India’s exports of cotton yarn declined 38 per cent during the first six months of the current fiscal.
In fact, the export quantity in June 2019 was the lowest monthly export in the last five years. China’s free trade agreement with Pakistan from April this year is seen as one of the major factors for the drop in India’s cotton yarn exports to China. In addition, exporters of cotton yarn are at a serious disadvantage vis-a-vis competing countries due to differential import duties in leading export markets. There is an import duty ranging from 3.5 per cent to five per cent on cotton yarns imported from India into major markets like China, EU, Turkey and South Korea. But imports from competing countries like Bangladesh, Cambodia, Pakistan, Indonesia and Vietnam enjoy benefits of zero duty in these markets.

Cotton yarn is a value-added product with substantial value addition taking place within the country. As a result of a decline in exports this year, the supply of cotton yarn has increased in the domestic market and in turn led to a drop in prices. Cotton yarn is not granted export benefits such as the Merchandise Exports from India Scheme and the three per cent interest equalisation scheme.