Is India's Cotton Yarn Industry Set for 9% Growth by 2025-26?

New Delhi, May 5 (NationPress) A resurgence in exports along with favorable domestic demand is projected to propel India's cotton yarn sector towards a 7-9 percent revenue increase in the current financial year, a significant rise from a modest 2-4 percent growth in the previous year, as per a report by Crisil released on Monday.

The anticipated growth will be primarily driven by an uptick in volumes, alongside a slight increase in yarn prices, the report indicates.

After recovering in the last financial year, operating margins are expected to improve further by 50-100 basis points this fiscal year, attributed to stable cotton yarn spreads and enhanced cotton availability through the Cotton Corporation of India (CCI).

This report is based on an analysis of 70 cotton yarn spinners, representing approximately 35-40 percent of the industry's revenue.

The primary catalyst for revenue growth in fiscal 2026 is anticipated to be the revival of yarn exports to China. Exports constitute around 30 percent of the industry's revenue, with China accounting for 14 percent.

In fiscal 2025, India's yarn exports to China saw a decline due to an extraordinarily high cotton production in China, leading to a 5-7 percent decrease in India’s total cotton yarn exports. However, this trend is expected to reverse in the current fiscal, with yarn exports projected to grow by 9-11 percent, as exports to China recover, driven by the normalization of their domestic cotton production, the report elaborates.

Crisil Ratings Director Gautam Shahi noted that this is likely to benefit Indian spinners as they will capitalize on steady domestic cotton production in the current cotton season and reclaim their market share.

Furthermore, India’s standing in textile exports to the US remains robust, given the higher tariffs imposed on China, which is expected to bolster a 6-8 percent revenue growth for the downstream home textiles and ready-made garments sectors this fiscal, Shahi added.

According to the report, CCI's substantial cotton procurement during the cotton season for 2025 will ensure consistent cotton availability, reducing inventory losses and enhancing spinners’ profitability by 50-100 basis points this fiscal, following a 100-150 basis points recovery in fiscal 2025.

The interest coverage ratio for spinners is expected to rise to 4.5-5 times this fiscal, up from 4-4.5 times in fiscal 2025.

Nevertheless, potential changes in tariffs imposed on India and competing nations, increased inflation, or a slowdown in economic growth in the US—leading to a demand dip—and any adverse fluctuations in domestic cotton prices relative to international prices will need close monitoring, the report concludes.