This recovery will benefit Indian spinners, who can take advantage of steady domestic cotton production and reclaim market share.
In India, the cotton textile industry is more than just a sector—it’s a lifeline for nearly 60 million people. From the 6.5 million hardworking cotton farmers nurturing their crops under the sun, to the countless hands involved in processing, trading, and crafting fabrics, this industry weaves together the livelihoods of millions.
While the sector continues to grapple with numerous challenges—including climate change, slowing economic growth, and trade uncertainties—there is finally a reason for cautious optimism. India’s cotton yarn industry is projected to achieve a revenue growth of 7–9% this fiscal year, a marked improvement from the modest 2–4% growth recorded last year.
According to rating agency Crisil Ratings, this improvement will be mainly driven by a rebound in export demand and stable domestic consumption. Growth in volumes will be the primary driver, supported by a slight increase in yarn prices, the agency said in a report released on Monday.
Operating margins, which recovered last year, are projected to improve further by 50–100 basis points (bps) this fiscal. This will be supported by steady cotton yarn price spreads and improved cotton availability through procurement by the Cotton Corporation of India (CCI).
This outlook is based on an analysis of 70 major cotton yarn spinning companies, which together account for 35–40% of the industry’s revenue, the agency said.
Export Recovery, Especially to China, a Key Growth Driver
The main reason for this expected revenue boost in FY26 is the recovery in yarn exports to China. Exports make up about 30% of the industry’s total revenue, with China contributing around 14%. Last year, India’s yarn exports to China declined due to an unusually high cotton output in China, which caused a 5–7% drop in India’s total yarn exports. However, this trend is expected to reverse this year, with exports projected to grow by 9–11% as China’s cotton production returns to normal.
Gautam Shahi, Director at CRISIL Ratings, explains, “This recovery will benefit Indian spinners, who can take advantage of steady domestic cotton production and reclaim market share. Also, India’s competitiveness in textile exports to the US remains strong, especially with higher tariffs imposed on Chinese exports. This will support 6–8% revenue growth in downstream segments like home textiles and readymade garments.”
Strong Cotton Supply to Boost Profitability
On the raw material front, CCI’s significant cotton procurement during the 2025 cotton season will help ensure steady supply. This will reduce inventory losses and support a 50–100 bps increase in profitability for spinners, following a 100–150 bps improvement last year.
Pranav Shandil, Associate Director at CRISIL Ratings, notes, “Improved operating performance will help keep credit profiles stable this fiscal. Most spinners are expected to maintain moderate capital spending, limiting the need for new debt. Better cotton availability will also reduce the need for high inventory levels, lowering the demand for additional working capital.”
As a result, the interest coverage ratio for spinners is expected to improve to 4.5–5 times, up from around 4–4.5 times last year. Gearing is expected to stay stable at approximately 0.55–0.6 times.
Risks to Watch
However, certain risks remain, warns the rating agency. Any changes in global tariffs, higher inflation, slowing economic growth in key markets like the US, or significant fluctuations in domestic cotton prices versus international prices could impact the outlook.