By: Seshadri Ramkumar, Professor, Texas Tech University, USA
With inflation reaching near double digits — a 40-year high — major national banks such as the U.S. Federal Reserve and the Bank of England have resorted to restrictive monetary policies to control rising prices. At the same time, fiscal policies, including tax cuts and infrastructure investments, are being implemented to stimulate economic growth.
While the benefits of these growth-oriented policies are expected in the months ahead, there is hope that the restrictive monetary stance will begin to yield results in the short term.
The British Pound Hits Record Low
On September 23, 2022, the United Kingdom’s Chancellor of the Exchequer announced a package of tax cuts aimed at boosting domestic demand. However, the move — largely financed through international borrowing — drew a negative response from global financial markets. The British Pound consequently hit a record low of 1.03 USD on September 26, 2022, reflecting investor uncertainty and pressure on the UK’s fiscal credibility.
Weak Currencies and Textile Trade Challenges
The declining value of currencies such as the Pound Sterling and Turkish Lira is having direct implications for the global textile sector. Since most textile commodities, including cotton, are traded in U.S. dollars, importing textiles and raw materials has become more expensive for these nations.
This depreciation is likely to reduce consumer spending on textile products across Europe, the United Kingdom, and other importing markets. As a result, textile producers in exporting countries could face lower demand and tighter margins in the coming months.
Cotton Prices Reflect Global Economic Stress
The global economic slowdown and falling demand are also visible in cotton pricing trends. In June 2022, Indian cotton was priced at about ₹105,000 per candy (356 kg). By November 2022, the price dropped sharply to ₹64,000 per candy, primarily due to weakening global demand.
A South Indian cotton mill purchaser remarked:
“In June 2020, one load of cotton (100 Indian bales) cost around ₹20 lakhs, but during the summer of 2022, we paid nearly ₹60 lakhs for the same quantity. With peak arrivals expected between November and January, we anticipate further price declines — depending on demand recovery.”
Recession Risks and Industry Outlook
Central banks’ focus on price stability suggests further rounds of monetary tightening, which may result in higher unemployment and slower economic growth. Although the effects may take time to materialize, these factors point toward a potential recession, which would inevitably influence textile demand worldwide.
Import-dependent countries are effectively importing inflation through weaker currencies, making textiles and other essential goods more expensive. This dynamic highlights the delicate balance between inflation control and economic growth, a challenge many economies are currently facing.
The Textile Industry Must Stay Watchful
For the textile industry, this is a critical period requiring close monitoring of cotton arrivals in India, seasonal demand trends, and currency fluctuations. As the global macroeconomic landscape continues to evolve, textile producers and traders must remain alert to changes in price stability, demand cycles, and monetary policies that shape the industry’s future.
Dr. Seshadri Ramkumar, PhD, CText, FTI (UK), FTA (Honorary), TAPPI Fellow (USA)
Professor, Nonwovens & Advanced Materials Laboratory, Texas Tech University, USA
