The Indian government has extended its waiver on cotton import duties until December 31, 2023. This decision is intended to support textile manufacturers facing pressure from high US tariffs.
Impact of Cotton Duty Waiver
Global cotton prices rose by 0.2% following the announcement, however, additional imports may depress demand for local fiber and lower domestic prices. India had earlier lifted an 11% duty on cotton imports, which is now effective until the end of December.
Risks to Small Exporters and Jobs
The new US tariffs pose a threat to thousands of small exporters and jobs in India, particularly in Gujarat. Economists warn that this could slow down the country's economic growth. Negotiations to reduce tariffs have yet to yield results.
Market Prospects and Consequences
Imports of cotton are expected to reach a record 4.2 million bales this year. A significant portion of shipments is anticipated in the first quarter of the next year, which could help to lower prices. As Atul Ganatra, president of the Cotton Association of India, noted, the extension of the waiver will allow manufacturers to secure larger volumes of imported cotton.
The extension of the import duty waiver for cotton is a crucial step in supporting India's textile sector, but it may also create challenges for the local market and exporters in light of global trade shifts.
