Slow growth in domestic consumption and exports is likely to pose a challenge for textile spinners if demand remains muted this fiscal, ratings agency Icra said.
"The slow pace of growth in spun yarn production has been driven by factors like tepid domestic consumption and limited growth in exports. With cautious outlook on cotton yarn exports, domestic demand growth will determine the production growth going forward," Icra's AVP, Corporate Sector Ratings, Anil Gupta said.
As per Icra estimates, the domestic consumption growth for cotton yarn in 2015-16 is expected to be 1.4 per cent compared to 7.6 per cent in the previous fiscal.
The consumption growth for spun yarn is estimated to be 3.1 per cent in 2015-16 from 6.3 per cent in 2014-15.
It said this is the lowest level of domestic consumption growth since 2012-13.
The ratings agency said the growth in cotton yarn shipments has also been slow with exports of 1,302 million kg in 2015-16, an increase of 3.7 per cent compared to growth rates of 47.5 per cent and 18.3 per cent witnessed in FY13 and FY14, respectively.
In terms of cotton yarn production, the industry witnessed slowest pace of growth in 2015-16. Production is estimated to have grown by 2 per cent to 4,136 million kg and is the lowest in last four years.
Cotton yarn production had grown by 14.6 per cent, 9.6 per cent and 3.2 per cent in FY13, FY14 and FY15, respectively.
Since cotton yarn accounts for three-fourths of India's yarn production, the country's total spun yarn production has also emulated this trend with a 3.2 per cent growth in 2015-16, compare to 11.3 per cent, 9.1 per cent and 3.4 per cent growth in FY13, FY14 and FY15, respectively.
