The Confederation of Indian Textile Industry (CITI) has issued a high-stakes call to the government, asserting that the permanent removal of the 11% import duty on cotton is no longer a policy preference but a strategic necessity to bridge a widening pricing gap. As Indian exporters face a devastating 50% tariff in the United States, the industry argues that eliminating raw material taxes is the only immediate way to survive an increasingly protectionist global trade environment.

The Pricing Gap Crisis: Navigating the 50% US tariff wall

The most critical challenge facing the Indian textile and apparel (T&A) sector is the sudden loss of price competitiveness in its largest market. Effective August 27, 2025, the US implemented a 50% tariff on a broad range of Indian textile imports, combining a 25% reciprocal duty with an additional 25% penalty. This has created a massive pricing disparity between Indian goods and those from nations like Vietnam and Bangladesh, who benefit from lower or zero duties.

Export Market Reality

Source: DGCIS / CITI Industry Intelligence

This pricing gap is leading to a rapid diversion of orders as US buyers, sensitive to the 30% cost difference, shift procurement to Southeast Asian hubs. CITI emphasizes that while the 50% tariff is an external factor, the 11% import duty on cotton remains a domestic handicap that the government can control to narrow this gap. The impact is already stark, with one-third of textile exporters reporting that their turnover has halved following the imposition of these tariffs.

Analyzing the Merit: Duty removal as a competitive buffer

CITI’s case for scrapping the duty rests on the premise that Indian mills must have access to cotton at international parity prices. Currently, the 11% duty keeps domestic cotton prices artificially high, often trading at a premium to the global Cotlook 'A' Index. By removing the duty, the industry could reduce its yarn and fabric production costs by roughly 6% to 8%, providing a vital cushion that allows exporters to lower their quotes.

Cost Comparison: Why Duty-Free cotton matters

This reduction helps exporters stay in the "consideration set" for global retailers who are currently exiting the Indian market due to price. While the government extended the duty exemption until December 31, 2025, the industry is pleading for a permanent waiver to stabilize the long-term fiber and yarn supply chain.

Redesigning Fiber Dynamics: Balancing supply and farmer interests

The primary challenge to this plan is the perception of its impact on domestic cotton farmers, yet the context of the 2025-26 season suggests the duty is not the farmer's primary shield. Initial estimates for the season suggest a 2.4% dip in production to approximately 305 lakh bales due to unseasonal rains, a shortfall that naturally pushes domestic prices up and widens the gap with global rates.

Furthermore, the government has already protected farmer interests by hiking the Minimum Support Price (MSP) for long-staple cotton to ₹8,110 per quintal, an increase of nearly 8%. Industry leaders argue that the MSP, managed by the Cotton Corporation of India (CCI), is the appropriate tool for farmer protection rather than an import tax that cripples the downstream value chain. Additionally, the quality gap remains a factor since India produces limited quantities of Extra-Long Staple (ELS) and contamination-free cotton, making duty-free imports essential for manufacturers sourcing specific fibers for premium global brands.

The growth plan under pressure

The Indian textile industry is a cornerstone of the national economy, contributing 2% to total GDP and 11% to total manufacturing output. Under the "5F" Vision, the government aims to scale textile exports to $100 billion by 2030. However, large Indian retail houses and exporters are finding these investments at risk if core manufacturing units become unviable due to raw material costs.

The next step

As the December 31 deadline for the current duty waiver approaches, the industry remains on edge. CITI maintains that a permanent removal is the only way to signal stability to global buyers and prevent an irreversible loss of market share to regional competitors.