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Summary
Indian textile industry sentiment has improved following the Indo-US trade deal, which is expected to provide phased tariff relief and better market access in the United States. Coming after India’s agreement with the European Union, the deal arrives at a time when the sector is grappling with raw material shortages, quality constraints, and higher domestic cotton prices.
Indian textile industry benefits from phased tariff relief
The Indo-US trade deal is being seen as a positive development for the Indian textile industry, particularly due to the prospect of zero-tariff access for Indian textiles in the US market over a period of time. Industry participants view this as an extension of the export momentum created by India’s trade agreement with the European Union, strengthening long-term demand visibility.
Cotton supply constraints challenge textile production
The Indian textile industry continues to face constraints in sourcing raw materials. Availability of contamination-free cotton remains limited, while manufacturers of high-value textiles face shortages of extra-long staple cotton. These quality issues have increasingly affected production planning and cost structures across the sector.
Cotton prices remain elevated in the domestic market
Domestic cotton prices in India are trading well above international benchmarks. Brazilian cotton, for example, is landing at around Rs 50,000 per candy of 356 kg, compared with domestic prices of nearly Rs 55,000 per candy. The Cotton Corporation of India, holding around 95 lakh bales of cotton, is offering the current season’s crop at close to Rs 56,000 per candy. Imported cotton is therefore over 10 percent cheaper than domestic cotton, while also offering better quality.
Cotton imports rise as production declines
India’s cotton production has been declining in recent years. Government data shows output falling to 29.72 million bales in the 2024-25 crop year from 35.25 million bales in 2020-21. In contrast, cotton imports increased sharply to 4.14 million bales in 2024-25 from 1.02 million bales earlier, aided by duty-free imports allowed between September and December. This shift has increased reliance on overseas cotton to meet textile industry requirements.
US cotton emerges as a competitive sourcing option
Under current conditions, the US trade deal opens an opportunity for the Indian textile industry to source high-quality cotton at prices below domestic levels. Industry leaders expect cotton demand to rise over the next few years, with imports from the US playing a larger role alongside supplies from Africa and Australia.
Cotton imports may expand under duty concessions
There is optimism that US cotton could be allowed duty-free imports of up to about 300,000 bales, similar to provisions under India’s trade deal with Australia. There is also hope that import duties on US cotton could be reduced to around 5.5 percent, further improving cost competitiveness for Indian mills.
Structural gaps in cotton cultivation remain
Nearly 95 percent of India’s cotton acreage is under genetically modified varieties, yet no new cotton variety has been approved for commercial cultivation since 2006. This has left growers several generations behind in productivity gains, contributing to stagnation in output. In this context, greater access to imported cotton through trade agreements is being viewed as a critical support mechanism for the textile value chain.
Conclusion
The Indo-US trade deal has arrived at a crucial juncture for the Indian textile industry. With domestic cotton production under pressure and quality gaps widening, improved access to competitively priced imported cotton could help stabilise raw material supplies and strengthen export competitiveness. While structural issues in domestic cotton cultivation persist, the agreement offers the sector a meaningful opportunity to navigate current constraints and plan for future growth.