India’s cotton yarn production grew by two 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.

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

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.