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

Commerce minister says India will secure concessional-duty access for garments made from US yarn and cotton, similar to benefits obtained by Bangladesh

India will also secure concessional-duty access for garments made from American yarn and cotton under its trade agreement with the US — similar to the benefits Bangladesh has secured under its pact with Washington, Commerce and Industry Minister Piyush Goyal said on Thursday.

 

While the fine print of the deal is awaited, its implementation could provide relief to India’s textile and apparel industry, which has been concerned about Bangladesh receiving relatively more favourable treatment in the textiles sector.

 

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

 

Under 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 using US cotton and man-made fibres. Currently, garments exported from Bangladesh to the US face a 31 per cent import tariff, comprising a 12 per cent most favoured nation (MFN) duty and a 19 per cent reciprocal tariff. The tariff incidence will fall to 12 per cent if US fibres are used.

 

“That is there in the 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 over the potential impact on Indian cotton farmers. The US has limited cotton production, and its exports are only around $5 million, while India’s cotton economy is valued at about $50 billion, he said.

 

According to four industry sources close to the development, the minister on Wednesday also reassured industry leaders during a meeting at Vanijya Bhawan. The industry, they said, has no reason to worry, as India may be exploring a deal similar to Bangladesh’s.

 

“According to the 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 goods to the US at zero duty. Zero-duty access is therefore not exclusive to Bangladesh. The minister assured us that India is also considering a similar arrangement,” said one source who attended the meeting.

 

“This means there is no risk of losing our competitive edge vis-à-vis Bangladesh in the US market, or of losing cotton exports to Bangladesh,” another source said.

 

Goyal further said that 90–95 per cent of farm products produced in India have been excluded from the trade deal, ensuring that farmers’ interests are protected. Fruit, vegetables, ethanol, tobacco, several pulses, and millets have been safeguarded, he said.

 

The minister’s remarks came amid criticism from Leader of Opposition Rahul Gandhi, who alleged that the India-US interim trade deal amounted to a “wholesale surrender”, compromising India’s energy security and farmer interests.

 

Cotton: Trade at the margins

 

There has also been speculation that the move could affect India’s cotton exports to Bangladesh. Bangladesh imports about 8.5 million bales of cotton annually to supply nearly 500 spinning mills. Its sourcing is largely from Brazil, India, and Africa, with negligible imports from the US in recent years.

 

Despite this, domestic cotton yarn production in Bangladesh is insufficient to meet the needs of its garment industry. As a result, it continues to import large volumes of yarn and fabrics while also expanding capacity in man-made fibre production. India exports around 1.2 million bales of cotton to Bangladesh each year on average.

 

India produces roughly 37 million bales of cotton annually. However, strong domestic consumption, export commitments across cotton, yarn, and fabrics, and structural demand from the textile value chain mean the country also imports cotton. India brings in nearly 5 million bales a year to bridge supply-demand gaps.

 

“This shows that India is not surplus in cotton availability, even at current production levels. Based on present and projected fundamentals, India is not at a disadvantage. On the contrary, with free trade agreements (FTAs) with the UK and the European Union and a forthcoming US trade deal, India is set for a sharp rise in textile and apparel exports,” an industry source said.

 

As these FTAs come into force, capacity expansion across spinning, weaving, processing, and garmenting is expected to accelerate, driving higher domestic cotton consumption and tightening supply.

 

“Without a corresponding rise in cotton productivity or acreage in the near term, India will likely need to increase cotton imports rather than reduce them. Indian cotton farmers are therefore not at risk. Instead, the evolving trade landscape offers an opportunity to expand cotton acreage and improve farm realisations,” the source added.