INDIAN TEXTILE INDUSTRY IN STITCHES FOLLOWING COVID-19.
Updated: Oct 3, 2020
The Covid -19 pandemic has caused major sectors in India to lose their threads over the economy. It has also teared the second largest employment provider in India after agriculture, which is the "Textile industry of India." This industry is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool and silk products to the organized textile industry which is characterized using capital-intensive technology and apparel manufacturing.
The textiles industry in India was estimated at more than US$ 100 billion in January 2020. It contributed two per cent to the GDP of India and employed more than 45 million people directly, and another 6-crore people in allied sectors, including many women and rural population in FY19.
How Covid-19 impacted this industry?
Labour force and employment -Textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country. These sectors are labour and capital intensive. Many workers are migrant labourers; they have returned to their native places. With less adaptability to virtual payment systems, these workers had no means to collect wages .Hence, with total disruption in workflow and production schedule, the industry is facing its worst-ever crisis. Apparel brands are cancelling or postponing orders and delaying payments. This leads to suppliers laying off or suspending workers without any paid leave or social benefits. This is further pushing the vulnerable workers towards more social and economic disparities. Though the government has asked factories not to cut wages or benefits, small businesses and low-income households do not have the cash flow, balance sheets or savings to sustain the downturn in business or loss of income for a few months. Output losses and insufficient liquidity in many sectors have created a high risk of large-scale layoffs.
Domestic consumption- The sector experienced very low consumer sentiment and much less consumption during this year due to limited movement of people and purchasing ability. Retailers and brands have already halted production lines, delayed season releases and cut buying budgets to prepare for these eventualities. Of course, with few garments being made there will be less demand for fabrics so overall the situation is looking gloomy.
Exports- The pandemic has affected the majority of India’s export market causing order cancellations/deferral of order leading to inventory build-up and expectation of slower realization of export receivables leading to higher working capital requirements. A recent report calibrated by Wazir Advisors – "Impact of COVID-19 Scenario on European and the US Apparel Market"- estimates that EU and US consumption would be 40-45% lower than the 2020 projected consumptions. This will be a tough time for Indian apparel exporters as about 60% of the country’s apparel exports are destined for EU and the US markets. It is expected that the export demand of cotton yarn will fall by 40% affecting spinning mills in India.
Supply chains- The garment manufacturers need to look at local sourcing opportunities, due impact on imports and exports. Due to the pandemic, businesses and supply chains are witnessing a drastic shift from traditional products to new medical textile ones such as PPEs, N-95 masks, technical textiles, synthetic material, etc. India has also become the second-largest manufacturer of PPE in the world. More than 600 companies are certified to produce PPEs today in India.
Consumer sentiment- Will consumers want to march into crowded malls to do their shopping, as they nonchalantly did before? Covid -19 has impacted consumer sentiments due to social distancing and the preference for sanitized products. The most critical part of an apparel purchase in a market like India is trial. After the crisis is over, consumers will be uncomfortable to touch and feel garments in retail stores, jittery about who would have touched it before them. Hence, there would be rise in the need of disclosure of information regarding the extent of safety while buying textile products in near future.
Indian government has come up with several export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the sector under the automatic route.
To reverse the trend of India importing significant quantities of technical textiles—worth $ 16 billion every year—and to position India as a global leader for this product category, a National Technical Textiles Mission was announced with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of Rs 1,480 crore
Ten laboratories have also been set up for testing of PPE coveralls.
To minimize the impact the Confederation of Indian Textile Industry (CITI) has requested the government to immediately announce a relief package to mitigate the crisis being faced by the capital and labour-intensive textile Industry, post the corona virus spread.
CCEA approved mandatory packaging of food grains and sugar in jute material which will boost the demand for jute.
A proposal for setting up 10 mega integrated textiles region and apparel parks all over the country, on over 1,000 acres of land has also been mooted. They will be a one-stop investment destination for FDI, and ideally, will be situated near ports with connectivity and links.
Many retailers have shifted to virtual platforms for conducting exhibitions while hoping to increase their sales amid this crisis. While domestic demand could revive in third quarter of FY21 with the onset of festive season and reopening of retail spaces, export demand would fairly depend on revival of major economies. There also seems to be a short-term opportunity for Indian companies to cater to those foreign markets which were earlier catered by China, as the customers would like to decrease their dependence on China. Cloth being the bare necessity of life, the slow recovery of textile industry is certain.