BURGENSTOCK, Switzerland — The lifting of global quotas on textiles and apparel has spurred Indian exports, and is sharply increasing the demand for cotton and putting pressure on prices, a top Indian executive said.
“The Indian textile industry has benefited enormously from the World Trade Organization’s dismantling of the quotas, and particularly from the freedom Indian producers now enjoy for their exports,” said PH Ravikumar, managing director and chief executive officer at National Commodity & Derivatives Exchange, based in Mumbai.
Ravikumar said the modernization of the textiles industry in the last seven years also has helped Indian producers.
Related Articles
Interviewed at the international finance conference here sponsored by the Swiss Futures & Options Association, Ravikumar said the concern is that with such demand for cotton, “prices will go up,” which “will benefit the farmers, but hurt the consumers.”
You May Also Like
The ceo noted that India is an exporter and importer, but said the sector has some barriers.
“There are restrictions for exports of cotton from India because the textiles industry needs cotton,” he said. “We export medium and lower grades of cotton, and we import high grades of cotton from Sudan, Egypt … mostly from Africa.”
However, India is liberalizing its economy and removing decades of regulatory restrictions, a move international economists say has helped spur an annual growth rate of 8 percent.
“The lid has been lifted from the pots,” said Lamon Rutten, joint managing director at the Multi Commodity Exchange of India, also in Mumbai. “The potential has been there, but the restrictions of governments have been keeping growth low and they’re still keeping growth low. Growth could be much faster if the government liberalized faster.”
Earlier this month, it was announced that an expert group from the Reserve Bank of India had recommended convertibility of the rupee in three phases over a five-year period ending in 2010-11.
Last year, India’s exports increased by 19 percent to $90 billion and its imports expanded by 35 percent to $132 billion, according to WTO data.
Expectations are that the economy, Asia’s best-performing after China’s, will continue to surge ahead at this robust rate for years, adding to the demand for quality cotton fabrics and apparel in both the Indian and global markets.
A global outlook report the International Cotton Advisory Committee published last week concludes that, fueled by the growth in exports of cotton products, “mill consumption of cotton in India increased by 6 percent to reach 3.4 million tons in 2005-06.”
The ICAC forecasts mill consumption in India to increase to 3.6 million tons in 2006-07.
India, China and Pakistan together in 2005-06 accounted for 73 percent of global mill consumption of cotton, up from 47 percent in 1998-99, according to ICAC estimates.
Vinay Kotak, a director of Kotak Ginning & Pressing Industries Ltd., in a presentation to the annual ICAC meeting in Goiânia, Brazil, this week, said that in addition to the post-WTO development of rising exports of cotton yarn, fabric, apparel and home furnishings, growing income is spurring consumption. He said India’s burgeoning middle class wants “status-symbol cotton.”
India’s domestic market, he said, was growing to $45 billion in 2006-07 from $25 billion in 2002-03.