MUMBAI: India’s 2016-17 cotton imports are set to jump more than a third from a year ago to a record 3 million bales as the rupee’s rise makes buying overseas cheaper, senior industry officials and executives said.
The strong rupee – now at its highest level in 18 months – has also braked cotton exports from the world’s biggest producer of the fibre, a trend that has helped rival suppliers in Brazil, the United States and some African countries boost their own exports.
“Usually (textile) mills in southern India import cotton,” said K. Selvaraju, secretary general of the Southern India Mills’ Association (SIMA), in a recent interview. “This year mills from even the north are importing. Overseas supplies have become competitive due to the strong rupee.”
India’s currency has risen 4.8 percent so far in 2017 versus the U.S dollar. Indian mills have contracted to import around 1.5 million bales and another 1.5 million bales will be imported by end of the current crop year, ending Sept. 30, Selvaraju said.
That total of 3 million bales would be 36 percent more than the 2.2 million bales imported in the 2015-16 crop year, with stocks coming mainly from African countries, the United States, Brazil and Australia.
Tightness in domestic supply is also boosting imports, as Indian farmers hold off on deliveries in the hope of achieving higher prices later in the crop year.
Usually Indian mills import cotton in the second half of the crop year as domestic supplies dwindle. But this year they began importing in January as local prices jumped due to limited supplies, said Chirag Patel, chief executive of Indian exporter Jaydeep Cotton Fibers.
The state-run Cotton Advisory Board has forecast production of 35.1 million bales in the current crop year, but industry officials say production is likely to be around 34 million bales as output was hit in southern states of Andhra Pradesh and Tamil Nadu by a drought.
The rampant rupee has also dented cotton exports from India.
“Because of currency fluctuation right now Indian cotton is not competitive in the world market,” said Jaydeep Cotton Fibers’ Patel. “Traders want to export but they couldn’t sell.”
The country has so far contracted to export 4.5 million bales in the current crop year, and total exports in the season could be around 5 million bales, down 30 percent from a year ago, he said.