Cotton imports into the country continue to rise with local prices (minimum support price) being higher than international prices, according to the latest edition of India Ratings and Research (Ind-Ra) credit news digest on India's textile sector.
Till August 31, the import of cotton was 2.3 million bales, up 0.8 million bales than in the previous cotton season.
This will further reduce domestic cotton prices, said the report highlighting trends in sub-segments of the textile sector, including cotton, man-made fibres, yarns, fabric with a focus on commodity prices, imports and exports, production and recent rating actions.
"Cotton prices continued to reduce in August 2019, mainly due to a fall in international prices. The agency expects the prices to fall further as global production is likely to be higher than demand growth," it said.
On the other hand, cotton yarn continues to witness reduced exports due to low demand and increased competition. Exports fell 40 per cent month-on-month during July, mainly due to 80 per cent year-on-year fall in the demand from China.
China has entered into the second phase of a free trade agreement with Pakistan on goods worth 64 billion dollars, of which cotton yarn directly competes with India's, said Ind-Ra in the report.
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Man-made fibres saw the second consecutive month of stabilisation on stable crude oil prices in August, However, the instability in prices during September with the attack on Aramco oil refinery in Saudi Arabia created pressure on margins of synthetic fibres for some time.
The prices have corrected by 20 per cent after that with positive news of fast recovery at the attacked sites.
Apparel exports are seeing a moderate recovery with stabilising demand from the United States. The US-China trade war seems to have no major impact as the apparel exported by China for July were 35 per cent higher than those in the previous month.
"India is yet to see the benefit in the trade war, as only a 10 per cent month-on-month increase in exports was recorded in July," said the report.
Capital expenditure in textiles has been majorly to replace machines with new technologies and add premium or niche products in the existing line-up. Outstanding projects have outpaced the completed ones due to muted demand, volatility in cotton prices and the US-China trade war.
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