India will import 20,000 cotton bales from Pakistan.This is because of high Indian prices following limited supply. India is the world's biggest cotton producer. Landed cost of imported cotton is lower than local prices.
The move is a role reversal from earlier this year, when Pakistan was buying cotton from India after its output had been hit by bad weather. Indian cotton prices have risen by 28 per cent since the start of the 2015-16 season as two years of drought have affected output. Pakistani supplies are available at about 70 cents per lb on a free-on-board basis.
India has so far imported about 1.2 million bales in 2015-16 and needs another 4,00,000 bales before the new crop starts arriving from the end of September.
In fact supplies are dwindling in both countries. Global cotton prices could rally sharply in the coming months as stocks become further depleted in key producing countries.
The sharp rally in Indian prices is making imports viable from Pakistan. But Indian buying has been pushing up prices in Pakistan. Mills in Pakistan say cotton exports to India should be restricted and the raw material should instead be provided for domestic textile production.