India’s cotton yarn output may decline five to seven per cent for the financial year 2016-17. Sluggish demand is partly due to the substitution taking place from manmade fibers. However, yarn demand from overseas buyers has revived in the last few weeks. It was sluggish so far since importers withheld orders in anticipation of a price dip. But now they realize cotton prices are not going to come down. So they are booking cotton and cotton yarn.

And with Chinese cotton auction starting at a 25 per cent premium over the prevailing fiber rate in India, Indian exporters are hoping to see a revival in cotton yarn exports. Cotton yarn exports are expected to turn positive this year after a steep decline last year.

Meanwhile cotton yarn demand from domestic mills has also revived. Spinning mills want a two per cent tax benefit on yarns under the Merchandise Exports from India Scheme. For April to December 2016, India’s cotton yarn exports fell by 12 per cent compared to the corresponding period last year. Cotton yarn exports from India rose by a marginal 4.29 per cent in financial year 2015-16 compared to the previous year.