A significant increase in domestic cotton and cotton yarn prices over the last six months has made Indian cotton less competitive in international market. This may lead to garment exports migrating to other countries such as Bangladesh, Thailand, and Vietnam, say exporters.

Unrestricted export of cotton and cotton yarn, particularly to competitors such as Bangladesh, Vietnam, and Thailand with an advance settlement is causing a regional scarcity of these raw materials and driving up their prices, says a report by the Textile Value Chain.

This is impacting exporters’ businesses as they have six-month contracts with importing countries for finished goods. The sharp spike in cotton prices, ranging from 30 to 60 per cent in the last six months, has also increased production costs, says Lalit Thukral, President, Noida Apparel Export Cluster.

In the last six months, India’s cotton and cotton yarn exports have increased by 56 per cent whereas apparel shipments have risen by just 24 per cent.