Indian cotton prices have jumped up by 28 percent since the start of 2015/16 season on Oct. 1 to 40,800 rupees per 356 kg candy (77.4 cents per lb) as two years of drought took its toll on output due to which India, the world's biggest cotton producer, has contracted to import 20,000 bales from Pakistan for shipment this month, , industry officials told Reuters.

Dhiren Sheth, president of the Cotton Association of India (CAI), said that around 20,000 bales have been imported from Pakistan. Landed cost of imported cotton is lower than local prices.

Sheth further added that India has so far imported about 1.2 million bales in 2015/16 and needs another 400,000 bales before the new crop starts arriving from the end of September.

Indian buying has been pushing up prices in Pakistan, said Shahzad Ali Khan, chairman of Pakistan Cotton Ginner's Association.

The All Pakistan Textile Mills Association has urged the Pakistan government to restrict cotton exports to India in an attempt to provide raw material for domestic textiles production.

As per Karachi-based dealer, global cotton prices could rally sharply in the coming months as stocks become further depleted in key producing countries,

According to one Mumbai-based dealer with a global trading firm, supplies are dwindling in both countries. The sharp rally in Indian prices is making imports viable from Pakistan, as Pakistani supplies are available at about 70 cents per lb on a free-on-board basis, but it has limited quantity for exports.

This move is a role reversal from earlier this year, when Pakistan was buying cotton from India after its output had been hit by bad weather.