Indian Cotton Yarn Sector To Witness 5-7% Growth In FY’24
Indian cotton yarn industry is likely to witness 5-7 percent year on year growth in sales volume, while the operating margin is expected to expand by 100-150 bps from a year ago in fiscal 2023-24.
“Factors contributing to this improvement include the alignment of Indian cotton prices with international prices and a shift in demand from competing nations,” a CareEdge Ratings report informed.
Other factors include a gradual recovery in demand from China following the relaxation of its zero-covid policy, and a rebound in global demand from downstream industries.
Historically, Indian cotton prices had largely remained at par or lower than international cotton prices.
“However, it remained 20-25 percent higher than international prices in the previous fiscal resulting in decline in the competitiveness of Indian cotton yarn spinners, amidst restrictions on cotton import” the rating agency explained.
India’s cotton yarn exports have a significant impact on its production, accounting for around 25-35 percent of total production.
However in fiscal 2022-23, Indian cotton yarn exports faced challenges due to the disparity between domestic and international cotton prices, affecting India’s global competitiveness.
The global demand slowdown resulting from high inflation and recessionary pressures in developed economies, such as the USA and the European Union, further impacted the industry.
Indian cotton yarn exports hit a decade-low level of 664,000 tons in the previous fiscal compared to the highest exports of 1,389,000 tons in fiscal 2021-22.
“Consequently, cotton yarn exports stood at 19 percent of cotton yarn produced in fiscal 23’, while average spread of cotton yarn remained around Rs.100-105 per kg, similar to pre-Covid levels,” the report added.
Historically, China was the largest buyer of cotton yarn from India. However, post USA’s ban, Bangladesh took its place and became largest importer of Indian cotton yarn during fiscal 22’ and fiscal 23’.
