India lifts ban on cotton exports

An Indian worker sorts cotton at Patel Cotton Industries, Ginners and Exporters, in Dhrangadhra, India in December 2011.

Story highlights

  • India will end its export ban after six days, the trade minister says
  • The South Asian nation is the world's 2nd largest cotton producer
  • The China Cotton Association had complained the ban seriously disturbed the international trade
  • Analysts had said the ban could spike consumer prices for cotton goods

India will end a six-day ban on cotton exports that impacted global commerce, the country's trade minister said Sunday.

The South Asian nation is the world's second-largest producer of the commodity. Its March 5 ban aimed at boosting domestic supplies in light of a surging export surplus drew criticism from domestic farmers, political leaders and a key Chinese trade lobby.

"Keeping in view the facts, the interests of the farmers, interest of the industry" and other concerns, India's group of ministers decided to roll back the ban, Trade Minister Anand Sharma said in a statement.

The prohibition had drawn flak from businesses in China, which is the biggest buyer of Indian cotton.

In a statement Thursday, the China Cotton Association called the ban an "irresponsible act" that ended "a large number of registered contracts" and "disturbed international cotton trade order seriously."

As fury grew, Indian Prime Minister Manmohan Singh ordered a quick review of the decision.

U.S. cotton futures surged last week after India announced the ban, igniting fears of another jump in prices for cotton goods.

Officials in India explained they were concerned about a supply crunch in the country.

"This India development really caught the entire cotton industry and traders off guard because it came with no warning," Phil Flynn, senior market and commodities analyst with PFG Best, told CNN last week.

Last year, when cotton prices hit an all-time high due to a global supply crunch, manufacturers first raised prices, then used less cotton and more blended fabrics such as poly-cotton.

Cotton prices cooled off toward the end of last year, Flynn said.

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