Finally, there’s some good news amidst the economic slowdown. Thanks to rising labour costs in China, the dragon is now reducing cotton purchase and shifting to the value-added yarn from India, especially Gujarat. Importing cotton and making yarn is no longer viable in China.
Industry pundits expect this trend to consistently rise in coming years given the changing political situation in China and favourable domestic textile policies. The Mahajan genes of Gujarati entrepreneurs have sensed an opportunity in this turn of events and industry sources confide that over 100 new units are in the pipeline in Gujarat itself. Moreover, existing players are also upping their capacity. Over a period, one may see a completely new industry emerging in the state.
Currently, Gujarat contributes less than 5% in yarn production of India. But in about four years, it is estimated to increase to over 20%. Till now, the largest cotton producing state, Gujarat was depending on southern states to spin cotton yarn. For a long time now, China has been the hub of garment manufacturing and its goods are supplied across the world — but they are now culling at least some processes in the chain. Much of the cotton used by China to manufacture the garments was imported from India, 80-90% of which came from Gujarat.
In the last one-and-half years, yarn exports from India have already increased by 68%.
“Because of the rising demand of yarn from China and textile benefits announced by the state and central governments, over 100 spinning units are in the pipeline in Gujarat,” said Sajjan Kejriwal, Ahmedabad-based yarn exporter and director of Ambica Taptex.
Between the last half of 2012 and the same period in 2013, yarn exports from India have already increased by 30% from 90 million kg to 118 million kg per month. “This was mainly due to demands from China,” he said. In the current cotton season, India is estimated to produce around 370 lakh bales out of which about 28% is contributed by Gujarat.
Interestingly, cotton prices increased by about 30% in last one year from around Rs32,800 per candy to Rs42,000. But yarn prices, for more commonly sold 16 counts open-end, were around Rs140 per kg in last year, which increased by less than 15% to Rs160 per kg. “Due to many factors, cotton prices saw a huge jump and we are expecting that cotton prices will continue to rise as demand will increase. However, the yarn prices have not increased much,” said Bharat Chhajer, committee member of Powerloom Development & Export Promotion Council.
Compared to previous year, the cotton farmers are believed to be in a better position, said MD of Gujcot, NM Sharma. “Last year farmers incurred losses. This year, the season started with low prices but in last few days, the prices have recovered which is better for cotton farmers of Gujarat. The prices increased as demand for cotton is increasing from spinning units of the country,” he said.