Cotton is a principal cash crop in India and a major raw material for the domestic textile industry. The textile industry in India contributes about 14 per cent to the industrial production, 4 per cent to the GDP and 11 per cent to the country’s export earnings. It’s the second largest employment generator after agriculture. Hence, growth and all around development of cotton and cotton industry has a vital bearing on the overall development of Indian economy. 

Rise in cotton production
India is the only country to grow all four species of cultivated cotton: Gossy
piumarboreum and herbaceum (Asian cotton), G. barbadense (Egyptian cotton) and G. hirsutum (American Upland cotton). India produces a large number of cotton varieties and hybrids. Cotton is produced in three zones: North, comprising of Punjab, Haryana and Rajasthan; Central, comprising of Maharashtra, Madhya Pradesh and Gujarat and South, comprising of Andhra Pradesh, Karnataka and Tamil Nadu. Besides these nine states, cotton cultivation has gained momentum in Orissa as well.

With increased acreage and advent of Bt cultivation, the country produced 5.90 million metric tons of cotton in 2011-12 as against 5.76 million metric tons in the previous year. India has once again retained its position as the second largest cotton producing country in the world, after China. 

In 2012, in the first half of the year from April to September, due to piling up of inventory, demand for yarn both domestically and internationally was subdued faced with high raw materials prices and difficulties to access credit by spinners, declining prices of cotton yarn and competition from chemical fibres. Subsequently, with a slowdown in demand and large finished goods inventory, capacity utilization by spinning mills dropped down to one-third of optimal utilization, thereby further declining the operating profit margin of spinners.

However, with a view to arrest downward pressure and help stabilize prices of cotton and cotton yarn, the government India reinstated DEPB benefits on export of cotton yarn and cotton and removed cap on cotton exports. Still the operating profitability of spinners remained under pressure which affected overall demand for cotton domestically and internationally the mills preferred to purchase cotton to meet immediate requirements rather that building lean season requirement. However the Cotton Season 2012-13 has seen an improvement in domestic consumption at an estimated 256 lakh bales as against 253.4 lakh bales in 2011-12.

Export-import measures
The government had decided to allow exports of cotton under
OGL subject to prescribed registration procedures from October 1, 2012 for the cotton season 2012-13.There was no export demand in the initial months
for Indian cotton, due to global over stocking by countries like China. Imports of cotton into India fall under Open General Licence (OGL) since April 1994. The government abolished import duty of 10 per cent along with countervailing duty of 4 per cent on cotton imports. Thus Indian mills now import cotton without any restrictions from anywhere in the world.

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