Bangladesh lobbies for a 20% safeguard tariff on Indian cotton and blended yarn

The Indian textile value chain is facing a tough New Year with aggressive protectionist maneuvers from its largest export partner. Bangladesh’s textile industry has formally lobbied for a 20 per cent safeguard tariff on Indian cotton and blended yarn, a move that threatens to disrupt approximately 30 per cent of India’s total yarn exports. This development follows allegations from Dhaka regarding ‘bonded yarn leakage,’ where duty-free imports intended for export-oriented garments are reportedly diverted into the local Bangladeshi market, undercutting domestic mills.

For Indian spinners, particularly those in the Vidarbha and Ludhiana clusters, this potential tariff could affect their margins drastically. The domestic industry is already grappling with the re-imposition of the 11 per cent import duty on raw cotton as of January 1, 2026. This policy reversal has already led to a Rs 2-Rs 5 per kg hike in yarn prices across North India this week, as mills attempt to pass on rising input costs. With ICRA projecting India’s cotton output to hit a decadal low of 29.2 million bales this season, the cost of fiber remains stubbornly high.

The dual whammy of high domestic fiber costs and new export barriers creates a precarious environment for mid-scale spinners, notes a sectoral analyst. While CRISIL anticipates a 7 per cent-9 per cent revenue growth for the broader sector in FY26 driven by Chinese demand, the immediate outlook for the Bangladesh-dependent apparel corridor remains cautious as negotiations between the two nations intensify.