UPDATE: India has lifted its ban on cotton exports less than a week after it halted exports to ensure a supply for its domestic textile market.
The ban, introduced last Monday March 6, was reversed yesterday following criticism from its biggest cotton export buyer China and its own farmers, according to the Financial Times.
However, the country will not issue any new export registration certificates for cotton for at least 10 days. Only the approximate 2.5m bales registered before the ban will be given clearance in the meantime.
The u-turn on the ban is seen as a response to needing to maintain a relationship with Beijing, as well as answering demand from Indian cotton farmers and its own textile industry.
Domestic farmers had complained of a loss of competitiveness against rivals in Bangladesh and Pakistan because of rising cotton prices in India. The ban was supposed to have pushed down prices. They wanted to continue to export to recoup losses.
“Keeping in view the facts, the interests of the farmers, interest of the industry, trade, a balanced view has been considered by the group of ministers to roll back the ban,” commerce minister Anand Sharma said yesterday.
The move is expected to add further volatility to the commodity, which has in the last two years, reached highs of $2 (£1.52) per pound and sunk to an all-time low 75 cents.
As India closed off exports last week global cotton prices rose 4.5% with the absence of shipments from the world’s second-largest producer likely to affect the market. US cotton futures for May rose by 4 cents to 93.23 (59.04p) cents a pound. The move sparked fears of the inflation of the cost of raw material among retailers.
India previously banned exports in 2010, which led to record hikes in cotton prices, with farmers and mills defaulting on deliveries as prices climbed and crashed.
Cotton prices are now expected to drop below $1 per pound, according to analysts, due to weakening global demand. Mills that had switched to synthetic blends were slow to come back to cotton, while China’s strategic buying of cotton reserves is also set to come to an end. It had been aggressively buying as a way of safeguarding against price volatility.
India is responsible for about 25% of global cotton production.