In fact, according to the latest CMIE data, production during the first seven month of the current fiscal registered a negative growth of 5.3 per cent. The country produced only 1662.5 million kgs during April-October '98 compared to 1756.40 million Kgs in the corresponding period of the previous year.

The inventory levels in the industry is also higher putting pressure on their finances. Closing stock as on August 1998 was 125.3 million kgs as against 106.6 million kgs. This is mainly on account of lower domestic demand as well as export demand.

Domestic offtake has been affected due to fall in fabric production. In the first eight months of the current fiscal, fabric production has declined by 3.6 per cent.

Exports which was for some time a meansto negate dull domestic demand has also been sluggish. Cotton yarn export during April-October was in value terms Rs 3,376 crore, a 2.7 per cent fall compared to the previous year. The decline in terms of quantity would be much higher considering the depreciation in rupee value vis-a-vis the US dollar.

All these have already impacted the prices. The average price of cotton during the April-November '98 period is lower by close to five per cent. CMIE says that listed companies engaged in the textiles business have suffered substantial fall in sales and profits. Sales growth has declined from 30 per cent in 1994-96 to 4 per cent in 1996-98.

For the year ended March '98 net profit declined by 63 per cent and the first half of 1998-99 saw a steeper fall in profits - a whopping 96 per cent.

Cotton output for 1998-99 is estimated by CMIE at 135 lakh bales compared to 111 lakh bales expected in 1997-98. This could soften raw material prices for textile mills provided government is cautious in announcingexport quota for raw cotton.