Required Report - public distribution

**Date:** 5/14/2004

**GAIN Report Number:** IN4047

IN4047

**India**

**Cotton and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, FASNEWDELHI

**Prepared by:**

Santosh Kr. Singh

**Report Highlights:**

Indian cotton production in MY 2004/05 is forecast to decline marginally
to 16.2 million bales (170 kg) because of a likely lower yield despite
an increase in planted area. Cotton consumption is expected to increase
to 17.1 million bales on expectations of low cotton prices and improved
demand by the textile mills. Cotton imports are projected lower at 1.2
million bales on comfortable domestic supplies.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

# 

[*SECTION I: SITUATION AND OUTLOOK 3*](#section-i-situation-and-outlook)

[Production 3](#production)

[Consumption 3](#consumption)

[Trade 3](#trade)

[Marketing 4](#marketing)

[SECTION II: STATISTICAL TABLES 5](#section-ii-statistical-tables)

[Table 1: Commodity, Cotton (Metric Tons), PSD
5](#table-1-commodity-cotton-metric-tons-psd)

[Table 2: Commodity, Cotton (480 lb bales), PSD
6](#table-2-commodity-cotton-480-lb-bales-psd)

[Table 3: Commodity, ELS Cotton (1-3/8\" or 35mm staple length)
7](#table-3-commodity-els-cotton-1-38-or-35mm-staple-length)

[Table 4A: Area, Production & Yield of Cotton in Major States
8](#table-4a-area-production-yield-of-cotton-in-major-states)

[Table 4B: Planting Season, Irrigation & Cotton Type by Major Region
9](#table-4b-planting-season-irrigation-cotton-type-by-major-region)

[Table 5: Mill Use by Month 9](#table-5-mill-use-by-month)

[Table 6: Month End Prices of Popular Varieties
10](#table-6-month-end-prices-of-popular-varieties)

[Table 7: India's Monthly Import of Raw Cotton
11](#table-7-indias-monthly-import-of-raw-cotton)

[Table 8: Commodity, Cotton, Import Trade Matrix
12](#table-8-commodity-cotton-import-trade-matrix)

[Table 9: Commodity, Cotton\*, Export Trade Matrix
13](#table-9-commodity-cotton-export-trade-matrix)

[Table 10: Growth of the Indian Textile Industry
14](#table-10-growth-of-the-indian-textile-industry)

[Table 11: Production of Spun Yarn
15](#table-11-production-of-spun-yarn)

[Table 12: Count Groupwise Cotton, Blended and Non-Cotton Spun Yarn
16](#table-12-count-groupwise-cotton-blended-and-non-cotton-spun-yarn)

[Table 13: Production of Manmade Filament Yarn
17](#table-13-production-of-manmade-filament-yarn)

[Table 14: Production of Fabric 17](#table-14-production-of-fabric)

[Table 15: Consumption of Major Fibers/Yarns by the Textile Industry
18](#table-15-consumption-of-major-fibersyarns-by-the-textile-industry)

[Table 16: Prices of Raw Cotton and Other Fibers
19](#table-16-prices-of-raw-cotton-and-other-fibers)

[Table 17: Per Capita Availability of Cloth in India
20](#table-17-per-capita-availability-of-cloth-in-india)

[Table 18: India's Exports of Textile Items
21](#table-18-indias-exports-of-textile-items)

[Table 19: Exports of Ready-made Garments from India
21](#table-19-exports-of-ready-made-garments-from-india)

[Table 20: Commodity, Export Trade Matrix, Cotton Yarn (Metric Tons)
22](#table-20-commodity-export-trade-matrix-cotton-yarn-metric-tons)

[Table 21: Export Trade Matrix, Cotton Fabrics (Metric Tons)
23](#table-21-export-trade-matrix-cotton-fabrics-metric-tons)

[Table 22: Export Trade Matrix, Cotton Madeups (Metric Tons)
24](#table-22-export-trade-matrix-cotton-madeups-metric-tons)

[Table 23: Existing Import Policy & Tarriffs/Duties for Cotton/Cotton
Textiles
25](#table-23-existing-import-policy-tarriffsduties-for-cottoncotton-textiles)

[SECTION III: NARRATIVE ON SUPPLY, DEMAND, POLICY & MARKETING
27](#section-iii-narrative-on-supply-demand-policy-marketing)

[Production 27](#production-1)

[Status of Bt. Cotton 27](#status-of-bt.-cotton)

[ELS Cotton 28](#els-cotton)

[Production Policy 28](#production-policy)

[Consumption 28](#consumption-1)

[Trade 29](#trade-1)

[Trade Policy 29](#trade-policy)

[Marketing 30](#marketing-1)

# SECTION I: SITUATION AND OUTLOOK

Note: All data in the narrative are in Indian bales of 170 kilograms.

## Production

Assuming a normal monsoon rainfall, MY 2004/05 (Aug-Jul) cotton
production is forecast at 16.2 million bales (including 1.2 million
bales of loose cotton) from 8.5 million hectares, compared with 16.6
million bales from 8.0 million hectares in MY 2003/04. Although cotton
planting in MY 2004/05 is forecast to increase significantly in response
to high cotton prices in the previous season, per hectare yield is
unlikely to reach the record MY 2003/04 level, when weather conditions
were ideal. Production of extra long staple (ELS) cotton is forecast to
recoup to 250,000 bales, provided planting and growth conditions are
favorable.

Although cotton output registered a 22 percent increase in MY 2003/04 in
response to perfect weather conditions and increased usage of new high
yielding varieties, ELS production suffered due to two consecutive
droughts in the major growing states of Karnataka and Tamil Nadu.

The Government of India (GOI) has so far approved commercial planting of
only four genetically engineered Bt. varieties for the central/southern
states. No Bt. varieties for northern states have yet been approved.
However, several unapproved Bt. varieties are illegally bred,
distributed, and planted in several states including those in the north.
Bt. cotton coverage is expanding rapidly, with MY 2004/05 planting
projected at 700,000 hectares (300,000 hectares of approved varieties
and 400,000 hectares of illegal varieties) compared with 290,000
hectares in MY 2003/04 (90,000 hectares approved and 200,000 hectares of
illegal).

A resurgence in textile export demand, increased domestic off take, and
expected lower cotton prices are expected to lift Indian fiscal year
(IFY) 2004/05 (Apr-Mar) cotton textile production by 3-4 percent over
the stagnant IFY 2003/04 level.

## Consumption

Cotton consumption in MY 2004/05, forecast at 17.1 million bales, is
expected to benefit from likely anticipated low cotton prices and
improved textile demand (both domestic and export), although increasing
competition from man-made-fibers (MMF) can temper growth. Cotton prices
during MY 2004/05 are expected to rule lower than those last year due to
large carryover stocks, higher production, and expected weak world
prices. Prices remained firm in MY 2003/04 (Table 6) in response to
strong international prices, tempering consumption. Manmade
fiber/filament yarn consumption continues to grow, diminishing the share
of cotton (Table 15).

## Trade

Owing to larger carry over stocks and expected higher production, cotton
imports in MY 2004/05 are forecast to decline marginally to 1.2 million
bales, although the ELS imports are expected to increase to 270,000
bales on expected weaker world prices and a recovery in export demand
for fine yarn/fabric/made-up. Cotton exports are forecast lower at
400,000 bales due to anticipated weak world prices.

MY 2003/04 cotton imports are estimated lower at 1.3 million bales,
compared with previous year's 1.6 million bales due to comparatively
strong world prices vis-à-vis domestic prices. U.S. cotton is expected
to account for 35-40 percent, and other major suppliers are West Africa,
Egypt, Greece, Sudan, and Brazil. ELS imports, mostly from Egypt, USA,
and CIS countries, are estimated lower at 220,000 bales due to strong
international prices and stagnant export demand for Indian fine
yarns/fabrics/made ups. After a gap of 5 years, India is back in the
export market, with MY 2003/04 exports estimated at 700,000 bales. Major
markets were China, Pakistan, Bangladesh, Indonesia, Philippines,
Thailand, and Taiwan.

Cotton textile exports in IFY 2003/04 are expected to decline by 5
percent, but are forecast to bounce back in 2004/05 driven by likely
cheaper cotton prices and strong export demand. Industry sources
reported a resurgence in export demand for cotton yarn in recent months.

## Marketing

India is a growing market for ELS and other superior quality staples
(28-32 mm), with occasional imports of medium staple. Most importing
mills are willing to pay a premium of 5-8 percent for foreign cotton due
to its higher quality (less trash, uniform lots, higher ginning out
turn), better credit terms (3-6 months vs. 15-30 days for local), and
staggered delivery over longer periods at the contracted price. Indian
mills importing US Pima and US upland cotton have been appreciative of
its quality and consistency compared to cottons from other origins.
Trade servicing missions by the Cotton Council International and SUPIMA
have also helped to develop better appreciation for U.S. cotton by
Indian mills. Although the United States has emerged as the leading
supplier during the past four years, prices will have to remain
competitive in order to counter freight advantages and shorter delivery
periods enjoyed by Egypt, West Africa, the CIS countries, and Australia,
due to their geographic proximity to India.

# SECTION II: STATISTICAL TABLES 

## Table 1: Commodity, Cotton (Metric Tons), PSD

  ------------------ --------- ------------ --------- --------- ------- --------- --------------
  PSD Table                                                                       

  Country:           India                                                        

  Commodity:         Cotton    (HECTARES)                                         
                               (METRIC                                            
                               TONS)                                              

                               2002                   2003              2004      UOM

                     Old       New          Old       New       Old     New       

  Market Year Begin            Aug-02                 Aug-03            Aug-04    (MONTH/YEAR)

  Area Planted       7572000   7572000      8000000   8000000   0       8500000   (HECTARES)

  Area Harvested     7572000   7572000      8000000   8000000   0       8500000   (HECTARES)

  Beginning Stocks   1115994   1115994      782089    782089    0       872316    METRIC TONS

  Production         2307901   2307901      2822000   2822000   0       2754000   METRIC TONS

  Imports            264860    264860       217727    217727    0       217727    METRIC TONS

  TOTAL SUPPLY       3688755   3688755      3821816   3821816   0       3844043   METRIC TONS

  Exports            10886     10886        87091     119000    0       68000     METRIC TONS

  USE Dom.           2664070   2664070      2609500   2609500   0       2686000   METRIC TONS
  Consumption                                                                     

  Loss Dom.          231710    231710       221000    221000    0       221000    METRIC TONS
  Consumption                                                                     

  TOTAL Dom.         2895780   2895780      2830500   2830500   0       2907000   METRIC TONS
  Consumption                                                                     

  Ending Stocks      782089    782089       904225    872316    0       869043    METRIC TONS

  TOTAL DISTRIBUTION 3688755   3688755      3821816   3821816   0       3844043   METRIC TONS
  ------------------ --------- ------------ --------- --------- ------- --------- --------------

Note: Production figures for MY 2002, 2003 and 2004 include 1.15 million
bales (170 kg), 1.1 million bales and 1.2 million bales of loose cotton
respectively.

## Table 2: Commodity, Cotton (480 lb bales), PSD

  ------------------ --------- --------- --------- --------- ------------ ---------- --------------
  PSD Table                                                                          

  Country:           India                                   Conversion   0.004593   

  Commodity:         Cotton                                                          

                               2002                2003                   2004       UOM

                     Old       New       Old       New       Old          New        

  Market Year Begin            08/2001             08/2002                08/2003    (MONTH/YEAR)

  Area Planted       7572000   7572000   8000000   8000000   0            8500000    (HECTARES)

  Area Harvested     7572000   7572000   8000000   8000000   0            8500000    (HECTARES)

  Beginning Stocks   5126      5126      3592      3592      0            4006       1,000 480lb
                                                                                     bales

  Production         10600     10600     12961     12961     0            12649      1,000 480lb
                                                                                     bales

  Imports            1216      1216      1000      1000      0            1000       1,000 480lb
                                                                                     bales

  TOTAL SUPPLY       16942     16942     17553     17553     0            17655      1,000 480lb
                                                                                     bales

  Exports            50        50        400       547       0            312        1,000 480lb
                                                                                     bales

  USE Dom.           12236     12236     11985     11985     0            12337      1,000 480lb
  Consumption                                                                        bales

  Loss Dom.          1064      1064      1015      1015      0            1015       1,000 480lb
  Consumption                                                                        bales

  TOTAL Dom.         13300     13300     13000     13000     0            13352      1,000 480lb
  Consumption                                                                        bales

  Ending Stocks      3592      3592      4153      4006      0            3991       1,000 480lb
                                                                                     bales

  TOTAL DISTRIBUTION 16942     16942     17553     17553     0            17655      1,000 480lb
                                                                                     bales
  ------------------ --------- --------- --------- --------- ------------ ---------- --------------

Note: Production figures for MY 2002, 2003 and 2004 include 1.15 million
bales (170 kg), 1.1 million bales and 1.2 million bales of loose cotton
respectively.

## Table 3: Commodity, ELS Cotton (1-3/8\" or 35mm staple length)

  ---------------------- ----------- ----------- ----------- ----------- ------------
  Units : Metric Tons    2000/01     2001/02     2002/03     2003/04     2004/05

                         (Revised)   (Revised)   (Revised)   (Revised)   (Forecast)

  Beginning Stocks       13474       12114       9564        2764        1064

  Production             56440       53550       30600       28900       42500

  Imports                28900       25500       42500       37400       45900

  Total Supply           98814       91164       82664       69064       89464

  Exports                0           0           0           0           0

  Domestic Consumption   86700       81600       79900       68000       85000

  Ending Stocks          12114       9564        2764        1064        4464

  Total Distribution     98814       91164       82664       69064       89464

                                                                         

                                                                         

  Units : 480 lbs bales  2000/01     2001/02     2002/03     2003/04     2004/05

                         (Revised)   (Revised)   (Revised)   (Revised)   (Forecast)

  Beginning Stocks       61887       55641       43928       12696       4888

  Production             259229      245955      140546      132738      195203

  Imports                132738      117122      195203      171778      210819

  Total Supply           453854      418717      379677      317212      410909

  Exports                0           0           0           0           0

  Domestic Consumption   398213      374789      366981      312324      390405

  Ending Stocks          55641       43928       12696       4888        20504

  Total Distribution     453854      418717      379677      317212      410909
  ---------------------- ----------- ----------- ----------- ----------- ------------

Note: ELS production estimates for MY 2000/01 onwards revised based on
the variety-wise (DCH-32, Varalaxmi, Suvin and other varieties of 35mm
or more length) production figures reported by the East India Cotton
Association (EICA). Consumption and stock estimates revised to reflect
changes in the production estimates.

Source: 1. MY 2000/01, 2001/02 and 2002/03 production figures as
reported by EICA.

2\. Other estimates derived based on information from trade sources.

## Table 4A: Area, Production & Yield of Cotton in Major States

(Area 000 ha; Production 000 bales of 170 kgs, Yield Kgs/ha)

  ------------- ------------ --------- --------- ----------- --------- --------- ------------- --------- ----------
                                                                       Final     Provisional   Revised   Forecast

  STATE                      1997/98   1998/99   1999/2000   2000/01   2001/02   2002/03       2003/04   2004/05

  Maharashtra   Area         3139      3199      3254        3077      2980      2799          2800      2950

                Production   2150      2650      3650        2050      3425      2400          3000      2900

                Yield        116       141       191         113       195       146           182       167

  Gujarat       Area         1519      1607      1516        1615      1687      1498          1680      1700

                Production   4200      4750      2850        2400      3250      3050          4600      3800

                Yield        470       502       320         253       328       346           465       380

  Madhya        Area         517       501       525         506       623       550           590       590
  Pradesh                                                                                                

                Production   2250      1875      1550        1750      2000      1800          1580      1600

                Yield        740       636       502         588       546       556           455       461

  Punjab        Area         727       562       475         474       600       425           530       580

                Production   725       500       800         900       925       800           1050      1100

                Yield        170       151       286         323       262       320           337       322

  Haryana       Area         638       582       546         555       610       535           550       600

                Production   900       700       1050        1000      550       850           1080      1100

                Yield        240       204       327         306       153       270           334       312

  Rajasthan     Area         645       645       583         510       347       335           290       350

                Production   1100      1150      1300        1050      700       450           740       800

                Yield        290       303       379         350       343       228           434       389

  Andhra        Area         898       1278      1040        1022      1002      900           850       950
  Pradesh                                                                                                

                Production   2550      2500      2200        2500      2675      2000          2550      2400

                Yield        483       333       360         416       454       378           510       429

  Karnataka     Area         518       608       600         560       591       362           400       480

                Production   750       875       800         800       700       600           400       650

                Yield        246       245       227         243       201       282           170       230

  Tamil Nadu    Area         247       243       185         193       200       115           230       220

                Production   500       550       550         550       500       400           400       550

                Yield        344       385       505         484       425       591           296       425

  Others        Area         56        62        67          64        90        53            80        80

                Production   100       125       150         100       75        100           100       100

                Yield        304       343       381         266       142       321           213       213

  All-India     Area         8904      9287      8791        8576      8730      7572          8000      8500

                Production   15225     15675     14900       13100     14800     12450         15500     15000

                Yield        291       287       288         260       288       280           329       300
  ------------- ------------ --------- --------- ----------- --------- --------- ------------- --------- ----------

Note: Production figures for 1997/98 -- 2004/05 in the PS&D includes
loose cotton estimates.

## Table 4B: Planting Season, Irrigation & Cotton Type by Major Region

  ---------------- ------------------ --------------- --------------------------
  REGION           STATES             TYPE OF COTTON  PLANTING SEASON/IRRIGATION
                                      GROWN           AVAILABILITY

  North            Punjab, Haryana,   Medium & Short  End April-May/Irrigated
                   Rajasthan          Staple          

  Central          Gujarat,           Medium & Long   Mid June-July (after onset
                   Maharashtra &      Staple          of monsoon)/Largely
                   Madhya Pradesh                     rainfed

  South\*          Andhra Pradesh,    Long & Extra    August-September/Largely
                   Karnataka & Tamil  Long Staple     rainfed
                   Nadu                               
  ---------------- ------------------ --------------- --------------------------

Note: \* There is also a small summer cotton crop planted in
January-February in Tamil Nadu.

## Table 5: Mill Use by Month 

(in 100,000 bales of 170 kg each)(August/July Marketing Year)

  ------------- --------- --------- ----------- --------- --------- --------- -----------
  Month\\Year   1997/98   1998/99   1999/2000   2000/01   2001/02   2002/03   2003/04

                                                                              

  Aug           13.07     11.44     12.45       12.64     12.40     12.65     11.31

  Sept          13.24     11.38     12.11       12.41     12.05     12.39     11.07

  Oct           12.75     11.28     12.20       12.00     11.83     12.45     10.92

  Nov           12.59     11.68     11.62       12.45     11.48     11.69     11.90

  Dec           13.48     12.48     12.85       12.93     12.54     12.62     12.92

  Jan           12.69     12.28     12.80       12.58     12.54     12.38     **12.87**

  Feb           11.12     11.57     12.38       11.74     11.71     11.41     

  Mar           11.89     12.37     12.89       12.90     12.37     12.21     

  Apr           11.23     12.12     12.22       12.41     12.25     11.71     

  May           11.43     12.15     12.79       12.64     12.32     12.37     

  Jun           11.46     12.36     12.75       12.50     12.16     11.40     

  Jul           11.78     12.68     13.04       12.76     12.70     11.80     

                                                                              

  TOTAL         146.73    143.79    150.10      149.96    146.35    145.08    70.99
  ------------- --------- --------- ----------- --------- --------- --------- -----------

Note: Figure in bold is provisional estimate.

Source: Textile Commissioners' Office, Mumbai.

## Table 6: Month End Prices of Popular Varieties 

(Rupees per Metric Tons)

  ------------- --------- --------- --------- ----------- --------- ---------
  Year          Bengal    S.G.J.    H-4       Shankar-6   MCU-5     DCH-32

                Deshi     F-34      M.P.      Gujarat     A.P.      South

  2002/03                                                           

  Aug           39930     41060     49210     51740       61580     81830

  Sept          38520     40490     47800     50050       59610     77330

  Oct           41620     43330     48930     50620       63270     78740

  Nov           41060     46680     49770     52020       63270     80980

  Dec           36840     46400     49490     52870       64680     83800

  Jan           34590     46400     50620     53990       64680     82950

  Feb           38810     52300     56240     59050       65520     88280

  Mar           38240     55680     58210     61860       67490     87720

  Apr           41620     59050     61020     63560       68330     87160

  May           40490     58210     59050     61860       69740     88000

  Jun           40770     59050     60740     63000       70300     88560

  Jul           41060     61020     62710     63560       71710     91360

  Avg Price     39463     50806     54483     57015       65848     84726

  2003/04                                                           

  Aug           39090     60460     61580     63540       68900     87560

  Sept          37970     59060     63820     65520       70300     87180

  Oct           39090     60460     61580     63540       68900     87560

  Nov           37110     55960     58220     61320       65540     87990

  Dec           39630     57920     61300     63840       66100     85750

  Jan           42740     62420     64940     67480       71410     91390

  Feb           43860     59050     62980     66080       70290     88590

  Mar           44420     59900     62140     66640       70290     85790

  Apr           43590     59900     62140     65800       71700     85790

  Avg Price     40833     59459     62078     64862       69270     87511
  ------------- --------- --------- --------- ----------- --------- ---------

Source: East India Cotton Association, Mumbai.

## Table 7: India's Monthly Import of Raw Cotton

(Figures in 100,000 bales of 170 kg each)

  ---------------- ------------------ ------------------ ------------------
                   2001/02            2002/03            2003/04

  August           4.01               1.38               1.94

  September        3.93               1.24               2.77

  October          3.64               1.83               1.64

  November         3.26               1.28               0.73

  December         3.46               0.86               0.71

  January          2.53               0.86               

  February         2.6                1.03               

  March            1.15               1.04               

  April            1.38               0.84               

  May              0.93               1.31               

  June             1.67               1.72               

  July             2.02               2.19               

  Total            30.58              15.58              7.79
  ---------------- ------------------ ------------------ ------------------

Note: Import figures as reported by end-user cotton textile mills.

Source: The Textile Commissioner's Office, Ministry of Textiles, GOI.

## Table 8: Commodity, Cotton, Import Trade Matrix

  ----------------- --------- ------------- --------- ------------- -----------
  Import Trade                                                      
  Matrix                                                            

  Country:          India     Units:        Metric                  
                                            Tons                    

  Commodity:        Cotton                                          

  Time period:      Aug-Jul                                         (Aug-Dec)

  Imports for       2001                    2002                    2003

  U.S.              224,670   U.S.          82,460    U.S.          47,484

  Others                      Others                  Others        

  Australia         44,532    Egypt A Rep   27,800    Mali          14,467

  Brazil            34,247    Mali          17,657    Egypt A Rep   11,614

  Egypt A Rep       24,779    Greece        16,700    Greece        8,974

  Paraguay          17,200    Benin         13,500    Benin         6,418

  Greece            14,286    China         10,912    Tanzania      6,033

  Uzbekistan        13,846    Ivory Coast   9,908     Sudan         5,427

  Benin             12,692    Tanzania      8,590     Camroon       4,998

  Argentina         12,156    Cameroon      7,828     Ivory Coast   4,686

  Malaysia          12,023    Burkino FASO  7,098     Burkino FASO  3,410

  Ivory Coast       9,855     Sudan         6,200     Uzbekistan    3,151

  Total for Others  195,616                 126,193                 69,178

  Others not listed 99,538                  56,148                  15,763

  Grand Total       519,824                 264,801                 132,425
  ----------------- --------- ------------- --------- ------------- -----------

Note: MY2003 data are August through December, 2003.

Source: 1. Directorate General of Commercial Intelligence & Statistics
(DGCIS), GOI.

2\. Textile Commissioners Office, Ministry of Textiles, GOI.

## Table 9: Commodity, Cotton\*, Export Trade Matrix

  ------------- --------- ------------- --------- ------------- -----------
  Country:      India     Units:        Metric                  
                                        Tons                    

  Commodity:    Cotton                                          

                                                                

                                                                

  Time period:  Aug-Jul                                         (Aug-Dec)

  Exports for   2001                    2002                    2003

  U.S.          326       U.S.          213       U.S.          18

  Others                  Others                  Others        

  Japan         3,424     Japan         8,607     China Rep     5,420

  Belgium       1,212     Korea         1,546     Indonesia     2,506

  Malaysia      1,208     Nepal         1,256     Bangladesh    2,147

  Italy         459       Indonesia     579       Pakistan      1,963

  France        412       Belgium       473       Phillipines   1,963

  Korea         280       Bangladesh    461       Turkey        1,931

  Bangladesh    260       China Rep     229       Mauritius     1,309

  Portugal      204       Switzerland   200       Nepal         911

  UAE           161       Vietnam       136       Japan         905

  Canada        126       Singapore     128       Korea         526

  Total for     7,746                   13,615                  19,581
  Others                                                        

  Others not    1,069                   368                     1,101
  listed                                                        

  Grand Total   9,141                   14,196                  20,700
  ------------- --------- ------------- --------- ------------- -----------

Note: MY2003 data are August through December 2003.

\* Includes non-spinnable cotton & cotton waste not included in the
PS&D.

Source: Directorate General of Commercial Intelligence & Statistics
(DGCIS), GOI.

## Table 10: Growth of the Indian Textile Industry

+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Item\|Year \*     | 1   | 1   | 1999  | 2   | 2   | 2   | 2      |
|                   | 991 | 995 | /2000 | 000 | 001 | 002 | 003/04 |
|                   | /92 | /96 |       | /01 | /02 | /03 | (P)    |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Organised Mills @ |     |     |       |     |     |     |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Spinning          | 846 | 1   | 1565  | 1   | 1   | 1   | 1564   |
|                   |     | 294 |       | 565 | 579 | 599 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Composite         | 271 | 275 | 285   | 281 | 281 | 276 | 223    |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Exclusive Weaving | na  | 172 | 202   | 203 | 207 | 209 | 206    |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Small Scale       | na  | 750 | 921   | 996 | 1   | 1   | 1135   |
| Spinning Units    |     |     |       |     | 046 | 146 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Power Loom Units  | na  | 326 | 365   | 374 | 375 | 378 | 385    |
| (\'000s)          |     |     |       |     |     |     |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Spindles          | 27  | 31  | 37.08 | 37  | 38  | 39  | 37.03  |
| (millions)@       | .82 | .75 |       | .91 | .33 | .03 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Rotors (\'000s)@  | 113 | 226 | 444   | 454 | 480 | 468 | 482    |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Looms (\'000s)@   | 169 | 148 | 140   | 140 | 141 | 137 | 105    |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Power Loom        | na  | 1   | 1630  | 1   | 1   | 1   | 1721   |
| (\'000s) @        |     | 365 |       | 662 | 666 | 684 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Hand Loom         | na  | 3   | 3891  | 3   | 3   | NA  | NA     |
| (\'000s) @        |     | 891 |       | 891 | 891 |     |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Spun Yarn Prod    |     |     |       |     |     |     |        |
| (mil kg)          |     |     |       |     |     |     |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Cotton Yarn       | 1   | 1   | 2204  | 2   | 2   | 2   | 2075   |
|                   | 450 | 894 |       | 267 | 212 | 177 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Other Spun Yarn   | 356 | 591 | 842   | 893 | 889 | 904 | 905    |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Man-made Filament | na  | 493 | 894   | 920 | 957 | 1   | 1120   |
| Yarn              |     |     |       |     |     | 100 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Fabric Production |     |     |       |     |     |     |        |
| (mil sq m)        |     |     |       |     |     |     |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Cotton            | 14  | 18  | 18989 | 19  | 19  | 19  | 19800  |
|                   | 647 | 900 |       | 718 | 769 | 300 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| Blended           | 2   | 4   | 5913  | 6   | 6   | 5   | 6040   |
|                   | 712 | 025 |       | 351 | 287 | 876 |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+
| 100% non-cotton   | 5   | 9   | 14306 | 14  | 15  | 16  | 16798  |
|                   | 229 | 033 |       | 187 | 978 | 797 |        |
| (inc Khadi/       |     |     |       |     |     |     |        |
| wool/silk)        |     |     |       |     |     |     |        |
+-------------------+-----+-----+-------+-----+-----+-----+--------+

Note: \*-Refers to Indian fiscal Year April/March.

@-As on end of the Indian fiscal year (31^st^ March).

NA-not available.

P- provisional estimate.

Source: The Textile Commissioner's Office, GOI.

## Table 11: Production of Spun Yarn 

(Fiber-Wise, Million kg.)

  -------------- -------------- -------------- -------------- --------------
  Year/1         COTTON         BLENDED        100%           TOTAL
                                               NON-COTTON     

                                                              

  1995           1894           395            196            2485

  1996           2148           484            162            2794

  1997           2213           583            177            2973

  1998           2022           595            191            2808

  1999           2204           621            221            3046

  2000           2267           646            247            3160

  2001           2212           609            280            3101

  2002           2177           585            319            3081

  2003 (P)       2075           575            330            2980
  -------------- -------------- -------------- -------------- --------------

Note: /1: Year 2003 refers to Indian fiscal year 2003/04 (April-March)

(P): Provisional.

Source: Textile Commissioner's Office, GOI

## Table 12: Count Groupwise Cotton, Blended and Non-Cotton Spun Yarn 

(Fiber-Wise, Million kg.)

  ---------------------- ------------ ------------ ------------ ------------
  Item                   2000         2001         2002         2003 ( P)

                                                                

  I. Cotton Yarn                                                

  1-10s Count            521          524          459          438

  11-20s                 469          439          445          415

  21-30\'s               479          456          476          463

  31-40\'s               561          548          533          506

  41-60\'s               146          147          161          148

  61-80\'s               52           61           61           58

  80\'s & above          39           37           42           47

  Total                  2267         2212         2177         2075

  II\. Blended                                                  

  Cotton/Viscose         25           24           16           16

  Cotton/Polyester       177          167          150          155

  Cotton with Others     16           12           13           11

  Polyester/Viscose      367          355          359          350

  Polyester with Others  44           38           38           35

  Others                 17           13           9            8

  Total                  646          609          585          575

  III\. 100% Non-Cotton                                         

  Viscose                62           52           74           76

  Polyester              113          156          174          178

  Acrylic                65           63           60           62

  Others                 7            9            11           14

  Total                  247          280          319          330
  ---------------------- ------------ ------------ ------------ ------------

Note: /1: Year 2003 refers to Indian fiscal year 2003/04 (April-March)

(P): Provisional.

Source: Textile Commissioner's Office, GOI

## Table 13: Production of Manmade Filament Yarn 

(Million Kg.)

  ---------- ------------ ------------ ------------ --------------- ------------
  Year/1     VISCOSE      POLYESTER    NYLON        POLY-PROPLENE   TOTAL

                                                                    

  1995       61           376          42           15              494

  1996       57           493          38           13              601

  1997       57           668          30           14              769

  1998       61           745          29           15              850

  1999       49           801          26           17              893

  2000       55           820          26           19              920

  2001       48           866          27           20              961

  2002       51           995          30           24              1100

  2003 ( P)  54           1018         27           22              1121
  ---------- ------------ ------------ ------------ --------------- ------------

Note: /1- Year 2003 refers to Indian fiscal year 2003/04 (April/March).

\(P\) - Provisional.

Source: The Textile Commissioner's Office, GOI.

## Table 14: Production of Fabric 

(Fiber-wise,Square Meters)

  -------------- ---------- ---------- ----------------- ------------ -----------
  Year/1         COTTON     BLENDED    KHADI/WOOL/SILK   100%         TOTAL
                                                         NON-COTTON   

                                                                      

  1995           18900      4025       498               8535         31958

  1996           19841      4888       540               9569         34838

  1997           19992      5751       545               11153        37441

  1998           17948      5700       559               11895        36102

  1999           18989      5913       575               13725        39202

  2000           19718      6351       581               13606        40256

  2001           19769      6287       644               15334        42034

  2002           19300      5876       662               16135        41973

  2003 (P)       19800      6040       662               17250        43752
  -------------- ---------- ---------- ----------------- ------------ -----------

Note: /1- Year 2003 refers to Indian Fiscal Year 2003/04 (April/March).

\(P\) - Provisional.

Source: The Textile Commissioner's Office, GOI.

## Table 15: Consumption of Major Fibers/Yarns by the Textile Industry 

(Million Kgs)

  -------------- ------------ ---------- ---------- ------------ ----------
  Year/1         Cotton       Cotton     Man-made   Man-made     Total Yarn
                                         Fibre      Filament     

                 Qty          \% Share   Qty        Qty          Qty/2

  1995           2295         66.6       557        488          3446

  1996           2566         65.6       646        581          3913

  1997           2719         62.8       770        722          4337

  1998           2485         58.9       783        821          4221

  1999           2652         58.6       840        899          4528

  2000           2721         58.8       889        878          4630

  2001           2701         57.7       863        970          4682

  2002           2699         55.4       923        1099         4871

  2003 (P)       2550         54.0       920        1100         4720
  -------------- ------------ ---------- ---------- ------------ ----------

Note: /1 - Year 2003 is Indian fiscal year 2003/04 (April/March).

/2 - Total yarn includes some quantity of other natural yarns
(silk/wool).

\(P\) -- Provisional estimate.

Source: The Textile Commissioner's Office, GOI.

## Table 16: Prices of Raw Cotton and Other Fibers 

(Rupees/Kg)

  ------------- -------------- -------------- -------------- --------------
  Period        Raw Cotton     Viscose Staple Polyester      Acrylic Staple
                Fibre          Fibre          Staple Fibre   Fibre

                (wtd avg)      (avg)          (avg)          (avg)

  March 1989    21.94          33.43          83.28          68.00

  March 1990    18.15          38.63          70.40          75.50

  March 1991    26.71          44.29          75.31          76.77

  March 1992    33.61          51.72          80.13          97.67

  March 1993    27.69          58.32          79.73          106.72

  March 1994    49.50          59.56          78.50          104.67

  March 1995    60.58          76.53          104.55         106.00

  March 1996    45.71          83.20          89.05          85.50

  March 1997    46.07          79.80          67.56          84.63

  March 1998    56.10          80.09          51.30          88.50

  March 1999    49.03          78.58          47.95          67.75

  March 2000    47.75          78.58          63.34          80.25

  March 2001    51.25          89.54          27.43          88.51

  March 2002    37.68          83.74          49.73          84.95

  March 2003    53.82          88.01          64.82          91.17

  March 2004    58.10          91.06          76.22          95.00
  ------------- -------------- -------------- -------------- --------------

Note: Prices are average of weekly prices for the month.

Source: The Textile Commissioner's Office, GOI.

## Table 17: Per Capita Availability of Cloth in India 

(Meters)

  --------------- ----------- --------------- --------------- -------------
  Year/1          Cotton      Blended/Mixed   100% Non-Cotton Total

                                                              

  1980            12.8        2.2             2.3             17.3

  1990            15.1        3.0             6.1             24.1

  1995            16.3        3.5             8.2             28.0

  1996            16.2        4.0             9.1             29.3

  1997            15.9        4.6             10.4            30.9

  1998            13.1        4.1             11.0            28.2

  1999            14.2        4.5             11.9            30.6

  2000            14.2        4.5             12.0            30.7

  2001            14.8        4.7             12.5            32.0

  2002            14.4        4.4             12.6            31.4

  2003 (P)        \-          \-              \-              32.0
  --------------- ----------- --------------- --------------- -------------

Note: /1 - Year 2003 refers to Indian fiscal year 2003/04 (April/March).

\(P\) -- Provisional estimate; fabricwise breakup is not available.

Source: The Textile Commissioner's Office, GOI.

## Table 18: India's Exports of Textile Items 

(Million US\$)

  --------------------------------------- ---------- --------- ---------- --------- ---------
  Item                                    2000       2001      2002       2003\*    2002\*

  Cotton Textiles                         3,563.8    3,092.3   3,386.5    2,260.9   2,524.3
  (Fibre/Yarn/Fabric/Madeups)                                                       

  Man-made Textiles                       1,101.8    1,092.2   1,423.3    1,259.6   1,029.6
  (Fibre/Yarn/Fabric/Madeups)                                                       

  Wool Textiles (Yarn/Fabric/Madeups)     63.9       52.3      51.1       42.3      37.9

  Silk Textiles (Yarn/Fabric/Madeups)     317.8      286.9     315.7      261.7     236.9

  Ready-made Garments                     5,586.4    5,024.6   5,754.5    3,969.2   4,085.4
  (Cotton/MMF/Silk/Wools/etc)                                                       

  Total                                   10,633.7   9,548.3   10,931.1   7,793.7   7,914.1
  --------------------------------------- ---------- --------- ---------- --------- ---------

Note: Year 2002 refers to Indian fiscal year (IFY) 2002/03
(April/March).

> \* refers to the period of April-December 2003 and 2002. i.e., first 9
> months of IFY 2003/04 and 2002/03 respectively.

Source: 1. DGCIS, GOI.

2\. The Cotton Textile Export Promotion Council, GOI.

## Table 19: Exports of Ready-made Garments from India

(Calender year basis, in Millions)

  ----------- -------------- ------- ------- ------- ------- ------------- -------------
  ITEM                       CY 2000 CY 2001 CY 2002 CY 2003 2004\*        2003

                                                             (JAN-MARCH)   (JAN-MARCH)

  COTTON      Qty. (pieces)  1221    1054    1032    1047    354           361

              Value (\$)     4080    3390    3390    3803    1322          1266

                                                                           

  SYNTHETIC   Qty.(pieces)   267     196     191     188     58            58

              Value (\$)     1526    1012    912     959     310           288

                                                                           

  WOOL        Qty.(pieces)   16      15      8       7       0.4           0.4

              Value (\$)     160     142     108     112     6             8

                                                                           

  TOTAL       Value (\$)     5765    4543    4410    4874    1639          1562
  ----------- -------------- ------- ------- ------- ------- ------------- -------------

Note: \* - Provisional.

Source: 1. DGCIS, GOI

2\. Apparel Export Promotion Council, GOI.

## Table 20: Commodity, Export Trade Matrix, Cotton Yarn (Metric Tons)

  ------------------- ------------ ------------ ------------ ------------
  Country             2000         2001         2002         2003\*

                                                             

  USA                 4,593        3,543        3,890        1,370

  Others                                                     

  Korea Rp            44,878       49,622       75,293       23,770

  Bangladesh          59,601       48,876       43,423       15,180

  Hong Kong           70,323       45,304       39,599       11,630

  Mauritious          29,836       28,188       27,434       10,910

  China P Rp          21,151       23,716       25,374       8,780

  Chinese Taipei      14,696       14,324       24,497       5,660

  Italy               15,335       15,196       20,430       9,410

  Japan               13,440       16,660       19,832       6,900

  Korea Dp Rp         22,007       22,874       17,950       5,470

  Egypt A Rp          13,274       12,116       15,419       7,250

  Israel              14,157       11,066       14,400       6,100

  Malaysia            11,152       10,484       12,655       4,480

  Sri Lanka           12,693       12,028       12,486       4,460

  Portugal            6,222        6,207        9,373        4,070

  Belgium             9,062        5,330        9,363        2,030

  Canada              11,162       10,097       8,735        4,460

  Spain               6,459        7,171        8,607        3,350

  German F Rep        7,615        8,110        8,386        15,180

  Others              117,844      82,625       108,015      37,990

                                                             

  Total               505,499      433,535      505,161      188,450
  ------------------- ------------ ------------ ------------ ------------

Note: Year 2002 refers to Indian fiscal year 2002/03 (April-March).

> \*- figures for 2003 refers to the period April-September, 2003, i.e.,
> first six months of IFY 2003/04.

Source: 1. DGCIS, GOI.

2\. The Cotton Textile Export Promotion Council, GOI.

## Table 21: Export Trade Matrix, Cotton Fabrics (Metric Tons)

  -------------- -------------- -------------- -------------- --------------
  Country        2000           2001           2002           2003\*

                                                              

  USA            39,620         30,451         35,750         31,170

  Others                                                      

  Bangladesh     15,522         12,651         22,710         23,260

  UK             27,578         19,561         16,880         15,100

  Italy          15,758         19,539         14,870         14,420

  Sri Lanka      9,491          8,466          11,650         13,730

  UAE            12,022         10,716         11,470         13,050

  Niger          3,525          4,958          8,150          19,720

  Spain          6,482          6,881          7,900          5,520

  German F. Rp   6,811          7,049          7,650          9,940

  Togo           3,705          4,853          7,150          10,250

  Nigeria        7,583          7,727          6,090          11,260

  Benin          3,866          5,081          5,940          6,800

  Belgium        8,572          6,856          5,770          5,930

  Turkey         6,425          6,434          5,300          6,210

  Hong Kong      5,568          4,839          4,910          4,200

  Tanzania Rp    4,474          4,544          4,500          na

  France         5,015          4,050          3,590          3,670

  South Africa   5,534          5,054          3,530          1,620

  Ivory Coast    5,221          4,153          3,240          na

  China P Rp     5,478          5,361          2,180          1,980

  Others         92,191         84,581         94,990         109,930

                                                              

  Total          290,444        263,804        284,220        307,760
  -------------- -------------- -------------- -------------- --------------

Note: Year 2002 refers to Indian fiscal year 2002/03 (April-March).

> \*- figures for 2003 refers to the period April-September, 2003, i.e.,
> first six months of IFY 2003/04.

Source: 1. DGCIS, GOI.

2\. The Cotton Textile Export Promotion Council, GOI.

## Table 22: Export Trade Matrix, Cotton Madeups (Metric Tons)

  -------------- -------------- -------------- -------------- --------------
  Country        2000           2001           2002           2003\*

                                                              

  USA            85,739         82,760         145,070        183,750

  Others                                                      

  UK             24,233         25,570         23,210         27,170

  German F Rp    22,388         17,600         19,270         21,120

  France         13,462         12,220         12,710         13,060

  Japan          13,584         12,400         12,670         11,980

  Spain          6,372          6,480          9,400          9,900

  Italy          8,756          8,670          8,540          10,070

  Canada         5,628          5,880          7,540          70,170

  UAE            6,194          9,400          7,500          7,440

  Sweden         6,393          5,880          6,930          8,100

  Australia      5,898          5,230          6,130          7,310

  Netherland     6,375          5,200          5,420          6,620

  Belgium        5,399          4,900          3,870          4,730

  Denmark        3,174          400            3,540          4,050

  South Africa   2,643          2,440          2,880          6,440

  Saudi Arab     2,118          2,020          2,760          2,500

  Israel         2,353          2,540          2,390          1,340

  Korea Rp       1,748          1,520          1,490          480

  Portugal       1,566          1,460          1,480          1,750

  Others         34,855         42,550         41,000         47,660

                                                              

  Total          258,878        255,120        323,800        445,640
  -------------- -------------- -------------- -------------- --------------

Note: Year 2002 refers to Indian fiscal year 2002/03 (April-March).

> \*- figures for 2003 refers to the period April-September, 2003, i.e.,
> first six months of IFY 2003/04.

Source: 1. DGCIS, GOI.

2\. The Cotton Textile Export Promotion Council, GOI.

## Table 23: Existing Import Policy & Tarriffs/Duties for Cotton/Cotton Textiles 

  ----------- ------------------------------------------ ---------- --------- --------
  Commodity   Description of Comm.                       Policy/1   Basic     CVD
                                                                    Duty      

  Code                                                              Rate/2    Rate/3

                                                                              

  HC 52.01    Cotton-not carded or combed                OGL        10        0

                                                                              

  HC 52.02    Cotton Waste                               OGL        15        0

                                                                              

  HC 52.03    Cotton-carded or combed                    OGL        30        0

                                                                              

  HC 52.04    Cotton Sewing Thread                       OGL        20        /4

                                                                              

  HC 52.05    Cotton Yarn (85% or more cotton)           OGL        20        /4

                                                                              

  HC 52.06    Cotton Yarn (less than 85% cotton)         OGL        20        /4

                                                                              

  HC 52.07    Cotton Yarn for Retail Sale                OGL        20        /4

                                                                              

  HC 52.08    Cotton Fabric (85% or more cotton)weighing OGL        Mostly 20 /6
              \<200gm/sq.m                                          /5        

                                                                              

  HC 52.09    Cotton Fabric (85% or more cotton)weighing OGL        Mostly 20 /6
              \>200gm/sq.m                                          /7        

                                                                              

  HC 52.10    Cotton Fabric(less than 85%                OGL        Mostly 20 /6
              cotton)weighing \<200gm/sq.m                          /8        

                                                                              

  HC 52.11    Cotton Fabric(less than 85%                OGL        Mostly 20 /6
              cotton)weighing \>200gm/sq.m                          /9        

                                                                              

  HC 52.12    Other Cotton Fabric                        OGL        Mostly 20 /6
                                                                    /10       
  ----------- ------------------------------------------ ---------- --------- --------

Notes:

/1 : OGL(Open General License)- No restrictions on imports.

/2 : Most goods of the HC 52 get a tariff concession upto 50 percent of
the effective basic duty on imports from LDC members of SAPTA -
Bangladesh, Nepal, Bhutan and Maldives.

/3 : CVD (Countervailing Duty) equivalent to local excise taxes +
additional duties & cess

/4 : Local excise tax rate = 8% for items not containing synthetic fibre
12% for items containing synthetic fibre

Plus add additional duty of excise = 15 percent of the total excise tax

Plus add Cess under Textile Com Act, 1963 = 0.05% of CIF Value + Basic
Duty

/5 : Basic Duty on 5208.39 is 20% or rs. 150/kg

on 5208.41 is 20% or\* rs. 9/sqmeter

on 5208.42 is 20% or\* rs. 37/sq meter

on 5208.49 is 20% or\* rs. 200/kg

on 5208.51 is 20% or\* rs. 27/sqmeter

on 5208.52 is 20% or rs. 23/sqmeter

on 5208.53 is 20% or\* rs. 35/sqmeter

on 5208.59 is 20% or\* rs. 50/sqmeter

/6 : CVD equivalent to local excise taxes = 10 percent; nil for fabric
processed without the

aid of power or steam

/7 : Basic Duty on 5209.31-39 is 20% or rs. 150/kg

> on 5209.41 is 20% or\* rs. 32/sqmeter

on 5209.43 is 20% or\* rs. 30/sqmeter

on 5209.49 is 20% or\* rs. 150/kg

on 5209.51-52 is 20% or\* rs. 30/sqmeter

on 5209.59 is 20% or\* rs. 38/sqmeter

/8 : Basic Duty on 5210.39 is 20% or\* rs. 150/kg

on 5210.49 is 20% or\* rs. 132/kg

on 5210.51-59 is 20% or\* rs. 15/sqmeter

/10: Basic Duty on 5211.31-39 is 20% or\* rs. 150/kg

on 5211.41 is 20% or\* rs. 44/sqmeter

on 5211.43 is 20% or\* rs. 40/sqmeter

on 5211.49 is 20% or\* rs. 150/kg

on 5211.51-59 is 20% or\* rs. 18/sqmeter

/11: Basic Duty on 5212.15 and 5212.25 is 20% or\* rs. 165/kg

on 5212.24 is 20% or\* rs. 20/sqmeter

\* - Whichever is higher

**Method for Computing Total Applicable Duty**

A: CIF Value of Good

B: Basic Duty = Basic Duty Rate \* CIF Value

C : CV Duty = CVD Rate \* (A+B)

where CVD Rate = Excise Tax Rate + Additional Duty on Excise Tax + Cess

Total Applicable Duty = B+C

# SECTION III: NARRATIVE ON SUPPLY, DEMAND, POLICY & MARKETING 

## Production

Cotton is predominantly a monsoon season crop planted during April
through September and harvested in the fall and winter (Table 4B).
Planting intentions are largely influenced by price relationships with
competing crops: (paddy/fodder crops in the north, coarse
grains/pulses/sugarcane in central India, and paddy/tobacco/chilies in
the south). Due to relatively high cotton prices compared to major
competing crops in MY 2003/04, cotton area is forecast to expand by
500,000 hectares to 8.5 million hectares in MY 2004/05. Assuming a
normal yield, production is forecast at 16.2 million bales.

MY 2003/04 production is estimated at 16.6 million bales from an
estimated area of 8.0 million hectares. Highly favorable growing
conditions, characterized by well-distributed rains and abnormally low
incidence of pests and diseases combined with increased usage of new
higher yielding varieties to produce a record per hectare yield of 353
kilograms. Available market arrival data further supports this high
production figure. Market arrivals through May 1, 2004, are estimated at
16.2 million bales vs. 12.5 million bales for the corresponding period
last year. The overall quality of the cotton was reported to be better
than in previous years.

Although cotton planted area in India is the highest in the world,
yields are among the lowest due to lack of irrigation, limited use of
high quality seeds, and poor management practices. Bollworm is a major
problem, especially in the northern states and parts of Gujarat and
Andhra Pradesh, where most of the high-yielding, irrigated cotton is
produced. Yield losses from bollworm infestation in the past have ranged
from 30 to 50 percent.

Cotton textile production in the IFY 2003/04 (April-March) stagnated
(Tables 11-13) owing to high cotton prices, poor export demand and
increasing competition from cheaper MMF. However, market sources report
recovery in export demand for Indian cotton textiles (mainly yarn) since
December 2003 as reflected by improved monthly mill consumption figures
(Table 5).

## Status of Bt. Cotton 

India has recently approved a new Bt. cotton variety (RCH-2), besides
the three Bt. varieties already approved for commercial cultivation, for
six central and southern states. The GOI has permitted field trials of
several new Bt. varieties during the forthcoming season, which may take
1 to 2 years for final approval. The government so far has not approved
any Bt. cotton varieties for the bollworm-prone northern region,
although two Bt. varieties are now at the field trial stage. Besides the
four approved varieties, there are some fifty unapproved Bt cotton
varieties, illegally bred and marketed by farmers/seed companies, which
are offered at a hefty discount over the approved varieties. Some
dishonest traders are also selling F2 generation of Bt hybrids.
According to trade sources, cotton area under 'illegal' Bt cotton
varieties was twice that of approved Bt varieties.

Despite conflicting reports about the performance of Bt. cotton in the
central and southern regions this season, farmers were generally
satisfied by its performance. Scientists report that since the pest
incidence was abnormally low due to drought conditions, the impact of
the Bt. variety over non-Bt. varieties may not have been highly visible.
Nevertheless, farmers recognize the benefits derived from this
technology based on the field performance of Bt cotton in the last two
years. Despite the Bt. seed costing more than the normal hybrid seeds,
Bt. cotton coverage in MY 2004/05 is expected to more than double to
700,000 hectares (8 percent of the total cotton acreage).

## ELS Cotton

Adverse planting conditions due to two consecutive droughts reduced ELS
cotton production to 170,000 bales in MY 2003/04, a record low (Table
3). Only a few domestic varieties (DCH-32, TCH-213, and Suvin), grown
mostly in south India, meet the ELS specification. Fiber quality and
yields of these varieties have deteriorated in recent years, causing
marketing problems and lower returns to growers, prompting them to shift
to new long staple (30-34 mm) varieties which have higher yields and
lower quality problems. Efforts to improve the productivity of ELS
parent lines have met with only limited success. ELS cotton is used for
the production of quality yarn, fabric, and dress material for exports,
and for a small but growing high-end domestic market segment. MY 2003/04
consumption decreased to 400,000 bales on high cotton prices.

## Production Policy

The GOI establishes minimum support prices (MSP) for cotton at the start
of each marketing season. The Cotton Corporation of India (CCI), a
government organization, is responsible for implementing the support
operation in all states. Typically, market prices remain well above the
MSP, and CCI operations are generally limited to commercial purchases
and sales. The state of Maharashtra recently liberalized its monopoly
cotton procurement scheme by allowing private traders to procure
directly from farmers. Future trading in cotton, which was launched by
the East India Cotton Association (EICA) in 1998, continues to remain
limited. There are several government agencies, research institutions,
besides the CCI, engaged in the development, seed distribution, crop
surveillance, integrated pest management, and extension activities for
cotton. The GOI\'s Cotton Technology Mission also supports activities
aimed at improving cotton yields, reducing cultivation costs, and
improving quality through modernization of existing facilities.

The GOI\'s statutory hank yarn policy requires that 50 percent of a
mill\'s output of yarn meant for the domestic markets be produced in
hank yarn form for use by the handloom industry. Export oriented units
(EOUs) are exempted from this obligation. In addition to ensuring supply
of hank yarn to the handloom sector, the GOI also subsidizes the sale of
handloom products. The Technology Upgradation Fund (TUF), launched in
1999 to modernize the textile industry, provides an interest subsidy on
loans meant for technology upgradation.

## Consumption

A normal monsoon this year would support higher cotton consumption in MY
2004/05, not only by ensuring comfortable domestic supplies at lower
prices but also by increasing the purchasing power of the majority farm
population, spurring cloth demand. MY 2004/05 mill consumption is
forecast to rise to 14.6 million bales, consumption by small spinning
units to 1.2 million bales, and non-mill consumption at 1.3 million
bales.

Cotton is increasingly being displaced by MMFs, mainly polyester staple
fiber (PSF) and polyester filament yarn (PFY) (Table 15). High growth in
PSF/PSY use was fueled by rapid expansion in domestic production
capacities and a reduction in import duties and taxes on the raw
material for MMF. Polyester and poly-blends are also popular in India
due to their durability and ease in washing and maintenance under
tropical conditions. Cheaper PSF/PFY and ease of spinning have resulted
in mills changing their cotton/polyester blend ratio from 65:35 to
55:45. Consequently, future growth in cotton usage is likely to be
determined by relative prices of cotton vis-à-vis MMFs.

To keep pace with the demand for clothing from the growing Indian
population, the textile industry must expand by 3-4 percent per year.
The industry includes both an \"organized\" sector (large-scale spinning
units and composite mills) and an \"unorganized\" sector (small-scale
spinning units, power looms, handlooms, hosiery units). More than 95
percent of the yarn is produced in the organized sector. The weaving
industry is mainly supplied by the unorganized sector with power looms
accounting for 60 percent, handlooms for 18 percent, and hosiery units
for 17 percent of total cloth production.

## Trade

Strong international cotton prices, comfortable domestic supplies, and a
slowdown in export demand for cotton textiles reduced cotton imports in
MY 2003/04 to 1.3 million bales from 1.6 million bales in 2002/03. Most
imports were ELS and other specialty cotton by EOUs. Market sources
expect that the U.S. will continue to dominate with a market share of
35-40 percent. Monthly imports sagged since November 2003, but are
expected to pickup in June/July due to lack of availability of good
quality domestic cotton.

High international cotton prices brought India back to the export market
after a pause of over 5 years, with MY 2003/04 exports estimated at
700,000 bales. Market sources estimate that about 600,000 bales were
exported through early May 2004. New export contracts slowed down since
early April due to a weakening of international cotton prices and a
shortage of quality cotton. Major export destinations are China,
Pakistan, Bangladesh, and South East Asian countries. Exports were
mostly medium/long staple cotton like J-34 (24mm at 67-72 cents/lb),
Shankar-6 (28mm at 71-74 cents/lb) and MCU 5 (32mm at 74-75 cents/lb).

High raw cotton prices, and the appreciation of Indian rupee vis-à-vis
the U.S. dollar adversely affected cotton textile exports during most of
year 2003. Cotton yarn exports saw a strong resurgence during the
December 2003 to March 2004 period, which, however, slowed down since
April 2004. The European Union's (EU) decision to impose anti-subsidy
duty on Indian bed linen exports since January 2004 has adversely
affected exports to this region. Indian textile exports are typically
targeted toward the lower end of the international market. Coarse yarn
(below 40's count) and grey fabric (including denims) accounts for major
share of total cotton and fabric exports, respectively.

The Indian textile industry is hoping to expand its global share after
the abolition of the quota system under the Multi-Fiber agreement (MFA)
in 2005. Market sources report that global procurement companies are
setting up offices in India, signaling higher volume orders. In recent
years, a few modern integrated textile units have shifted their focus to
exports of finer count yarns, fabric, and branded garments for the
upper-end segment of the domestic and world market. These integrated
textile units are expected to benefit more from the removal of MFA,
since they will have the ability to supply a wider range of quality
products.

## Trade Policy

In April 2001, quantitative restrictions on imports of all cotton and
cotton textile products were removed (Table 21). In the 2004 interim
budget, the GOI lowered the peak tariff levels on most products from 25
percent to 20 percent and abolished the special additional duty of 4
percent. The basic import duty on raw cotton remained unchanged at 10
percent.

In January 2002, the export of yarn was liberalized and the quota limit
was abolished. However, exports of yarn to quota countries such as the
U.S. and the EU will continue to be monitored by the Cotton Textile
Export Promotion Council (TEXPROCIL). The quota allocation is done in
following manner: 55 percent according to past export performance; 15
percent for manufacturer exporter with upgraded and modernized units;
and 30 percent on a first-come-first-served basis. The export of yarn to
quota countries accounts for only 9-10 percent of total yarn exports.

Restrictions on fabric/made-ups exports to non-quota countries were
removed in April 2001. Exports to quota countries are monitored by
TEXPROCIL, and account for only 12 percent and 18 percent of total
exports of fabrics and made-ups, respectively. Fabric and made-ups
exports to quota countries are based on the following formula: 55
percent according to past export performance; 15 percent for
manufacturer exporter with upgraded/modernized units; 15 percent for
powerloom units; and 15 percent on a first-come-first-served basis.

In an effort to promote the export of value-added cotton textiles, the
Indian government provides various incentives. The EOUs and firms
importing against an advance license get a duty drawback (zero duty for
EOUs and duty discounts for others) on imports of raw materials for the
export of value-added goods. Under the EPCG scheme, imports of capital
goods/machinery are allowed at subsidized duty rates against export
obligations (zero duty for 100% EOU). In addition, many EOUs and other
exporting firms receive exemptions from the export quota limitation.
However, no direct subsidies are provided for the export of cotton and
cotton textiles.

## Marketing 

India has a traditional cotton marketing system -- farmers bring their
hand-picked, raw seed cotton to the market, where it is auctioned and
bought by traders. Seed cotton is ginned, pressed, and baled in ginning
mills and the baled cotton is supplied to mills directly or through
agents. In addition to the private trade, government parastatals like
the CCI and state marketing federations also operate in the market on a
commercial basis, besides undertaking price support operation as and
when required. Most Indian mills import their cotton through these
Mumbai-based cotton traders/brokers, though some are exploring
possibilities of importing directly.