India bans cotton exports to shield textile industry | Business| Economy and finance news from a German perspective | DW | 05.03.2012
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India bans cotton exports to shield textile industry

Short supply in local markets caused India to impose a ban on cotton exports - the second within just two years. Rising demand for the commodity in China pushed up prices, threatening India's textile makers.

The export ban for cotton was imposed with "immediate effect", a statement issued by the Indian Commerce Ministry said Monday.

The decision taken by the ministry's Directorate General of Foreign Trade (DGFT) came in light of stagnant cotton production in India and spiking exports recently.

"It took into account the trend of domestic consumption and depletion of domestic availability," the statement said.

India - the world's second largest producer of cotton after the United States - has already exported 8.5 million bales (1.4 million tons) in the current financial year, which ends in March.

That is more than a government estimate of 8.4 million bales and well above the 7 million bales exported in the last financial year, ending in March 2011.

"The ban came as India's export target estimates were met. It was also to ensure that India has enough cotton available locally," Ravi Singh, analyst at SMC Global Securities, told the AFP news agency.

High demand, low output

The ban also comes in the wake of lower output estimates for India, seeing production fall to 34.5 million bales this year from 35.6 million projected earlier. The forecast was reduced after the cotton crop in India was hit by disease and bad weather.

In addition, demand has soared recently, driven mainly by factories in China, the world's largest textile manufacturer.

The ban comes just six months after India completely freed cotton export controls. However, it's India's second stop of overseas shipments of the commodity within two years and likely to crimp global supplies and subsequently drive up market prices.

uhe/ng (AFP, dpa, PTI)