Price Volatility in the Cotton Yarn Industry: Lessons from India

The document examines the vulnerability of India's 6.5 million handloom weavers to cotton yarn price volatility, which is driven by export-oriented policies, value chain collusion, and technological gaps. It analyzes macro-interventions like the Mill Gate Scheme and the Technology Upgradation Fund Scheme, as well as micro-interventions such as decentralized micro-spinning, concluding that an integrated approach across the entire value chain is necessary to protect the livelihoods of unorganized weavers.

• Handloom weavers in India are highly vulnerable to yarn price volatility because they are unorganized and lack the market power to negotiate, meaning price increases are absorbed by the weavers rather than passed to consumers.
• Price volatility significantly impacts the income of handloom households, where yarn costs represent nearly 50% of production costs; fluctuations can lead to a loss of 10% to 20% of monthly income.
• The shift toward exporting raw cotton and yarn to international markets, such as the US and EU, has squeezed domestic supply and forced Indian weavers to compete with international actors for raw materials.
• The Mill Gate Scheme (MGS), managed by the National Handloom Development Corporation, aims to provide yarn at mill gate prices but is hampered by corruption, time lags, and a limited scope that only reaches 30% of weavers who are part of cooperatives.
• The hank yarn obligation, which requires spinners to earmark 30% of production for handloom weavers, is often circumvented through collusion where hank yarn is rewound into cone yarn for sale to mills.
• The Technology Upgradation Fund Scheme (TUFS) has primarily benefited the spinning and composite mill sectors, with over 30% of loans granted to them between 1999 and 2004, suggesting a need to shift focus toward weaving and processing.
• The Technology Mission on Cotton (TMC) has successfully increased yields from 302 kg per hectare in 2003 to 468 kg per hectare in 2006 and modernized 777 spinning mills.
• Micro-spinning technology, piloted in Chirala, Andhra Pradesh, reduces costs by approximately 40% for weavers by eliminating baling and transportation and bypassing the margins of traders and mills.
• Market-based risk instruments like futures and options are underdeveloped in India due to historical government price controls and a lack of access for decentralized weavers.

APA

Grandhi, V. S., & Crawford, A. (2007). Price Volatility in the Cotton Yarn Industry: Lessons from India. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_price_case_cottonyarn.pdf

Chicago

Grandhi, Vijaya Switha, and Alec Crawford. Price Volatility in the Cotton Yarn Industry: Lessons from India. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/trade_price_case_cottonyarn.pdf.

Wikipedia

{{cite report |last1=Grandhi |first1=Vijaya Switha |last2=Crawford |first2=Alec |title=Price Volatility in the Cotton Yarn Industry: Lessons from India |publisher=International Institute for Sustainable Development |date=October 2007 |url=https://www.iisd.org/system/files/publications/trade_price_case_cottonyarn.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{grandhi2007price, author = {Grandhi, Vijaya Switha and Crawford, Alec}, title = {{Price Volatility in the Cotton Yarn Industry: Lessons from India}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = oct, url = {https://www.iisd.org/system/files/publications/trade_price_case_cottonyarn.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }