MUMBAI — In a move that gave no notice to any of the parties concerned, the government of India has decided to stop the export of raw cotton with immediate effect, until further notice.
The ban was imposed because exports had been higher than anticipated, according to a government statement.
So far, 9.4 million bales have been exported in this fiscal year, which ends March 31.
However, industry analysts said that low cotton prices as well as the travails of the textile companies in India were the key reasons why the government has taken this step.
Dr. A. Sakthivel, chairman of the Apparel Export Promotion Council of India, said this was a good move as cotton used for garment manufacture yields more jobs. “Finished goods production offers maximum potential for employment,” he said, looking at the employment within the textile segment.
However, a lot of the industry fears that the government decision will cause cotton prices to drop to a point where government intervention to support a minimum price will be necessary.
“We wrote to the government saying there was no case for its intervention in the cotton market,” said D.K. Nair, Secretary-General, Confederation of Indian Textiles Industry.
This has come at a time when the textile industry is hard hit in India, and cotton production is expected to be much higher than last year. Prices of cotton have fallen more than 45 percent in the last six months.
Export quality cotton, particularly Shankar-6, saw an immediate drop in price on Monday and industry representatives are asking the government to reconsider this decision which makes Indian policy on cotton seem erratic.
India is the second largest cotton producer in the world and analysts warn that its cotton pricing could create turbulence in markets around the world.