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Is India the answer to Pakistan’s current cotton yarn crisis?

Textile exports fell 3.1 percent year-on-year and 6.8 percent month-on-month to $1.2 billion in February, the PBS data released on Tuesday shows. This is being attributed to the low supply of cotton yarn in Pakistan.

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Data released by The Pakistan Bureau of Statistics for February 2021 shows that exports have fallen overall in the country and the exports of textile and clothing shrank YoY on the back of a decline in value-added exports.

Read More: Textile sector fears losing orders due to unavailability of cotton yarn

The overall exports in February remained at $2.07 billion, down 4.22 percent from January, while imports were at $4.62 billion, showing an increase of 4.71% MoM.

According to the data, the export value of these sectors fell to $1.23 billion in February Year-on-Year (YoY), falling by 3.12 percent.

According to the 8MFY21 July-February figured, the major growth in textile growth came from the value-added sector of the industry. During this period the value of exports had reached $9.99bn compared to the same 8MFY20 with exports at $9.37bn. The eight-month period of this fiscal year had shown a growth of 6.69 percent.

The textile sector manufacturers were already requesting the government to allow duty-free import of cotton yarn to bridge the shortfall in local production, but the shortfall has now impacted the export sector of the economy.

The textile sector has even been asking the government to allow the import of cotton from neighbor India, as several reports from February have suggested. The shortfall of cotton yarn in Pakistan means that the value-added sector cannot retain orders from abroad, which was the main source of growth last year.

However, the government has turned down the demand, and this means things are not expected to take a turn for the better for the textile sector anytime soon.

According to the data, the biggest drop in exports from last month came in Readymade garments which dropped by 16.25 percent, where the change in value is in million rupees. This is followed by a percent change in the export of towels, knitwear, bed wear, and cotton cloth, with -12.03, -10.85, -7.87, and -2.19 respectively.

Exports Chart Pakistan

Is Indian Yarn the Solution?

Talking to GVS, Mr. Shahid Sattar, Executive Director All Pakistan Textile Mills Association said that the option of importing from India is in no way good for Pakistan. He said,”India has a surplus of cotton yarn this season and wants to dump it in Pakistan at a reduced rate. This will lead to a huge loss to local yarn industry.”

After a very long time, Pakistan’s cotton yarn is at 12,000/Maund, and that means almost 8,000/Maund is going to the farmers. If the cotton yarn is imported at low prices from India, the demand for local yarn will decrease and the prices will fall. This means that the farmers’ remuneration will decrease significantly.

According to Mr. Sattar, “the sowing season of cotton is upon us and such decreased remuneration of farmers will disincentivize them from growing cotton, causing Pakistan to have lower cotton supply in the next season.”

Thus, the impact of importing cotton from India right now to cater to the fall in textile exports is not positive for the country’s textile sector in the long run.

Read More: Pakistan might resume cotton import from India

It must also be noticed that the government has decided to announce a five-year textile policy worth Rs. 1 trillion with support for the textile sector.