India may secure zero duty for US-cotton garments under interim trade deal, Goyal says, as New Delhi shields most farm products
India’s textile and apparel exporters could receive a zero-reciprocal-duty window for garments made using cotton sourced from the United States once New Delhi and Washington sign their proposed interim trade agreement, Commerce and Industry Minister Piyush Goyal said on Wednesday.
Speaking on the sidelines of an event on February 12, Goyal said the arrangement would allow Indian exporters using US cotton to qualify for zero duty under the reciprocal tariff component of the deal. India and the United States are expected to sign the interim trade agreement around March, though final documentation and schedules are still awaited.
Under the framework being discussed, the United States would lower the reciprocal tariff on Indian textiles and apparel exports to 18 percent. However, products manufactured with US-origin cotton would be eligible for zero duty on the reciprocal portion. Since the Most Favoured Nation (MFN) tariff would still apply, the effective duty on such garments would fall to roughly 3 percent, according to the minister’s explanation.
Goyal also reiterated that India has kept around 90–95 percent of domestically produced farm products outside the scope of tariff concessions in the deal, stating that farmers’ interests have been “fully protected.”
Why it matters: Textile competitiveness and farm sensitivities intersect
The proposal sits at the intersection of two politically and economically sensitive areas: textile exports and agricultural protection.
Textiles and apparel are among India’s largest labour-intensive export sectors, employing millions and competing directly with countries such as Bangladesh and Vietnam in the US market. Even small changes in tariff structures can influence sourcing decisions by global retailers.
At the same time, agriculture remains a politically sensitive sector in India. Trade concessions on farm products often face domestic resistance because of concerns around farmer incomes and food security.
By linking zero-duty benefits to the use of US cotton while excluding most Indian farm products from concessions, New Delhi appears to be balancing export competitiveness with domestic political economy considerations.
What we know so far: Tariff structure and competitive context
According to Goyal’s remarks:
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The US would cut the reciprocal tariff on Indian textile and apparel exports to 18 percent.
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Garments made with US-origin cotton could receive zero duty on the reciprocal component.
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The MFN tariff would continue, bringing effective duty on such garments to about 3 percent.
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Around 90–95 percent of Indian farm products are excluded from the deal.
The comments come at a time when Indian exporters have been closely watching Bangladesh’s evolving trade terms with the US.
Under the Bangladesh–US arrangement, Dhaka secured a reduced reciprocal tariff rate of about 19 percent and zero-duty access for certain ready-made garments using US cotton and fibres. Trade data cited by officials show that from April to November 2025, Bangladesh exported about $7.6 billion worth of ready-made garments to the US, compared with India’s $3.26 billion in the same period.
This gap underscores the competitive pressure Indian exporters face in the US market.
What remains unclear: Final terms and eligibility details
Several aspects of the proposed arrangement are not yet clear:
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The exact rules of origin for determining what qualifies as US cotton.
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Whether there will be volume caps or tariff-rate quotas tied to zero-duty access.
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The implementation timeline after signing.
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Compliance and certification requirements for exporters.
Officials have indicated that discussions are ongoing and that operational details will be clarified closer to signing. Until then, exporters and buyers may remain cautious in fully pricing in the benefits.
Market or sector impact: Potential relief for cotton-based exporters
If implemented as outlined, the zero-duty window could provide a targeted advantage to Indian exporters focused on cotton garments, particularly those already integrated into US cotton supply chains.
Sector specialists note that US buyers often value supply chain transparency and origin-linked benefits. A lower effective tariff could improve price competitiveness versus regional peers.
However, the benefit may be uneven:
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Firms relying heavily on non-US cotton may see limited gains.
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Exporters will need to manage input sourcing and compliance costs.
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Large diversified exporters may adapt faster than smaller units.
For now, there is no immediate stock market reaction data tied specifically to these remarks, and flow data on investor positioning in textile stocks is awaited.
Broader context or background: Trade diplomacy and supply chains
India–US trade discussions have periodically focused on market access, tariffs and regulatory issues. Textiles are a recurring theme because of their employment intensity and role in bilateral trade.
Globally, apparel supply chains have been gradually diversifying after pandemic-era disruptions and geopolitical tensions. Buyers increasingly look at tariff regimes alongside reliability and compliance.
Bangladesh’s strong position in the US apparel market reflects both scale and preferential access in certain segments. India has been trying to narrow that gap through trade diplomacy and value-added manufacturing.
On agriculture, India has historically taken a defensive stance in trade talks, citing food security and livelihood concerns. The exclusion of staples such as rice, wheat, dairy, pulses and edible oils from concessions is consistent with that approach. Limited concessions on items like almonds, walnuts, pistachios, apples, cranberries and soybean oil—often via tariff-rate quotas—indicate calibrated openness rather than full liberalisation.
What analysts or officials are saying: Balancing opportunity and caution
Goyal framed the arrangement as supportive of exporters while safeguarding farmers. His remarks suggest the government sees the deal as a targeted tool rather than a sweeping liberalisation.
Trade analysts say such cotton-linked provisions can encourage bilateral supply chains but also add complexity. Exporters may need tighter documentation and sourcing discipline.
Some experts note that tariff advantages alone do not guarantee market share; factors such as scale, delivery timelines and compliance standards remain critical in global apparel trade.
What it means for investors or stakeholders: Watch supply chain alignment
For investors and industry stakeholders, the proposed framework highlights a few themes:
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Supply chain strategy may become more important for textile firms.
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Companies with access to US cotton sourcing networks could benefit.
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Policy clarity will influence capital allocation and capacity expansion.
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Agricultural exclusions signal limited near-term opening in farm trade.
The deal, if signed, may be more meaningful for operational planning than for immediate re-rating of the entire textile sector.
What to watch next: Signing, rules of origin and buyer response
Key watchpoints in the coming weeks include:
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Formal signing of the interim deal expected around March.
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Publication of rules of origin and compliance norms.
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Reaction from major US apparel buyers and sourcing houses.
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Any reciprocal adjustments from competing exporters.
Until the fine print is available, market participants are likely to treat the proposal as directionally positive but not fully priced in.
For now, India’s approach signals a calibrated trade strategy—leveraging textile competitiveness while ring-fencing sensitive farm sectors. Whether this translates into a measurable export boost will depend less on headlines and more on execution once the agreement moves from framework to practice.
