India extends cotton import duty exemption amid US tariff pressure

By Rajendra Jadhav and Nikunj Ohri

MUMBAI/NEW DELHI, Aug 28 (Reuters) - India has extended an import duty exemption on cotton by three months, until the end of December, a government order showed on Thursday, as New Delhi seeks to support the local garment industry that has been hit by hefty U.S. tariffs.

The imports are likely to support global cotton prices CTc2, which erased losses and rose 0.2% after the order. However, they are likely to reduce demand for local cotton, pressuring domestic prices, market watchers said.

The world's second-biggest cotton producer had earlier announced an exemption on cotton imports from an 11% duty until September-end and has now extended that to December 31.

The cotton is likely to be sourced from Australia, Brazil, the United States and Africa, which have a surplus available for export, industry officials said.

U.S. President Donald Trump's doubling of tariffs on imports from India to as much as 50% on good such as garments and jewellery took effect on Wednesday.

The United States is India's largest market for garments and jewellery, worth nearly $22 billion in 2024. India has a 5.8% share in the U.S. garment market, behind China, Vietnam and Bangladesh.

The duty exemption until year-end will let Indian textile companies import cheaper cotton, easing pressure amid a slowdown in U.S. demand, Atul Ganatra, president of the Cotton Association of India, told Reuters.

"With the duty-free extension, imports could hit a record 4.2 million bales this year. Strong imports are likely to continue into the first quarter of next year as well," Ganatra said.

India's cotton marketing year runs from October to September.

The earlier import window, ending in September, was too narrow, said a New Delhi-based trader with a global trading house.

Textile mills could not import cotton during that period, as the voyage from exporting countries typically takes more than a month. However, they can now place orders for large quantities for the subsequent period, the trader said.

The landed cost of imported cotton is nearly 5% to 7% lower than that of local supplies, and the quality is also superior, said a Mumbai-based trader.

"Most of the imports will arrive around the December quarter, just when the local crop hits the market. This is likely to push local prices down," the trader said.

(1 Indian bale = 170 kg)