India’s cotton sector faces a critical phase in 2025. Domestic production has fallen sharply, prompting the government to withdraw the 11% import duty on cotton until the end of the current season on 30 September. This decision follows a steep rise in cotton imports despite the duty, reflecting the textile industry’s raw material shortage. The move aims to balance the interests of farmers and manufacturers amid fluctuating supply and demand.
Background of Cotton Import Duty
The 11% import duty was introduced in February 2021 to protect cotton farmers. At that time, India produced 350 lakh bales annually, slightly exceeding domestic demand of 335 lakh bales. Despite exports, imports continued, pressuring local growers. The duty sought to reduce imports and support farmer income by raising cotton prices.
Recent Production and Import Trends
India’s cotton output has dropped to 294 lakh bales in 2024-2025, the lowest in 15 years. Demand stands at 318 lakh bales including non-mill use. This production shortfall is about 20 lakh bales less than the previous year. Imports surged over 100%, reaching nearly 40 lakh bales. Major suppliers include Australia, the United States, Brazil, and Egypt. The cotton trade value doubled from $579.2 million to $1.20 billion between FY2023-24 and FY2024-25.
Government Support to Farmers and Market Intervention
The Cotton Corporation of India (CCI) bought nearly 100 lakh bales at Minimum Support Price (MSP), spending ₹37,500 crore. It has sold 73 lakh bales in the market to stabilise prices. For the 2025-2026 season starting October 1, MSP was increased by 8% to encourage cultivation. Farmers in northern India will supply cotton from October, while central and western states will begin after Deepavali.
Implications of Duty Withdrawal
The withdrawal allows duty-free imports till 30 September, benefiting textile mills and garment exporters by lowering raw material costs. This helps them compete globally on a level playing field. However, cotton farmers express concerns. They argue that removing the duty disincentivises cultivation and offers little government support. Farmer groups show the need for stronger backing to sustain production.
Long-Term Industry Demands
The textile industry seeks a stable and predictable cotton policy. It suggests suspending import duty annually during the non-peak season (April to September) when most cotton is sold. The industry also requests a 5% interest subvention on working capital loans for mills, especially MSMEs, to secure cotton during peak seasons. This could reduce government MSP expenditure and ensure steady raw material supply.
Market Dynamics and Future Outlook
With fluctuating production and rising imports, India’s cotton sector remains vulnerable. Balancing farmer welfare and industry needs is critical. Policy clarity and financial support mechanisms are essential for sustainable growth. The government’s approach will influence cotton cultivation trends and the competitiveness of India’s textile exports.
Questions for UPSC:
- Discuss the impact of import duties on agricultural commodity markets with reference to cotton in India.
- Critically examine the role of Minimum Support Price in stabilising farmer incomes and its limitations.
- Explain the challenges faced by the Indian textile industry in raw material procurement and how government policies can address them.
- With suitable examples, discuss the importance of balancing farmer interests and industrial growth in agricultural policy formulation in India.
