Indian cotton yarn sector to enter a sustainable growth phase in FY27

The Indian cotton yarn industry is looking at turnaround in FY27, shedding years of fiscal stagnation to enter a sustainable growth phase. Following a challenging three-years marked by inventory glut and volatile raw material costs, the sector has benefited from a shift in supply-side dynamics. The phasing out of approximately 10 to 12 million inefficient spindles has effectively right-sized domestic capacity to a leaner 40-44 million spindles, leading to a healthier equilibrium between supply and demand.

The consolidation, coupled with the restoration of cotton price parity, has boosted global competitiveness. Data shows yarn spreads have grown from a constrained range of Rs 95-100 per kg in FY26 to levels of Rs 120-125 per kg. Stakeholders, including firms like DCM Nouvelle, have noted that operational discipline and integrated manufacturing efficiencies are becoming the new standard for margin protection.

CareEdge Ratings indicate this favorable environment will drive a 150-200 basis point increase in operating profit margins throughout the current fiscal year. With export momentum growing, particularly to China and optimism surrounding pending India-UK and India-EU trade agreements, the industry is projected to achieve 10 per cent Y-o-Y revenue growth.

The Indian textile industry is a vital economic engine comprising fibre, yarn, and fabric production. It serves diverse global apparel markets, with strategic growth focused on scaling man-made fiber exports and leveraging mega-infrastructure projects like PM MITRA parks to achieve a $100 billion export target by 2030.