Spinning mills in India are facing a sharp decline in demand from fabric and garment manufacturers, forcing them to cut their production. They are also going in for business consolidation, mainly by laying off labor. One-third of the spinning mills’ installed capacity remains unutilised due to the weak demand. This is because India’s biggest market for yarn — China — has started sourcing cotton from Vietnam. Demand from China has fallen by 35 per cent. Also, the country’s competitiveness at the global level is low because of embedded taxation.

Demand for cotton is low as the textile sector is facing a recession as bad as in 2008. Due to weakening demand by spinning mills, the produce is selling at prices below the minimum support price. Apart from the domestic market, exports of garments are also down by 20 to 30 per cent. Since manufacturers opt for production after getting export orders, they have been forced to restrict production due to weak demand. On the domestic front also, sales are not picking up despite the festival season’s having started. Retailers are not willing to keep more stocks. As a result, manufacturers have little choice but to go in for consolidation and labor layoffs.