The present invention relates to a novel formulation, comprising Anacardic acid or its derivatives and phytohormones (1-NAA and GA3), which promotes the increase in fiber yield and improvement in fiber quality. The in-vitro ovule culture assay was used to check the effect of formulation on initiation and development of cotton fiber. Increased initiation and length of cotton fibers was observed in the cultured ovules treated with the formulation which were validated by biochemical assays. The formulation was applied directly onto the at least 70 plants of Gossypium hirsutum genotypes in three replicates with control plants treated with phytohormones only. The formulation was applied by spraying on buds, flowers and bolls. The treated plants show significant increase in boll weight, fiber length, fineness and fiber strength. Thus, the formulation may serve as an important plant growth stimulator leading to the increase in fiber yield and improvement in fiber quality in cotton plants.