Exports of cotton yarn from India in the first quarter have fallen 33 per cent. The steep fall has been caused by a variety of reasons, including a decline in exports to leading export markets like China, Bangladesh, South Korea and the duty-free access given for import of cotton yarn by China to countries like Pakistan and Vietnam. It is feared that if the current trend of declining exports continues in the next quarter, it will lead to the closure of several spinning units in the near future, resulting in layoffs.

Considering the large scale investment in spinning sector and sluggish demand in the domestic markets, exports are the only avenue to ensure uninterrupted production and capacity utilization. Even though cotton yarn is a value added product, it has been excluded from export benefits like interest subvention, the Merchandise Export of India Scheme and the Rebate of State and Central Taxes and Levies schemes. There is no rebate on embedded taxes like agricultural cess, mandi tax, power and fuel surcharge, which are incurred in the production process.

The cotton yarn sector is one of the pillars of the Indian textile industry and is also highly modernised and technology driven and also provides sustainable income to farmers.