Slow consumption growth could hit Indian spinners

The Dollar Business Bureau

Indian credit rating agency (ICRA) on Wednesday expressed concerns over limited growth in domestic consumption and exports of spun yarn and said a similar outcome in the financial year 2016-17 will pose a serious challenge for the Indian textile spinners.

The report indicated that a tepid domestic consumption and subsiding exports of yarn will deter its volume growth as well as profitability of spinners.

“The slow pace of growth in spun yarn production has been driven by factors like tepid domestic consumption and limited growth in exports. With cautious outlook on cotton yarn exports, domestic demand growth will determine the production growth going forward,” the agency said in its report.

According to ICRA’s estimates, domestic consumption growth for cotton yarn in 2015-16 is expected to be its lowest since 2012-13.

The agency projected a 1.4% consumption growth for cotton yarn in 2015-16 as against 7.6% in 2014-15, and 3.1% consumption growth for spun yarn in 2015-16 compared to 6.3% in 2014-15.

In 2016 fiscal, India’s domestic cotton yarn production registered its slowest pace of growth in the last four years, as it grew by a mere 2% to about 4.14 million kg.

Earlier, the domestic production of cotton yarn had registered a growth rate of 14.6% in FY 2013, 9.6% in FY2014 and 3.2% in FY2015.

The exports growth of cotton yarn has also been its slowest during the last three years, as its outbound shipments grew by a meager 3.7% to about 1,302 million kg in FY2016, substantially less from 18.3% and 47.5% growth witnessed in FY2014 and FY2013 respectively.

India’s heavy dependence on exports to China and Beijing’s policy on reserve cotton stock have always created a cautious environment on India’s yarn shipments.