Stable yarn prices support India’s textile growth amid easing cotton costs

Despite higher domestic cotton prices compared to international rates, demand in the Indian textile sector is improving, says a report by Systematix Institutional Equities Research. The sector is expected to benefit from normalizing global inventories, potential US tariffs on China, rising labor costs in Vietnam, and instability in Bangladesh. However, capacity constraints among Indian garment manufacturers could limit gains.

The report highlights a strong financial performance, with Indian textile firms recording 11 per cent revenue and EBITDA growth, while profit after tax surged 28 per cent year-on-year. Falling cotton prices, down 10 per cent YoY, and stable yarn rates supported margin expansion for spinners.

The Union Budget 2025-26 aims to boost the sector through increased textile allocations to Rs 52.7 billion, cotton productivity initiatives, and duty restructuring. The focus on the PLI scheme, manmade fibers, and technical textiles is expected to drive growth.

The Cotton Association of India (CAI) cut its 2024-25 cotton production forecast by 7.8 per cent YoY to 30.17 million bales, while ICAR-CICR projects 32 million bales. Domestic prices remain firm at Rs 54,000-55,000 per candy, staying above global rates. However, steady supply could stabilize input costs.