MUMBAI, 9 Sep (Commoditiescontrol): The Indian spinning industry is facing a difficult road ahead, grappling with the world's highest cotton prices and a slowing global demand for finished textile products. India's cotton prices have now significantly diverged from global trends, signaling deeper structural issues within the domestic cotton market.
Industry experts point to two possible reasons for this divergence: either it reflects a short-term market anomaly, or it indicates a prolonged period of weak global demand for finished textiles. Unfortunately, signs suggest the latter is more likely, as global textile consumption has slowed considerably, allowing the world to manage with reduced cotton imports from India.
This period of high-priced Indian cotton is unlikely to be short-lived. Domestic cotton prices are set to remain elevated due to the Indian government's continued Minimum Support Price (MSP) operations, which have kept prices artificially high. Additionally, the imposition of a steep import duty on cotton leaves Indian spinners with little flexibility to tap into lower-priced global cotton supplies.
India's domestic supply situation has further complicated the scenario. Despite being one of the largest cotton producers globally, India's cotton production has seen volatility due to erratic weather patterns, pest attacks, and fluctuating yields. While the MSP has ensured farmers receive stable prices, it has inadvertently created an oversupply of cotton in government reserves, driving prices higher.
On the demand side, the situation is equally challenging. India's textile industry, a major exporter of finished goods, has been hit hard by the global slowdown. Key export markets, including the U.S. and Europe, are witnessing reduced consumer spending on apparel and textiles, leading to a significant drop in orders for Indian spinners. With global demand shrinking, Indian mills are being forced to cut production to avoid stockpiling unsold goods.
Domestic demand has also failed to pick up the slack, with the local market unable to absorb the excess production. Spinners are finding themselves squeezed between high raw material costs and weak demand for their output, leaving many with no choice but to scale back operations.
India holds a prominent position in the global spinning industry, boasting the second-largest spinning capacity worldwide, trailing only China. The country produces more than 4,700 million kilograms of spun yarn annually, with over 3,400 million kilograms dedicated to cotton yarn alone. India plays a significant role in the global yarn trade, exporting approximately 1.2 million tons, accounting for about 30% of the total global trade in yarn. Looking ahead, the Indian cotton spinning industry is projected to grow by 12-14% in the fiscal year 2024, reflecting the sector's robust outlook.
The path forward for the Indian spinning industry remains uncertain. Without significant reforms, such as a reduction in import duties on cotton or a rebound in global demand, industry players are bracing for continued struggles. For now, Indian spinners find themselves at a critical juncture, balancing high costs with dwindling demand, and hoping for relief on either front.
(By Commoditiescontrol Bureau; +91 98201 30172)
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