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India’s textile mill profit challenging on domestic, exports front

According to analysts, with India’s domestic consumption of cotton yarn advancing at its slowest pace in three years and exports witnessing only a moderate increase, profits of textile spinning mills would be under stress. Domestic consumption is estimated to have advanced by only 1.4 per cent for cotton yarn and 3.1 per cent for spun yarn in 2015-16, the lowest since 2012-13. Consumption has increased by a robust 7.6 per cent for cotton yarn and 6.3% for spun yarn in 2014-15.

Incidentally, the growth in cotton yarn exports has also been slow in 2015-16 compared to previous years. Exports are estimated to have topped 1,300 million kgs (mkgs) in 2015-16, a 3.7 per cent increase compared to the previous year. Cotton yarn exports declined 4 per cent in volume terms and 14 per cent in value terms in 2014-15.

Cotton yarn production is estimated to have grown by about 2 per cent to around 4136 mkgs, the lowest increase in the last four years, data compiled by ratings agency ICRA showed. Production of cotton yarn rose by 14.6 per cent, 9.6 per cent and 3.2 per cent in 2012-13, 2013-14 and 2014-15 respectively. Slow growth in domestic consumption and export is leading to lower growth in production, ICRA said.