China reduces cotton yarn import from India-facts and policies PART-1
China has been a major buyer of Indian cotton yarn for long, accounting for more than one-third of total shipment. Of late, its share has dwindled to less than one-fifth, a level very occasionally seen in last three years. In July, cotton yarn shipment to China was just 12 million kgs slightly up from 10 million kgs in June. In terms of values, exports were worth US$28 million in June and US$31 million in July. In the entire fiscal year of 2018-19, the average monthly value of export was US$34 million. The same was US$27 million in 2017-18 and US$32 million in 2016-17. So just around US$10-12 million is an alarming situation.
The recent slide can be attributed to overall macroeconomic conditions globally, falling manufacturing sector in China, and most crucial the US-China trade war. The war has been wagging since early 2018 and has competed more than one-year. But textiles were not part of this tariff war from the US side, but the latest list which imposes 10% tariff on Chinese goods now includes textiles via clothing and footwear, among others. So going forward for textile industry in China is even more alarming.
On textile front, China has started sourcing more yarn from Vietnam, who in turn, is one of the major importer of Indian cotton. The other factor is duty free access given for import of cotton yarn by China to countries like Pakistan and Vietnam from 1 April 2019. Thus, the fall in May and June is partly the result of the duty free arrangement. In April 2019, India’s shipment of cotton yarn was more than 40 million kgs, but those were booked before 1 April.
Within India, as per Confederation of Indian Textile Industries (CITI), the textile industry has been underperforming due to sluggish exports, poor domestic demand, and growing imports from Bangladesh and Sri Lanka. It further adds that the industry is going through a deep crisis because of various factors including uncompetitive fibre prices, declining exports, in-competitiveness of products in international markets, embedded taxes not refunded, and lack of working capital, among others.
In a press statement, Dr. K V Srinivasan, Chairman of TEXPROCIL, stated that the steep fall in cotton yarn exports has been caused by a variety of reasons including decline in exports to leading export markets like China, Bangladesh, South Korea. Although cotton yarn is a value added product, it has been excluded from the export benefits like interest subvention, MEIS and the ROSCTL schemes. He has urged the government to include cotton yarn in the interest subvention scheme and also rebate the embedded taxes like Agricultural Cess, Mandi Tax, Power and Fuel Surcharge which incurred in the production process.
To be concluded…
