Based on official data for the first six months of the fiscal year (FY), cotton textile exports for FY 2005/06 (April-March) are estimated to increase by about 14% over the FY 2004/05 level of $3.4 billion. Exports of readymade garments (mostly cotton-based) are expected to grow 34% over the FY 2004/05 exports of $6.2 billion.

The industry is one of the largest employers after agriculture. India is the largest player in the world in cotton spinning/ weaving in terms of installed capacity and second largest after China in terms of production. The industry is growing on the back of several favorable factors like easy availability of raw materials, skilled and reasonable work force and also consistently provides newer designs. Another buffer to this industry is a huge and growing domestic market. The government has also provided certain fiscal incentives to boost this sector like removal of mandatory Cenvat, excise exemption, reduction of excise duty on polyester filament yarn from 24% to 16% and for blended fabrics from 16% to 8%. The government also offers an interest subsidy of 5% under Technology Upgradation Fund and 10% subsidy on specified processing machinery. The companies are on a capacity expansion spree.

India is expected to double its share in global textile exports from the present 4% to 8% by the year 2008 and is targeting overseas sales of worth $50 billion in textiles by 2010. Of the targeted $50 billion of exports, 50% is expected to come from garments.

Nahar Industrial Enterprises has planned Rs 800 crore expansion by FY 2008. Recently, Banswara Syntex formed a JV with Carreman Michel Thierry of France for high-end fabrics. The company had estimated project cost of Rs 37 crore.

Suryajyoti Spinning Mills has also initiated expansion and modernisation of its cotton yarn production capacities with the aim of expanding its presence in some key segments of the overseas market. The company would add 32,256 spindles in two phases to be completed by the second half of 2006-07 at a cost of Rs 28 crore, financed by debt (Rs 24 crore) and internal accruals (Rs 5.6 crore). Currently, the company operates 55,360 spindles across two units located at Makthal and Burgul in the Mahabubnagar district of Andhra Pradesh. The total spindlage of the Makthal unit will increase to 29,232 from 22,172 leading to increased production of cotton yarn. The next phase of expansion is being implemented at a total investment of Rs 47 crore to be financed by debt (Rs 35 crore) and internal accruals (Rs 12 crore). With this expansion, the company will add 25,200 spindles by putting its third new unit at Rajapur (Mahabubnagar).

Outlook

India’s competitiveness in the post-Multi Fiber Agreement (MFA) quota system will likely fuel double-digit growth in cotton textile exports, which should allow it to capture an increasing share of the global textile trade over the next few years. India will be in the export market for the next 2-5 years, until domestic consumption catches up with the recent production surge. Most exports will be of medium-to-long staple cotton (25 to 32 mm length) to neighboring countries, China, and various Far East destinations. Traditionally, Indian cotton used to be discounted by five to six percent vis-à-vis comparable international cotton because of lower quality (higher trash, lower consistency, etc). But in the last two years buyers of Indian cotton have expressed satisfaction with the quality, and now offer competitive prices.