India's farmers have the potential to eventually supply most of the cotton needed by the nation's fast-growing textile industry, but it is unclear how soon that will happen, the US Agriculture Department said on Friday. In a special report, the USDA's Economic Research Service analysed how India's cotton demand will be affected by government policies, including taxes that discriminate against manmade fibers and regulations affecting the scale and competitiveness of the textile industry.
Currently, India must import cotton to supply its textile industry, the world's second-largest behind China, because of chronically low crop yields and poor quality.
In the 2005/06 cotton marketing year, India is expected to harvest 19 million bales of cotton and import about 700,000 bales, according to a recent USDA attache report.
The United States is the biggest supplier of cotton to India, with a market share of around 22 percent.
India slowly began to liberalise its textile sector in anticipation of the 2005 lifting of import quotas on textiles by developed countries.
However, the USDA report said it was not clear if India's textile makers can meet the government's target to more than triple exports to $50 billion by 2010.
In 2002, India had exported $12.1 billion of textiles, with most goods produced by small-scale, non-integrated spinning, weaving, finishing and apparel businesses.
Despite some reforms in recent years, government policy still favours small firms, the USDA report said.
"The pace of demand growth for cotton will depend heavily on implementation of reforms in the domestic textile industry, including taxes that discriminate against the use of man-made fibers and the array of past and current regulations that have affected the scale, technology use, and export competitiveness of the textile and apparel industry," the report said.
Growth in cotton demand should also increase as India's industry boosts investment to improve technology and efficiency like those of China and other major producers, it said.
"India has the agronomic potential to meet much, if not all, of its future growth in cotton demand domestically. However, it is unclear if and when the necessary productivity gains will be achieved," the USDA said.
As more farmers in India adopt genetically modified Bt cotton to fight pests, crop yields should improve and lead to "significant" gains in production, it said.
However, the erratic monsoon rainfall in some cotton farming areas and problems in delivering seeds, technology and other crop inputs "seem equally likely" to slow the pace of productivity growth, it said.
Market share for India's cotton imports is sensitive to both price and quality. "US cotton, with a reputation for consistent quality, can maintain its market share, provided it remains price competitive," the report said.
The USDA also noted that more reforms in India's apparel and textiles industry may be driven by foreign retailers.
Wal-Mart Stores Inc "has expressed willingness to buy goods worth $7-$10 billion from India over the next 2 years, provided local companies assure quality products, make timely delivery, and offer competitive prices," the report said.
J.C. Penney Co Inc also would like to buy $2 billion annually in textiles and apparel from India, the USDA said.
Comments
Comments are closed.