With mounting losses due to a slowdown in both domestic and export market, spinning mills in India have started cutting down on production. India is the world’s largest yarn exporter. Chinese demand has slowed down drastically as it has been offloading cotton stocks from own reserves for a while now, making locally-produced yarn competitive, compared to Indian yarn. Yuan’s devaluation is making imports even more expensive.

Due to the withdrawal of export incentives for yarn in the recent trade policy, exports to countries such as Latin America are getting affected due to high shipment costs. Poor demand in the domestic market has resulted in piling up of stocks. Indian exporters want free trade agreements with China, the EU and other countries to be expedited as this would create a level playing field for them . They have also sought a three to five per cent export incentive as an interim relief until the FTAs are signed.

Since the capital-intensive spinning segment accounts for the bulk of investment under the Technology Upgradation Fund Scheme, non-payment of subsidy amount for earlier investments is taking a toll on the balance sheets of spinning mills.