New Delhi: Shares of leading textile companies surged on Monday after the government scrapped customs duty and agriculture cess on raw cotton imports until September 30. This decision is being interpreted both as a relief measure for India’s stressed textile industry and as a calibrated signal to the United States amid tense trade talks.

The Finance Ministry, through a notification by the Central Board of Indirect Taxes and Customs (CBIC), announced that all imports under heading 5201, covering raw cotton, will be duty-free for the next six weeks. Until now, cotton imports have attracted about 11 percent in combined duties.

The announcement immediately buoyed stocks such as Vardhman Textiles, Ambika Cotton Mills, Gokaldas Exports, and Welspun Living, which rallied between 1 and 8 percent. Industry bodies said the move would help stabilise raw material costs and prevent a spike in yarn and garment prices ahead of the festive season.

“CITI has long been requesting that the import duty on cotton be removed to help domestic prices align with international benchmarks. We therefore greatly welcome this measure, even though the relief is temporary,” said Chandrima Chatterjee, secretary general of the Confederation of Indian Textile Industry.

The decision also comes against a backdrop of heightened trade friction. Washington imposed 25 percent retaliatory tariffs on Indian exports earlier this month, with the rate set to double to 50 percent on August 27. A planned US delegation visit for the sixth round of trade talks on August 25 has already been cancelled.

Experts see the cotton exemption as an attempt to defuse tensions without compromising on India’s red lines in sensitive areas such as agriculture and dairy. “It is a calibrated gesture that addresses US concerns while safeguarding domestic sensitivities,” noted Ajay Srivastava, founder of the Global Trade Research Initiative.

At home, falling output has squeezed supply. India’s cotton production has dropped from 33.7 million bales in FY23 to an estimated 30.7 million bales in FY25, according to the agriculture ministry data. Imports, meanwhile, surged to 2.71 million bales this year, with the US emerging as the largest supplier, alongside Brazil, Egypt, and African nations like Benin and Mali.

For American exporters, India’s duty waiver is significant, particularly after China imposed additional tariffs on US cotton. For India’s $150-billion textile sector, it offers immediate respite, keeping mills running and consumer prices steadier during the crucial festive season.