Indian textile exporters may get zero-duty US access, easing B'desh impact
Commerce Minister indicates sector may get zero-duty US market access similar to Bangladesh; industry says cotton exports and farmers unlikely to be hit
 "Indian textile exporters may get zero-duty US access, easing B'desh impact")
Commerce Minister Piyush Goyal has indicated India may secure zero-duty textile access to the US, matching a tax relief granted to Bangladesh that has put Indian exporters under pressure.
A deal is expected to be signed by the end of March. According to four industry sources, Goyal told industry leaders in a meeting at Vanijya Bhawan in New Delhi on Wednesday evening that India is exploring with the US a similar arrangement given to Bangladesh.
“According to initial tariff guidelines issued 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 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 rivals Bangladesh in the US, and also losing exports of cotton to Bangladesh,” said another source.
Cotton exports
It was speculated that the US arrangement may also affect India’s cotton exports to Bangladesh. Bangladesh imports about 8.5 million bales of cotton annually to service its spinning mills. It sources cotton from Brazil, India and Africa, with no significant imports from the US in recent years.
Bangladesh’s cotton yarn production is insufficient to meet the needs of its garment manufacturing industry. Consequently, Bangladesh continues to import substantial volumes of yarn and fabrics, alongside maintaining a strong and growing presence in 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. It also imports nearly 5 million bales annually to meet 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 (FTAs) signed with the United Kingdom and the European Union, 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 in spinning, weaving and processing is expected to 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 said.