India’s exports of cotton-based readymade goods dropped by two per cent in 2015-16, while exports of cotton fabrics declined a little more than four per cent. The high price of domestic cotton, coupled with heavy duties on import of cheaper Chinese varieties, have hampered production of cotton goods.

This was part of a larger trend of a fall in merchandise exports, down for a seventeenth continuous month in April. Apart from cotton, manmade yarn also registered a major decline in export, of 11 per cent.

High export demand has pushed up prices. Also, high dependence on exports to China and the sensitivity of India's shipments to China's policy on a reserve cotton stock are a factor for the fall in cotton-based exports. India is likely to produce 34.1 million bales in the 2015-16 season, which ends on September 30. This is down from last year's 38.3 million bales. Successive droughts have reduced the supply from India, traditionally world leader in cotton production.

Textile exports are 13 per cent of all exports in terms of revenue earned. But a fall in FY ’16 is expected. This is because the rate of growth was a marginal 0.5 per cent in 2014-15, down from a significant rise of 12.4 per cent the year before.