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India's Ban of Cotton Exports Could Hurt Textile Industries in Neighboring Countries

Textile industry analysts in India say the government's ban on cotton exports is hurting textile producers in neighboring Bangladesh and Pakistan, and affecting Indian exporters.

Surprise decision to halt shipments of raw cotton was made to slow the rise in domestic prices, which have surged more than 25 per cent since last October.

The government says it also wants to ensure adequate supplies of cotton for its own garment and textile industry.

Dhiren Sheth, president of the Cotton Association of India, says the suspension of exports will affect the country's image as a reliable supplier of cotton. India has emerged as the world's second largest cotton exporter.

"The brand value that we had made for Indian cotton is going to get diluted now. It brings in a bit of confusion in the buyers mind and he will tend to discount Indian cotton for that risk premium attached to such uncertainty," said Sheth.

The suspension could also hit the flourishing garment export industries of neighboring Pakistan and Bangladesh. The concern is that India's action could trigger a global price increase and thus erode its neighbors' competitiveness in the textile market.

Many of the textile mills in these South Asian countries rely on cotton from India. They are now scrambling to ensure sufficient supplies from other countries.

Taufiq Hasan, the secretary-general of the Bangladesh Garment Manufacturers Association, says the industry is pinning its hopes on West Africa.

"Next month we have a very big delegation from West Africa. We have made a proposal to them, that if we provide some space for them, whether they are willing to have warehouse in Bangladesh, so that whenever there is a necessity, we can have that [cotton] without any further delay in the delivery schedule," said Hasan.

In Pakistan, exporters have urged their government to ask India to honor contracts that had been negotiated before the imposition of the ban. Pakistan is a big cotton producer, but still has to import to meet the needs of its textile industry. Exporters are turning to Central Asia, West Africa and the United States to fill the gap.

The textile and garment industries in South Asia provide crucial foreign exchange earnings and employ millions of workers.

The suspension of exports has also led to uncertainty for Indian farmers, who may be discouraged from growing cotton in the next season. India emerged as a leading cotton producer in the world after it adopted genetically modified strains of the plant.