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Key Points

India's cotton yarn industry is primed for significant growth in the upcoming fiscal year, with exports to China playing a crucial role. The Crisil report highlights a potential 7-9% revenue increase, driven by robust export demand and stable domestic market conditions. Cotton availability through the Cotton Corporation of India is expected to minimize inventory risks and boost spinner profitability. Experts are optimistic about the sector's performance, though potential global economic fluctuations remain a watchpoint.

Key Points: India Cotton Yarn Industry Set for 9% Growth Boost

  • Yarn exports to China expected to grow 9-11% in current fiscal
  • Cotton Corporation of India ensuring steady raw material availability
  • Operating margins projected to improve 50-100 basis points
3 min read

India's cotton yarn industry poised for 9 pc growth in 2025-26: Report

Crisil report forecasts strong recovery in India's cotton yarn sector driven by exports to China and domestic demand in 2025-26

"India's position in textile exports to the US remains competitive - Gautam Shahi, Crisil Ratings Director"

New Delhi, May 5

A rebound in exports and favourable domestic demand are expected to drive India's cotton yarn industry to a 7-9 per cent revenue growth in the current financial year, up from a modest 2-4 per cent growth in the previous financial year, according to a Crisil report released on Monday.

The uptick in volumes will primarily drive this growth, supported by modest increase in yarn prices, the report stated.

Operating margins, after witnessing a recovery in the last financial year, are expected to see further uptick of 50-100 bps this fiscal, owing to stable cotton yarn spreads and better availability of cotton through Cotton Corporation of India (CCI).

The report is based on an analysis of 70 cotton yarn spinners, which account for 35-40 per cent of the industry revenue.

The primary driver for the revenue uptick in fiscal 2026 will be the rebound in yarn exports to China. Exports account for around 30 per cent of the industry’s revenue, of which China accounts for 14 per cent.

In fiscal 2025, India’s yarn exports to China declined compared to prior fiscals on account of an exceptionally high cotton production in China. This resulted in a 5-7 per cent de-growth in India’s total cotton yarn exports. However, this is likely to reverse in the current fiscal with yarn exports seeing a 9-11 per cent growth as exports to China recover, driven by normalisation of their domestic cotton production, the report stated.

Crisil Ratings Director Gautam Shahi said this is likely to benefit Indian spinners as they will leverage steady domestic cotton production in the current cotton season and regain their market share.

"Moreover, India's position in textile exports to the US remains competitive given the higher tariff on China, which is expected to support the 6-8 per cent revenue growth for the downstream home textiles and readymade garments segments this fiscal," Shahi added.

According to the report, on the raw material front, CCI's significant cotton procurement in the cotton season for 2025 will ensure steady cotton availability, minimising inventory losses and boosting spinners’ profitability by 50-100 bps this fiscal, after a 100-150 bps recovery in fiscal 2025.

The interest coverage ratio of spinners is expected to improve to 4.5-5 times this fiscal from 4-4.5 times in fiscal 2025.

However, any potential changes in tariffs imposed on India and the competing nations, higher inflation or slowing economic growth in the US leading to a demand slowdown, and any adverse movement in domestic cotton prices vis-à vis international prices in the near term will bear watching, the report added.

- IANS

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Reader Comments

R
Rajesh K.
This is excellent news for our textile sector! 🇮🇳 The rebound in China exports shows our cotton quality is still preferred globally. Hope the government continues supporting farmers to maintain cotton production levels. More growth means more jobs in spinning mills across Tamil Nadu and Gujarat.
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Priya M.
While the growth projections look promising, I hope the industry also focuses on sustainable practices. Cotton farming consumes huge amounts of water - we need to invest in better irrigation and organic methods. Growth shouldn't come at environmental cost.
A
Amit S.
Good to see CCI's role in stabilizing cotton supply. My father was a cotton farmer in Maharashtra - price fluctuations used to ruin us. Now with better procurement systems, farmers can plan better. Hope the benefits reach small farmers too, not just big players.
S
Sunita R.
The US market opportunity is golden! With China facing higher tariffs, our garment exporters should grab this chance to establish long-term relationships. We need better design capabilities though - can't just compete on price alone. #MakeInIndia
V
Vikram J.
The report mentions risks like US demand slowdown - very valid concern. Our industry needs to diversify exports beyond China and US. Why not focus more on African and European markets? Overdependence on 2-3 countries is risky business.
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Neha P.
As someone working in a spinning mill, I hope this growth translates to better wages for workers. Last boom period only benefited owners while we struggled with long hours. Industry must share prosperity with all stakeholders 🙏

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