Jan 3 (Reuters) - Cotton prices in India are likely to rise this week due to demand from exporters and yarn makers, and on lower-than-expected arrivals in spot markets .

Most traders expect output in the current cotton year ending in September to be lower than projected, said Arunbhai Dalal, a trader based in Rajkot, Gujarat, the largest producer of the fibre.

State-run Cotton Advisory Board has projected India's cotton harvesting in 2011/12 season to be at 35.6 bales.

"There is a revival in demand from both local yarn makers and exporters due to a decline in the rupee, which could push prices up," Dalal said.

Cotton arrivals in India till Dec. 25 in the 2011/12 season fell by a quarter to 8.81 million bales of 170 kg each, compared with 11.79 million bales a year ago, state-run Cotton Corp of India said last week.

Arrivals in Maharashtra, the second largest producer, nearly halved this year compared with the corresponding period last year, the data showed.

On Tuesday , the most traded Shankar-6 variety rose 400 rupees to 35,700 rupees per candy of 356 kg each, data from the Cotton Association of India, a trade body, showed.

The government has estimated exports of nearly 8 million bales in the current cotton year, which began on Oct. 1, but some exporters feel the target is unlikely to be met.