, even as countries such as Vietnam and Bangladesh have strengthened their position in global textile supply chains.

Against this backdrop, Ashwin Chandran, Chairman of CITI, says the 11% import duty had become a significant disadvantage for Indian manufacturers. “Amid the ongoing global volatility, the 11% import duty on cotton was acting as a major hindrance, especially since our major Asian competitors already have duty-free access to cotton,” Chandran says. He contends that the duty increases costs across the value chain and makes it harder for exporters to leverage opportunities arising from new trade agreements and shifting global sourcing patterns.

The disadvantage faced by Indian mills is not just limited to yields and fibre quality. Industry stakeholders highlight that policy asymmetries have further widened the gap between Indian manufacturers and their global competitors.

Chandran says the country’s challenge is not a lack of cotton production, but the limited availability of contamination-free and specialised cotton required for high-value textile manufacturing. “While Indian cotton broadly matches international parameters in terms of staple length and strength, two structural disadvantages persist. Indian cotton has higher trash content because of manual picking, while yarn made from imported cotton, such as Australian, Brazilian and the US varieties, delivers at least 4% higher realisation, impacting mill profitability,” he says

He further emphasises that quality-driven cotton imports should not be viewed as a threat to domestic farmers since they often cater to specialised requirements and export commitments.

According to Chandran, these factors make selective imports necessary for producing premium yarns and fabrics demanded by global buyers. He also points out that after the reimposition of import duty, domestic cotton prices consistently traded at a premium to international benchmarks, increasing raw material costs for spinners and eroding competitiveness across the textile value chain.


A deeper competitiveness challenge
The issue assumes greater significance because cotton and cotton-based products continue to dominate India’s textile exports, making the health of the cotton ecosystem critical to the sector's long-term competitiveness.

Neelesh Hundekari, Senior Partner at Kearney India and a member of the CII Textile Committee, says cotton remains central to India’s textile economy. According to Hundekari, nearly two-thirds of India’s textile exports are linked to cotton products. However, the country’s traditional strength in cotton textiles could come under pressure if productivity continues to stagnate. India’s cotton yields have steadily declined over the years and are now among the lowest globally, he says, highlighting that there is an urgent need to improve productivity and ensure adequate cotton availability for both domestic consumption and exports.

That concern is echoed by other industry observers. Kanishk Maheshwari, Co-founder and Managing Director of Primus Consulting, believes the industry’s challenge is fundamentally structural rather than tariff-related. “India cannot realistically aspire to become a global textile manufacturing powerhouse while taxing a critical raw material with an 11% cotton import duty,” he says.

According to him, India’s cotton yield remains around 450-500 kg per hectare, compared with a global average of nearly 800 kg per hectare. Countries such as Brazil and China have productivity levels several times higher. At the same time, concerns around contamination and fibre quality continue to affect India's competitiveness in premium textile markets. The result, Maheshwari argues, is that Indian mills often pay higher prices for cotton while competing against manufacturers in countries that enjoy duty-free access to imported fibre and, in many cases, better quality raw materials.

Sesh believes part of the challenge lies deeper within the cotton ecosystem. He says rising cultivation costs, evolving seed requirements, and productivity constraints have increased pressure on growers over the years, making it harder to sustain improvements in both yields and profitability. He further highlights that while duty reductions may provide temporary relief to manufacturers, they do little to address the underlying factors affecting cotton production and farmer economics.

Kearney’s Hundekari maintains that competitiveness ultimately depends on production costs, quality, service levels, and lead times rather than restrictions on trade flows. In an increasingly integrated global market, manufacturers can import raw material if domestic supplies are insufficient. The larger challenge, he says, is ensuring that Indian cotton and textile products remain globally competitive.

Industry stakeholders also point to the need for sustained efforts to improve yields and fibre quality.

Sanjay Jain, Managing Director of TT Ltd, says India’s productivity levels remain well below global benchmarks despite the country having the world’s largest area under cotton cultivation. According to Jain, pilot initiatives undertaken by industry groups have demonstrated that substantially higher yields are achievable under the right conditions. In some cases, yields have touched nearly 1,000 kg per hectare, suggesting that the productivity gap is less a technological limitation and more an execution challenge.

“We have seen examples where yields have reached 1,000 kg per hectare. This shows that it is possible,” Jain says.

TEXTILE EXPORTS OVER THE YEARS (Source: Textile Ministry)

In multiple ways, the industry’s response to the latest duty waiver reveals a broader concern. Manufacturers are not merely seeking cheaper imports; they are questioning why India’s textile sector, despite operating in one of the world’s largest cotton-producing nations, continues to face recurring shortages, quality concerns, and cost disadvantages.

Definitely, for the exporting community, the latest exemption offers temporary relief at a time of rising input costs and uncertain global demand. However, as industry views it, a larger challenge lies in building a cotton ecosystem capable of consistently delivering the volume, quality, and competitiveness required by global markets.

Trade expert Sesh maintains that any durable solution must improve value creation across the entire chain rather than focusing exclusively on either farmers or manufacturers. He points out that better yields, stronger quality standards, improved processing, and more remunerative returns for growers will all be necessary if India is to strengthen its position in global textile markets.

Until that happens, industry observers say, debates over cotton import duties are likely to resurface every time the sector faces supply pressures or a widening gap between domestic and international cotton prices.