The Indian government is undertaking a comprehensive review of customs duty exemptions on imported components, a move that could significantly impact the domestic textiles industry. While the review spans various sectors, the potential lapse of exemptions on certain textile-related imports, such as shuttleless looms and potentially some specialized weaving, knitting, and sewing machines, is generating considerable discussion within the industry.
Currently, several imported goods enjoy basic customs duty exemptions, ranging from 0-5%. However, with these exemptions set to expire by September 30, 2025, the Ministry of Finance is evaluating whether to extend them or allow them to lapse, potentially bolstering domestic manufacturing under the “Make in India” initiative.
The review focuses on 31 product categories, with a key consideration being the level of domestic value addition achieved. This aligns with India’s broader strategy to enhance its participation in global value chains. While specific details on textile-related products under review remain limited, the potential impact on the sector is noteworthy.
A representative of the cotton textile industry noted that the import component within the sector is relatively low, suggesting a limited direct impact on raw material costs. However, the potential removal of exemptions on machinery like shuttleless looms, used in modernizing textile production, could influence investment decisions and technological advancements within the industry.
Experts suggest the government will carefully balance the need to promote domestic manufacturing with potential impacts on micro, small, and medium enterprises (MSMEs) within the textile sector. The review also considers geopolitical factors, particularly concerning imports from the US.
The government’s previous budget decisions offer some insight into its approach. For instance, reductions in import duties on certain metals aimed to lower production costs for downstream industries. Similarly, duty reductions on medical equipment components supported the Phased Manufacturing Programme for medical devices.
The potential phasing out of conditional customs duty exemptions has been anticipated by industries, allowing them time to prepare for the transition, according to experts. This suggests a measured approach, aiming to promote domestic production without causing undue disruption.
This review presents both challenges and opportunities for the Indian textiles sector. While increased costs for certain imported machinery could pose a short-term hurdle, it also creates an incentive for domestic manufacturers to step up and potentially fill the gap, further strengthening the “Make in India” initiative within the textile industry. The industry awaits further details and policy decisions with keen interest.
