In response to the increasing demand from China for both cotton and yarn over the past three years, many cotton yarn spinning mills in India increased their production capacities to meet the rising demand, are facing tough challenge today as change in Chinese policy hits Indiaâ€™s cotton exports.
After witnessing a remarkable rise in yarn exports in 2013 over 2012, from 77 million kg of yarn export to 1,107 mn kg and anticipating a consistently high demand from China, the spinning mills in India have added a combined 500,000 spindles in the past five years.
The Chinese government has not only cut the reserve price for sale of cotton in the domestic market but also plans to release more of cotton from its reserves than before. Moreover, with the depreciating value of Chinese currency, the yuan, in recent times has made Indian imports more expensive for China.
However, there is one hope of Indian exporters, the compulsion of using Chinese cotton stock together with high manufacturing cost, making of yarn and fabric would be unviable in the long run which will drive the Chinese garment units to move their manufacturing out of China to countries like Vietnam and Cambodia which are more cost-competitive for garment manufacturers.
Also, in the coming season China to increase the area under staple crops is likely to cut on cotton sowing, which might help revive cotton imports from there. Indian mills, nevertheless, will have to explore new markets to reduce dependence on China.
There is a need of Indian textile industry review their plan and also contemplate on diversifying export to these countries to offset the drop in demand from China. This would definitely require little time, thus the Indian textile sector in the coming months will have to be ready to face tough challenging and overcome it soon.
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