The Indian textile supply chain is facing a significant bottleneck in the downstream garment sector, leading to an acute decline in cotton yarn prices across major trading hubs. In Mumbai, South Indian cotton yarn rates have fallen by an estimated ₹5 to ₹8 per kg, driven by intense selling pressure from stockists and spinning mills. This downward trend is a direct result of sluggish fabric lifting from readymade garment units and tight payment conditions throughout the value chain. India's textile exports, particularly ready-made garments, saw a 12.9% slump in October 2025 due to global demand slowdown and high US tariffs, compounding the domestic inventory issue.
The weakening demand cycle
The issue stems from global economic uncertainty, which has lowered demand for finished apparel and, consequently, reduced fabric production. "Slow lifting of fabric from the garment industry is the real problem," noted a Mumbai-based trader, adding that weaving units are actively discouraging higher production. This creates a classic demand-side weakness where spinners are forced to offer steeper discounts to clear inventories and improve cash flow. This challenging scenario threatens the operational viability of smaller, less financially robust spinning mills, despite the fact that India's domestic cotton yarn production and sales volumes remain relatively stable, supported by domestic apparel and home textile sectors.
Industry outlook and mitigating factors
While the immediate outlook is bearish, the industry is closely monitoring global factors. The removal of the Quality Control Order (QCO) on certain man-made fibres (MMF) intermediates by the government is expected to ease raw material costs for the downstream garment sector, potentially boosting demand for yarn as an input.
Furthermore, an expected recovery in domestic demand is forecasted to drive cotton yarn volumes up by 5-6% in 2026. However, the pressure on the ₹4,500 Cr spinning segment highlights the vulnerability of India's textile sector to global demand swings and the need for stronger financial support for the entire value chain
