What movements do you notice in the cotton market? How do constant policy changes in cotton affect your kind of businesses? What expectations do you have from the govt for better & smooth operations?
Cotton is the backbone of the country when it comes to textile industry as most of the textile fibre consumption continues to remain in Cotton including ours. Cotton market in India is slowly but steadily coming in sync with the global market. All the factors which are affecting global cotton demand and supply are having a significant effect on Indian cotton prices as well. But, it is unfortunate that since last few years the global market is being driven more by speculators than by actual users resulting into Cotton trade being caught in the quagmire of market sentiments than by actions.
Another important factor affecting Cotton trade today is that of China. China has acquired such an important place in the overall dynamics of Cotton trade that its policies are having enormous impact on the prices. China being highest in terms of Cotton Production & Consumption but with its whimsical policies, is having a enormous impact on the way various governments of other countries frame their policies. This has resulted into abnormal volatility causing extensive damage to the whole of cotton supply chain.
Volatility, per se, in any business is very harmful for the performance of any sector. With presence of high fluctuations, people in the trade start taking long or short positions trying to maximize their gains. This scenario causes long period of cyclic nature into the business which is never good for the industry as in periods of high demand, no manufacturer can take full advantage owing to restriction in production capacities and finances involved in the business. In such periods they also tend to sour their relationship with their long term customers in search of greener pastures. On the other side, during lull periods the manufacturer is forced to slow down production, cut labour force and ultimately take a hit on margins and then sell. Thus cyclic/periodic spurts in demand and supply are not helping the industry to stabilize and grow.
Further adding to the woes of this cyclic nature of business is the constant tinkering with the regulations of cotton trade by various governments. Unfortunately mostly these actions/policy changes are reactions to the actions of the counterpart government creating a chain of events which ultimately disturb the trade irreparably. Long and sustained efforts put in for number of years by organization like ours goes waste by such hasty decisions causing significant damage resulting into complete anarchy and ballooning losses.
Keeping in view the above, my expectation with the government is to make long term rational decisions based on the current need of the total supply chain. I appreciate that in our agrarian economy where millions of people are engaging themselves in cotton farming and have their whole livelihood depending on Cotton crop, Government of India has to maintain a balancing act between the interests of both the parties i.e. Growers and Users who continue to provide the second highest employment in the country. Textile Ministry has to understand that the strength of the country lies in spinning with its state-of-the-art machinery setup available in the country and also has to make sure that the valuable raw material does not get exported out of the country without any value addition. On the Cotton production front, focus should be directed in ensuring that quality of cotton grown in the country is as per the need of the downstream users with productivity too matching the global standards.
Published on: 14/08/2012
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.