Strong Growth of Cotton Yarn Exports in FY19 is Expected in India
The surge in export demand for cotton yarn over the past few months has come as a major respite for the domestic spinners, who had reported a multi-year low profitability during FY2018 amid multiple headwinds. Even though the pace of growth is likely to moderate during the year with the base effect setting in, India is set to record strong growth in cotton yarn exports during FY2019, according to an ICRA report released on Monday.
It is expected that the India’s cotton exports will jump 43 per cent to 10 million bales in the 2018-19 marketing year on strong overseas demand, mainly from China. In year, 2017-18, in general cotton shipments are likely to cross 7 million bales in the ongoing marketing year. Till May 2018, already 6.2 million bales have been exported. According to reliable sources, the demand for Indian cotton is high as prices are almost 10 % lower than the international prices. The President of Cotton Association of India, Atul Ganatra also informed about the same. He also went on saying that the Indian cotton is quoted at Rs 46,500 per bale in the spot market, which is very much lower than Rs 54,000 per bale in the US and Rs 58,000 per bale in Australia.
Hence, China, which is the world’s second largest producer, has signed an advance contract for 5 lakh bales of new cotton crop from India. This will be delivered in November-December of the 2018-19 marketing year. It is expected that in the next marketing year, total cotton exports to China could increase to 30-40 lakh bales from 10 lakh bales this year. Till May of this marketing year, 6.2 million bales were undertaken. Also, 20 lakh bales have been exported to Bangladesh and 10 lakh bales to China.
The president of CAI also stated that the industry body has revised upward the country’s cotton output by five lakh bales to 36.5 million bales for the 2017-18 marketing year. It has considered higher yields. For information, India is the world’s largest cotton producer and second-largest exporter. Some of the main cotton growing states are Gujarat, Karnataka, Andhra Pradesh, Madhya Pradesh and Tamil Nadu.
Market Growth of the Industry
- Textile industry accounts for almost 15 per cent of total exports
- It was estimated that the size of India’s textile market in 2016 was around US$ 137 billion, which will be growing to US$ 226 billion market by 2023.
- The industry will be growing at a CAGR of 8.7 per cent between 2009-23E
- The government of India has plans to finalize and launch the new textile policy in the next three months. With the help of this policy textile industry will achieve US$ 300 billion worth of textile exports by 2024-25 and create an additional 35 million jobs.
- Aggregate net sales of the industry stood down 9.4% compared with the same period a year ago.
- Aggregate net profit for the Tata group’s Trent Ltd, Shoppers Stop Ltd and Titan Co. Ltd, Cesc Ltd, Gitanjali Gems Ltd that runs the Spencers super and hypermarket chains, is expected to be at Rs.454.27 crore.
These days, the consumer mindset has changed and become careful. Now, people are in the macroeconomic environment, where they have gone back to savings mode and only buy the essentials rather than buying all other purchases. Due to the economic uncertainty, consumers are also holding on to their durables for longer. The average life of a product has improved by 20%, which means replacement or upgrade that use to take five years earlier now takes seven years.