The world of textile and readymade garment manufacturing continues their collective rollercoaster ride of ups and downs indicate various analyses, reports and experts’ statements. The international financial projections have added to the confusion on the state of economies worldwide which saw international cotton prices spiral downwards. In this milieu, Indian cotton grower has been showered with good news that the product is holding its ground and a fortnight ago a candy of Indian spot cotton was selling for Rs 63,300 and a candy of the S-6 2 variant at Rs 62,150. This begets the question what is prompting this trend that bucks the international one?

Market delivery lowered

Reports have confirmed that raw cotton being delivered to local market in India is significantly lower this year compared to the previous years. Weekly arrivals were only about 55 kt in the last few weeks and by April 9, 2023, the cumulative delivery of domestic cotton was 3.068 million tonnes, a significant shortfall as per the prediction of 5.32 million tonnes as was assessed by the Cotton Association of India. The body also reported that as early as February 2023, delivery totaled 2.632 million tons, a deficit of 32 per cent. The continuous delivery shortfall is organically increasing price.

India’s manufacturing sector contributes to hike

The local textile industry is seeing a surge of positivity as the Indian government’s expansion plan in this sector is about to take off. In this context, the overall domestic manufacturing sector has held fort against the global downturn and is carrying on well as per World Bank’s report commending the growth of Indian manufacturing and exports.

As one of the main sectors within India’s manufacturing industry, textile production has been resilient despite sluggish global growth, one of the reasons being a robust domestic demand. It should be noted that India’s Manufacturing Purchase Index (PMI) rose by 1.1 per cent and as of January 2023 stood at 55. 4 points, signaling steady growth. In comparison, the world’s largest economy, the US is at a PMI of 47.70 currently.

Vibrant downstream demand triggers up-pricing

From the very first week of fiscal year 2023-24, downstream industry for cotton has regained activity. In South India, cotton yarn transactions started increasing and cotton yarn prices in Mumbai’s market gained 2-3 pounds per kilo. It is said that the local spinning wheels are getting busier although the cotton inventory this year is lower than last year. Orders from lockdown-free China, post-earthquake Turkey and coming to terms with its new economic reality Europe have increased, leading to escalating prices for a commodity in short supply.

Globally, cotton of Indian provenance has taken an upward turn in demand. India’s cotton-yarn spinners are the secondary beneficiaries as well as the projection is a 100-basis point improvement in operating profitability to 12 per cent in fiscal year 2023-24 despite a 10 per cent on year fall in revenue due to lowered realisations and sluggish exports, based on CRISIL ratings.

Indian government’s initiatives

The Indian government continues to introduce policies that are conducive to downstream capacity expansion which is what makes the Indian textile industry’s commercial outlook upbeat. The acclaimed seven gigantic textile parks in the country are in their advanced stage of readiness, fuelling a lot of hope for both the domestic and exports markets. The key components of these governmental policies are reduced import tariffs on certain textile machinery, spare parts and accessories, including shuttle-less looms in the category of zero tariffs.