According to Bloomberg News, in order to help domestic farmers, India announced a 10% tariff on imported cotton. According to the Indian government’s budget, the tax includes a basic customs duty of 5% and a surcharge of 5% to fund the development of agricultural infrastructure in the country. Previously, there had been no tariffs on cotton imports from India.
The report said that India’s tax on overseas purchases may support local prices amid increased domestic production. At the same time, the government hopes that even if India’s MSP is higher than international prices, it is trying to encourage spinning mills to buy domestic cotton.
In 2020/21, India’s cotton production is expected to increase from 35.49 million bales to 37.12 million bales (170 kg per bale). The Ministry of Textiles of India said that the MSP purchase volume of the state-owned Cotton Corporation of India (CCI) in the 2020/21 season will increase from 10.5 million bales in the previous year to 12.5 million bales. The government plans to spend 350 billion rupees ($4.8 billion) to purchase cotton, compared with the previous year. 285 billion for the year. According to the Cotton Association of India, India’s cotton imports this year are expected to drop from 1.55 million bales to 1.4 million bales.
According to Indian media reports, the scope of the tariff increase includes import tariffs on products such as cotton, corn, some auto parts, capital equipment, leather, plastics, chemical products, solar lamps and electronic products. The move is in sync with the government’s policy to promote domestic production, especially in micro, small and medium enterprises, and has been cheered by domestic producers.
India’s Finance Ministry stated that its tariff policy should have the dual goals of promoting domestic manufacturing and helping India better enter the global value chain. The focus now must be on easy access to raw materials and exports of value-added products. The WTO said the simple average import tariff imposed by India increased from 13% in 2014-2015 to 14.3% in 2020-2021. </p
