Evolving dynamics of India's cotton policy and what's in store for 2026

• Higher MSP, digitised procurement strengthen price protection
  
  
• Price discovery to remain policy-driven rather than market-led
  
  

India's cotton market in 2025 has been decisively shaped by policy interventions, as outlined in a year-end review released by the Press Information Bureau (PIB). The government combined higher minimum support prices, operational reforms in procurement, and digital traceability with temporary import duty relief to stabilise prices, manage supply availability, and protect textile export competitiveness across the cotton value chain.

What happened during 2025 was a clear strengthening of the MSP framework alongside structural reforms. For the 2025-26 season, the government fixed MSP for seed cotton at INR 7,710/quintal (INR 77,100/t) for medium staple and INR 8,110/quintal for long staple cotton, marking an increase of about INR 589/quintal from the previous season.

This increase was aimed at shielding farmers from volatile prices and rising cultivation costs. Cotton remains a politically and economically sensitive crop, engaging nearly six million farmers, while the textile and apparel industry consumes close to 94% of India's cotton production, making price policy central to both rural incomes and industrial competitiveness.

Digitising procurement

Alongside higher MSP, procurement operations were modernised through digitisation and transparency initiatives. The Kapas Kisan mobile application was introduced to allow farmers to self-register and book procurement slots at MSP centres, reducing delays and congestion. The CotBiz digital platform enabled e-invoicing, contract generation, and real-time tracking of transactions.

To improve quality assurance and traceability, the government rolled out the Blockchain Integrated Traceability System, under which cotton bales are QR-coded to allow tracking from procurement centres to spinning mills. These reforms were designed to improve efficiency, curb malpractices, and enhance confidence among downstream buyers while ensuring smoother MSP operations.

Import duty relief

In parallel, the government continued its policy of import relief by suspending the 11% customs duty on raw cotton from 19 August to 31 December 2025. This measure was introduced to address a persistent demand-supply mismatch, as domestic cotton consumption exceeds production in quality-adjusted terms. Duty-free imports were intended to ensure uninterrupted raw material availability for spinning millers, contain input cost inflation, and safeguard India's textile and apparel exports at a time of weak global demand and intense price competition.

Lower productivity, quality variability, and weather-related risks have limited domestic supply growth, making MSP intervention essential to prevent distress sales when market prices fall below support levels. At the same time, higher MSP-linked domestic prices increase raw material costs for spinning millers operating on thin margins. The import duty exemption therefore acted as a balancing tool, supporting mills while MSP protected farmer incomes.

To address the underlying productivity challenge, the government announced a five-year 'Mission for Cotton Productivity', focusing on yield improvement, varietal upgradation, and promotion of extra-long staple cotton to reduce future import dependence.

Outlook

What may happen next will depend on policy continuity into 2026. If the import duty exemption ends after December, domestic prices could firm further, potentially increasing MSP procurement and reinforcing the price floor for farmers and ginners. If the exemption is extended, spinning millers may retain cost relief, but domestic markets could remain reliant on policy support.

For brokers and market participants, cotton price discovery is likely to remain policy-driven rather than purely market-led, with MSP operations, import policy, and productivity reforms jointly shaping trade flows and pricing dynamics in the coming season.