Granny cutting cotton cloth (7)
I believe the answer is:
nankeen
'cotton cloth' is the definition.
(I've seen this before)
'granny cutting' is the wordplay.
'granny' becomes 'nan'.
'cutting' becomes 'keen' (I've seen this in other clues).
'nan'+'keen'='NANKEEN'
(Other definitions for nankeen that I've seen before include "Yellowish stuff" , "hard-wearing stuff" , "Durable yellow cotton fabric, originally from China" , "Buff-coloured cotton cloth" , "Yellowish cotton cloth" .)