India, the world’s second-largest producer of cotton, has made a series of conflicting announcements regarding the highly-demanded commodity. Today the country’s government said it would reverse a week-old ban on cotton exports, but hours later modified their statement again, limiting any possible benefit to international markets.
On March 5, India’s Directorate General of Foreign Trade announced an immediate cessation of all cotton exports, including active orders not yet shipped, in order to fulfill the country’s internal demand. Global cotton prices immediately jumped 4.5 percent, followed by protests from a number of sources, including number one buyer China.
Early this morning, the Directorate General announced the government would lift the ban, and that export permits for growers and traders would be issued within 10 days. Prices fell, with China and other markets applauding the decision.
The celebration, however, was short-lived. Hours after announcing that the ban would be overturned, the commerce ministry revised the statement, saying that only the 2.5 million bales registered for shipment as of March 5 would be cleared for export, and that new export certificates would not be issued for at least two weeks as the country’s ministers reviewed the matter.
“This is a de facto ban dressed up as a non-ban,” said Dhiren N. Sheth, president of the Cotton Association of India. “The point is that we cannot export new cotton till further notice, call it however you want … this is very disappointing and will harm India’s reputation in global markets.”
While the ban was implemented to protect India’s garment industry, farmers and exporters are unhappy with the move. Cutting off the supply of cotton would raise prices worldwide, but allow India’s government to control costs and keep them low for its textile mills. The apparel industry is the country’s second largest sector, after telecommunications.
India previously banned cotton exports in April 2010 in order to control internal supply and demand, but lifted those bans later that same year. The duration and impact of the most recent ban will be better understood when India’s ministers announce the findings of their reviews at the end of the month.
