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  Continent-wise exports of cotton yarn from India

Before Independence, when India was a British colony, the pattern of cotton exports was typically colonial and India supplied raw cotton to Britain. After independence, the colonial pattern of exports was changed to suit the needs of the developing Indian economy and the exports of raw cotton turned into export of cotton yarn. During the Plan periods, special attention was paid to increase the volume of cotton yarn exports.

 The change in the international scenario altered the direction of exports and resulted in diversification of exported products. The yarn exporters started exploring new markets instead of depending on one or two international markets. The quantum of exports of cotton yarn was enlarged and the destinations were branched out to capture new markets in the major continents of the world like America and Europe. The export of cotton yarn was spread out also to the less reached continents like the Oceanic. This article attempts to analyse the continent-wise exports of cotton yarn.
Data:
To study the continent-wise export of cotton yarn, the data were obtained from the Cotton Textiles Export Promotion Council (TEXPROCIL) for a period of seven years from 1996-97 to 2002-03 as the export of cotton yarn from this period was substantial with diversified markets. 

      Analytical tool

Geographic Concentration Index:
To find out the degree of concentration of cotton yarn exports to various continents, Geographic Concentration Index1 was used. 

   Geographic Concentration Index

Xi – refers to the exports of cotton yarn to a particular continent 
X - refers to the total exports of cotton yarn from India

Volatility Index:
To analyse the volatility in the export of cotton yarn from India to the various continents, the volatility index has been used. To estimate volatility index, Coppock’s Log-variance method2 has been adopted. According to Coppock, the volatility index equals the antilog of the square root of the logarithmic variance of the series and that is given in algebraic terms as: 

Where, V log = logarithmic variance 


X = value of exports
 t = year; N = Number of years

Continent-wise export of cotton yarn from India

Even during the period of different rulers and kings, textiles were exported to Egypt and other African countries like Kenya, Uganda3 and the like, but cotton yarn was mainly exported to Britain before Independence. The need for foreign exchange and survival of the cotton yarn industry led to the diversification of yarn market in the international arena. The cotton yarn exports to various countries are studied on the basis of five continents, namely, Asian, African, European, American, and Oceanic as categorised by Texprocil. Table 1 shows the continent-wise export of cotton yarn and geographic concentration index for the study period.

Table 1. Continent-wise Exports of Cotton Yarn from India (1996-97 - 2002-03)

Continent

Exports of Cotton Yarn

Mean

GCI

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

Asia

345.74 (74.37)

334.9 (68.99)

324.43 (66.66)

391.58 (70.6)

355.17 (69.19)

292.13 (67.38)

336.93 (66.70)

340.13

182.99

Africa

42.88 (9.22)

53.20 (10.96)

54.45 (11.19)

50.28 (9.07)

44.22 (8.61)

46.35 (10.69)

53.17 (10.53)

49.22

26.66

Europe

61.55 (13.24)

71.45 (14.72)

82.56 (16.96)

85.49 (15.41)

87.56 (17.06)

68.82 (15.87)

81.86 (16.20)

77.04

41.51

America

10.41 (2.24)

19.72 (4.06)

20.9 (4.29)

22.9 (4.13)

23.70 (4.62)

22.47 (5.18)

27.17 (5.38)

21.04

11.58

Oceania

4.32 (0.93)

6.17 (1.27)

4.32 (0.89)

4.37 (0.79)

2.65 (0.52)

3.77 (0.87)

6.03 (1.19)

4.52

2.83

Total

464.90 (100)

485.44 (100)

486.66 (100)

554.62 (100)

513.90 (100)

433.54 (100)

505.16 (100)

492.03

 

Source: The Cotton Textiles Export Promotion Council, Mumbai.
Figures in parentheses represent percentages to total.
(GCI - Geographic Concentration Index)

Table 1 indicates that the Asian continent tops the list as the major importer of cotton yarn from India with the geographic concentration index of 182.99. It is obvious that the yarn exporters concentrate more on the neighbouring continents than on the distant continents. The destination of more than two thirds of the total exports is towards Asian continent. But compared to 1996-97 (74.37%), there was a fall in the exports to Asian continent in 2002-2003 (66.7%).

In spite of the fluctuations, Asian continent has dominated the scene. The countries importing cotton yarn in Asia either do not grow cotton or grow less cotton, but they manufacture and export textile products with the help of the imported yarn4. Countries like Japan and Hong Kong have more weaving mills than spinning mills5. Therefore, India has an advantage in exporting cotton yarn to Asian countries.

Figure 1 

Next to the Asian continent, India exports more to Europe. The cotton yarn exports hovers around 15% during the study period, even though, India’s market share in cotton yarn exports to Europe in 2000-01 was 17.06%. The textile imports into the EU have to pass through a series of regulations before reaching the EU consumers. The General Agreement on Tariff and Trade (GATT) and the multilateral trade agreements liberalised imports from developing countries. However, the Multi Fibre Agreement (MFA) laid several quota restrictions. India’s quota problems under the MFA existed with six countries namely the USA, the EU, Canada, Finland, Norway and Austria6. The WTO’s Agreement on Textiles and Clothing (ATC) replaced the MFA in 1995; it also governed the textile trade with a framework of bilateral agreements7.

Quota restrictions were proposed to be phased out during a transition period of ten years from 1st January 1995 to the end of 2004. Developed countries like the EU, Norway, Canada and the US were permitted to restrict textiles but had to phase out their import quotas by January 20058. These restrictions hampered Indian exports to the European continent. 

India also exports cotton yarn to the African continent. Around 10% of the cotton yarn exports flow towards the African continent.The quantum of cotton yarn exports to the American continent was comparatively lesser than the exports to Asian and European continents. But, it has experienced a marginal increase in growth; it has increased from a mere 10.41 mn kg in 1996-97 to 27.17 mn kg in 2002-03. The fall of Russian regime as well as the improvement in the trade relationship between the USA and India has contributed much towards this increase. The Indian exporters also found new avenues in the American continent like Argentina, Brazil, Chile and Colombia. The export to Oceanic continent is relatively meagre. Table 2 shows the volatility in the export of cotton yarn to various continents.

Among the five continents, the volatility index is the least for Africa (12.59), which shows that there was stability in the export of cotton yarn during the study period. The export of cotton yarn ranged from 9.22% in 1996-97 to 10.53% in 2002-03. Next to Africa, the volatility index of Asia is less at 14.17. Though Asia stood first in terms of quantity exported, there was slightly less stability in the export of cotton yarn over the years 1996-97 to 2002-03 compared to Africa.

Similarly, following Asia, Europe has got volatility index of 15.29 though the export of cotton yarn to Europe has taken the second place among all the continents. Compared to other continents, the volatility indices are 26.36 for America and 45.16 for Oceania, which are remarkably high, indicating that the volatility in the export of cotton yarn to these continents is more. For Oceania, the exports dipped heavily from 1.27% in 1997-98 to 0.52% in 2000-01, which is the reason for high volatility.

              Summary of findings  

From the study it has been found that the Asian continent topped the list as the major importer of cotton yarn from India with the geographic concentration index of 182.99. More than two-thirds of the total exports were to Asian continent. The European continent took the second place in the yarn exports from India. The percentage of cotton yarn exports to total exports hovered around 15% during the entire study period. 

Around 10% of the cotton yarn exports flow towards the African continent. The quantum of cotton yarn exports to the American continent was comparatively less than the Asian and the European continents. The export to the Oceanic continent was negligible.

The analysis of continent-wise exports of cotton yarn showed that the volatility index was less for Africa (12.59), which showed that there was stability in the exports of cotton yarn during the study period. The volatility index for the Oceania was remarkably high indicating less stability in the exports of cotton yarn. The exports dipped heavily from 1.27% in 1997-98 to 0.52% in 2000-01, which was the reason for high volatility.

References 
1. J D Coppock: The Experience after World War-II”, International Economic Volatility, McGraw Hill Book Co Inc, New Delhi, 1962, pp 23-26. 2. Dutt, Ruddar and K P M Sundaram: Indian Economy, S Chand & Co, New Delhi, www.ccsindia.org, 2000. 
3.Michaely Michael: Concentration of Exports and Imports an International Comparison, The Economic Journal, December 1958, pp 722-736. 
4. Prem Malik: Emerging Global Trends, The Textile Magazine, March 2000, pp 63 :
5. Akemi Harima, Gain Report No. HK 4014, Hong Kong Cotton and Products Annual, www.usfoods.hongkong.net, 2004. 
6. P K Vasudeva: Textile Mills Gain a Lot with Strategy, Indian Management, Vol 39, No.8, August 2000, pp 38. 
7. Unraveling the Multi Fibre Agreement: www.cleanclothes.com.
8. B N P Singh and Muneshwar Singh: Antagonistic Role of the WTO towards India’s Trade Prospects, Economic Affairs, Vol 45, December 2000, pp 226.

Note: For detailed version of this article please refer the print version of The Indian Textile Journal July 2008 issue. 

Dr T Jeyanthi Vijayarani 
Lecturer in Commerce (SG), 
Fatima College, Madurai. 
Email: jashny28@yahoo.com

Dr Punithavathy Pandian 
Professor with the Department of Commerce, 
Madurai Kamaraj University, 
Madurai, 
Tamil Nadu.

published July , 2008
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