Global Economic Scenario
On the global scenario, the fuel and the commodities prices have
taken a serious hit due to drastic cut in consumer spending and demand, especially
in USA and Europe. The global crude oil price has come down to the $40-43 level
which is a huge 70% down from the peak level of $146/barrel, recorded May-June
of 2008. Due to ongoing decline in global energy demand, the world oil prices
may even come down to $30-35 level over next Q1/2009.
The global economy, however, remains in the slow and recessionary
mode due mainly to failure of some top financial institutions in the USA and the continuing 'deep' recessionary conditions which have now also taken Europe [incl.
UK/France/Italy] and Japan into its grip. The quarterly growth in these erstwhile
well to do economies is projected at not more than 0.25 to 1%. There is a
complete erosion of consumer confidence which has reflected in poor pre-Xmas
sales and closing down of several branches of the retail chains in the USA
and Europe; and drastically bringing down the demand for oil.
Impact on India's Textile Sector
This decisively has impacted the demand for textiles and
clothing from, both the USA and the Europe. Due to reduced export demand from
the USA and the EC countries, the textile industry in both India and China has been in slow growth phase. Due to drying up of textile/clothing export orders, the
export plummeted 10.5% in Oct 2008 itself. Both the exports of apparel and
textiles have gone down already by 10-11% with respect to last year's.
The erstwhile key drivers for growth of the Indian textile
industry have been the global/export demand for its products and competitive
price for domestic cottons. While, there has been a comfortable Cotton crop,
at 325 lac Bales for the new 2008-09 season, the fixing of higher MSP by the government
[due to undesirable vote bank gimmicks] has not enabled the input price for
the textile industry to go down; which in effect is making Indian textile
products out priced and not duly competitive.
Due to above and the ongoing contraction in demand and
prices, the domestic textile sector is in 'decline' mode, due mainly to slow
lifting of fabrics and made ups owing to continuing slowdown in demand for clothing
and apparels in both global and domestic markets. In the domestic markets, the
drastic erosion of share market value [which is now lowest in last 4 years] has
in effect led to the flight of much required FDI capital. Also, the high cost
of borrowings [along with the corresponding liquidity and credit crunch] is still
fuelling the negative sentiments and consumers are in bearish mood.
Domestic Textile Scenario
Owing to the already increased burden of fuel and interest
costs, there is slow down of consumption in the domestic economy. With lowering
of repo. rate by the central RBI bank, it is expected that there will be infusion
of credit and liquidity in the economy. The impact of this interim Govt.
relief to the financial system may shown 'positive' signs perhaps over Q1 of
2009 provided the USA/Europe/Japan are able to make some corrections to their
sinking economies. To a greater extent, this depends upon the success of the
Bailout package for USA auto majors.
Meanwhile, the Govt. declaration of providing Rs.1400 crore
for the TUF scheme is not to have any significant impact on the health of
industry. It seems, this amount is only to clear the 'backlog' of last years
and, therefore, a mere eye wash. With the interest rates still ruling high, there
would be No takers for new investment.
As, of present the Textile and clothing sector has touched
the bottom of the 'U' and this is reflected in the downtrends in production and
demand as shown below:
- Cotton yarn, production down to 227 from 320 Mln kg pm
- Apparel exports down to 8.7from $9.6 bln for last year
