ICRA, the investment information and credit rating agency, forecasts that India’s cotton spinning industry will grow by 6-8 per cent in fiscal 2025 (FY ’25) after two years of decline due to weak domestic demand and falling yarn prices. The recovery is expected to come from a 4-6 per cent increase in production and modest gains in yarn prices.
Most of India’s cotton yarn is used within the country, and there are signs of recovery in the garment and home textile sectors. While exports improved in FY ’24, they are expected to stabilise in FY ’25 despite weak global demand. A shift in sourcing preferences away from other countries may help.
Domestic cotton prices, which peaked at Rs. 284 per kg in FY ’23, have dropped over the past two years, falling by 26 per cent in FY ’24 due to lower global prices and weak demand. Prices are expected to rise slightly with recovering demand and less cotton being planted. Cotton yarn prices, which have been falling since June 2022, are also expected to increase slightly in FY ’25 but will still depend on demand.
The industry saw a lot of debt-funded spending in FY ’23, mainly due to delays in expenses from the COVID-19 pandemic. This led to weaker financial health with a drop in yarn demand in the second half of FY ’23. In response to weak demand and lower prices in FY ’24, spinners have paused major spending plans. However, ICRA expects a slight increase in spending in FY ’25 for machinery upgrades and better domestic demand.
