The United States Department of Agriculture (USDA) expects India’s cotton exports to slip to its lowest in 19 years during the current crop season between October 2022 and September 2023 as it expects farmers to shift to other profitable crops such as oilseeds and pulses.
NEW DELHI: India, one of the world’s largest cotton producers, is at risk of becoming a net importer as both exports and production have experienced a significant decline in the current financial year. Weak demand for textile products in the West, primarily due to the prolonged Ukraine war, has contributed to this decline.
According to the United States Department of Agriculture (USDA), India’s cotton exports are expected to reach their lowest point in 19 years during the current crop season, spanning from October 2022 to September 2023. The USDA predicts that farmers will shift to more profitable crops like oilseeds and pulses. In the fiscal year 2023, Indian cotton yarn exports hit a ten-year low of 664,000 tonnes, compared to the highest exports of 1.38 million tonnes in the previous fiscal year. The value of cotton yarn and handloom product exports also dropped by 14% in May 2023 compared to the same period last year. Cotton exports decreased by almost 75% in fiscal year 2023, totaling $678.75 million compared to $2.65 billion in the previous financial year.
It is worth noting that cotton yarn manufacturers had previously witnessed record profits due to strong demand following the end of the COVID-19 pandemic. Additionally, demand was boosted by lower domestic cotton prices compared to global prices, along with the US ban on cotton products from China’s Xinjiang region based on human rights concerns.
However, demand faced pressure in fiscal year 2023, and the decline in domestic production raised concerns about India becoming a net importer. India’s textile production mainly caters to the domestic market. Experts also attributed the decline to a decrease in demand from China following an uneven recovery from COVID-19. Historically, China has been the largest buyer of Indian cotton yarn, but after the US ban, Bangladesh replaced it and became the largest importer of Indian cotton yarn in fiscal years 2022 and 2023.
Queries sent to the Union Textile Ministry have not yet been answered at the time of writing. According to the latest data from the Ministry of Agriculture, cotton sowing across India is 8.5% lower compared to the previous year, with 7 million hectares dedicated to cultivation. This decline is primarily due to decreased cultivation in major cotton-growing states such as Maharashtra, Andhra Pradesh, and Telangana, caused by erratic rainfall. Although the country’s overall rainfall has returned to normal levels from being deficient within approximately ten days, the uneven distribution of monsoon rains in these regions remains a concern for cotton cultivation. As of Thursday, rainfall deficiency was 22% in Maharashtra, 27% in Telangana, and 14% in Andhra Pradesh. However, Gujarat, the largest producer of cotton in India, experienced a 106% above-normal rainfall, leading to a 4.6% year-on-year increase in cotton sowing. Cotton plantation lags behind in Maharashtra by 10.4% at 1.7 million hectares, in Telangana by 2% at 1 million hectares, and in Andhra Pradesh by 0.3% at 57,000 hectares.
According to the government’s third advance estimates, cotton production in the 2022-2023 period (July-June) has reached 34.3 million bales (1 bale = 170 kg), compared to last year’s 31.1 million bales. However, the Cotton Association of India has revised the cotton crop estimates downward to 29.8 million bales, compared to the predicted 30.7 million bales in 2021-2022. Care Edge rating agency noted that Indian cotton yarn exports were the lowest in a decade, leading to a decline in sales volumes and a contraction in operating profitability margin for cotton yarn spinners in fiscal year 2023, which remained below the historical average. Last year, former textiles secretary UP Singh cautioned, “India has been the largest producer and exporter of cotton for quite some time now. But of late, chances are that we will become a net importer of cotton from being a net exporter. The reason is that while cotton production and productivity have not increased, cotton consumption is rising.”
Stagnant cotton production is also a concern as textile prices have consistently risen over the past three years, as highlighted in the Economic Survey 2023. Clothing and footwear have been among the major contributors to headline inflation in fiscal year 2023.
