Indian Textile Industry Faces Crisis Due to Rising Cotton Prices

14 October 2023, Mumbai

The Indian textile industry, which relies heavily on cotton for its products, is facing a crisis due to the high domestic prices of raw materials. 

ASKS

The industry has been asking the government to remove the 11 percent import duty on cotton, which was imposed three years ago to encourage local sourcing and reduce environmental impact.

However, the government has not responded to the industry’s demand, even though the domestic cotton prices have increased by 18 to 19 percent compared to the imported ones. 

The industry claims that importing cheaper cotton is the only feasible option to remain competitive in the global market, especially during the off-season from April to September when the domestic supply is low.

Representations

The Southern India Mills Association (SIMA), a representative body of the textile mills, has been lobbying for a temporary suspension of the import duty during the off-season. The government, however, has not agreed to this proposal, citing that the domestic prices have not risen significantly during this period.

The textile industry is also facing challenges from other factors such as climate change, which affects the natural yield and quality of cotton, economic slowdown, which reduces the demand for non-essential items like apparel and home furnishing, and sustainability activism, which criticizes cotton farming for its high water consumption and soil degradation.

Govt support

Last year, the government granted an import duty exemption until October, but this year it has not announced any such relief. 

The textile industry hopes that the government will reconsider its decision and allow duty-free imports of cotton to ease its woes.

Analysis:

The Indian textile industry is a major contributor to the country's economy, employing millions of people and generating billions of dollars in export revenue. However, the industry is facing a number of challenges, including rising cotton prices. The government's decision not to remove the import duty on cotton is putting the industry at a disadvantage in the global market.

The government should consider the industry's demands and take steps to support it. 

This could include providing temporary relief from the import duty on cotton, especially during the off-season. The government could also invest in research and development to help the industry produce cotton more efficiently and sustainably.

By supporting the textile industry, the government can help to create jobs, boost exports, and grow the economy.

Gist

ASKS:

• Remove 11% import duty on cotton
• Import cheaper cotton during off-season

Challenges: climate change, economic slowdown, sustainability activism

Govt support: grant import duty exemption until October

Analysis: Govt should reconsider decision and allow duty-free imports of cotton to ease industry's woes.

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