11% duty on raw cotton imports waived

- Concerns over US tariffs weakening MSME loans prompting relaxation of rules for classifying loans as NPA

- Decision taken to support textile industry facing tariffs

Mumbai: The US has imposed a 25% tariff on Indian goods and another 25% is being levied, which has posed a threat to the country's exports of several sectors, including textiles, and the government has waived the 11% duty on raw cotton imports till September 30. On the other hand, to provide relief from the US tariff hike, the central government is considering increasing the period for classifying non-performing assets (NPA) in case of loans given to micro, small and medium enterprises (MSMEs) from 90 days to 180 days.

 duty will provide relief to the textile segment including yarn, fabric, garments. According to a notification issued by the Central Board of Indirect Taxes and Customs, the government has abolished the 11 percent duty on raw cotton and the Agriculture Infrastructure and Development Cess till September 30 with effect from August 19.

Various industry bodies including the Confederation of Indian Textile Industry have been demanding the removal of import duty for a long time.

This abolition was necessary to make the country's textile industry globally competitive. India's textile industry requires high-quality cotton to comply with global duty standards for exports.

The removal of duty will see a reduction in cotton prices in the country. The Confederation of Indian Textile Industry has welcomed this step of the government. Cotton output is expected to be high in most parts of the country due to good monsoon, sources in the Cotton Association of India (CAI) said in a statement. The cotton production for the new season of 2025-26, starting from October, is expected to be 325-330 lakh bales.

Keeping in mind the possibility of the country's micro, small and medium enterprises (MSMEs) being affected by the US decision to impose higher tariffs on Indian goods, the Reserve Bank of India (RBI) is considering doubling the current 90-day non-payment norm for classifying MSME loans as non-performing assets (NPA) to 180 days. The Reserve Bank believes that this proposal of the RBI will be a relief for the cash-strapped MSMEs in the country.

MSMEs account for a significant share of the country's exports. Keeping this in mind, the Reserve Bank is considering extending the moratorium, as banks are concerned that the loans provided earlier will come under pressure due to tariffs.

The asset quality of MSMEs has been stable so far, but tariffs may reduce their competitiveness in the export market, which will affect their asset quality. Of the MSMEs operating in the country, 48 to 50 percent MSMEs produce export-oriented products.

In the financial year 2020, 11.03 percent of the total loans of MSMEs became non-performing assets, which came down to 3.59 percent at the end of the financial year 2025. Now, bankers are worried that the situation will become serious again.