GS 3: Economy | GS 2: Governance | Prelims
Context:
The Indian government’s decision to remove the 11% import duty on cotton has triggered a sharp divide between farmers and textile industries — with cultivators protesting the move and industry players welcoming it.
Key Developments
- Policy Move: The government scrapped the 11% duty on imported cotton to ease input costs for the textile sector.
- Reactions:
- Farmer unions have opposed the decision, warning of falling domestic prices and greater dependence on global markets.
- Textile manufacturers, however, see it as a positive step to make Indian exports more competitive.
- Import Trends: India imported 5.25 lakh tonnes of raw cotton in 2024–25, marking a 77% increase over the previous year despite existing duties.
- Domestic Procurement: The Cotton Corporation of India (CCI) purchased nearly 34% of total production by June 2025, reflecting imbalances in supply and demand.
- Productivity Gap: India’s average yield of 437 kg per hectare is almost half the global average (833 kg/ha), indicating persistent inefficiency in cultivation.
Analytical Insights
- Evolving Trade Patterns:
Post-2004–05, India’s cotton exports expanded rapidly due to high global demand and robust domestic supply, which previously reduced the industry’s import reliance. - Price Parity Challenge:
Domestic cotton prices have become higher than global benchmarks, eroding price parity and pushing textile firms to seek cheaper imports — even when duties existed. - Structural Issues in Domestic Production:
- Declining acreage: Preliminary estimates for 2024–25 show an 8.7% fall in cotton cultivation as farmers switch to paddy, soybean, and groundnut for better returns.
- Productivity stagnation: Output is constrained by falling yields, pest infestations, and ineffective Bt hybrids, which now cover over 95% of the total cotton area.
- High production costs: Rising input costs and a weak cotton-to-lint ratio further reduce farm profitability.
- Technology and Research Deficits:
India’s agricultural R&D expenditure remains low compared to other developing economies, limiting technological innovation and adoption of advanced seed varieties.
Way Forward
To balance the interests of both farmers and industry, India must:
- Strengthen farm-to-firm linkages through public investments in cotton research, quality improvement, and supply chain infrastructure.
- Promote innovation in seed technology to counter pest resistance and raise yields.
- Develop price support mechanisms to protect farmers from global volatility while maintaining competitiveness in the textile sector.