Ind-Ra: cotton outlook promising for FY 2019

By

Isabelle Crossley

Published
Feb 23, 2018

According to the latest India Ratings and Research (Ind-Ra) report, cotton textiles are doing well thanks to lower prices and the financial year 2019 should also see improvements.

The Indian textile industry has had a hard time, much like many sectors, following demonetisation in winter 2016 and then the introduction of the Goods and Services Tax (GST) in July 2017. However, the latest Ind-Ra report offers a positive outlook for the future.

"We have maintained a stable outlook for cotton textiles and synthetics for FY19 [financial year 2019],” said the report. “This is in view of expected margin expansion due to softening in cotton prices, improved consumer spending outlook in key user countries and the low base effect of FY18."

The report also states that the second half of the current fiscal year saw domestic textile demand “bottoming out” but that the coming financial year should see things back on track. This will be helped by better profit margins and a small reduction in working capital requirements and so cotton’s overall credit profile should improve.

One issue that plagued the industry last year was the impact of the pink bollworm, an insect that has decimated many cotton producer’s fields. The report explained that, as this variable cannot be predicted, possible bollworm epidemics should be accounted for.

Cotton acreage grew by 19 percent in the 2017/2018 financial year which was higher than expected, according to Ind-Ra. There was a consequent 11 percent rise in cotton crops during the same time period and this will moderate cotton prices in the coming year despite recent bollworm, induced price hikes. Overall, the report looks promising for cotton textile production moving into the next financial year.