Cotton textiles expected to see stable outlook in financial year 2018 after negative 2017, according to the India Ratings and Research (Ind-Ra). It’s not only cotton, the agency has also revised its outlook for synthetic textiles to stable for financial year 2018 from negative financial year 2017.
“The stable textile outlook is in view of stable input prices, healthy capacity utilisation and steady domestic demand scenario in financial year 2018 and support emanating through fiscal incentives and implementation of Goods and Services Tax (GST) that will improve the textile industry’s export competitiveness,” a statement issued by Ind-Ra said.
Moreover, the US’ exit from the Trans-Pacific Partnership is likely to realign textile trade and investments towards the Indian subcontinent that were diverted to Vietnam over financial year 2016-17.
The stable cotton outlook is in view of an increase in acreage, a rise in supply in first quarter of financial year 2018 (due to demonetisation) and a decline in global inventory assisting with a balanced supply.
Liquidity position of small players was acutely affected due to a surge in cotton prices in first half of 2017, followed by a challenging operating environment in second half due to demonetization. It further expects cotton acreage to increase 10 to 15 per cent to nearly 120 million hectares in financial year 2018, leading to increased production.
“A unified tax structure in the form of GST is likely to create a level playing field for the cotton and polyester industries, and promote sponsor interest towards the polyester chain. Ind-Ra viewed that textile companies would be able to deleverage their balance sheets in financial year 2018 in the absence of major investments due to adequate capacities and pending uncertainty over the GST tax rates,” the report added.
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