Cotton Output Falls Sharply, Rural Employment Pressure Mounts In India.
By jayesh chouhan 2026-01-05 10:38:19
India’s Cotton Output Drops, Rural Jobs at Risk
India’s cotton production is expected to contract by 1.7 per cent in the cotton year 2026 (October 2025–September 2026), taking output to 29.2 million bales, the lowest level in a decade, according to a report by rating agency Icra. The reduction is driven by declining acreage, water shortages, uneven monsoons, and farmers shifting to more profitable crops.
The report notes that while yields per hectare are rising modestly, up 1.8 per cent year-on-year, this gain is insufficient to offset shrinking cultivation areas, which have declined nearly 20 per cent from peak levels in 2021. The contraction in output is likely to affect rural employment, as cotton farming continues to provide significant seasonal work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and local wage opportunities.
Domestic cotton consumption is expected to remain flat in CYi2026, despite subdued output. Analysts cited in the Icra report highlighted that U.S. tariffs on Indian apparel exports are likely to dampen downstream demand, further reducing incentives for higher cotton production.
In response to the domestic shortfall, India has increased its dependence on imports, which rose 85 per cent year-on-year in the first five months of FY2026 to 1.5 million bales of 170 kg each. The United States remains the largest supplier, accounting for 22 per cent of imports. Icra emphasised that while import duty exemptions provided between 19 August and 31 December 2025, helped maintain supply, they also contributed to soft cotton prices domestically.
Cotton yarn prices mirrored the softness in raw cotton markets. Domestic cotton fibre prices fell 3 per cent month-on-month in November 2025, while average cotton yarn prices dropped 4 per cent, reducing contribution margins from Rs. 103 per kg in the first half of FY2026 to Rs 96 per kg by November 2025. Icra expects margins to stabilise at Rs 98–100 per kg in FY2026, due to moderation in realisations in the second half.
The report surveyed 13 cotton spinning companies, representing 25–30 per cent of the industry’s revenue. These companies are projected to see revenue decline by 4–6 per cent in FY2026, with margin contractions of 50–100 basis points, largely due to weaker second-half performance.
The slowdown in cotton production and yarn demand has broader implications for rural India, where cotton cultivation is closely tied to local livelihoods. Lower output may reduce casual and seasonal employment, pressuring rural wages and increasing reliance on government employment schemes such as MGNREGS. The report signals a need for policy attention to sustain both farmer incomes and rural employment amid shifting crop patterns and global trade uncertainties.
