(Reuters) - Cotton prices in India, the world's second-largest producer, are seen nudging up on buying by government agencies although low demand from yarn and textile makers could cap the gains.

"Prices are expected to rise marginally as around 75 percent of the crop has already been harvested and from next month arrivals would start declining," said Arunbhai Dalal, a trader based in the western Indian state of Gujarat.

India has cleared 1 million bales of cotton for export from pending requests as of April 11, a government statement said last Thursday. {ID:nL3E8FC75O]

The world's second-biggest exporter of the fibre will also approve pending requests for 900,000 bales by April 17, it said.

Earlier, a government official said a total of 10 million bales of 170 kg each were allowed for overseas sales since the start of the current year in October.

Additional shipments will not have much impact on prices as exporters have already secured their supplies, traders said.

India aims to build cotton reserves of 2.5 million bales to meet the needs of its local textile industry and the government has directed state-run Cotton Corporation of India to intervene in the market to ensure price stability.

On Monday, the prices of the most traded Shankar-6 variety rose 200 rupees to 34,000 rupees per candy of 356 kg each, data from Cotton Association of India showed.

India banned shipments last month, only to lift it after a few days. However, it has stopped registering fresh consignments while allowing already registered after revalidation.

Cotton arrivals from the new crop have fallen 6.18 percent in the current season to 27.93 million bales, from 29.77 million bales a year earlier, the CCI said on Monday.

India is expected to harvest a record 34 million bales for the second straight year.