Spun yarn production growth in FY16 slowest in 4 years

26 May '16

3 min read

India's cotton yarn production grew by 2 per cent to 4,136 million kg in FY2016, which is the slowest pace of growth during the last four years, professional investment information and credit rating agency ICRA has said.

In its update on India's spinning sector, it pointed out that earlier, cotton yarn production had grown by 14.6 per cent, 9.6 per cent and 3.2 per cent respectively in FY2013, FY2014 and FY2015. Further, as 3/4th of India's spun yarn production is cotton-based, the growth in total spun yarn production has also emulated this trend with a 3.2 per cent growth in FY2016 as against 11.3 per cent, 9.1 per cent and 3.4 per cent growth in FY2013, FY2014 and FY2015 respectively, which is also the lowest in last four year.

The marginally higher growth in total spun yarn production compared to cotton yarn production in FY2016 reflects an increased share of manmade/blended spun yarn aided by enhanced competitiveness of polyester fibre, given the sharper decline in polyester prices compared to cotton prices, the report said.

Supported by the aforesaid factor, the growth in production of non-cotton yarn in FY2016 was 6.4 per cent against 3.8 per cent in FY2015.

According to the report, tepid domestic consumption and subsiding exports pose challenge to volume growth.

The slow pace of growth in spun yarn production has been driven by factors like tepid domestic consumption and limited growth in exports.

ICRA estimates domestic consumption growth for FY2016 to be 1.4 per cent (7.6 per cent in FY2015) for cotton yarn and 3.1 per cent (6.3 per cent in FY 2015) for spun yarn. This is the lowest level of domestic consumption growth since FY2013. The growth in cotton yarn exports has also been slow with exports of 1,302 million kg in FY2016, which reflects 3.7 per cent growth (47.5 per cent and 18.3 per cent growth witnessed in FY2013 and FY2014).

In its outlook, ICRA said high dependence on exports to China and resulting sensitivity of India's exports to China's policy on reserve cotton stock has always warranted a cautious outlook on India's yarn exports. Thus, slow growth in domestic consumption and exports will pose a challenge for profitability of spinners if the demand growth remains muted in FY2017. (SH)

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