Dhirendra Kumar

New Delhi: In a move seen as breaking the ice in strained trade relations with the US, the Indian government late on Monday removed the customs duty and agriculture cess on cotton imports, a step that industry observers believe could ease tensions and create fresh room for engagement.

Through a notification issued by the ministry of finance, the Central Board of Indirect Taxes and Customs (CBIC) said all imports under heading 5201—covering raw cotton—will be exempt from duties between 19 August and 30 September. The decision is expected to directly benefit American exporters, who have been pressing for easier market access in India after Washington increased tariffs on Indian products earlier this year.

The development comes after months of back-and-forth between the two sides, with India holding its ground on sensitive sectors such as agriculture and dairy in bilateral trade talks. By offering temporary relief on cotton, New Delhi appears to be signaling flexibility without compromising on its core red lines. 

The US team of negotiators, who were scheduled to visit New Delhi for the sixth round of talks on 25 August, has cancelled its visit, and no fresh date has been announced.

Notably, the 25% reciprocal tariffs on Indian exports imposed by US President Donald Trump took effect on 7 August may double to 50% on 27 August when the additional tariffs linked to New Delhi’s oil trade with Russia come into force.

Before the latest exemption, cotton imports into India attracted a combined duty of around 11%.

“It is a calibrated gesture that addresses US concerns while safeguarding domestic sensitivities,” said Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), a think tank. Srivastava added that the short exemption window allows the government to retain leverage in ongoing negotiations.