India’s textile industry is experiencing a “butterfly effect” triggered by the cotton supply chain. As a major global exporter of cotton cloth, the 8% year-on-year decline in India’s cotton cloth exports in the second quarter of 2024 is underpinned by a surge in domestic cotton prices due to reduced production. Data shows that India’s cotton spot prices rose by 22% from the start of 2024 to Q2, directly pushing up the production costs of cotton cloth and weakening its price competitiveness in the international market.
Ripple Effects Behind Reduced Production
The reduction in India’s cotton production is no accident. During the 2023-2024 planting season, major producing areas such as Maharashtra and Gujarat suffered from abnormal droughts, resulting in a 15% year-on-year drop in cotton yield per unit area. The total output fell to 34 million bales (170 kg per bale), the lowest in the past five years. The shortage of raw materials directly triggered price increases, and cotton cloth manufacturers have weak bargaining power: small and medium-sized textile mills account for 70% of India’s textile industry and struggle to lock in raw material prices through long-term contracts, having to passively accept cost transfers.
The reaction in the international market is even more straightforward. Amid the diversion of competitors like Bangladesh and Vietnam, India’s cotton cloth export orders to the EU and the US decreased by 11% and 9% respectively. EU buyers are more inclined to turn to Pakistan, where cotton prices remain stable due to a bumper harvest, and the quotation for similar cotton cloth is 5%-8% lower than that of India.
Policy Toolkit for Breaking the Deadlock
In the face of the predicament, the Indian government’s response shows a dual logic of “short-term emergency rescue + long-term transformation”:
- Abolishing cotton yarn import tariffs: If the policy is implemented, India will exempt imported cotton yarn from the current 10% basic tariff and 5% additional tax. According to estimates by India’s Ministry of Textiles, this move can reduce the cost of cotton yarn imports by 15%, and it is expected to increase monthly cotton yarn imports by 50,000 tons, filling 20% of the domestic raw material gap and easing the raw material pressure on cotton cloth manufacturers.
- Betting on the recycled cotton track: The government plans to provide a 3% tariff rebate for exports of recycled cotton fabrics through the “Recycled Fiber Export Incentive Program” and work with industry associations to establish a recycled cotton quality certification system. Currently, India’s exports of recycled cotton fabrics account for less than 5%, while the global recycled textiles market is growing at an annual rate of 12%. Policy dividends are expected to drive exports of this category to exceed $1 billion in 2024.
Industry Anxiety and Expectations
Textile enterprises are still watching the effect of the policies. Sanjay Thakur, President of the Federation of Indian Textile Industries, pointed out: “Tariff reduction can address the urgent need, but the transportation cycle of imported cotton yarn (45-60 days for imports from Brazil and the US) cannot fully replace the immediacy of the local supply chain.” More crucially, the international market demand for cotton cloth is shifting from “low price priority” to “sustainability” – the EU has legislated that the proportion of recycled fibers in textile raw materials should not be less than 50% by 2030, which is the core logic behind India’s promotion of recycled cotton exports.
This crisis triggered by cotton may be forcing India’s textile industry to accelerate its transformation. When the short-term policy buffer and long-term track switching form a synergy, whether India’s cotton cloth exports can stop falling and rebound in the second half of 2024 will become an important window to observe the restructuring of the global textile supply chain.
Post time: Aug-05-2025