Cotton Imports Surge Amid Production Dip And Trade Deal Concerns

Over the past 16 months, India’s cotton economy has witnessed two parallel and contrasting developments. On one hand, the Union Budget 2025-26 announced a Cotton Mission aimed at reviving domestic output, which has declined by nearly 25 percent over the past decade. On the other hand, cotton imports have surged sharply, raising concerns among farmers and trade experts.

Between October 2024 and January 2026, India imported 7.6 million bales of cotton, each weighing 170 kg, valued at approximately Rs 21,000 crore. Of this, 4.3 million bales were imported during the 2024-25 cotton year, while 3.3 million bales were brought in during the first four months of the current cotton year, from October 2025 to January 2026.

Duty-Free Window Triggered Import Spike

Industry sources attribute the spike largely to the government’s decision to temporarily abolish import duties. On August 19, 2025, the government allowed duty-free cotton imports until September 30. However, within ten days, the window was extended until December 31, 2025.

This extension led to imports far exceeding immediate requirements, according to trade representatives. The timing has drawn scrutiny, especially as domestic output remains under pressure.

Production Decline And Rising Consumption Gap

The government estimates cotton production at 29.2 million bales for 2025-26. Industry estimates place annual domestic consumption between 31.5 and 33 million bales, indicating a structural shortfall.

According to the Cotton Association of India, production peaked at 39.8 million bales in 2013-14. Since then, yields per hectare have steadily declined. In 2025-26, acreage has also fallen due to pest attacks and unremunerative prices in previous crop years.

Of the 7.6 million bales imported over 16 months, around 1.2 million tons comprised medium and small staple lint cotton valued at Rs 18,350 crore. This variety is produced domestically. An additional 88,500 tons of extra-long staple cotton worth Rs 2,650 crore was imported. Extra-long staple cotton is not widely produced in India and continues to enjoy duty-free status.

India-US Trade Deal Adds Fresh Uncertainty

Concerns have intensified following the India-US trade agreement announced on February 2 and the subsequent interim framework. Statements by Union Commerce Minister Piyush Goyal indicate that cotton imports from the US may receive duty concessions, possibly even zero duty.

Market reaction has been swift. Following the trade deal announcement, US cotton prices rose by Rs 1,500 to Rs 1,800 per candy. Analysts attribute this to expectations of duty-free access to the Indian market.

Currently, African cotton costs around Rs 61,000 per candy, while potential duty-free US cotton could land at roughly Rs 57,000 per candy in India. Trade experts argue that Indian mills may benchmark US cotton prices against the selling price of the Cotton Corporation of India and duty-inclusive imports from Africa and Brazil.

Major US exporters expected to benefit include commodity trading giants Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus Company, collectively known as the ABCD companies.

Pressure On CCI And Farmers

The Cotton Corporation of India procures cotton at the Minimum Support Price to safeguard farmers’ incomes. Last season’s MSP translated into a cost of Rs 59,700 per candy, and CCI has nearly completed the sale of around 9.4 million candies from old stocks.

After the duty removal, domestic cotton prices fell from around Rs 60,000 per candy to Rs 52,000–53,000. For 2025-26, the MSP implies a cost of Rs 61,900 per candy for CCI. Given current market prices of Rs 52,000–54,000 per candy, the agency may once again incur losses.

Many farmers have already sold their produce below MSP this season, reflecting mounting distress in cotton-growing regions.

Bangladesh And Australia Factors

India’s cotton trade dynamics are further complicated by developments in neighboring markets. India exports approximately $4 billion worth of cotton and yarn to Bangladesh annually. However, following a trade agreement between Bangladesh and the United States, US cotton exports to Bangladesh may rise, while Bangladeshi textile products could receive duty-free access in the US market.

In addition, India’s trade pact with Australia permits duty-free imports of 300,000 bales of high-quality long-staple cotton.

While duty-free imports may offer marginal cost advantages to sections of the textile industry, experts argue that the primary beneficiaries are likely to be multinational trading firms rather than farmers.

Cheap imports could intensify pressure on domestic prices, undermine the effectiveness of the Cotton Mission, and deepen financial stress among cotton growers. As production stagnates and imports rise, the sector stands at a critical crossroads.