India will receive the same benefits as Bangladesh on textile exports to the US if raw materials are sourced from America, Commerce and Industry Minister Piyush Goyal said on Thursday.
“India is also getting the benefit on textiles that Bangladesh is getting in the final agreement. Benefits of ‘yarn forward’ and ‘cotton forward’ benefit. If some specific cotton and specific yarn will come from outside, processed here and exported to the US. It will be in our agreement also,” he told reporters.
‘Forward’ Advantage
In trade deals, “yarn forward” and “cotton forward” are rules of origin that require specific production stages to be undertaken within partner countries to qualify for concessional or duty-free access. The aim is to ensure that the final apparel uses materials sourced from within the agreement framework, thereby boosting regional manufacturing.
Goyal said the benefit for the apparel sector will flow after India and the US sign the legal text of the interim trade deal, expected by mid-March. The minister added there would be no loss to Indian cotton farmers under the arrangement, noting that total US cotton exports are about $5 billion, while India is targeting $50 billion in textile and clothing exports. There will be no quota on imports of raw materials such as cotton. “The US businesses are now looking only at India as a trusted partner.”
Goyal’s remarks come days after the US and Bangladesh announced a trade deal under which the US will reduce tariffs on Bangladeshi goods to 19%, compared with 18% for Indian exports, narrowing India’s competitive edge. More significantly, the US has agreed to cut tariffs to zero on select Bangladeshi garment and apparel products, provided the cotton used is sourced from the US.
Industry executives, however, point out that India’s dependence on US cotton is structurally lower than Bangladesh’s, given its abundant availability of natural fibres such as cotton and synthetic fibres like polyester and viscose. India’s cotton imports in FY25 were only about $1.2 billion. The country produces 300–350 lakh bales annually and imports only 20–30 lakh bales of specialised varieties, such as contamination-free cotton and extra-long staple (34mm+) cotton, from the US and Brazil. India has a diversified fibre base. It is a major producer of man-made fibres and yarns, including polyester, viscose, and blended fabrics, giving manufacturers flexibility in raw material sourcing. In India’s textiles and garments export basket, cotton yarn and fabrics of assorted variety are a major component, along with readymade garments, whereas Bangladesh’s strength lies largely in RMG.
Bangladesh, on the other hand, imported $2.5 billion worth of cotton fibre, mainly from India ($655 million) and Brazil ($604 million), with US cotton accounting for only $255 million. Cotton yarn imports stood at $1.8 billion, of which India supplied $1.6 billion.
“China was the largest importer of US cotton but they have moved away to Brazil. So, the US is in desperate need of countries like India and Bangaldesh,” an industry expert said.
K. Venkatachalam, chief advisor to the Tamil Nadu Spinning Mills Association, said Indian spinners are anyway importing US cotton at zero duty under the advance licensing scheme. “Around 60 lakh bales are missing this season due to crop failure in India. We are already struggling to source raw cotton domestically,” he said, adding that the shortfall could be bridged through imports of US cotton.
Agriculture Safeguards
On concerns over agricultural concessions, Goyal said the majority of products grown by Indian farmers — including dairy, cereals, poultry, soyameal, maize, most fruits and vegetables, ethanol, tobacco, pulses and millets — are outside the scope of the trade deal.
“Around more than 90-95% of the products grown by farmers are out of the US trade deal,” Goyal said, responding to opposition criticism that India had opened up a large portion of its agricultural market.
“Only items that India needs we import even now and items that will not hurt farmers in India in any way have been opened in a calibrated manner after careful consideration. This will also benefit India in a way,” he added.
In practical terms, a Bangladeshi garment that normally faces a 12% US Most Favoured Nation (MFN) tariff would attract a total duty of 31% (12% MFN plus 19% reciprocal). For India, the comparable total would be about 30% (12% MFN plus 18% reciprocal), according to GTRI. However, Bangladeshi garments made with US fibres would avoid the reciprocal duty and pay only the 12% MFN tariff.
By manufacturing textile products using cotton or yarn sourced from the US, Indian exporters would be eligible for a similar benefit once the interim agreement is finalised.