Indian raw cotton exports are expected to plummet around 20 percent in the next crop year, with demand from China fading as it unwinds a controversial stockpiling scheme.

That would be greater than the nearly 6 percent drop touted for this year, with the change in Chinese policy coming on top of rising cotton consumption in India and a spurt in exports of finished yarn, industry officials said.

Cotton markets around the world have been watching closely as China abandons a stockpiling scheme under which it has amassed more than 10 million tons of the fiber - accounting for around 60 percent of global cotton inventories.

The policy had driven up import demand by removing cotton from the domestic market and pushing up local prices.

"Cotton exports have been falling year-on-year and we will not be able to export more than 7-7.5 million bales in 2014-15" said M.B. Lal, managing director of Shail Exports and former chairman of the Cotton Corporation of India. The country's cotton year runs from October to September.

China, the world's largest cotton importer, accounts for more than 60 percent of total raw cotton exports from India. The rest goes to Bangladesh, Pakistan and Vietnam.

India, the world's No.2 producer and exporter of cotton, has shipped a total of around 8.2-8.5 million bales so far in 2013-14, with the amount expected to grow to around 9.2-9.5 million bales by September, industry officials said. Due to harvest cycles, the vast majority of exports typically occur in the first half of the Indian crop year.

India exported 10.1 million bales in the 2012-13 year, down from 12.9 million bales in 2011-12.

Reuters
Newspaper headline: India's cotton exports hit as China changes policy