The outlook for Indian cotton textiles for financial year 2016-’17 is expected to be stable. This will be led by a marginal expansion in the cotton space on the back of lower cotton prices, even as revenue growth will be slower, mirroring lower sales realisations.

Most revenue growth is expected to come from higher production efficiency rather than significant capacity additions. However, the cotton textile sector faces key risks also. A cotton or yarn price crash led by uncertainty from China on the buying or stocking of cotton or yarn is a key risk, and could lead the outlook revision to negative for cotton textiles. Uncertainty stemming from China’s policy and production strategy remains a threat.

Revenue growth in financial year ’17 is likely to be driven by the enhanced domestic consumption of fabrics, apparels and home textiles in view of lowering interest rates, rising discretionary income, favorable demographics and moderating inflation.

The outlook for synthetic textiles for financial year ’17 is negative because of continuing overcapacity, falling capacity utilisation, dumping from China, and continuously falling raw material prices, which could translate into inventory losses. India is likely to lose competitive advantage against peers such as Vietnam, which has duty-free access to Europe, and possibly to the US upon the passage of the Trans-Pacific Partnership.