Synopsis: The government’s five-month cotton import duty waiver boosted textile stocks such as Vardhman Textiles, Welspun Living, and Arvind. The move is expected to reduce raw material costs, improve profitability, and enhance export competitiveness.
The Indian government has announced a temporary exemption on cotton import duty from June 1, aiming to ease raw material costs and ensure adequate cotton availability for the textile and apparel industry. The move comes amid concerns over elevated cotton and yarn prices affecting manufacturers.
The policy is expected to support textile exporters and downstream industries by improving cost efficiency and global competitiveness. However, the increased availability of cheaper imported cotton could create challenges for domestic cotton farmers and ginners by putting pressure on local prices and demand.
Stocks movement
With a market capitalisation of Rs. 13,912 cr, the shares of Welspun Living Ltd were trading at Rs. 145.05 per share, surging 6% in today’s market session, making a high of Rs. 145.90, up from its previous close of Rs. 138.15 per share.
With a market capitalisation of Rs. 17,741 cr, the shares of Vardhman Textiles Ltd were trading at Rs. 613.30 per share, jumping 8% in today’s market session, making a high of Rs. 621.40, up from its previous close of Rs. 576.15 per share.
With a market capitalisation of Rs. 12,867 cr, the shares of Arvind Ltd were trading at Rs. 490.85 per share, surging 6% in today’s market session, making a high of Rs. 502.45, up from its previous close of Rs. 471.85 per share.
Overview of the Duty Exemption
The Indian government has announced a temporary, five-month duty exemption for all cotton imports into the country. This policy change will remain in effect for a fixed period, officially starting from June 1 to October 31. The primary goal behind this measure is to lower prevailing domestic cotton prices and ensure a steady supply of raw materials for the country’s texturizing, garment, and textile industries.
Impact on the Textile Sector and MSMEs
According to the Ministry of Finance, the temporary duty relief is expected to significantly reduce overall input costs across the entire apparel and textile sector. Downstream industries, especially Micro, Small, and Medium Enterprises (MSMEs) have recently struggled with a sharp inflation spike in cotton and yarn prices.
This intervention is anticipated to provide much-needed financial breathing room to these smaller manufacturers while keeping the broader interests of domestic farmers protected.
Enhancing Global Competitiveness
Industry leaders, including representatives from the Apparel Export Promotion Council and the Confederation of Indian Textiles Industry (CITI), have strongly welcomed the move. Previously, the 11% import duty on cotton acted as a commercial hurdle for Indian businesses, particularly because major competing Asian nations have duty-free access to global cotton.
Industry experts note that these specialised cotton imports are typically quality-driven to fulfill specific export orders and will not displace or harm the domestic farming market.
The Centre’s decision to waive import duty on cotton is expected to benefit several textile and apparel companies, including Vardhman Textiles, Trident, Welspun Living, KPR Mill, Arvind, Gokaldas Exports, Pearl Global Industries, and Nitin Spinners.
The move is likely to lower raw material costs for textile and garment manufacturers, helping improve profit margins and making Indian products more competitive in global export markets.
However, the duty waiver could put pressure on domestic cotton growers and ginners, as cheaper imported cotton may reduce demand for locally produced cotton and impact their pricing power.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
