India’s cotton yarn exports fell 25 per cent from 2013 to 2018. Spinning mills performed well in exports during 2013-14 when cotton yarn was covered under schemes such as the two per cent incremental export incentive, the two per cent interest subvention and the three per cent focus market incentive. The sector could penetrate into markets other than China. However suddenly all incentives were withdrawn leaving spinning mills high and dry.

China which is the largest importer of cotton yarn has shifted from India to Vietnam and Indonesia as they have duty free access while Indian yarn carries a 3.5 per cent import duty. From 2013 to 2017, there has been a decline in India’s cotton yarn exports to China by 48 per cent while exports from Vietnam and Indonesia have increased at a remarkable rate of 129 per cent and 55 per cent respectively in the same period.

Fabric exports from India are at serious disadvantage vis-à-vis exports from competing countries due to duty differentials in leading export markets. Markets like EU, China, Turkey and Vietnam impose an import duty in the range of eight per cent to 12 per cent on Indian fabric while duty free access is given to countries such as Pakistan, Cambodia and Bangladesh.