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Mumbai: India’s textile industry is set to benefit from a temporary exemption of customs duties on raw cotton imports, effective from 19 August to 30 September 2025. The move, announced by the Central Board of Indirect Taxes and Customs, removes the 5% Basic Customs Duty, the 5% Agriculture Infrastructure and Development Cess, and the 10% Social Welfare Surcharge previously levied on cotton imports. In total, the waiver eliminates an 11% import duty, offering immediate cost relief to manufacturers across the textile value chain.

The exemption is expected to ease pressure on domestic cotton prices, which have remained elevated due to supply constraints and seasonal volatility. By allowing duty-free imports, the government aims to improve raw cotton availability, reduce input costs, and stabilise prices for downstream products such as yarn, fabric, garments, and made-ups. This is particularly significant for small and medium enterprises (SMEs), which form the backbone of India’s textile ecosystem and are more exposed to fluctuations in raw material costs.

The timing of the waiver is critical. With export competitiveness under strain and inflationary pressures affecting consumer demand, the cost reduction could help manufacturers maintain margins and pricing stability. Lower input costs may also support India’s textile exports, which face stiff competition from countries with more favourable sourcing and duty regimes.

Industry associations have long called for the removal of import duties on cotton, citing the need to align domestic policy with global trade realities. The current exemption responds directly to these concerns, albeit for a limited duration. While the measure is temporary, it signals a willingness to intervene in support of a sector that contributes significantly to employment and foreign exchange earnings. Beneficiaries of the move include spinning mills, fabric producers, garment exporters, and ancillary units that rely on cotton as a primary input. The relief is expected to be most pronounced for SMEs operating in high-volume, low-margin segments, where even modest cost reductions can have a meaningful impact on viability.

The exemption also has implications for price transmission across the supply chain. If cotton prices soften as expected, consumers may see more stable prices for finished textile products, particularly in the domestic market. However, the short duration of the waiver means that its long-term impact will depend on subsequent policy decisions and market responses. The government’s decision reflects a balancing act between protecting domestic producers and ensuring affordability and competitiveness. While cotton farmers may be concerned about the potential impact on domestic prices, the exemption is framed as a short-term measure to address immediate supply and cost challenges.

As the textile sector navigates global headwinds and domestic constraints, the customs duty waiver offers a window of relief. Whether it translates into sustained gains will depend on how quickly manufacturers can leverage the cost advantage and whether the government considers extending or institutionalising similar measures in future.

(Write to us at editorial@bombaychamber.com)