India’s cotton yarn exports have declined 9.79 per cent in the April to July period of the current financial year. The main reason was slow pick up from China and Bangladesh, which comprise around 50 per cent of overall shipments from India. Exports to China declined by a staggering 48.58 per cent.

Domestic cotton yarn manufacturers have been reeling under tremendous pressure since demonetisation and GST. The appreciating rupee aggravated the situation. Between April and July, the Indian currency appreciated by over one per cent.

Meanwhile, Chinese textile mills have built a large inventory of cotton and yarn over the past few years amid fears of a sharp increase in prices. Following the price hike, mills there started to use local cotton and yarn, resulting in a sharp decline in their imports not only from India but from other surplus countries.

Chinese traders are more inclined towards imports from Vietnam. Vietnam’s exports to China have zero tariff; imports from India attract a tariff of 3.5 to five per cent. Apart from that, Chinese textile mills have invested in the textile and apparel sector in Vietnam. So they are buying back yarn to China from their own manufacturing units, thereby cutting down imports from other countries including India.