Indian Cotton Spinning Industry: A promising recovery amidst challenges

As per various industry reports and expert projections India’s cotton spinning industry, is poised for a recovery in the financial year 2024-25 (FY25). Recent reports and expert opinions have focused on cautious optimism for the Indian cotton spinning sector in FY 2024-25, with ICRA's forecast of a 6-8 per cent growth driven by a 4-6 per cent increase in production and modest gains in yarn prices, serving as a prime example. And the Office of the Textile Commissioner estimates a 6 per cent decrease in domestic cotton production for CY2024 due to reduced sown area and uneven rainfall. However, carry-over stocks are expected to support consumption. While exports improved in FY24, they are projected to stabilize in FY25 due to weak global demand.

However, the reality on the ground is more nuanced, with many spinners reporting mixed business and challenges. While some are indeed witnessing a rebound in demand and improved financial performance, others are grappling with volatile raw material costs, subdued export markets, and the lingering effects of the previous year's downturn.

Optimistic projections

As per ICRA forecasts, a gradual recovery for the industry in FY25, driven by improved demand from domestic and international markets, easing cotton prices, and a favorable policy environment. ICRA anticipates a 6-8 per cent growth in revenues and a 100-150 bps improvement in margins for its sample set of 13 companies in FY25. Similarly, several industry associations, including the Confederation of Indian Textile Industry (CITI) and the Southern India Mills' Association (SIMA), have echoed ICRA's optimism, predicting a rebound in the sector's fortunes.

Experts attribute the expected recovery to a combination of factors.

They say, easing cotton prices which means a decline in global cotton prices is expected to ease input costs for spinners, boosting profitability. Improved demand will also act as a catalyst. There is anticipated growth in domestic consumption and exports is expected to drive demand for yarn. And various government initiatives, such as the Production Linked Incentive (PLI) scheme for textiles, are likely to provide a further impetus to the sector.

Table: Key projections for Indian cotton spinning sector in FY 2024-25

Correlation with reality

While the projections for the Indian cotton spinning sector are generally positive, the correlation with the actual experiences of spinners is mixed. Some are witnessing a rebound in demand and improved financial performance, aligning with the optimistic forecasts. However, others are facing challenges such as volatile raw material costs and subdued export markets, which are hindering their recovery.

Therefore, the outlook for Indian cotton spinning sector in FY 2024-25 is one of cautious optimism. While projections point towards a recovery, the actual situation on the ground is more complex, with spinners experiencing a mixture of opportunities and challenges. The sector's performance will depend on several factors, including the stabilization of raw material prices, sustained domestic demand, and a revival in global export markets. Careful monitoring and strategic planning will be crucial for spinners to navigate this dynamic landscape and achieve sustainable growth.