China was a major buyer of Indian cotton yarn. But of late, its share has dwindled to less than one-fifth. The recent slide can be attributed to overall macroeconomic conditions globally, the falling manufacturing sector in China, and most crucial the US-China trade war. On the textile front, China has started sourcing more yarn from Vietnam, which in turn is one of the major importers of Indian cotton. The other factor is duty free access given for import of cotton yarn by China to countries like Pakistan and Vietnam. While Indian yarn incurs 3.5 per cent to four per cent duty in China, the levy is nil for yarn exported to China from Vietnam, Bangladesh and Pakistan.

There is a mismatch between the counts required by China and Indian supplies. The majority of spinners in China want 32s count yarn. On the other hand, India majorly produces and exports 30s count.

India is among the largest producers of cotton in the world. But there has been an increase in the minimum support price of cotton by 25 per cent to 28 per cent while prices have fallen sharply in the global market. So the production cost of yarn has gone up in India and Indian prices are now not viable in the international market.