India likely to receive zero-tariff benefits similar to Bangladesh on US Cotton: Commerce Ministry

New Delhi: India is on the verge of securing zero-duty access to US raw cotton imports on terms similar to those currently enjoyed by Bangladesh, according to senior officials in the Commerce Ministry.

The development follows intensive discussions during the latest India–US Trade Policy Forum (TPF) meeting in Washington last month and is now part of the ongoing bilateral mini-trade package negotiations.

Current Trade Disadvantage

• US raw cotton currently attracts 4.4 cents per kg (specific duty) + 0–4% ad valorem duty when imported into India.
• Bangladesh enjoys zero duty on the same product under a special US preferential arrangement (GSP-like benefits).
• This ~3–5% effective cost differential makes Indian cotton yarn ₹8–12 per kg more expensive than Bangladeshi yarn, severely hurting Indian spinning mills’ competitiveness in global apparel markets (especially US and EU).

Expected Benefits of Zero-Duty Access

Commerce Ministry estimates suggest that removal of duty on US cotton would deliver immediate and significant gains:

• Lower input costs for spinning mills by 4–6%
• Improved yarn export competitiveness (particularly in US, EU, UK, Middle East and Japan)
• Potential recovery of lost orders — Indian cotton yarn exports to the US fell 14% in FY25 mainly due to the cost disadvantage against Bangladesh and Vietnam
• Support to 25–30 lakh direct jobs in spinning, weaving and garment clusters across Gujarat, Maharashtra, Tamil Nadu, Telangana and Andhra Pradesh

Timeline & Negotiation Status

• 19th round of India–US bilateral trade talks concluded in early January 2026.
• Zero-duty access for US cotton is now part of the “early harvest” mini-package being finalized.
• Officials are hopeful of including the concession in an agreement that could be signed before mid-2026.
• Tariff relief would likely be implemented on an immediate or very short phase-in basis (unlike longer phase-outs for other categories).

Industry Reaction

• Confederation of Indian Textile Industry (CITI): “This is the single most critical tariff correction needed right now. Zero-duty US cotton will directly improve spinning margins and help regain lost export orders.”
• Southern India Mills’ Association (SIMA): “The duty differential has been a structural disadvantage for years. Early relief on US cotton will protect jobs and revive capacity utilization.”
• Cotton Association of India: “While welcoming the move, we urge simultaneous steps to improve domestic production of long-staple cotton so import dependence reduces over time.”

Broader Trade Context

The cotton concession is believed to be part of a larger India–US understanding that may also include:

• Tariff reduction on select US agricultural products (almonds, cranberries, pistachios)
• Greater market access for Indian generics and auto components
• Resolution of six pending WTO disputes

Commerce Ministry officials reiterated that the government is pursuing a balanced and commercially meaningful outcome that protects domestic sensitivities while expanding export opportunities.

Conclusion

Zero-duty access to US cotton would be one of the most impactful tariff relief measures for India’s textile value chain in recent years. It would immediately lower raw material costs, improve export competitiveness and support millions of jobs in cotton spinning and garment clusters. With negotiations in the final stages, the cotton concession is now one of the most closely watched elements of the emerging India–US mini-trade package.