India has the largest area under cotton cultivation in the world, covering 12.7 million hectares of cultivated land, which constitute about 37 per cent of the total area under cotton in the world. The country is currently the world’s second largest exporter. However, it’s estimated that cotton production in India will fall by over seven per cent for the October 2015-September 2016 crop year.

This year, India will produce about three million bales less than last year. India will produce 35.3 million bales this year. A striking point is that this season India has an opening stock of 7.36 million bales as against 5.39 million bales in the last season that began in October of 2014. This year, as mill consumption is expected to remain at the same level, less production this year will somewhat offset the excess opening stock. Despite a drop in production, cotton prices have been in a bear grip owing to higher carryover stocks. Indian cotton prices, since the beginning of 2016, have fallen three per cent compared with over nine per cent correction in international prices. Prices in India are finding support on the back of rising exports.

Cotton prices in the international market have also crashed to a level not seen since August 2009. The fall is due to widespread fears that China, which has been a net big importer, will soon start selling cotton from reserves, depressing prices the world over.

India has already exported about 40 lakh bales of cotton so far this year, of which 20 lakh bales were shipped to Pakistan. Pakistan is buying more cotton than expected from India after floods cut its own crop to the smallest in over a decade. Cotton production in the next season (October 2016 to September 2017) may see an uptick and could reach about 38 million bales. The market will also see an uptick in the next season with price expected to be about Rs 34,000 to Rs 35,000 per candy.