The government had scrapped the import duty and withdrawn export incentives for raw cotton on July 9, in a bid to boost cotton stocks in India and to facilitate availability of cotton at lower prices, domestically.
According to CRISIL Research, this is because a significant portion of India's cotton consumption is of the short-to-medium staple variety, a segment in which the country is self-sufficient, cost-competitive and has an exportable surplus.
The current domestic prices of the said varieties are at a significant discount to the landed cost.
"Raw cotton exports are expected to increase despite the withdrawal of export incentives, as global cotton output will continue to decline in the cotton season 2008-09.
"This is due to a sharp drop in the US cotton output on account of shifting acreage towards corn and climbing global demand from large consumers, including China where demand will out pace supply, CRISIL Research Head Sridhar Chandrasekhar said.
India's output is expected to exceed consumption resulting in an exportable surplus.
"Consequently, we expect exports to China to continue to increase
