A surge is likely in India’s cotton yarn exports. There was a 56 per cent year on year growth in cotton yarn exports. The strong revival in export demand augurs well for profitability of domestic spinners as it has enabled them to pass on the increase in raw material costs, unlike last year. In addition they have access to low-cost cotton from the previous harvest season.
The strong year on year growth in cotton yarn exports has been driven by a more than two-fold increase in exports to China and also by competitive Indian cotton and yarn prices. Indian cotton prices increased at a relatively slower pace vis-a-vis international prices during the seven-month period ended May 2018, with a six per cent increase in dollar terms vis-a-vis a 20 per cent increase in international cotton prices during the same period.
However, in spite of the healthy demand prospects in export markets in the near term, the spike in growth rate of exports witnessed is likely to be moderate with the arbitrage opportunity as well as base effect fading out. Other factors apart, competitive pressures from Vietnam and China’s focus on improving cotton availability situation are also expected to moderate the export demand for India’s cotton yarn going forward.