India Cotton Yarn Prices Rise 60% on Tight Supply

For exporters, the problem is immediate. The Apparel Export Promotion Council has urged the government to consider curbs on cotton yarn exports to cool domestic prices, underscoring how the squeeze has moved from procurement friction to policy pressure. Industry representatives say the shortage is being driven by weaker cotton output, tighter availability and firm international prices, leaving mills and garment makers exposed.

The concern is especially acute because India’s cotton crop has fallen to a provisional 290.91 lakh bales in the 2025-26 season from 352.48 lakh bales in 2020-21, according to government data. The government attributes much of the decline to farmers shifting acreage to more remunerative crops, but for textile companies the practical effect is the same: scarcer raw material, higher yarn prices and less predictability in supply.

That matters economically because textiles remain one of India’s labour-heavy export industries and a major source of rural and industrial demand. When yarn costs rise faster than final garment prices, margins compress first at fabric makers and then at apparel exporters. Hemant Jain, joint managing director at Kewal Kiran Clothing, said companies can soften the blow with inventory planning and operating efficiencies, but a sustained increase eventually works through the cost structure.

The macro risk is that India’s textile sector could miss the window opened by an expanding FTA network. Trade agreements can reduce tariff barriers, but they do not offset weak cost competitiveness if domestic input prices are out of line. That is why industry executives keep returning to the same argument: market access alone does not create export orders if Indian makers are already at a cost disadvantage.

The policy response so far has been partial. The recent duty-free cotton import window helped, but industry participants say that is only a short-term fix. They want a longer-term push on cotton productivity, better market transparency, more flexible imports and less distortion in yarn supply. Some also want a broader Cotton Mission to raise domestic output and reduce reliance on a tightening local market.

For investors, the implications are mixed. Companies with stronger sourcing, better inventory control and more pricing power are better placed to defend margins, while smaller mills and garment exporters face greater earnings pressure if the current yarn inflation persists. Export-oriented textile names could still benefit from any tariff cuts under FTAs, but only if raw-material inflation does not absorb the advantage.

The next catalyst is policy. If the government moves to curb yarn exports, extend cotton import relief or push structural measures to boost supply, it could ease cost pressure across the sector. If not, the industry may enter the next export cycle with market access on paper but less room to compete in practice.