OTL, cotton was a very niche market until the invention of the Cotton Gin, which won't have happened yet ITTL at this point of the story.
The sheer amount of effort required to pick out the seeds meant that it was very, very expensive.
Picking the seeds out of Indian cotton required manual labour, but not enough to price it out of the market. For the species of cotton native to the Old World, the cotton fibres were not attached as securely to the seeds as they were in short-staple cotton (aka Mexican or upland cotton). Nor, for that matter, were they so securely attached in the long-staple cotton species (aka Sea Island cotton) grown in more tropical regions of the New World.
Seed extraction was only a really serious problem with short-staple cotton, where the amount of manual labour required to remove the seeds meant that it was pretty much unviable as a cash crop until the invention of the cotton gin. (Short-staple cotton was easier to grow, though, which was why it became the dominant crop during the nineteenth century; it could be grown in so many more places.)
Cotton was in sufficient demand that in Britain alone, the EIC imported a quarter of a million pieces of woven cotton textiles by 1664. By the 1690s, imported cotton textiles (from India) were deemed such a threat to wool manufactures that the British Parliament passed a series of acts (the Calico Acts) banning their importation, although thread and raw cotton could still be brought in. In the 1720s, Britain was importing ~680
tonnes of cotton a year.
Cotton wasn't yet the biggest fibre being used in textiles, but it was widespread enough that it couldn't really be classified as niche. I expect that Aururia will have a similar interest in cotton textiles, particularly when compared to linen. (Wool might be somewhat more competitive.)
Linen/flax was the main plant fiber until then. IIRC.
Linen was certainly used a great deal in Europe, though if I remember right wool was the main competitor to imported cotton. Wool and silk textile manufacturing were the main industries which the Calico Acts were aimed at protecting (together with a desire to stem the trade imbalance with India, which led to fears of loss of bullion to there).
I dunno if it was that niche or expensive: cotton was widely worn in China and India, and in England cheap cotton cloth from India by the 1700s was being used by the middle class as well as the rich. Sure, the majority was still woolens and linens until the 19th century, but it wasn't insignificant as a trade item. And wasn't most world trade before the age of mass manufactures luxury goods?
Cotton textiles were certainly extremely desireable to both the wealthy and middle classes. And by the standards of the time, it would count as a luxury good (though much bulkier than traditional spices).
