To boost the competitiveness of its cotton sector, India has exempted import duties on cotton. This measure, effective from August 19 to September 30, addresses a key demand from industry groups.
The Indian government’s recent decision to temporarily suspend the import duty on certain textile machinery, announced late on Monday, has been met with a sigh of relief by the nation’s beleaguered garment industry.
This strategic move is widely perceived as a crucial intervention to alleviate the immense pressure currently facing Indian apparel manufacturers, who are grappling with a punitive 50% tariff imposed on their shipments to the United States.
Industry struggles
For months, the Indian garment sector has been struggling to maintain its competitive edge in the global market. The substantial tariff levied by the US, a major export destination for Indian textiles, has significantly eroded profit margins and made Indian products considerably more expensive for American consumers.
This has led to a decline in export orders, an accumulation of inventory, and growing concerns about job security within the industry.
The temporary suspension of the import duty on textile machinery is expected to provide a much-needed impetus to modernisation and efficiency within Indian garment factories.
By making it cheaper to acquire advanced machinery, the government aims to encourage manufacturers to upgrade their production capabilities, enhance product quality, and ultimately reduce production costs.
This could, in turn, help offset some of the disadvantages posed by the US tariffs, allowing Indian garments to become more price-competitive once again.
Tariffs
India faces a US tariff of 25%, with an additional 25% penalty taking effect this month due to its Russian oil purchases. This combined 50% tariff is higher than the 20% levied on Bangladesh and Vietnam, and the 30% on China.
The government had been urged by industry bodies, including the Confederation of Indian Textile Industry (CITI), to abolish the import duty on cotton. This measure was seen as crucial for enhancing the competitiveness of the textile sector.
Previously, an 11% duty was applied to cotton imports before the exemption.
Government may extend duty-free cotton imports beyond September, as anticipated by industry officials, according to a Reuters report.
Reuters previously reported that some Indian exporters were urgently seeking manufacturing alternatives abroad to counteract the effects of increased tariffs.
India’s garment sector is already struggling with a labor shortage and limited production capacity. The potential relocation of production by exporters to other countries presents an additional hurdle for the government’s “Make in India” manufacturing initiative.
India aims for a significant increase in textile exports, targeting $100 billion by 2030.
This ambitious goal coincides with a sharp rise in US tariffs, even as India had begun to establish itself as a viable alternative for American garment buyers.
This shift in buyer preference is partly driven by political uncertainty in Bangladesh and a broader effort by companies to diversify their supply chains away from China.
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