Crisil Ratings Sees Strong Recovery in India’s Cotton Yarn Industry on Export Demand

Exports, improved global demand and higher yarn realisations expected to support revenue growth in FY27, says Crisil Ratings

India’s cotton yarn sector is projected to recover during FY27, with Crisil Ratings forecasting improved business conditions on the back of rising global demand, easing trade-related disruptions and expanding export opportunities.

Following a largely flat FY26, industry revenues are expected to increase by 9-11% in FY27, according to Crisil Ratings' assessment of 70 spinning companies. The projected growth is expected to be supported by a 6-8% increase in yarn realisations along with a 2-4% rise in sales volumes.

Exports are expected to remain the primary growth driver. Export revenues are projected to grow by 12%-14%, increasing exports’ contribution to total industry revenue to around 31% from 28% in the previous fiscal.

A significant rise in shipments to China, the world's second-largest cotton yarn market, is expected to support this trend. Lower domestic cotton production in China has increased its reliance on imports. At the same time, demand from Bangladesh, the leading export destination for Indian yarn, is recovering as political stability improves and the country's readymade garment sector revives.

According to Ankush Tyagi, Director, Crisil Ratings, exports are expected to be the key growth engine for cotton yarn manufacturers during the current fiscal.

The domestic market, which contributes around 70% of industry revenue, is also projected to expand by 7%-9%. Demand is improving across downstream sectors, including home textiles and apparel, supported by the rationalisation of US tariffs from last year's higher levels.

Crisil Ratings also noted that the industry remains largely insulated from the direct impact of the West Asia conflict because of its limited exposure to the region and minimal dependence on crude-linked inputs.

With demand strengthening, spinning mills are expected to regain pricing power to offset higher raw material costs. Despite an estimated 10%-15% increase in raw cotton prices, cotton yarn spreads are expected to remain in the range of ₹108-110 per kg, according to the report.