Is cotton the new trade-tariff candy? Earlier, when the Government waived the 11 per cent duty on cotton imports for a short period (August 19-September 30), critics termed it as an effort to placate the White House. Recent reports that this was extended till December 31 gave them a chance to claim, “I told you so”. The US’ tariff of 50 per cent puts Indian textiles exporters at a disadvantage since competitors like Bangladesh and Vietnam are subjected to 20 per cent. Even China attracts 30 per cent.
Hence, the duty exemption on cotton was seen as a strategic move in response to the escalating international and domestic pressures. While it helped India's textile sector, it pleased the White House, which wanted India to reduce the high tariffs on American exports of agricultural products. The Indian policy-makers justified it as a short-term step “in the public interest.” It seemed like a near-perfect solution to ameliorate price volatility (due to fear of shortages), supply constraints, and enhanced global competition.
The extension of the exemption indicates that it may be a bait to reel in the US to the negotiation table. It may hint that India is willing to open the agriculture sector in a careful and calibrated manner so that the moves do not hurt the farmers and impact the ruling regime’s electoral equations. Recent reports reveal that there are moves on both sides to resume the bilateral trade talks.
The textile industry welcomed the move, which came before the festive season, when demand for garments is high. The US Department of Agriculture (USDA) was happy. Most farmer groups denounced the move, claiming it as an effort by New Delhi to extend an olive branch to Washington. The real picture, as usual, is complex.
The RSS-affiliated farmers’ union, Bharatiya Kisan Sangh (BKS), feels that the cotton production in the country may fall to 30 million bales this year, against a projected demand of 31.5 million. The production has consistently declined over the past few years, from 35.3 million bales in 2020-21 to 30.7 million in 2024-25, due to adverse weather conditions and pest attacks. The 2024-25 cotton season was marred by these reasons, as well as acreage decline due to crop switching (notably in Gujarat).
Official data shows that the area under cultivation this year has come down by 3.24 per cent compared to the previous year. Lower production invariably boosts prices and allows the farmers to improve their incomes. Duty-free imports enhance supplies and curtail any price increases. Logically, the farmers are against New Delhi’s decision, especially the extension part.
BKS claims that after the duty waiver, cotton price fell by `1,100 per candy (356 kg), and may fall further. Although the Minimum Support Price (MSP) for medium staple cotton for 2025-26 was fixed at `7,710 per quintal, and `8,110 for long staple, market prices were adversely affected in the recent past. The state-owner buyer, Cotton Corporation of India, reduced its procurement price, even as the textiles industry sought further cuts. Farmers want higher prices. Terming the waiver “a death warrant to cotton farmers,” the Samyukta Kisan Morcha (SKM), a platform of 40-odd farmers’ organisations, wants the MSP to be hiked to `10,075 per quintal.