Demand for yarn & fabric set to rise in Indian market

21 Jun '12

3 min read

The demand for yarn and fabric is set to increase in the Indian market during the current financial year due to softening of cotton prices, the Centre for Monitoring of Indian Economy (CMIE) stated in its monthly review of the Indian economy.

Last fiscal, the demand for yarn and fabric had fallen owing to poor demand from the downstream apparel manufacturing sector.

The decline in cotton prices, compared to last fiscal, will lead to a fall in prices of readymade garments, which, in turn, would increase the demand for fabric, the CMIE said.

The CMIE report predicts a 6.5 percent year-on-year growth in fabric production during the current financial year, owing to the rise in demand.

Last fiscal, the demand for fabric dipped as clothing items became expensive owing to rise in yarn and fabric prices. The imposition of 10 percent excise duty further lifted the prices of apparels.

In 2011-12, hosiery fabric as well as synthetic fabric output fell by 8.7 percent year-on-year. Yarn production decreased by 5.3 percent, while output of cotton yarn, which formed 54.2 percent of total yarn, dipped by 8 percent.

In comparison, cotton fabric production is likely to grow by 4.5 percent y-o-y during the current fiscal, while synthetic fabric output is expected to rise by 6.3 percent y-o-y, CMIE said.

The improved demand for fabric will lead to a similar increase in demand for yarn. The CMIE expects India’s cotton yarn production to jump by 10 percent y-o-y, and synthetic yarn output to rise by 3.5 percent y-o-y.

The monthly review also highlights that the Indian apparel exports would lose its growth momentum during the current financial year. It is because the demand for garments is likely to decline from two of India’s biggest markets – the US and the EU, owing to financial crisis in those countries.

Indian apparel exporters may not reap full benefits of the depreciating Indian rupee, which is estimated to depreciate by 10.5 percent in 2012-13, according to the CMIE. It is because the buyers have already started asking for discounts.

Indian apparel export volume is projected to grow by only 3.5 percent during the current fiscal. In terms of value, CMIE expects apparel exports to decline by 0.3 percent, especially due to reduced input costs compared to previous fiscal year.

In 2011-12, India’s apparel exports grew 24.8 percent in value due to an increase in the cost of raw materials such as yarn and fabric and a weak rupee.

Fibre2fashion News Desk - India

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