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Growth in India-Pakistan cotton consumption

A K Chowdhury, consultant, CCI -

A United States Department of Agriculture (USDA) report on world markets and trade relating to cotton published about three years ago had mentioned

“India and Pakistan, the two important cotton growing countries of the world, have continued to increase their presence in the world cotton market. The two countries combined use of cotton has been now approaching nearly 25 per cent of the world total i.e. nearly double their share 15 years ago. In terms of both actual consumption and share of the world total, the two countries have shown increases in 13 out of the last 15 years.”

Extending the USDA review further, it is seen that same trend of high consumption of cotton by these two countries and their increased share in the world total had continued in the subsequent years also i.e 2000-01, 2001-02 and 2002-03, as will be evident from the data presented in the table.

Further, as per the same USDA review: “However, production of cotton in these countries while trending upwards, was not stated to have kept pace with the growth in consumption. If these trends continue, these two traditional net exporting countries could face deficit of upto 700,000 bales of cotton per year.”

In this case also i.e. combined cotton consumption of India and Pakistan surpassing their combined production, the same trend had continued beyond 1999-2000 as per the data presented in the table.

That both India and Pakistan traditional net exporting countries till the mid 1990s have been facing deficit in order to meet their ever increasing demand (consumption) is corroborated by the continued increase in their cotton imports.

Thus, the quantum jump in cotton import figures of both these countries from 1999-2000 onwards corroborates the USDA review made three years back that is “If these trends continue (i.e. production not keeping pace with consumption), these two countries could face a deficit of upto nearly seven lakh bales (170 kg each) per year.” (Increased imports having been taking place to meet deficit irrespective of other factors like lower International prices of cotton vis-à-vis domestic prices, quality consideration, freeing cotton imports, etc).

Thus, what is the solution to cut back cotton imports to these countries on the one hand, and to meet their ever increasing consumption of cotton by the textile industry from domestic supplies on the other, considering that imports will not be cheaper in the future years in the wake of firming of international cotton prices from 2002-03 season as reflected by the climbing up of

Cotlook A Index?

ICAC has estimated the season average of the Index to be 53 US cents per pound this year (2002-03) as against 41.8 US cents per pound in 2001-02. ICAC release of January 2003 states that world cotton prices are likely to rule firm in 2003-04 also because of an expected rise in consumption from 20.56 million tonnes this year to 20.88 million tonnes next year, in spite of an estimated increase in production.

Need for improvement of production

The above facts bring into focus the need of improving production and productivity of cotton both in India and Pakistan to strike a balance between production and consumption. The government of India has already taken an initiative in this direction by launching Technology Mission on Cotton (TMC) with four mini missions for increasing productivity and improving the quality of cotton. It is expected that with new innovative technologies, such as Bt cotton, new molecules for pest management, water shed management, etc, the target of 225 lakh bales by the end of Tenth Five Year Plan (2006-07) will be achieved. However, we have also to achieve the export target of $ 50 billion which will also include non cotton by 2010, as envisaged in the National Textile Policy, 2000.

Yield of cotton in Pakistan which is almost entirely irrigated, is already much better than India. There is scope for further improvement and with leaf curl virus resistant varieties developed which are replacing susceptible varieties and with better crop management practices their production and productivity will certainly improve. It is to be seen, however, whether balance between production and consumption will be achieved.

As is already known, Pakistan’s agrarian economy is heavily dependent on cotton. Pakistan is also an important country for cotton and yarn production and has the potential to become a key force in the world-wide cotton and textile sector, according to the official delegate of Pakistan who attended the 61st Plenary Meeting of the International Cotton Advisory Committee held in Cairo, Egypt in October 2002. Thus, in order to reach the above goal, concerted efforts will have to be made to further improve the productivity of cotton in the country and hence “current cotton policies in the country are directed towards quantitative and qualitative improvement of raw cotton” stressed the Pakistani delegate.

Incidentally, another point highlighted by the then USDA review was that “both India and Pakistan account for over 20 per cent of world production of cotton yarn and just under 50 per cent of world cotton yarn exports. They also account for over 24 per cent of world production of cotton fabric and just under 15 per cent of world cotton fabric exports. Both countries are also major apparel exporters. According to available data for 2001-02, share of both India and Pakistan in world production of cotton yarn remained at the same level of 20 per cent, as three years back, while in world fabric production, their combined share reached 25 per cent i.e. marginally higher than 24 per cent, three years back.

Both India and Pakistan maintain policies designed to support the export of value-added cotton products by supporting cotton production and favouring exports of value added products. (As is known, the value added component in textile exports is quite high).

For example, the USDA release had added that India set export quotas for yarn to assure adequate supplies to the domestic textile industry although the quota levels are revised from time to time.