Indian cotton spinning mills running at 60-65 percent capacity utilization, GST hits export further low

Desk Report       
Print Friendly

India is one of the largest producers as well as exporters of cotton yarn. Recently Indian cotton yarn exports witnessed a great slowdown. In the first four months of fiscal 2017-18, the country witnessed a fall of 9.79 percent according to data compiled by the Cotton Textiles Export Promotion Council (TEXPROCIL). Cotton yarn import from China and Bangladesh, the two big target markets comprising around half of the cotton yarn shipments from India, has decline, which is a major reason for this downhill.

Figure 1: Inside of an Indian Spinning Industry- sorting out cotton fiber.
Figure 1: Inside of an Indian Spinning Industry- sorting out cotton fiber.

According to Texprocil, India’s cotton yarn exports stood at 283.18 million kgs for the first four months of FY18, which value was worth $916 million between April and July, where exports to China, which accounts for 31 per cent of the overall export figure, have declined by 48.58 per cent during the period.

The export decline has put at risk substantial investments in this sector due to a 60-65 percent fall in capacity utilization due to weak demand from domestic and global markets.

Industry experts of India opined that there is an impact of GST levy of 5 percent that came to force after the goods and services tax (GST) was rolled out on July 1. Cotton yarn manufacturers never paid any taxes in the past. Demonetization and the imposition of GST creates tremendous pressure for the domestic cotton yarn manufacturers.

India’s cotton yarn export trend
Year Quantity (million kgs) Value ($ million)
2013-2014 1310.14 4,555.38
2014-2015 1253.33 3,938.19
2015-2016 1307.11 3,610.56
2016-2017 1203.25 3,352.25
2017-2018 (April-July period) 283.18 916
Source: Cotton Textiles Export Promotion Council (Texprocil)

India faces direct competition from Vietnam as China has allows zero duty import from there. According to TEXPROCIL Executive Director Siddhartha Rajagopal, “Vietnam is gaining market share in China at the cost of India primarily due to zero tariff on imports to China and investment by Chinese textiles mills in Vietnam.”

Previously, for the April–December 2016, India’s cotton yarn exports slumped by 12 per cent to 872.19 million kgs from 987.21 million kgs in the corresponding period last year, though, cotton yarn production was increasing after declining by 10 percent in 2011-12 by over 14 per cent y-o-y to 3,583 million kgs in 2012-13. In 2013-14, production increased by about 10 percent to 3,928 million kgs. However, in 2016-17, cotton yarn production observed a fall by about 5-7 percent to 3,936 million kgs on back of sluggish derived (Domestic yarn demand) demand with substitution taking place from MMF as well as distressed direct yarn exports due to lower demand from China.

Copyright Notice

Any unauthorized use or reproduction of Textile Today content for commercial purposes is strictly prohibited and constitutes copyright infringement liable to legal action.