Kashmir sericulture, or silkworm farming, is a casualty of changing regulations, regional political tensions and competition from China. Only about 30 per cent of the silkworm cocoons produced in Kashmir have been used locally to produce silk. The rest is exported to other regions in India and neighboring countries, which convert cocoons into silk more cheaply and efficiently.

Kashmiri silk factories have to find a way to produce as cheaply and efficiently as their East Asian competitors. Competition has meant that many Kashmiri silk producers have abandoned the industry as the price they receive for silk products has declined dramatically. The Kashmir silk industry once held a significant position in the world due to its superior quality and luster. Shortage of mulberry trees for rearing the cocoons is a pressing problem.

Since the 1980s, production has decreased dramatically. By the late 1990s the state was producing only 60,000 kg of cocoons per year. Rates have come down sharply from Rs 1500 per kilogram last year. The rates have touched Rs 500 to Rs 600 per kilogram. Previously prices were kept artificially high in an attempt to grow the silk industry. India is the second largest producer and consumer of silk products in the world.