(Reuters) - Cotton prices in India are likely to continue their upward journey this week as scanty rains in key growing regions adversely impacted sowing, though a decline in global prices could weigh.

On Monday, the most-traded Shankar-6 variety closed 200 rupees lower at 35,500 rupees per candy, data from the Cotton Association of India showed.

Cotton prices, which rose nearly 1,500 rupees in the last two weeks, fell on Monday a s traders were reluctant to buy at higher levels, traders said.

At 1020 GMT, the key July cotton contract on the Multi Commodity Exchange (MCX) was trading down 0.39 percent at 17,950 rupees per bale of 170 kg.

"Lower rains in top growing Gujarat and other cotton producing states have adversely impacted sowing and even if it rains now, the area under cotton is likely to fall," said Dheerajbhai Khaitan, a trader based in Gujarat.

Cotton cultivation in India, the world's second-biggest producer, is likely to fall in 2012/13 from last year, as patchy rains in key growing areas and better returns from competing crops like soybeans could prompt farmers to reduce areas under the fibre cultivation.

The country has so far received 22 percent lower rainfall since the beginning of the monsoon season on June 1, weather department data showed.

Most farmers in India plant cotton in June-July with the arrival of monsoon and begin harvesting after October-November.

Besides this, higher demand from yarn makers is also pushing prices, said Khaitan.

India's cotton year runs from October to September.

Cotton output in India in 2011/12 season ending on September rose to 34.7 million bales, according to an estimate by the Cotton Advisory Board.