Govt Mulls Customs Duty Relief on Cotton Import to Support Textile Industry

Why It Matters

Lowering import duties would cut raw‑material expenses, improve margins and help India’s textile industry stay competitive amid weak global demand. The move aligns with the government’s ambitious export‑growth target for the sector.

Key Takeaways

• Govt considering cutting 5% duty on raw cotton imports.
• Duty removal aims to offset raw material price surge from West Asia.
• Rayon‑grade wood pulp duty reduction remains under review, not war‑linked.
• Textile exports fell to $15.77 bn FY26, underscoring sector strain.
• Government targets $100 bn textile exports by 2030 to boost economy.

Pulse Analysis

India’s textile manufacturers have long relied on domestic cotton, but the industry still imports long‑staple varieties from the United States, Egypt and Australia. The ongoing West Asia war has disrupted global supply chains, pushing raw‑material prices higher and prompting the Ministry of Textiles to explore a duty cut on raw cotton. By eliminating the 5% customs levy, the government hopes to lower production costs, protect profit margins, and keep Indian fabrics price‑competitive in export markets.

A parallel discussion centers on rayon‑grade wood pulp, a key feedstock for viscose fibers. While the 2.5% duty on pulp imports remains in place, officials note that pulp constraints stem from factors unrelated to the war, suggesting a more measured approach. Reducing this duty could further ease input costs for manufacturers of apparel and industrial fabrics, but policymakers are weighing the fiscal impact against broader trade considerations. The nuanced stance reflects a balance between immediate relief for the sector and longer‑term revenue implications.

The sector’s export performance underscores the urgency of policy action. Readymade garment exports slipped to $15.77 billion in FY26, and overall textile exports hover around $35‑40 billion annually, far short of the $100 billion target set for 2030. By cutting duties, the government aims to boost competitiveness, stimulate higher‑value production, and capture a larger share of global textile demand. If successful, the measures could revitalize a critical export earner that accounts for roughly 8‑10% of India’s merchandise trade, reinforcing the country’s position in the global apparel supply chain.