A slight improvement in shipments was noticed in July this year over the previous month but the trend did not sustain. Despatches resumed their downtrend in August at 36.87 million kg, compared with 40.59 million kg in the earlier month.

Observers had attributed the improvement in July to better availability of shipping space during the month and not due to any improvement in overseas demand. They had also stressed that the overall trend remained downward. Not only in terms of export volume, but also in terms of foreign exchange, the performance in August has been dismal, as these exports fetched only $103.05 million compared with $128.04 million in the preceding month. The per unit realisation also dropped to a new low of $2.79 per kg compared with $3.15 per kg in the preceding month and $3.28 per kg in August last year.

If one looks at cumulative performance of cotton yarn exports inthe first five months of the current financial year, there seems to be about 14-15 per cent fall in the foreign exchange earnings through such exports. The export target for cotton yarn and sewing threads has been fixed at $1,600 million for 1998-99 but it may remain a far cry.

Experts do not rule out the possibility of further currency turmoil in the Southeast Asian countries, though China has ruled out devaluation of its currency.

Some exporters have noticed an unusual trend in exports of cotton yarn to Russia. While the Asian countries are all down, Russia has started buying more yarn from India. Exporters fear that this might lead to switch deals. If that happens some of our existing markets might be further spoiled. Cotton yarn exporters are also worried about further fall in the premium on special import licences (SILs) that are being issued to certain categories of exporters by way of special incentives. These SILs are transferable.

Besides, a number of items can be imported under these licences.Furthermore, some more items were recently added by the government hoping that it could help in raising the premium on such licences and provide some incentive to exporters. However, the premium, instead of moving up has fallen to just 1.50 to 1.75 per cent as buyers are few. The premium was around 3.5 per cent a few months ago and about 12-13 per cent when imports of gold were permitted under SILs. When gold imports by institutions and banks were placed on OGL, the SILs started losing their importance. Those having some export obligations but unable to fulfill them, can surrender such licences to bring down their obligations.

Pakistan and Uzbekistan remain serious competitors in the overseas markets. Moreover, Indonesia is now finding it easy to compete by importing cotton for the purpose, because it has the advantage of lower labour costs and benefits of devaluation.

The domestic demand for cotton yarn is weak in view of inadequate offtake of fabrics and money stringency.