King Cotton

Demand for exports of both raw cotton and the entire spectrum of cotton made upsyarn, grey cloth, apparels and ready madesis driving up cotton consumption. Of the total expected consumption of 138 lakh bales, trade circles estimate export drive demand to account for as much as 75 lakh bales. This marks a fundamental change in consumption patterns. While even three years ago, raw cotton exports would not exceed 4 lakh bales, the current years estimate is put at 15 lakh balesalmost at the same level as last years actual exports. Similarly, almost 40 lakh bales of cotton are expected to go into yarn meant for export, as against 26-27 lakh bales last year. Overall, the spindlage in the domestic textile industry is growing: while old textile mills are scrapping their capacities, better technology-driven, new capacities are coming up elsewhere to process the demand for cotton cloth. To that extent, cotton is still king.

 

Increasing the domestic production of cotton needs to be given priority attention. The ministry of agriculture has floated the Cotton Technology Mission with the avowed objective of increasing domestic production to 200 lakh bales by 2000AD. Improved technology may lead to significant productivity gains but the kind of quantum jump envisaged in three years may well remain a pipe dream unless reforms in price signaling mechanisms are simultaneously put into motion. The cotton farmer has not the foggiest idea of the price he will get when he plants the crop. Naturally he is reluctant to expand the acreage or invest in better seeds and technology, more so because the cotton crop is very susceptible to vagaries of the weather and to incidence of pest attacks. It does not help also that the cotton trade is notorious for the number of different interest groups working at cross purposes. Factual information on the progress of the crop, at aggregate levels, is only available to a coterie of traders and brokers, who

obviously twist the facts to their own advantage. All these distortions from the ideal reflects on the various sections of the industry, including the mills and the exporters but of them all it is the exporter who is the most vulnerable. This years budget had promised an early resumption of futures trading in cotton. The modalities are still being worked out by the Forward Markets Commission in consultation with industry associations. The system should hopefully be in place by the start of the 1997-98 growing season. With a reasonable degree of stability and predictability in prices, it should not be difficult to increase domestic cotton production.