The Indian textile industry is likely to face tough times in the coming months with China effecting a change in its cotton policy, rising cost of production and net margins rarely crossing 4 percent, say senior industry officials.
While concerns were expressed about the sustainability of the domestic textile sector, industry sources did not fail to point out that with China the largest producer, consumer and exporter of cotton – changing its policy on sourcing cotton and yarn, the export of both – the white fibre and yarn to China from India could take a beating this year.
“Uncertainty might prevail till stability comes in Chinese cotton production and consumption pattern. Chinese Cotton Policy brought a sudden downfall in the New York price index and this in turn had a cascading effect on the entire world,” said Matt Earlam of Plexus Cotton.
China is currently carrying high cost cotton inventory. It built huge stockpilr after buying the fibre at a reserve price of $1.34 a pound when prices in the global futures market were ruling at over $2. Saddled with high price stock, the country is now planning to reduce the inventory of cotton, besides cutting down yarn production, said Earlam.
Indian cotton prices also are not competitive, quoting higher than global market, he said