New Delhi: A rebound in exports and favourable domestic demand are expected to drive India’s cotton yarn industry to a 7-9 per cent revenue growth in the current financial year, up from a modest 2-4 per cent growth in the previous financial year, according to a Crisil report released on Monday.
The uptick in volumes will primarily drive this growth, supported by modest increase in yarn prices, the report stated.
Operating margins, after witnessing a recovery in the last financial year, are expected to see further uptick of 50-100 bps this fiscal, owing to stable cotton yarn spreads and better availability of cotton through Cotton Corporation of India (CCI).
The report is based on an analysis of 70 cotton yarn spinners, which account for 35-40 per cent of the industry revenue.
The primary driver for the revenue uptick in fiscal 2026 will be the rebound in yarn exports to China. Exports account for around 30 per cent of the industry’s revenue, of which China accounts for 14 per cent.
In fiscal 2025, India’s yarn exports to China declined compared to prior fiscals on account of an exceptionally high cotton production in China. This resulted in a 5-7 per cent de-growth in India’s total cotton yarn exports. However, this is likely to reverse in the current fiscal with yarn exports seeing a 9-11 per cent growth as exports to China recover, driven by normalisation of their domestic cotton production, the report stated.
Crisil Ratings Director Gautam Shahi said this is likely to benefit Indian spinners as they will leverage steady domestic cotton production in the current cotton season and regain their market share.
“Moreover, India’s position in textile exports to the US remains competitive given the higher tariff on China, which is expected to support the 6-8 per cent revenue growth for the downstream home textiles and readymade garments segments this fiscal,” Shahi added.
According to the report, on the raw material front, CCI’s significant cotton procurement in the cotton season for 2025 will ensure steady cotton availability, minimising inventory losses and boosting spinners’ profitability by 50-100 bps this fiscal, after a 100-150 bps recovery in fiscal 2025.
The interest coverage ratio of spinners is expected to improve to 4.5-5 times this fiscal from 4-4.5 times in fiscal 2025.
However, any potential changes in tariffs imposed on India and the competing nations, higher inflation or slowing economic growth in the US leading to a demand slowdown, and any adverse movement in domestic cotton prices vis-à vis international prices in the near term will bear watching, the report added.
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