India’s yarn exports have fallen. One reason is the higher cost of raw materials. Mills are running at below their capacity to match the demand and supply, which in turn is increasing the manufacturing cost.

The textile value chain, particularly the cotton-based manufacturing value chain, has slowed down resulting in a stagnancy or drop in domestic consumption. Prices of cotton in India are higher compared to international markets due to higher level of minimum selling price. Second, high fluctuation in prices along with the tight liquidity situation in the market is resulting in slow buying of yarn and fabrics. If the situation continues, there may be a need for converting short-term loans in the textile manufacturing sector to long-term loans.

To give a boost to the cotton value chain, a switch to direct benefit transfer to farmers in the upcoming season instead of an artificially higher level of MSP will help. Also steps on a war footing to increase cotton yields are necessary. Secondly, apparel makers should take advantage of the ongoing US-China trade war and focus on exporting more to the US market. If the situation does not improve, banks should be directed to reschedule loans given to the textile manufacturing sector.