Despite a recovery in yarn demand, skyrocketing raw cotton costs are squeezing profit margins for textile mills across India.

  • Cotton prices surged from ₹57,000 to ₹70,000 per candy.
  • Capacity utilization in textile mills has crossed the 90% mark.
  • Global factors like high Chinese demand and low US/China production are driving costs.
  • Mills are operating with low inventories, typically less than two months of stock.

The textile industry is currently navigating a complex economic landscape. While there is a visible revival in the demand for cotton yarn, with capacity utilization in mills crossing the critical 90% threshold, the rapid escalation in raw cotton prices is threatening the sustainability of these operations. This dual pressure of high demand and high input costs is placing immense strain on mill owners.

Durai Palanisamy, Chairman of the Southern India Mills Association (SIMA), noted that the demand for cotton yarn began recovering nearly five months ago. However, the industry is facing a supply crunch as mills are maintaining minimal inventories, often holding less than two months of cotton stock to manage liquidity.

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Why This Matters

BozokMedia analysis shows that the price volatility in the cotton market is directly linked to global geopolitical and agricultural shifts. Cotton prices, which fluctuated between ₹51,700 and ₹57,000 per candy between October 2025 and March 2026, have jumped to ₹70,000 per candy as of September 2, 2026.

The alignment of domestic prices with ICE Futures indicates that Indian textile mills are increasingly vulnerable to global market fluctuations.

According to Nishant Asher, Secretary of the Indian Cotton Federation, the primary drivers behind this spike include surging demand from China and expectations of lower production yields from both the United States and China.

Historical Context

Historically, the Indian textile sector has been a backbone of the manufacturing economy. However, it has always been sensitive to the 'commodity cycle.' Whenever global supply chains tighten or major exporters face crop failures, Indian manufacturers face a 'margin squeeze'—where the cost of production rises faster than the ability to pass those costs on to consumers.

Ravi Sam, Vice-Chairman of the Cotton Textile Export Promotion Council, emphasized that because the domestic apparel sector cannot absorb the entirety of the produced yarn, mills must aggressively target international markets to remain viable. This shift is crucial for maintaining the industry's global competitiveness.

Did You Know?: The 'Candy' is a traditional unit of measurement for cotton, typically weighing around 356 kg.

Frequently Asked Questions

1. What is causing the sudden hike in cotton prices?
A combination of high demand from China and anticipated production drops in the US and China is driving the prices up.

2. How are textile mills responding to the crisis?
Mills are increasing capacity utilization and looking toward international export markets to offset high domestic costs.