India extends zero-duty cotton imports by two months to cool domestic prices

what happened

The Indian government has stretched its suspension of the 11% duty on cotton imports by another two months, now running through the end of December, Reuters reports. The waiver first applied from June 1 to October 31 and was meant to top up stocks during the off-season, and textile mills had asked for the extension.

Domestic cotton prices usually soften once the new crop arrives in October, but they have stayed elevated this year because of uneven monsoon rains and worries about a smaller harvest. Cheaper foreign fiber should reduce costs for textile producers and lift shipments from the United States, Brazil and Australia.

why it matters

For markets, the move signals that Indian authorities are willing to use trade policy to contain raw material costs for the textile industry. The effect on local prices will depend on whether the harvest shortfall persists after the monsoon.

market impact

Cotton in India: more imports put pressure on local prices, while textile companies gain from cheaper raw material

• ▼Indian domestic cotton prices pressure down — duty-free imports add supply to the local market
• ▲Indian textile manufacturers pressure up — cheaper raw material lowers production costs

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