Indian Cotton exports may fall sharply as domestic prices rise

Having exported 85 lakh cotton bales in 2007-08, India might not even achieve its targets of exporting an estimated 50 lakh bales in 2008-09. And despite the latest estimates by the Cotton Association of India (CAI), which has put exports at 40 lakh bales by August 2009, the industry believes higher domestic cotton prices might limit exports to mere 30 lakh bales.

In 2007-08, India exported 85 lakh cotton bales, a majority of which went to China. However, ever since cotton prices played havoc in the domestic market, owing to abysmal 40% hike in MSP, not just the mills, but even traders and exporters kept off cotton purchase. The government’s decision to offer 5% incentive on export of cotton, too, has not seemed to have helped.

While CAI is all set to hold meetings with the Centre seeking extension of the 5% subsidy on export of raw cotton, Confederation of Indian Textile Industry (CITI) has been seeking that the government scrap this scheme with immediate effect. “The subsidy did not have any economic justification. While the government wants to encourage exports of raw cotton, it forgets to address the fall in exports of cotton textile products. How could the government make cotton uncompetitive to the domestic textile sector while enabling our competitors in South East Asia to avail of our cotton,” points out CITI secretary general DK Nair.

Source: ECONOMIC TIMES