Indian textile industry to brace for further uncertainties amid rising global trade tensions

India Ratings & Research (Ind-Ra) in its latest report has said that the US withhold release order on cotton and apparel imports from specific producers in Xinjiang Uygur Autonomous Region (XUAR) might escalate global trade tensions and thus, may have negative implications on the Indian textile sector in the short-run. However, Ind-Ra said that it could be beneficial in the medium term.

According to the report, there is a risk of further sanctions by the US government on curbing imports of the products originating from or having linkages with XUAR. Furthermore, it said that importers in the US are likely to be concerned about any economic, legal, or reputational concerns on any of their supply chains linked to XUAR.

It noted that this action may have spooked China and it could resort to retaliatory measures. It added that cotton procurement from the United States could be delayed by Chinese mills, leading to favourable supplies from Brazil and India, both of which are likely to have high inventories.

The report further stated that while demand from the United States could impact the overall cotton demanded by China, the value-addition could gradually move out of China to other geographies. However, it said that this is more of a medium term-phenomenon.

Indian yarn players have high export dependence on China (FY16 to FY19: around 30 per cent), which reduced to around 20 per cent for the three months ended June on account of lower demand and growing competition from Vietnam & Pakistan.