The Hindu Business Line : `China may find India's cotton, yarn attractive'

NOW that China has allowed its currency to appreciate, is it a good sign for Indian cotton and cotton yarn sectors seeking to access a greater slice of China's market?

The two sectors, credited with having abundant production this year, may get some boost from China's yuan revaluation in tapping the Chinese market, particularly for India's yarn, according to sources in the cotton textile sector.

"China may now find it attractive to import both cotton and cotton yarn from India, which will be cheaper to them after the removal of yuan's pegging against dollar," said Mr K.N. Viswanathan, Secretary of the South India Cotton Association (SICA).

The SICA official's optimism on increased marketability of India's cotton and yarn in China comes in the backdrop of the reported importation this season of Indian cotton by China to the extent of some three lakh bales. According to trade circles, the cotton exported from India to China this year was done through third party procurement by international shippers. Of the estimated seven-lakh bales shipped out of India this year so far, China would have bought around three-lakh bales. Of this, some two-lakh bales were sold by the Cotton Corporation of India (CCI), it is said.

Mr Viswanathan holds the view that coupled with the easing domestic prices amid projected higher output for the coming season and the opening the China currency revaluation has given, India's cotton institutions such as the CCI and the Maharashtra State Cotton Growers Co-operative Marketing Federation can put in that extra marketing facilitation by organising proper grading of domestic cotton for the potential Chinese consumers to step up raw cotton exports. India has consistently been a source point for China to procure its cotton yarn supply in recent years.

But many domestic suppliers are of the opinion that the latest move by China to allow yuan to appreciate may throw up opportunities to make India's yarn and garments more saleable; a good many yarn producers find the domestic market more attractive than exports.

The domestic yarn price (for the average 30s and 40s count group) is said to be higher by Rs 15 a kg compared to export prices, forcing many to turn to local market since April this year.

`Competitive edge to textile exports'

Our Delhi Bureau reports: "The revaluation of the Chinese renminbi would provide a competitive edge to Indian textile and apparel exports. Besides the upfront revaluation, what is even more important is the band in which the Chinese currency would be allowed to move in the future," Mr Sudhir Dhingra of Orient Craft said.

According to the Associated Chambers of Commerce and Industry of India, the revaluation of yuan and safeguards adopted by the US and the EU against China would help India to increase its share in world textile exports to 5 per cent by 2007 from the current 3.9 per cent. The country would be able to achieve $25-billion exports in the projected $500-billion world textile exports by 2007.

The Assocham President, Mr Mahendra K. Sanghi, said: "The unprecedented surge in textile exports orders for winter 2005 from the EU and the US and the revaluation of yuan will enable India to register excellent export growth in the textiles sector this year."

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