India may see strong cotton yarn exports growth, says ICRA

Indian spinners, who had reported a multi-year low profitability during 2017-18 due to multiple headwinds, have heaved a sigh of relief following the surge in export demand for cotton yarn. Though the growth pace is expected to moderate this year, India is set to record a strong growth in cotton yarn exports during this fiscal, according to an ICRA report.

Cotton yarn exports for the full year are expected to report a healthy growth this fiscal.

While the strong Y-o-Y growth of 56 per cent in cotton yarn exports during the four months of the current fiscal driven by a more than two-fold increase in exports to China is partly attributable to the low base effect, as exports were down by 56 per cent Y-o-Y in four months fiscal 2017-18, it has also been driven by competitive Indian cotton and yarn prices.

However, competition from Vietnam and China’s efforts to improve cotton availability are also likely to moderate the export demand for India’s cotton yarn going forward, says the recent report by the credit rating agency.

The revival in export demand has enabled ICRA’s sample of large spinning companies report a comfortable volumetric growth of 5 per cent year-on-year (Y-o-Y) in the first quarter of this fiscal, which has translated into a growth of nearly 12 per cent in sales turnover during the quarter, a top Indian business daily reported citing the document.

Indian cotton prices increased at a relatively slower pace vis-a-vis the international prices during the seven-month period ended May 2018, reporting a 6 per cent increase in US dollar terms vis-a-vis a 20 per cent increase in the international cotton prices during the same period.