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Cash crunch comes in way of India’s cotton exports

With the government’s move to ban high value currency notes exports of 1 million bales of cotton from India have been delayed. This has prompted farmers, who prefer payments by cash, to postpone sales, say officials. The supply crunch has driven up prices in India to levels higher than in the global market and could force buyers to switch to other producers like the United States, Brazil and African countries. It could also restrain India's total exports in the 2016/17 year marketing year that started on October 1.

Earlier this month, the Prime Minister scrapped Rs 500 and Rs 1,000 bills to crack down on corruption. But the move disrupted trading of farm commodities like cotton and soybean as most farmers prefer payments in cash. As is known that November remains a peak supply month but now supplies have stopped due to the cash crunch. Farmers who had the habit of taking payments by cash are not taking cheque payment.

Expecting a bumper crop of 35 million bales, Indian traders had contracted 2 million bales for exports to China, Vietnam, Bangladesh and Pakistan for shipments in November to January. But traders have managed to ship only around 300,000 bales and nearly 1 million bales that were due to ship in November and December are getting delayed, it is understood. India's inability to ship promptly could force buyers to switch to other suppliers like Brazil and the United States.

 
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