Rising cotton costs and shrinking supply strengthen the case for man-made fibres: Nuvama
Nuvama Institutional Equities report suggests that as India’s cotton surplus vanishes, textile producers are increasingly turning to man-made fibres to maintain margins.
According to a report by Nuvama Institutional Equities, India's cotton balance sheet is shifting away from surplus toward equilibrium. As domestic cotton becomes increasingly expensive and supply constraints tighten, the textile industry is facing a strategic necessity to diversify its fibre mix, with a growing emphasis on man-made fibres (MMF).
The shift in production is stark: output has declined from a peak of 6.31 billion kg in the 2021 agricultural year (CS21) to an estimated 4.95 billion kg in CS26. Simultaneously, imports have tripled, rising from 0.26 billion kg to 0.80 billion kg. This indicates that India is increasingly reliant on imports, particularly for fine-staple varieties from the US and Australia, as domestic availability fails to meet industrial demand.
Market volatility has also impacted pricing. Shankar-6 cotton, a benchmark variety, saw prices surge from ₹110/kg in CS21 to ₹221/kg in CS23 before moderating to approximately ₹155/kg. Historically, Indian manufacturers benefited from an 8–11% discount against global prices; however, that advantage has largely evaporated as domestic prices have converged with export parity.
Nuvama analysts warned that for spinners, the raw material 'cushion' is thinning, and profit spreads compress whenever crop yields disappoint. Consequently, the fading cotton surplus serves as a catalyst for the industry to expand MMF capacity, ensuring the textile value chain remains viable and less susceptible to the volatility of natural fibre markets.
Furthermore, government interventions, such as duty waivers, offer only temporary relief. The most recent exemption for the June 1–October 31, 2026 period is viewed by analysts as a move to support farm incomes rather than a sustainable measure to improve mill competitiveness. This reinforces the long-term trend of the industry seeking stability through diversified fibre sources.