India’s cotton yarn exports make up more than a tenth of its total textile exports and are one of the few segments in which the country had historically enjoyed an advantage until. However, in 2016-17, exports of cotton yarn fell 7.7 per cent. Apart from trade reasons, GST on both yarn and fabric has hit the hitherto untaxed industry hard. The rupee's rise over the past year, with high raw material prices in the past six to nine months, has affected the industry.

Also, with domestic demand not growing, investment in spinning mills has dropped, pushing up manufacturing prices. India’s cotton yarn industry wants benefits under the Merchandise Exports from India Scheme and the Interest Equalisation Scheme, something manmade yarn already gets.

It has raised the issue of drawback rates. Exporters have called for policy interventions with major buyers of Indian cotton yarn, such as China. India is disproportionately dependent on China for exports. But export orders have continued to decrease over the past couple of years. Vietnam and Bangladesh have advanced on the Chinese market with more than a four per cent tariff advantage due to trade agreements and cheaper labor costs. Cotton yarn is also exported to Bangladesh, Pakistan, Egypt and Korea.