India is the world’s second-largest producer and consumer of cotton, a vital cash crop for its economy and livelihood of millions. Major production centers include Gujarat, Maharashtra, Telangana, and Rajasthan. While India cultivates a large area for cotton, its overall yield is lower than leading countries like China and the U.S., partly due to issues like pink bollworm resistance to BT cotton and increasing reliance on imports.

Cotton is a crucial economic crop, often called “white gold,” and a major contributor to India’s foreign exchange earnings through exports. The cotton sector supports the livelihoods of approximately 60 million people in India, including farmers and those in related processing and trade activities.

India’s cotton cultivation is broadly divided into three zones:

(a) Northern Zone: Includes states like Punjab, Haryana, and Rajasthan.

(b) Central Zone: Features major states like Gujarat, Maharashtra, and Madhya Pradesh.

(c) Southern Zone: Comprises Telangana, Andhra Pradesh, and Karnataka.

However, India’s cotton yield is relatively low compared to global leaders, partly due to challenges with pest management and water usage. For instance, the pink bollworm has developed resistance to the BT (Bacillus thuringiensis) toxins in cotton, negatively impacting both the quantity and quality of lint produced.

The recent tariffs imposed by Trump, which include a 50% rate on Indian goods, are expected to significantly impact the textile sector, particularly cotton, as it makes Indian products less competitive in the U.S. market. In response, the Indian government has temporarily removed the import duty on cotton to help mitigate these effects and support domestic producers.

A 25% reciprocal tariff on Indian imports was announced on July 31, 2025. An extra 25% tariff will be applied to Indian goods from 27-08-2025, raising the total to 50%. This has adversely effected Indian textile sector that is surviving upon a thin profit margin. India has eliminated an 11% import duty on cotton to mitigate tariff effects. Nevertheless, the textile sector, heavily reliant on cotton, is expected to be the hardest hit if tariff issues are not resolved before 27-08-2025. This is because the U.S. is a key market, accounting for 33% of India’s ready-made garment exports. High employment intensity in textile sectors raises fears of job losses and further cementing the unemployment monster of India.

There is a misconception that U.S. exports constitute less than 2% of India’s GDP, suggesting a limited direct economic impact. But this is not true and if U.S. tariffs and non-trade barriers are not removed soon, Indian economic growth would be lucky to hit even 5% in 2025-2026. India is heavily dependent upon U.S. for its survival as it is importing from China and selling it to U.S. India had a trade surplus from U.S of 45.7 billion USD in 2024 and a trade deficit of 99.21 billion USD from China in 2024-2025. India also had a trade deficit of 58.9 billion USD from Russia in 2024. So while considering the economic impact of U.S. tariffs and non-trade barriers, we cannot solely consider export of good alone. If everything is excluded, even 25% tariff by U.S. would have devastating effect upon India. Lies, narratives and jumlabaazi would try to fool Indians but India is heading towards a big trouble.

Eliminating import duties upon cotton temporarily would not solve any problem but it would further increase the woes of cotton producing farmers in India. This is so because while the U.S. tariff rate for India has been set at 50%, the U.S. tariffs for competing countries such as Bangladesh is 20%, Pakistan, Indonesia and Cambodia are 19% and Vietnam is 20%. Eliminating the 11% import duty on cotton can never cover the gap of 30% tariff by U.S. but it would only crush Indian cotton producers in worst possible manner.

All this has happened when the harvesting season for cotton in India is about to happen. While the industries have welcomed this move this would incur financial loss for govt due to loss of revenue. Also, while the Cotton corporation of India (CCI) has shown support for removal of this import duty, in reality they may suffer a loss of Rs. 700 crores from previously held cotton stocks from last years. This move also has a huge impact on local traders who have withheld their cotton stocks from last year hoping for higher prices this year.

The new dumping of mainly U.S. cotton will destroy local prices, because cotton will be in over-supply and foreign cotton will be able to challenge the local farmers due to the reduction of the import duty. Cotton minimum support price (MSP) for the current harvest was supposed to be Rs 61,000, but with the new imported stock, cotton farmers would no more get that price.

This is sufficient to clarify that if 25% tariff upon just textile industry can create a complete chaos in India and for Indian economy, what 50% tariff and other non-trade barriers can do to India and Indians. Modi may continue to live in his fool’s paradise and use lies, jumlabaazi and narratives of supporting farmers, but the reality is he has done a tremendous damage to India says Praveen Dalal.