Falling demand from China for cotton and cotton yarn has hit Indian exports as there has been a 20 per cent decline in cotton prices in financial year ’15. China’s decision to liquidate cotton stocks has been an inflection point for the world cotton trade and has led to a glut in the cotton market with exporters facing waning demand.
As the Chinese off take has slowed down, the Indian government has asked exporters to focus on markets like Latin America, the CIS countries and Africa. However, the focus market scheme and additional incentives have been withdrawn and duties on yarn, fabrics and garments are making India less competitive against Vietnam and Pakistan.
India has a big opportunity to increase domestic manufacturing of value-added products and grow exports in textiles if the government gets proactive on some issues faced by the exporters. Import and central excise duties on manmade fibers are hurting the export competitiveness of Indian synthetic yarn. The duties can be reduced. The yarn industry has to get raw material at lower rates. The government also has to liberalise tariffs on textile exports by signing free trade agreements with markets like European Union and China to make Indian exports competitive in the international market.