The cotton yarn exports of India fell by 9.79% during April– July 2017 mainly because China and Bangladesh are picking up the shipments slowly. These countries take about half of the overall cotton shipments from India.
As per Cotton Textiles Export Promotion Council (Texprocil), the export figures of Indian cotton yarn were at 283.18kg in terms of quantity and $916 million in terms of value during April-July 2017. Local cotton Domestic cotton yarn manufacturers have been reeling under tremendous pressure since the demonetization of the high-value currency notes in November last year. This is because a major chunk of the industry falls under the unorganized sector and does business primarily in cash.
The GST levy of 5% from July 1st also came as a blow to the as there were no taxes on cotton yarn manufacturers before the GST regime started. Fall in exports has led to falling in capacity utilization by 60-65% as the demand is weak in the global and domestic market and so the large investments in the sector are at risk. The Indian yarn exporters are mainly blaming slow pick up from China for this down fall. China buys about 31% of the Indian cotton exports and is the single largest market for the Indian cotton yarn.
The exports to China have fallen by 48.58% in April–July of 2017. The yarn exports picked up after declining by a third to 130 million kg during April-May 2017 from 198.5 million kg in the same time of last year. The industry sources feel that this pickup was temporary and that the Chinese importers were more interested importing from Vietnam.
Vietnam levies zero taxes on imports to China whereas Indian imports are levied with 3.5-5% taxes. Chinese mills have invested in Vietnamese textile sector and are buying yarn from their own mills in the country and so are reducing imports from other countries including India. India needs to provide an incentive to the sector under Merchandise Exports from India Scheme (MEIS) of at least 2% to revive back its losing share in China market.
As per the industry, there is another view that appreciating value of rupee has further damaged the exports of the industry. Indian currency value has increased by more than 1% and reached 64.19 against the dollar between April and July. The rupee appreciated over 5% from February 2017 when it reached its recent low level of over 67.02 against the dollar.