Indian cotton yarn production increased six per cent between April to June 2019 as compared to the same period last year. At the same time, blended and 100 per cent non-cotton yarn production increased 18 per cent, while cloth production by the mill sector fell 10 per cent.

The slowdown in spinning sector is evident from a large number of mills curtailing their operations and accumulating more yarn stocks. The fall in yarn prices due to weak domestic demand, a lackluster export market coupled with high alternative fiber prices is negatively affecting the profitability of many small to medium-sized mills.

The cotton and blends spinning industry is witnessing the biggest crisis in the past nine years. More than 600 spinning mills have shut down across India. Out of this, 225 mills have been closed down in Tamil Nadu. 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.

The differential between domestic and international prices has narrowed in the past one month as global demand has also weakened due to the slowdown in major cotton consumption countries.