Behind the Veil
March 10, 2011 A riddle, wrapped in a mystery, inside an enigma” was Winston Churchill’s portrayal of Russia in 1939, and it was also an apt description of my read on India – that is, until making my maiden voyage there just a few weeks ago.
Many around the world of cotton, including Indians themselves, have been scratching their heads, trying to read the tea leaves. How might the Indian cotton saga unfold?
I don’t pretend to know the answer. But at least my view of India is much clearer now, thanks to the generous help and hospitality offered to me by several people representing India’s cotton and textile industries during my January visit. My sincere thanks go to all of you, with particular appreciation to Dhiren Sheth, president of the Cotton Association of India, Pranav Amratlal and Ashok Patel of Vama Group, and Suresh and Vinay Kotak of Kotak & Co.
When trying to balance India’s various interests in the cotton industry, the Indian ministries have acted less than predictably in their establishment and administration of cotton export quotas, designed first to satisfy the needs of India’s mills and garment manufacturers before allowing the surplus for export.
Forecasting and measuring India’s crop, produced by countless millions of farmers, cannot be an easy or expeditious task. But export quotas are based on the size of the crop and on estimating India’s domestic cotton needs – also an inexact science.
The openings and closings of India’s cotton exports in fits and starts created uncertainty in the market, forcing a discount on Indian cotton. Then, rules for issuing the latest round of quota certificates left room for some to manipulate the system and grab the lion’s share of the remaining 1.9 million bales of exportable volume. About a million of those bales were allotted to just 3% of the applicants, some from outside the cotton industry.
Lessons were learned and proposals have been made to make the system more equitable in the future.
The more intriguing question is this: In the future, will India remain a major supplier of cotton to the world’s mills? Or will India’s own burgeoning domestic demand, together with a global shift toward India to supply much greater volumes of cotton textiles, mean that little or no cotton surplus will be left for export?
Despite the growing productivity of India’s cotton farmers, could an Indian boom in cotton consumption even turn the country into a net cotton importer once again? It’s a mystery. Stayed tuned here.
GET THE NEWSLETTER TODAY!
