With Western retailers diversifying their sourcing away from China, there is a golden opportunity for India, with its rich textile heritage and a vast cotton-producing base. While India has witnessed encouraging growth in cotton textile exports, the path ahead is fraught with challenges and competitive pressures.

Shifting global trade

The decision by US and EU retailers to reduce reliance on Chinese cotton garments is influence by factors like, including geopolitical tensions, concerns about forced labor in Xinjiang, and a desire for supply chain diversification. This has created a vacuum, which countries like Vietnam and, to a lesser extent, India are attempting to fill.

India's cotton textile exports saw a 20 per cent year-on-year growth (April-December). Texprocil data suggests exports of cotton yarn, fabrics, made-ups, and handloom products grew by 11.98 per cent in December 2024 compared to December 2023. Overall growth for these products during April-December 2024 stood at 2.82 per cent. Apparel exports rose by 11.5 per cent in the same period. China’s market share in US dropped by 1 per cent in 2023 compared to 2022. India's share in the US market inched up by 0.2 per cent to reach 5.9 per cent.

Advantage India

India possesses several advantages, including a large domestic cotton production base; skilled workforce in textile manufacturing; well-established textile industry; government support for the textile industry.

However, India faces significant issues as well. For example, Indian cotton prices are currently higher than those of US cotton, making Indian exports less competitive. The Shankar-6 variety, a benchmark in India, is priced significantly higher than ICE prices. While ICE prices are hovering at 66-68 US cents per pound, Shankar-6 priced at Rs 53,550 per candy.

Table: Cotton’s competitive landscape

Meanwhile Vietnam's strategy of sourcing cheaper cotton from the US, Brazil, and West Africa gives it a cost advantage. The Indian cotton market is experiencing stagnation, with the Cotton Corporation of India (CCI) actively procuring cotton under the price support program. CCI has procured 92 lakh bales at the MSP. Estimates suggest CCI's procurement may exceed 100 lakh bales.

Kasturi cotton initiative, a game changer?

A significant development that holds immense promise for India's cotton sector is the ‘Kasturi Cotton’ initiative a joint effort by the Ministry of Textiles, the Cotton Corporation of India, and various textile industry stakeholders. The goal is to create a globally recognized Indian cotton brand that embodies quality, reliability, and sustainability.

This program is designed to elevate the status of Indian cotton on the global stage by focusing on. Quality as Kasturi Cotton signifies premium, high-quality cotton that adheres to stringent quality benchmarks. Utilizing blockchain technology, the initiative ensures end-to-end traceability, allowing consumers to verify the origin and quality of the cotton. And the program promotes sustainable cotton farming practices.

The Kasturi Cotton initiative has the potential to significantly impact India's cotton industry in several ways. By establishing a premium brand, India can command higher prices for its cotton, improving the profitability of farmers and textile manufacturers. The emphasis on quality and traceability will make Indian cotton more attractive to international buyers, particularly those seeking sustainable and ethically sourced products. The blockchain technology will enhance transparency and efficiency throughout the cotton supply chain. By following best practice farming, farmers will gain better renumeration for their products.

To capitalize on the current opportunity, India needs to:

Increase price competitiveness: Measures to reduce cotton production costs and improve efficiency are crucial. This may involve investing in better farming techniques, improving seed varieties, and streamlining supply chains.

Boost export infrastructure: Improve logistical efficiency, reduce transaction costs, and enhance port facilities.

Focus on value addition: Move up the value chain by producing high-quality, value-added textile products.

Promote sustainable practices: Embrace sustainable cotton farming and manufacturing practices to meet the growing demand for eco-friendly products.

Leverage government initiatives: Take full advantage of government schemes and incentives aimed at promoting textile exports.

Diversify markets: While the US and EU are key markets, exploring opportunities in other regions is also important.

Adapt to e-commerce changes: The new US tariffs on small parcels from China create an opening. Indian sellers must adapt to these changes and strengthen their presence on e-commerce platforms.