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Tuesday, 14 March 2017

STABLE INPUT PRICES, FISCAL INCENTIVES TO SUPPORT TEXTILE AND COTTON IN FY18: INDIA RATINGS AND RESEARCH

 

MUMBAI: Cotton textiles may see stability in the next financial year according to a research report by India Ratings and Research (Ind-Ra). The research agency revised its cotton outlook to stable for financial year 2018 from negative for financial year 2017 “The stable textile outlook is in view of stable input prices, healthy capacity utilisation and steady domestic demand scenario in FY18 and support emanating through fiscal incentives and implementation of Goods and Services Tax (GST) that will improve the textile industry’s export competitiveness. Moreover, the US’s exit from the Trans-Pacific Partnership is likely to realign textile trade and investments towards the Indian subcontinent that were diverted to Vietnam over FY16-FY17,” the research said. According to the research report the cotton acreage is set to to increase anywhere around 10%-15% to nearly 120 million hectares in FY18, leading to increased production. Ind-Ra projects a domestic stock-to-use ratio of nearly 13% for cotton marketing year. The expectation is in view of continued auction of Chinese reserves and global cotton processing countries (excluding China) holding about six months of inventory. Also Goods and Services Tax (GST) is set to have a positive impact on the cotton textile sector the report added. “A unified tax structure in the form of GST is likely to create a level playing field for the cotton and polyester industries, and promote enhanced sponsor interest towards the polyester chain. Ind-Ra opines that textile companies would be able to deleverage their balance sheets in FY18 in the absence of major investments due to adequate capacities and pending uncertainty over the GST tax rates. The next round of investment cycle is expected from FY19. Ind-Ra expects an improvement in the credit profiles of textile companies, including raw cotton players, driven by lower cotton inventories, limited capital investments and reduced borrowing costs,” the research report added.

Source: Economic Times

    
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