India's cotton surplus is narrowing, making cotton more expensive for textile producers and strengthening the case for expanding man-made fibre capacity, according to a report by Nuvama Institutional Equities published on August 3, 2026. The report said India's cotton balance sheet is shifting 'from a surplus towards equilibrium,' with benchmark Shankar-6 cotton prices moderating to around ₹155/kg — down from a CS23 peak of ₹221/kg but still well above the ₹110/kg level of CS21.
India's Cotton Balance Sheet Tightens
According to the Nuvama report, Indian cotton production has declined from a peak of 6.31 billion kg in CS21 to an estimated 4.95 billion kg in CS26, a season-over-season decline of roughly 21.6%. Imports have tripled over the same stretch, from 0.26 billion kg to 0.80 billion kg, while exports have fallen from 1.28 billion kg to just 0.20 billion kg — a drop of about 84.4%.
| Metric | CS21 | CS26 | Change |
|---|---|---|---|
| Production (billion kg) | 6.31 | 4.95 | −21.6% |
| Imports (billion kg) | 0.26 | 0.80 | ~3× |
| Exports (billion kg) | 1.28 | 0.20 | −84.4% |
| Shankar-6 price (₹/kg) | 110 | ~155 | +40.9% vs CS21; peak ₹221 in CS23 |
Shankar-6 Prices Surge as Spinner Margins Compress
The report documents a sharp price trajectory for Shankar-6, India's benchmark cotton grade: prices surged from ₹110/kg in CS21 to ₹221/kg in CS23 — an increase of about 101% — before moderating to around ₹155/kg. For spinners, the cost pressure is direct.
"For spinners, the raw material cushion is thinning and the price series is a margin series: spreads compress every time the crop disappoints," the Nuvama report stated.
Nuvama also flagged that India historically bought cotton at an 8–11% discount to global prices as a surplus producer, with domestic prices linked to export parity. That discount has now disappeared. "The FY26 convergence to parity reflects duty waivers rather than fundamentals," the report said.
Trade Flows Reshuffle: Bangladesh Buys, US-Australia Supply
Country-wise trade flows reflect the adjustment, according to Nuvama. Bangladesh's mills have emerged as key buyers of Indian raw cotton, while India increasingly sources imports from the United States and Australia for fine-staple varieties that domestic growers do not produce in sufficient quantities.
Temporary Duty Relief Favours Farm Incomes
The exemption behind the move to parity was reinstated on January 1, 2026, but waived again only for the June 1–October 31, 2026 period, according to the report. Nuvama said this makes the relief temporary and focused on supporting farm incomes rather than improving mill competitiveness.
The Case for Man-Made Fibres
For the broader industry, the fading cotton surplus strengthens the case for expanding man-made fibre (MMF) capacity, as the textile value chain increasingly needs to diversify its fibre mix. "The value chain from field to fabric is the map on which the rest of the report moves downstream," Nuvama said.
For commodity traders and procurement teams tracking Indian cotton, the report's key data points are the shrunken surplus cushion and the temporary nature of the relief: the FY26 convergence to parity reflects duty waivers rather than fundamentals, and the waiver window closes after October 31, 2026. With the raw-material cushion thinning, Nuvama's case is that the value chain increasingly needs to diversify its fibre mix, with MMF capacity expansion serving as the counterweight to a shrinking cotton surplus.
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