Yarn production in India is likely to decline this fiscal owing to lower demand from China and volatility in cotton prices.Cotton contributes about 50 per cent of the total raw material in the Indian textile industry. With muted demand for yarn from China, and Pakistan enjoying duty-free exports to China, Indian yarn manufacturers are suffering idle capacities and production losses. Prices of cotton have seen a declining trend due to higher production in some countries.

India’s cotton yarn exports between April and June was 35 per cent lower than last year. The ongoing crisis has resulted in the closure of approximately a third of the spinning capacity across India. The industry will not be able to buy the upcoming cotton crop of about 40 million bales worth around Rs 80,000 crores.

Prices of synthetic/manmade fiber have stabilized with support from almost-stable crude prices in the second quarter. Further, the improving spread with cotton has made manmade fiber a more lucrative sub-sector for the textile market. Readymade garment exports from India have started improving because of the introduction of the rebate from state and central taxes and levies scheme along with the existing Merchandise Exports from India Scheme.