New Delhi: A day after the US’s 50% tariffs on Indian items took impact, the Indian authorities prolonged the exemption on uncooked cotton import responsibility and agriculture cess until 31 December 2025.
Earlier than the exemption, cotton imports into India attracted a mixed responsibility of round 11%. The reduction, which was initially notified for the interval between 19 August and 30 September, has now been expanded to cowl the final three months of the 12 months, based on the finance ministry.
The choice, whereas aimed toward shoring up provides for the home textile trade forward of the competition season, can also be being seen as a calibrated gesture towards Washington at a time of strained commerce relations.
This comes at an important time in India-US commerce relations, with Washington lately imposing steep reciprocal tariffs on Indian exports and a standstill in commerce talks. As per the joint assertion issued by the management of each nations on 13 February, the primary tranche of the Bilateral Commerce Settlement (BTA) must be finalised by the autumn of 2025.
“It is a calibrated gesture that addresses US considerations whereas safeguarding home sensitivities,” mentioned Ajay Srivastava, founding father of the International Commerce Analysis Initiative (GTRI). The extension window will enable New Delhi to retain bargaining leverage in bilateral talks, which stalled after the US cancelled its newest negotiating spherical, he mentioned.
India’s cotton output has been falling, from about 33.7 million bales in FY23 to an estimated 30.7 million bales in FY25, forcing mills to step up imports. Trade associations had been warning that tight provides may push up yarn and garment prices, threatening export competitiveness. With almost 35 million individuals depending on the cotton worth chain and textiles accounting for about 80% of India’s textile exports, the federal government hopes the responsibility reduction will cool uncooked materials costs.
For American exporters, the transfer affords a direct opening. Nearly all of India’s $1.2 billion cotton imports in FY25 had been of fibre staple size 28 mm or above, a phase the place the US is a number one provider.
“Cotton was a sticking level within the discussions. This transfer can inject goodwill into the dialogue and maybe pave the way in which for broader tariff concessions in textiles,” mentioned an government with a number one attire exporters’ affiliation.
India’s cotton imports surged to 2.71 million bales in FY25 from 1.52 million bales in FY24, with the US, Brazil, Egypt and African producers reminiscent of Benin and Tanzania among the many key suppliers.
Whereas Washington’s tariff hike has solid a shadow over bilateral commerce prospects, New Delhi’s transfer on cotton is being learn as an try to melt the sides of the dispute.
As per the findings of Crisil Scores, income progress of India’s readymade garment (RMG) trade is ready to almost halve year-on-year this fiscal, because the imposition of fifty% tariffs by the US on imports from India turns into efficient from 27 August. This, coupled with a decline in profitability, will influence the credit score metrics of trade gamers. The influence will differ by firm, with some deriving greater than 40% of their income from the US, it mentioned.
