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Young Entrepreneurs Group of CITI meet to discuss impact of crisis
Feb '09
The Young Entrepreneurs Group of Confederation of Indian Textile Industry (CITI-YEG) met in Ahmadabad to discuss the impact of the economic recession on the Indian Textile Industry. Speaking at the meeting Mr Sanjay Lalbhai, Managing Director of Arvind Mills said that the steep hike of MSP of Cotton Prices have crippled the industry.

Minimum Support Prices announced for cotton year 2008-09 are unreasonably high and these have pushed up our cotton prices 15-20 percent higher than international prices. More than 72 lakh bales have been bought by procurement agencies and they have sold less than 10 lakh bales so far. Huge Government funds are locked in procurement and carrying charges.

These quantities will ultimately have to be disposed of at significant loss to be compensated by Government. Prompt disposal of procured cotton will reduce carrying charges and generate funds for further procurement, thus helping both farmers and the industry. Since over 50% of the production in the textile value chain is exported, global economic developments have a serious impact on this sector.

Over 90% of units in this industry are in the SME sector and this is the most labour intensive sector in our manufacturing industry as a whole. The entire textile value chain is currently going through a grave crisis, since demand and price realization have declined and export orders are drying up fast, he said.

Speaking at the meeting, Mr Vikas Ladia, Chairman, CITI-YEG said that the stimulus packages of 7/12 and 2/1 have not addressed the issues of Textile industry effectively. Releasing funds for TUFS for the period up to 30th June 2008 (which were due around one and a half years back), a partial reinstatement of interest subvention on export credit that had been withdrawn from October 2008 and some cosmetic changes in duty refunds incorporated in the packages do not have the potential to rescue this industry from its current crisis and to lead it to a path of sustainable growth.

Declining exports and UVR:
Mr Ladia pointed out that in August and September 2008, there has been export deceleration by 2.3 percent and 8.8 percent respectively, compared to the same period of 2007. Data available from USA for January-November 2008 show that their imports of T&C products from India during this period not only had a negative growth compared to the previous year, but also registered a decline of 4 percent in UVR.

The situation in the other major markets is similar and the subsequent months will be substantially worse because of the increasing impact of global economic crisis.

Industry Demand:
Mr Adarsh Kanoria, Deputy Chairman, CITI-YEG said that a comprehensive rescue package for a period of two years is required in order to bring this industry back to the path of growth that it had achieved immediately after abolition of quotas in 2005, which include allowing two year moratorium on repayment of principal amounts against term loans, in order to avoid defaults and loans turning into NPAs and reinstate the DBK rates that prevailed before the reduction effected in September 2008, for all T&C products.

Confederation of Indian Textile Industry

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