India to seek concessional duty for US-yarn garments: Piyush Goyal | Industry News

While the fine print of the deal is awaited, its implementation could provide relief to the Indian textile and apparel industry amid concerns over the neighbouring South Asian country getting a relatively more favourable deal as far as the textiles sector is concerned.

“Bangladesh ko jo mila hai, wo Bharat ko bhi milne wala hai final agreement me (Whatever Bangladesh has got, India will also get the same in the final agreement),” Goyal told reporters.

According to the US-Bangladesh agreement on reciprocal trade signed earlier this week, the reciprocal tariff on Bangladeshi imports will be reduced to 19 per cent. However, garments will get zero-duty access if made with US cotton and man-made fibres. Currently, garments exported from Bangladesh to the US face a 31 per cent import tariff, which includes 12 per cent import duty levied on a most favoured nation (MFN) basis plus a 19 per cent reciprocal tariff. The tariff incidence will fall to 12 per cent if US fibres are used.

That is there in that US-Bangladesh agreement, and “it will be in our agreement also”, Goyal said. India and the US are expected to sign the interim trade framework by the end of March.

The minister also allayed concerns regarding the potential impact on Indian cotton farmers. The US has limited cotton production; its exports are only $5 million, and for India, the target is $50 billion, the minister said.

According to four industry sources close to the development, the minister on Wednesday also comforted industry leaders during a meeting at Vanijya Bhawan. The industry has no reason to worry since the country may also be exploring a similar deal like Bangladesh.

“As per the initial tariff guidelines by the Trump administration, any country that uses US-origin raw materials amounting to at least 20 per cent of the import value, and converts them into finished products, may export those finished goods to the US under zero duty. Hence, zero-duty access to the US market is not exclusive to Bangladesh. The minister now assured us that India will also be considering a similar deal,” said a source who attended the meeting.

“This means that there will be no worry about losing our market advantage versus rival Bangladesh in the US, and also losing exports of cotton to Bangladesh,” said another source.

Goyal further said that around 90–95 per cent of the farm products produced in India have been left out of the trade deal, in which the interests of farmers have been protected. India has protected fruits, vegetables, ethanol, tobacco, many pulses and millets, he said.

Cotton exports dynamics

There were speculations that the move may also affect India’s cotton exports to Bangladesh. Bangladesh imports approximately 8.5 million bales of cotton annually to service nearly 500 spinning mills. Its cotton sourcing is predominantly from Brazil, India, and African origins, with no significant imports from the United States in recent years.

Despite this capacity, domestic cotton yarn production in Bangladesh is insufficient to meet the requirements of its garment manufacturing industry. Consequently, Bangladesh continues to import substantial volumes of yarn and fabrics, alongside maintaining a strong and growing presence in MMF (man-made fibre) production. India, on average, exports around 1.2 million bales of cotton annually to Bangladesh.

India produces approximately 37 million bales of cotton per annum. However, due to strong domestic consumption, obligations to export cotton, yarn, and fabrics, and structural demand from the textile value chain, the country imports too. India imports nearly 5 million bales annually to bridge supply-demand gaps.

“This clearly establishes that India is not surplus in cotton availability, even at current production levels. Based on current and projected fundamentals, India is not at a losing edge. On the contrary, with free trade agreements signed with the UK and the EU, and a forthcoming US trade agreement, India is poised for a significant surge in textile and apparel exports,” said an industry source.

As these FTAs come into effect, capacity expansion across spinning, weaving, processing, and garmenting will accelerate. This will lead to higher domestic cotton consumption, further tightening supply.

“Given the absence of a commensurate increase in cotton productivity or acreage in the near term, India will likely be compelled to increase cotton imports, not reduce them. Therefore, Indian cotton farmers are not under threat. Instead, the evolving trade landscape presents a strong opportunity to expand cotton cultivation areas and improve farm realisations,” the source added.