India removes import duty on cotton in temporary relief for garment industry
The temporary suspension of the duty, announced in a government order late on Monday, is seen as a relief for India's garment industry, which is reeling from a steep 50% tariff on shipments to the United States.
The U.S. tariff comprises an existing 25% levy and an additional 25% set to take effect later this month, imposed as a penalty for India's purchases of Russian oil. The effective rate compares unfavourably with 20% for Bangladesh and Vietnam, and 30% for China.
Industry bodies such as the Confederation of Indian Textile Industry (CITI) had urged the government to scrap the cotton import duty to help make the sector more competitive.
Before the exemption, cotton imports were subject to an 11% duty.
Industry officials now expect the government to extend duty-free cotton imports beyond September.
Reuters earlier reported that some Indian exporters were scrambling to explore manufacturing options overseas to offset the impact of the higher tariffs.
India's garment sector was already grappling with a labour crunch and limited production capacity. The prospect of exporters relocating production abroad poses a further challenge to the government's "Make in India" manufacturing drive.
India aims to increase textile exports to $100 billion by 2030.
The sharp rise in U.S. tariffs comes just as India was emerging as a strong alternative for American garment buyers, with Bangladesh facing political uncertainty and companies seeking to diversify supply chains beyond China.
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