India's neighbours help offset lower cotton exports to China

By Meenakshi Sharma

MUMBAI (Reuters) - A spurt in demand from Bangladesh and Pakistan for Indian raw cotton will help New Delhi offset falling exports to its top client China, traders said.

A bountiful crop and a weaker rupee have made Indian cotton cheaper for overseas textile and clothing makers, many of which are rushing to meet increased orders from the United States and Europe as the global economy picks up.

India, the world's No.2 producer and exporter of cotton, has seen growing appetite from its second and third largest customers, Bangladesh and Pakistan, as well as other key clothing producers such as Turkey and Vietnam, the traders said.

"Our company's exports to Bangladesh have doubled between November and January from the year ago period," said an official from a leading cotton exporter in the eastern city of Kolkata. He declined to be named.

This pick-up in buying will help stem an overall decline in India's cotton exports as Beijing prepares to scrap its controversial stockpiling scheme. That step could boost volumes of locally-grown cotton available in Chinese markets, curbing demand for imports.

Indian exporters told Reuters they expected to ship 8-9 million bales of the fibre in the crop year to September 2014, down from 10.1 million bales the year before.

GO EAST

The weaker rupee and a good harvest have been key in boosting exports to destinations other than China, said Suresh Kotak, chairman of Mumbai-based brokerage Kotak Commodities.

The Indian rupee fell 11 percent in 2013, while better yields have helped Indian farmers churn out 37.5 million bales of cotton so far in the year that started in October, nearly 3 percent more than a year earlier.

"Cotton imports from India to Bangladesh are rising because of competitive prices and a short lead time," said Mohammad Ayub, president of the Bangladesh Cotton Association.

Indian exporters are currently offering cotton at around 93 cents per pound, while competitors such as the United States, South Africa, Uzbekistan and Kazakhstan are selling at 97-102 cents.

Bangladesh's readymade garment exports soared 20 percent to nearly $12 billion for the six months to December, according to the latest data from its government, despite a spate of deadly accidents that have hit the country's multi-billion textile industry.

(Additional reporting by Ruma Paul in Dhaka; Editing by Mayank Bhardwaj and Joseph Radford)