Indian textile stocks soared on August 19, 2025, after the government announced a temporary waiver of the 11% import duty on raw cotton, offering a much-needed lifeline to an industry reeling from new US tariffs and global competition. The Ministry of Finance’s late-night notification, effective immediately and running through September 30, comes as the sector faces mounting pressure from a 50% tariff imposed by the United States, India’s largest export market for ready-made garments.
According to The Economic Times, Vardhman Textiles shares led the rally, jumping 9.3% to Rs 447.50. Ambika Cotton Mills followed with a 7.6% gain, closing at Rs 1,536.65, while Welspun Living surged 6.5% to an intraday high of Rs 124.75 on the Bombay Stock Exchange. Gokaldas Exports also saw a 3.5% boost, peaking at Rs 751.45. The market’s reaction underscored the industry’s relief at the government’s decision, which fulfills a long-standing demand from trade bodies such as the Confederation of Indian Textile Industry (CITI).
The removal of the duty, which had weighed heavily on sector margins since its introduction in February 2022, was described by the government as “necessary in the public interest.” The Finance Ministry’s order also eliminates the Agriculture Infrastructure and Development Cess (AIDC), further reducing the cost of importing cotton. The move, as reported by Indian Express, is seen as a direct response to the US tariffs, which threaten to make Indian exports uncompetitive in a key market that accounted for 33% of the country’s garment exports in 2024, according to the Apparel Export Promotion Council (AEPC).
Industry leaders wasted no time in welcoming the measure. “CITI has long been requesting that the import duty on cotton be removed to help domestic cotton prices align with international prices. We, therefore, greatly welcome this measure taken by the authorities even though the relief is only available temporarily,” said CITI secretary general Chandrima Chatterjee, quoted by Indian Express. The AEPC added that India’s top exports to the US include cotton T-shirts (9.71% of exports), women’s or girls’ cotton dresses (6.52%), and babies’ cotton garments (5.46%). These products, the council noted, hold significant shares in the US import market, making the impact of the tariffs—and the relief from cheaper cotton—especially profound.
The 50% US tariff, which combines an existing 25% levy with a new 25% penalty related to India’s purchases of Russian oil, stands in stark contrast to the rates faced by India’s competitors. As Business Today reported, Bangladesh and Vietnam both face a 20% tariff, Indonesia and Cambodia are at 19%, and China at 30%. The disparity has forced Indian mills to seek ways to cut costs and remain competitive, with many shifting to Brazilian cotton in recent years as US cotton became more expensive due to the duty. The share of US cotton in India’s imports dropped to 19% in fiscal 2024-25 from 40–50% before the duty was imposed.
The government’s decision, while cheered by mills and exporters, is a delicate balancing act. By making imported cotton cheaper, the move eases cost pressures for spinning mills and garment manufacturers, narrowing the gap with global competitors and improving profitability. As Reuters noted, the surge in textile stocks following the announcement reflects expectations of healthier margins across the sector. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), described the waiver as “short-term relief to help mills facing high input costs and support yarn and fabric exporters struggling with competitiveness, particularly ahead of India’s festival season.”
But not everyone is celebrating. Farmers in major cotton-growing states like Gujarat, Maharashtra, and Telangana are wary of the potential consequences. The arrival of duty-free cotton imports could put downward pressure on domestic prices, especially for those producing medium-staple cotton that competes directly with imported varieties. “The government limited the relief to 40 days to avoid sustained downward pressure on domestic cotton prices, which could hurt farmers. The measure is a time-bound stopgap to stabilize markets before the new crop arrives,” Srivastava told Business Today.
Industry officials and observers are already speculating about the future. While the current exemption is set to expire on September 30, many believe it could be extended if market conditions remain challenging. Such a move, however, could amplify negative effects on domestic cotton prices and deepen farmer discontent. The government’s strategy, as outlined by Business Today, is to support the export-oriented textile industry in the short term without inflicting lasting harm on farmer incomes—a tricky balancing act in a sector that directly and indirectly supports millions of livelihoods across India.
The stakes are high. The Ministry of Textiles has set an ambitious goal to expand the sector to $350 billion by 2030, including $100 billion in exports, up from the current market size of $180 billion. This vision depends on India’s ability to remain competitive in global markets, particularly the US, where buyers have increasingly looked to diversify sourcing away from China and Bangladesh. Sustained cost pressures, industry bodies warn, could undermine this momentum and threaten the “Make in India” initiative at a critical juncture.
India’s garment industry is also grappling with other challenges, including labor shortages and limited production capacity, leading some exporters to consider shifting production abroad. The sharp rise in US tariffs comes just as India was gaining traction with American buyers, adding urgency to the government’s efforts to stabilize the sector. According to Business Today, industry groups like CITI have been vocal in their calls for policy support, arguing that without relief, India risks losing its competitive edge to neighbors with lower tariff barriers and easier access to raw materials.
For now, the temporary waiver offers a reprieve. Mills can access cotton at international prices, improving their margins and helping them weather the immediate storm of US tariffs. Exporters, especially those focused on ready-made garments, home textiles, and carpets—sectors where the US accounts for 60% and 50% of exports, respectively, according to AEPC—stand to benefit the most. At the same time, the government’s cautious approach reflects a recognition of the risks to domestic cotton growers and the broader rural economy.
As the September 30 deadline approaches, all eyes will be on the government’s next move. Will the exemption be extended, deepening the divide between mills and farmers? Or will policymakers find a way to balance the competing interests of exporters and growers, keeping India’s textile ambitions on track? For now, the market rally and cautious optimism among industry leaders suggest that, at least temporarily, the government has managed to thread the needle.
