Raw Cotton Import Duty Withdrawal Essential for Competitiveness of Apparel Sector: Study

Why It Matters

Eliminating the duty could lower input costs, boost garment output and revive export growth, strengthening India’s position in the global apparel market. Aligning policy across ministries would also protect cotton growers while enhancing the entire value chain.

Key Takeaways

• 11% cotton duty hinders Indian mills vs duty‑free Asian rivals
• Textile ministry pushes duty removal; agriculture ministry seeks farmer safeguards
• Proposed cotton price stabilization fund offers 5% interest subvention
• Strategic cotton reserve of three months suggested for CCI
• Export decline of 2.2% to $35.79 bn highlights sector stress

Pulse Analysis

India’s textile sector faces a structural cost gap because raw cotton still carries an 11% import duty, whereas regional competitors such as Bangladesh, Vietnam and Pakistan source cotton duty‑free. The higher landed cost squeezes mill margins, discourages capacity expansion and erodes price competitiveness in global apparel contracts. By aligning its duty policy with neighboring exporters, India could reduce raw material expenses by several percentage points, directly supporting higher output and better pricing leverage in overseas markets.

Beyond duty removal, the Gherzi‑ICAC report proposes a cotton price‑stabilisation fund that would provide a 5% interest subvention to manufacturers during peak procurement months. Such a mechanism would mitigate cash‑flow pressures caused by volatile global cotton prices, encouraging steadier production schedules and protecting working capital. Coupled with a strategic three‑month cotton reserve managed by the Cotton Corporation of India, the scheme aims to buffer supply shocks, smooth price swings, and create a more predictable environment for both growers and processors.

Policy coordination remains the critical hurdle. While the Textile Ministry argues for a temporary duty waiver to spur garment exports, the Agriculture Ministry cautions against unintended impacts on farmer incomes. A balanced approach—combining duty relief, targeted financial support, and a managed reserve—could reconcile these concerns, fostering a resilient value chain that benefits growers, mills, and exporters alike. Such reforms would position India to recapture lost export momentum and reinforce its status as a leading global apparel supplier.