India: Key Player In A Global Market

Agriculture is the mainstay of the Indian economy, as it constitutes the backbone of the rural livelihood security system and therefore, the farmer is undoubtedly the focal point. It is a matter of pride that despite several handicaps, the Indian farmer has stood his ground and achieved sterling success in the country’s overall economic growth. Agriculture contributes significantly to India’s GDP, supplies over 10% percent of total exports and employs a large section of population.

The cotton economy in India has been accelerating at a fast pace in recent years. With tremendous growth in production, consumption, exports and yield, India has become a prominent player in the global cotton market. With an area of 9 million hectares (Ha) under cotton, India’s production was 4.76 million tonnes last season, or about 18% of world production.

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Improved Seed, Improved Farming

Cotton production in India has more than doubled from 13.6 million bales in 2002-03 to 28 million bales in 2006-07. Similarly, the cotton yield has recorded a healthy growth of 69% from 308 kg/ha in 2001-02 to 520 kg/ha in 2006-07.

Though there is still a gap in the yield level of cotton obtained in India vs. the global average (520 kgs/ha as compared to a world average of over 756 kg/ha), there is a great potential to reach that level in near future. Yields in some states like Gujarat and Punjab have crossed or almost touched the world average.

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One redeeming feature is that the growth rate in Indian average yields has far outpaced the world average. During the seven years from 2000-01 to 2006-07, the world average yield grew by 24% from 612 kg to 756 kg, whereas India posted growth of 87% from 278 kg to 520 kg after the launch of the Technology Mission on Cotton (TMC) and the advent of Bt cotton.

One of the major handicaps in the past was the availability of quality seed. In recent years, this handicap has disappeared, with several private seed suppliers entering the market offering good quality seeds at competitive prices. This has certainly improved both the quantitative and qualitative aspects of cotton.

The area cultivated under Bt cotton in 2002-03 (the first year biotech cotton was approved for commercial planting) barely reached 29,307 Ha. This has seen phenomenal growth, with the 2006-07 cotton season reaching almost 40% of the total cotton area under Bt seeds. More significantly, for 2007-08, over 60% of the total cotton area is reported to be planted to Bt cotton.

The cultivation of Bt cotton in India provides economic benefits from two factors. First, the cost of spraying and insecticides are lowered due to a reduction in the number of sprays required for bollworms; and second, yield loss is reduced by about 30%.

A study conducted by the Agro-Economic Research Centre of Andhra University established that Bt cotton yields were higher than those of non-Bt varieties under both irrigated and rainfed conditions, irrespective of land holding size.

With collective efforts put in by TMC, agricultural scientists, various State Agricultural Universities and NGOs like the Cotton Association of India (CAI) and others, there has been a marked improvement in the practices of cotton cultivation as well as seed technologies. Greater application of integrated pest management (IPM) technology and effective checks on pest and disease infestation also had the desired result in increasing productivity.

Apart from the technologies, we in India have been fortunate to have the Weather God on our side. Since more than 60% of the cotton area is rainfed, adequate and timely rainfall has provided a great boost to cotton production in recent years.

Consumption And Export

Over the last five years, the domestic consumption of cotton has increased steadily by about 41%, from 2.42 million tonnes in 2002-03 to 3.4 million tonnes in 2006-07. With the ambitious growth plans of the textile industry over the next five years, domestic consumption is set to keep going up.

India imported 2.5 million bales of cotton in 2001-02 and set a new all-time Indian record by exporting 5.5 million bales in 2006-07. This represents a remarkable six-fold growth when compared to exports of 0.91 million bales in 2004-05. This demonstrates the marked improvement in the quality of Indian cotton over the years, as it is now acceptable in international markets.

With yet another bumper crop this season, exporters are confident to achieve even higher targets. Imports by China will be a major plus in aiming for higher exports, as 75% to 80% of cotton exports from India are effected by members of CAI.

Competitive Strengths

Agro-climatically, India is fortunate to have suitable conditions to grow all the four major species of cotton (arboreum, herbaceum, hirsutum and barbadense). This provides varietal diversity to match the quality requirements of the textile industry.

India also has a well-organized cotton research regime spearheaded by the Indian Council of Agricultural Research (ICAR) and State Agricultural Universities.

Traditional methods of testing cotton quality by visual inspection have given way to scientific testing of cotton on HVI machines. The quality of Indian cotton has an added advantage of being harvested manually and processed through roller ginning, which limits damage during harvesting and processing.

China, Pakistan and Bangladesh are the leading importers of Indian cotton, with which India has the competitive advantage over many producing countries in transit cost and transit time.

India and the World

During the last five years, global cotton production increased steadily by about 38%, while consumption increased by 23.5%.

In 2006-07, Asian countries continued to dominate world cotton production and consumption with 54% and 65% shares, respectively. Imbalance in global production and consumption is likely to erode world ending stocks, boosting cotton prices.

In order to meet the industry’s increasing cotton requirements and to bridge the gap between the supply and demand of cotton, the concerned authorities in the central and state governments will have to make well directed efforts to substantially increase the income levels of the millions of cotton growers in India.

As global markets are concerned, India is now in a strong position to further consolidate its share of the cotton trade by focusing on increased productivity. The cumulative impact of major factors such as growing demand from China, relatively higher prices of polyester staple fibre due to high oil prices and the escalation of global cotton will facilitate exports, and India should prepare itself to wrest a larger share of those exports.

The Role of CAI

Originally incorporated in 1921, CAI has a history of over nine decades. All cotton growing regions and segments are represented on CAI’s Board, making it a representative body for buyers, sellers, processors, brokers, consumers, cooperatives, importers, exporters and market intermediaries.

CAI follows a blind survey system for settling quality disputes which has been recognized to be on par with the best in the world. Arbitration and conciliation has been accepted as the best option. CAI has upgraded and incorporated the regulatory framework of arbitration and conciliation procedures in line with the U.N. Commission on International Trade Law. Export sales to foreign countries are by and large subject to CAI arbitration.

CAI also maintains Cotton Testing Laboratories equipped with HVI systems, and has links with several international agencies. It is a signatory to the Jt. Standards Committee of the USDA, which provides standard boxes of all major growths of cotton. It also prepares and maintains grade and staple standards for all commercially grown varieties in India. It has representation on the Private Sector Advisory Panel of ICAC, and its vice president is a member of ICAC’s Committee for Standardization of Instrument Testing of Cotton.

CAI has also contributed to the improvement of Indian cotton through the COTAAP Research Foundation, and also collects and disseminates information and statistical data through several publications on trade, prices, crop situations, production, consumption, exports, imports and other topics.

Sustaining its Advantage

India is currently the second largest producer, consumer and exporter of cotton. The time has come when concerted steps should be taken to promote Indian Cotton as a brand in domestic and international markets, to make Indian cotton synonymous with quality, reliability and sanctity. Further, in order to sustain a competitive edge, special emphasis is being placed on:

  • Encouraging integrated cultivation, i.e. contract farming.
  • Rainwater harvesting and water resource management.
  • Sustained efforts to improve productivity.
  • Continued thrust on further improvements in quality.

With successful implementation of these strategies, India looks ahead to achieve even more milestones in the international cotton arena in the future.

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