India is fast losing its cotton export market to Brazil owing to a sharp increase in the fiber rates over the last six weeks which makes Indian shipments noncompetitive in world marketplaces.
The benchmark Shankar six variation of cotton jumped more than 11 percent to trade at Rs 12,908 a quintal on Friday such as against Rs 11,699 a quintal on February 28. By the Cotton Association of India (CAI) predicting that India’s cotton output will remain lower during the present season, its arrivals have started declining steadily. Cotton reaping completed early this season due to reports of yield damage in the main fiber producing states containing drought-hit Maharashtra and Gujarat.
Apart from rising national cotton rates, the appreciating rupee has made real recognition lower than the depreciating Brazilian actual. However, the rupee appreciated by 2.28 percent to close at Rs 69.19 against the dollar on Friday matched to Rs 70.76 on February 28. In the same time period, though, the Brazilian actual – has depreciated by 3.89 percent to 3.8 contrary to a dollar from 3.77 contrary to a dollar on February 28.
India’s shipment of approximately 500,000 – 600,000 bales of cotton is under severe threat of delivery default as Indian exporters have to face higher procurement rates than contracted for cotton exports. According to the Cotton Association of India in its latest report estimated the cotton yield for 2018-19 at 33.1 million bales of 171 kgs each which are lower by 0.8 million bales than its previous estimation of 33.8 million bales made in March.
Arun Sakseria, a veteran cotton exporter said that “Increasing cotton rates may restrict India’s exports this year. India has exported nearly 4 million bales’’ so far this year.
In the meantime, K V Srinivasan is a Chairman of Cotton Textile Export Promotion Council (Texprocil) has urged the government to stress the need to boost exports of textile products not only to recompense the decline in cotton exports but also to narrow the trade deficit with China.
Srinivasan said that “Exports of cotton textiles had contributed to the decrease in trade deficit with China, the biggest importer of India’s cotton. India’s exports of textiles and attire posted an increase of 68 percent to $1.5 billion between April 2018 and February 2019 in contrast to $919.75 million in the corresponding period previous year. The export of cotton textiles can be increased more if the tariff disadvantage of 3.6 – 11 percent suffered by India in contrast to Vietnam, Pakistan, and Indonesia on textile products is addressed by making more special efforts’’.
China is a significant trading partner for India with an import of $65.23 billion worth of goods and export of S$ 15.11 billion for the period April – February 2019, record of the all-time high in exports and sharp decline in imports from China.