Speculative Activities Are Hurting India's Cotton Textile Sector

Market News

Speculative Activities Are Hurting India's Cotton Textile Sector

Cotton is expected to remain in high demand in the global market for the next couple of years. The ban on Chinese Xinjiang cotton and cotton textiles has resulted in a sudden spike in demand and price of cotton, as supply is constrained. Some of India's cotton growing states are contemplating increasing cotton acreage to help farmers get better remunerations. Similarly, other cotton growing countries are also trying to increase cotton production and productivity. The ban on Chinese cotton will also affect China's apparel exports. Since the last three years especially, apparel brands had begun to reduce their dependence on China. The pandemic and the current ban on Xinjiang cotton is strengthening this trend. Then there is Myanmar. Its textile and garment industry is struggling to stay afloat in the midst of political uncertainty and civil unrest. Its apparel exports dropped 11.75% in 2020, and the fall is expected to be steeper in 2021. Major international shipping lines have ceased operations at Myanmar ports in response to the current political situation. This will lead to a faster and more permanent sourcing shift to more stable destinations - mainly India and Bangladesh. And it's worth mentioning the much touted advantage that India has - a full-fledged textile supply chain. India is better poised to supply textiles and apparel to the world. Of course, the government will need to support the growth of this industry. In the very short term, there needs to be a mechanism in place that ensures that domestic cotton and cotton yarn and other inputs are available to the domestic industry first so it is able to export competitively and meet schedules. The government and the industry are on the same page when it comes to promoting and exporting value-added textile goods, viz, apparel, made-ups, technical textiles. Then there is no case for allowing exports of cotton and cotton yarn to neighbouring countries at the cost of your own industry. The spiraling prices and shortage of cotton and cotton yarn has led many spinners and weavers to cut production or to even shut down completely. And this at a time when the industry is working to revive from the pandemic, and to keep jobs intact. While quantitative restrictions on exports may be necessary to avoid such situations every year, and to put an end to speculative trading; on its part, the industry too needs to have a better understanding of its cotton and yarn requirements, and enter into contracts with the respective suppliers to ensure operational stability. The government's One District One Product scheme may not go too far for the textile and apparel sector if getting the basic inputs at the right time and cost becomes a challenge. As traditional supply chains are shifting, India is well-positioned to attract international brands and buyers. A number of innovative policies are in place, India is working towards improving ease of doing business, as are other countries in this region. The current chain of events has once again opened up a large window of opportunities for the industry, which it must not miss again.