India's cotton textile exports to China up over 68% at $1.55 billion

India’s cotton textile exports to major consuming countries got a boost with the recent government move to reimburse all state and central levies on such shipments.

Reports quoting chairman of Cotton Textile Export Promotion Council K V Srinivasan said cotton textile exports from the country still suffers a 3.5-10 per cent tariff disadvantage compared to exports from countries such as Vietnam, Pakistan and Indonesia.

An increase in cotton textiles while helping to narrow India’s trade deficit with China by a very low margin, India still imports goods worth over $65 billon from China against exports of $15 billion to that country.

Much will depend on India gaining a long-term price advantage in textile production over China and other major producers.

India’s trade deficit with China declined to $50.13 billion in FY19 from $63 billion in FY18.

India, however, is losing its hold on cotton export market to countries like Brazil due to a sharp increase in the fibre prices, according to the Cotton association of India (CAI).

Cotton shipments from India have become uncompetitive in world markets with cotton prices of select varieties jumping to as much as 10 per cent against a decline in production.

Apart from rising domestic cotton prices, the appreciating rupee has made actual realisation lower than the depreciating Brazilian real. 

“Indian cotton has become uncompetitive in the world market. The largest importer, China, has started importing cotton from Brazil as it has become a cheaper substitute,” said M B Lal, former chairman of the Cotton Corporation of India.

India’s shipment of nearly 400,000 – 500,000 bales of cotton is under serious threat of delivery default as Indian exporters face higher procurement prices than contracted for cotton exports. The CAI in its latest report estimated the cotton crop for 2018-19 at 32.1 million bales of 170 kg each which is lower by 0.7 million bales than its previous estimate of 32.8 million bales made in March.

Meanwhile, Srinivasan has urged the government to emphasise the need to boost exports of textile products not only to compensate the decline in cotton exports, but also to narrow the trade deficit with China.