Indian garment sector needs more govt support: CMAI

11 Apr '20

3 min read

Pic: Prabhjit S. Kalsi / Shutterstock.com

India’s garment industry, especially micro, small and medium enterprises (MSMEs) that comprise 90 per cent of the sector, needs more government support for wages and working capital, according to a survey conducted by the Clothing Manufacturers Association of India (CMAI), which found a fifth of the respondents could close their business after the lockdown.

About three-fifths of the respondents are expecting a revenue drop of more than 40 per cent, and 29 per cent of them expect a fall in revenue of 20-40 per cent. Hence, CMAI believes that the apparel industry could take a hit of almost ₹1 trillion due to the lockdown. Almost 50 lakh jobs in the sector are at risk.

While 81 per cent of respondents have received order cancellations from buyers, four-fifths of them believe they will not be able to sustain current workforce without government support, CMAI said in a press release.

Almost all are expecting their payments to be delayed and 43 per cent are expecting their inventory to rise by more than 40 per cent, the survey found.

Four-fifths of the respondents indicated they will have to downsize their organisation immediately. A minimum 30 per cent reduction in the number of employees and about 20 per cent reduction in salaries for remaining employees is the action that CMAI members are likely to take to ensure survival after the lockdown is lifted.

In the light of the findings, CMAI has urged the government to take a host of measures to protect the apparel industry. These include 50 per cent wage subsidy of up to ₹5,000 per month for five months from March to July, the government bearing the provident fund and Employee State Insurance Scheme (ESIC) contribution of employer and employee for three months from March to May for employees drawing a monthly salary of not more than ₹15,000 with no cap on number of employees in the company.

All banks should offer interest subvention of 5 per cent on total borrowings and 25 per cent additional working capital should be made available on a mandatory basis, CMAI suggested.

While the Reserve Bank of India (RBI) has already allowed a three-month moratorium on terms and working capital loans, this needs to be extended to six months. Further, purchase bills discounting and letter of credits dues must also be offered a 90-day moratorium, CMAI recommended.

The Securities and Exchange Board of India should be instructed to relax rules for raising capital for listed companies due to the sudden fall in stock prices and it should also provide a 90-day moratorium on listed debt instruments that are used for financing working capital and term loans, CMAI added.

Fibre2Fashion News Desk (DS)

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