Strong ₹, Chinese policy hits cotton, yarn exports

China’s move to slash cotton prices coupled with the appreciating rupee will slow down Indian shipments of both fibre and yarn in the near term.

“China is a major market for Indian cotton and yarn. Exports of both cotton and cotton yarn will get affected by the latest Chinese move,” said DK Nair, Secretary-General, Confederation of Indian Textiles Industry. “It is a double whammy for us. The Chinese currency is depreciating, while our currency is appreciating, making our exports unviable,” he said.

From April 1, China plans to cut the floor price for the cotton auctioned from the state reserves by about 4.2 per cent. The proposed move is intended to reduce the accumulated stocks, which may in turn slow down imports into the world’s largest cotton consumer.

Manikam Ramaswami, Chairman of Texprocil, said the appreciating rupee, high interest rates and inflation in the country were a major concern than China’s move to cut cotton prices. Though Indian exporters are finding some demand from alternate markets, such as Pakistan, Bangladesh and South America, it is unlikely to offset the decline in demand from China, he said.

According to Texprocil, cotton yarn shipments in the April-February period of the current financial year were up by about a fifth to around $4.004 billion against $3.214 billion in the corresponding period last year. Suresh Kotak, Chairman, Kotak and Company, said the impact is bearish in the short-term but prices are seen firming in the long-term as the Chinese strategy to cut acreage and removal of stock restrictions on local textile mills would ensure demand for Indian cotton.

MB Lal, Chairman of Shail Exports, feels that the latest Chinese move is unlikely to have any impact on Indian exports though a stronger rupee has slowed down the shipments.

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