Why Citi Really Cannot Sleep

Exports of cotton put the Indian textiles and apparel industry at a disadvantage, and that’s where millions of jobs are. So goes the worry

Sleepless nights have come to afflict the Confederation of Indian Textile Industry (Citi). Just as India’s textile and apparel sector had producers rubbing palms in anticipation of a global recovery in demand, the Centre’s decision last fortnight to lift its ban on cotton exports has come as a damp squib.

Indian prices of cotton, a major input, are already too high, groans Citi, thanks to floods in Pakistan which have ruined its crop. Chinese inventories are running low, and with world prices at a 15-year high, bales of Indian cotton could go overseas by the tonne, driving up prices of cotton and cottonwear in India. “High raw material costs together with wage inflation will pinch the domestic consumer to the extent of 20 per cent more this year,” warns Shishir Jaipuria, chairman, Citi. Of course, all apparel is not cottonwear, and high cotton prices could have consumers clothing themselves with cheap manmade materials instead; but such shiny stuff is a compromise that discerning consumers would rather avoid. 

Indian cotton prices are currently hovering around Rs 106 per kg, up some 70 per cent from last year, when prices began their ascent. Last year’s inflation was blamed by policymakers on run-riot speculation on cotton exchanges, and the Government had banned exports of the commodity earlier this year in a bid to soften domestic prices. But with a robust Indian crop expected this harvest—32.5 million bales (of 170 kg each) against the estimated local consumption of 26 million bales—the Government decided to allow exports, capping them at 5.5 million bales, though. Cotton farmers are in for a bounty now. According to DK Nair, secretary general, Citi, “They will get the best price realisation in history this year, even if not a bale gets exported, since there is enough demand for cotton and cotton yarn. Whether that price comes from Indian mills or foreign mills will not make any difference to them.” 

But if India’s 3.5 million cotton farmers are important, so are industrial workers dependent on exports of finished cotton products. India’s cotton economy accounts for just about 4 per cent of India’s GDP, but employs over 76 million workers. Says Jaipuria, “The hardening of the currency along with these [input] factors make exports [of cloth and clothes] uncompetitive.” For a country with an age-old way with natural fibre, that’s very sad indeed.

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