Sector Update: Textile

Indian textile industry is going through a lot of challenges such as scarcity of raw material, obsolete machinery, liquidity issues due to poor sales, strikes and tough competitive environment. The tough times for the sector is yet not over and has to go through more pain due to the spread of Coronavirus (Covid19).

Indian Textiles and Apparels (T&A) industry, accounts for approximately 4% of the global T&A market. As per IBEF, the T&A industry is one of the largest and is the important sectors for the Indian economy in terms of output, foreign exchange earnings and employment. The industry contributes 2% to the GDP and 15% to the country’s export earnings. Due to countrywide lockdown, however, the industry is facing major hurdles in the following areas:

1. T&A provides direct employment to over 45 million people but the nationwide lockdown has led to a temporary closure of factories and the threat of lay-offs is very high among low wage workers. According to the Clothing Manufacturers Association of India (CMAI) if the lockdown continues, there could be one crore job cuts in the textile sector.
2. The textile industry players are finding it difficult to pay wages as the manufacturing units and outlets are forced to shut their operation to curb the covid19 spread. According to a media article, CMAI 3,700 members employing around 7 lakh people mainly in the garment industry mostly micro, small and medium enterprises do not have sufficient reserves to continue paying the wages and to bear the closure loss.
3. The pandemic has affected the majority of India’s export market (approximately, 60% of the total apparel exports from India together is contributed by US and EU in value terms as per the media reports), resulting in order cancellations/deferral of order leading to inventory build-up.Additionally, domestic consumption is also getting impacted due to complete lockdown in the country. Domestic stores are facing an inventory build-up due to apparel sources for the upcoming summer season, Further, domestic prices could be negatively impacted if exporters dump their inventories in the domestic market resulting in reduced margins.
4. The sector is already being facing profitability issues due to fall in yarn exports, cheaper imports etc. These issues will rise further with the current crisis.
5. The industry’s prospects are directly linked to consumers’ purchasing power. However, consumer spending, which is one of the key factors driving the economy, has largely slowed down due to the COVID-19 outbreak. More pain is anticipated in the near term as Indian consumers are restricting their purchases to essential products due to the pandemic. This will the hurt sales and productivity of textile companies.

Demand for relief fund from the Government

To deal with the Covid19 challenges and minimize its impact in the textile sector. Various textile organizations like Synthetic and Rayon Textile Export Promotion Council (SRTEPC), Confederation of Indian Textile Industry (CITI) has requested the government to immediately announce a relief package for the textile and apparel sector to mitigate the crisis being faced by the capital and labor-intensive textile Industry, post the coronavirus spread.

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