New Delhi, Aug 28: In its first move to cushion the blow from America’s sweeping tariff hikes on Indian exports, the Centre has extended the exemption of import duty on cotton till December 31, 2025, officials from the finance ministry said on Thursday.
The exemption, which was earlier in force from August 19 to September 30, 2025, will now run through the year-end, ensuring steady cotton availability for India’s textile sector, among the industries most directly hit by Washington’s sudden tariff escalation. “Central Government extends import duty exemption on cotton till 31st December 2025,” a finance ministry notification confirmed.
The extension is part of a broader set of tax and policy reforms the government is rushing through to offset the fallout of what officials describe as an “economic shock.” Prime Minister Narendra Modi has signalled that more sweeping relief is imminent, with steps ranging from exporter loans at lower interest rates to a two-tier GST structure aimed at boosting demand and easing compliance.
Media reports suggest that reforms to simplify the Goods and Services Tax could inject nearly $20 billion into the economy, spurring private consumption, which makes up around 60% of GDP. The government has already rolled out a $12 billion income tax cut earlier this year and is preparing fresh measures to sustain momentum. The Reserve Bank of India, meanwhile, is expected to step in with additional rate cuts to encourage lending. Salary hikes for government employees, scheduled for early 2026, are also likely to support domestic demand.
Economists and investment banks say that consumer-facing sectors, particularly those in the automotive, garment, and housing materials industries, stand to benefit the most from the fiscal push. India’s stock markets have so far reacted positively, but experts caution that the broader economic outlook remains fragile.
In parallel, India has stepped up lobbying efforts in Washington. Former foreign secretary and Rajya Sabha MP Harsh Vardhan Shringla, who once served as India’s ambassador to the US, is currently in America, engaging with key stakeholders. India has also hired local lobbyists to make its case in Congress and with the Trump administration.
