Recent Challenges Faced By Indian Textile Mills & Drop in Yarn Export

The textile industry of India contributes a whopping 12% to the nation’s forex earnings! However, the economic slowdown in the global market has had its adverse effects on the Indian Textile Industry, in addition to the various other verticals. While the overall textile and garment exports of the country rose by almost 4% in the current financial year, but it has still fallen short of the $45 billion target, pertaining to the massive decline in China’s demand with respect to cotton and yarn.

At present, the spinning mills have up to 10% material in excess capacity thereby resulting in higher inventory overheads and lower liquidity. The higher tariffs that have been imposed on products of these mills in all the major international markets, has further aggravated the issue.

While the nation is self-sufficient in the field of textiles and garments and hardly relies on any imports, it is still a matter of concern that that bilateral relationships with other nations in this has regard has not been given enough emphasis, which in turn requires the industry to be majorly dependent on the dynamics of the Chinese economy, which makes up for 40% of the yarn exports from this sector. In fact, the recent move of the Chinese Government – the Yuan devaluation- came as a blow to the Indian export market given the situation that the markets have already been going week in the recent past due to the recessionary conditions in the global arena. To get a clearer picture, let’s focus on some numbers. The yarn export has suffered a steep fall of about 15%, coming down from a whopping 1,303 million kgs in 2013-14 to a meagre 1,100 kgs in 2014-15 and is still going downhill.

Furthermore, according to a recent stipulation implemented by the Chinese government, for every bale of cotton that is brought from the overseas market, a local mill need to buy 4 bales from the domestic sources. This has further led to the decline in demand from this market that earlier accounted for 70% of the cotton exports from the Indian textile sector.

Undue delay in disbursing the Technology Up gradation Fund scheme subsidies, volatility and uncertainty in cotton prices, sudden glut in the synthetic yarn market, closure of dyeing units in Northern States resulting in accumulation of fabric stock in different power loom clusters added to the crisis of the sector.

While the import demands from many other countries have witnessed a rise, however, it still falls short in terms of compensating the decline in the same from the Chinese economy.  It is for this reason that the textile mills are now demanding a levelled playing field, thereby asking for a decrease in the raw material costs for cotton as well as synthetic fibres, so that these are available at par with the international prices.

Moreover, it is also the onus of the government to accelerate Free Trade Agreements with bigger players in the international arena such as the European Union, and announce a National Textile Policy, based on the same, at the earliest possible.