India's Cotton Yarn Exports To Fall To A Decade Low: ICRA

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Cotton yarn exports from India are estimated to fall by 18-20 per cent to nearly a decade low level of 750 million kg in FY21, closer to the level of exports last seen in FY12, following an estimated 25 per cent decline to 940 million kg in FY20, as cotton yarn remained uncompetitive in global markets during much of the previous year, according to ICRA.

"Starting March 2020, demand for the downstream products are at a near standstill amid lockdown across nations. With inventory pile-ups at the downstream level as well as expectations of a gradual pick-up in demand for apparels and home textiles, the pick-up in demand for yarn is also likely to be gradual and spread over several months," ICRA Research said in its latest report.

"The situation is likely to worsen, given the supply glut situation which is currently evolving in China, India’s largest export destination. As the lockdown in China was lifted from the beginning of April 2020 onwards, spinners there are scaling up operations even as demand from the downstream segments remains subdued amid weak domestic consumption demand as well as lack of demand in the export markets. As a result, there are reports of inventory pile-ups in China," said the report Impact Analysis: COVID-19 ties spinning sector in a knot.

Besides affecting direct demand from China, as it generally consumes 8- 10 per cent of India’s cotton yarn production, the supply glut there is likely to result in an increase in competition for India’s cotton yarn in the other overseas markets as well, the report said.

The size of India's domestic spinning sector is pegged at $15-17 billion, of which 75 per cent or $10-12 billion is accounted for by the cotton spinning sector, given India’s strong natural fibre base and the resultant competitiveness in the sector. Of the total cotton yarn manufactured by India, 70-75 per cent is consumed domestically, while the balance 25-30 per cent is exported to various countries, with China and Bangladesh together accounting for 50 per cent of India’s cotton yarn exports.