The latest market analysis of India TT Company believes that India’s cotton yarn exports have fluctuated greatly recently. Cotton yarn exports have just recovered in the past few months. The sudden and sharp appreciation of the rupee against the US dollar caused cotton yarn exports to weaken again in April this year.
Affected by the 5% appreciation of the Indian rupee and the rise in cotton prices, Indian cotton yarn is uncompetitive in the world, especially in China, which immediately triggered a domestic oversupply. Domestic cotton yarn prices quickly fell by 5-7%, and the US dollar quotation also fell by 1-2 %. At present, it is difficult for Indian cotton yarn prices to return to the level that stimulates exports. Domestic sales are generally at normal levels. However, due to the sharp decline in exports, the excess supply cannot be digested yet.
Judging from the current situation, it is difficult for Indian cotton yarn prices to recover. The recent sharp drop in yarn prices in a short period of time has put textile companies in trouble. At the same time, the domestic supply of high-grade cotton in India is tight, and sellers are reluctant to sell cotton, and the cotton price cannot let them breathe a sigh of relief.
It is very difficult to judge the market direction based on the current situation, but there are some situations that require the market’s attention.
1. After India’s demonetization policy, India’s domestic cotton consumption has returned to its previous normal level. The current increase in the supply of Indian cotton yarn is mainly due to a 90% reduction in demand from China. The question is how long can China continue without importing Indian yarn (it has not imported Indian yarn for 2 months).
2. Although the Indian rupee exchange rate has strengthened and international cotton prices have fallen, Indian cotton prices remain at a high level and will remain at a high level in the future.
Third, it is also the biggest problem at the moment. Starting from July 1, India will implement a unified tax system (GST, goods and services tax). The yarn GST is at least 5% and the maximum is 12%. It is expected that the Indian government will The results were announced mid-term. This move is likely to stimulate demand from domestic downstream companies and digest excess cotton yarn supply.
At present, yarn in some states in India is zero-rated. In order to reduce costs and profit losses as much as possible, exporters, unorganized garment factories and cloth factories may purchase cotton yarn in advance before July 1. The details of demand recovery The extent depends on the final standard of unified consumption tax.
In view of the above situation, it is expected that Indian cotton yarn prices will recover after the end of May and will continue until the end of June, and there may be short-term supply constraints in June.
Extended reading:
India enters the era of national unified tax system
The upper house of the Indian Parliament approved a controversial constitutional amendment on the evening of August 3, 2016. India’s existing confusing intra-state and inter-state sales taxes will be replaced by a unified goods and services tax (GST). The problems that plagued foreign investors were finally solved, and India has since entered the era of a unified national tax system.
Foreign investors are troubled by India’s complex tax system
India’s complex tax system has always been a major problem for foreign investors. India has 27 states. Each state has its own government and parliament, and each state has the power to impose different tax rates and tax laws on the goods and services under its jurisdiction. Many of these taxes are repeatedly levied by the central and local governments. In the past, Indian taxpayers had to pay various complex indirect taxes such as national value-added tax, central consumption tax, service tax, transit tax, and market entry tax. This has had a lot of adverse effects on market transactions, which is also an important reason why the Modi government has vigorously promoted GST tax law reform since it came to power.
What is GST?
The full name of GST is the Goods and Services Tax (The Good and Services Tax), which can be understood as consumption tax. Because it only levies taxes on the consumption stage, taxes will only be levied when the goods are consumed, and a uniform tax rate is implemented throughout India. Most developed countries currently adopt this tax system. In one sentence, the implementation of GST can effectively avoid double taxation, thereby effectively reducing the tax burden of enterprises in India.
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