New Delhi: In a move seen as breaking the ice in strained trade relations with the US, the Indian government late on Monday removed the customs duty and agriculture cess on cotton imports, a step that industry observers believe could ease tensions and create fresh room for engagement.
Through a notification issued by the ministry of finance, the Central Board of Indirect Taxes and Customs (CBIC) said all imports under heading 5201—covering raw cotton—will be exempt from duties between 19 August and 30 September. The decision is expected to directly benefit American exporters, who have been pressing for easier market access in India after Washington increased tariffs on Indian products earlier this year.
The development comes after months of back-and-forth between the two sides, with India holding its ground on sensitive sectors such as agriculture and dairy in bilateral trade talks. By offering temporary relief on cotton, New Delhi appears to be signaling flexibility without compromising on its core red lines.
The US team of negotiators, who were scheduled to visit New Delhi for the sixth round of talks on 25 August, has cancelled its visit, and no fresh date has been announced.
Notably, the 25% reciprocal tariffs on Indian exports imposed by US President Donald Trump took effect on 7 August may double to 50% on 27 August when the additional tariffs linked to New Delhi’s oil trade with Russia come into force.
Before the latest exemption, cotton imports into India attracted a combined duty of around 11%.
“It is a calibrated gesture that addresses US concerns while safeguarding domestic sensitivities,” said Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), a think tank. Srivastava added that the short exemption window allows the government to retain leverage in ongoing negotiations.
The move is also being read against the backdrop of India’s own supply needs. Cotton availability in the domestic market has been tight, with industry bodies repeatedly flagging the risk of higher yarn prices and downstream cost pressures in textiles. By permitting duty-free imports, the government aims to cool raw material prices ahead of the festival season, when demand for garments typically spikes.
For the US, the exemption is significant. With China slapping extra duties on American cotton, India has emerged as a promising alternative market. Industry leaders said the duty removal could help bridge some of the recent mistrust. “Cotton was a sticking point in the discussions. This move can inject goodwill into the dialogue and perhaps pave the way for broader tariff concessions in textiles,” said an executive with a leading apparel exporters’ association.
“CITI (Confederation of Indian Textile Industry) has long been requesting that the import duty on cotton be removed to help domestic cotton prices align with international prices. We therefore greatly welcome this measure taken by the authorities, even though the relief is only available temporarily,” said CITI secretary general Chandrima Chatterjee.
India imports cotton mainly from a handful of key suppliers. The largest share comes from the US, which has become an important source especially after China imposed extra duties on American cotton. Other significant suppliers include Brazil, Egypt and some African countries such as Benin, Tanzania and Mali, which provide long-staple and extra-long-staple varieties not grown widely in India. Australia also contributes, though shipments fluctuate depending on production cycles.
According to the Cotton Association of India, imports surged to 2.71 million bales in FY25, compared with 1.52 million bales in FY24 and 1.46 million bales in FY23. Each bale is equivalent to 170kg.
India’s cotton output dropped from about 33.7 million bales in 2022-23 to 32.5 million bales in FY24 and an estimated 30.7 million bales in FY25, according to agriculture ministry data. (The cotton production year runs from October through September.)
According to the US department of agriculture, China is the world’s largest producer of cotton, with its 32 million bales in 2024/2025, accounting for 26% of global production. India stood second with its 25 million bales, accounting for 21% of global cotton production.
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