Thousands of jobs are being slashed, as companies grapple with the mounting pressures of recession. In the international forefront, even the countries with developed economies; have been hit hard by the slow down. The global turmoil, which initially started off as a financial crisis, later lead to economic crisis is sending shivers; worldwide. The Indian textile sector, which was already wobbling due to rupee appreciation, and rising cotton prices, is hit hard than any other sector. Unable to tide over the crisis, many textile companies have laid off its laborers in the past six months. Consumers are caught between the Scylla and Charybdis of credit crunch, and a resulting job loss.


The Confederation of the Indian Textile Industry reports that 7 lakh people have already lost their jobs, and the count is expected to grow further. The retrenchments seen currently are contemplated by economic analysts as 'a tip of the ice berg'. Majority of the lay offs are targeted towards daily labors who make almost 25-35% of a companys work force, and 35 million out of the total workers in the Indian Textile Industry. Staffs at the junior, and entry levels are seeing the worst face of the meltdown. Even big companies involved in garment retailing like Eddie Bauer, Talbots, Cace, Foot Locker, Gap Inc, and Goodbye are involved in scaling down their operations. New recruitments have also come to a virtual halt due to the mired economy.

 

Textile merchants comment that, they are not feeling confident about their business in the forthcoming weeks. Decreases in the purchasing power of the consumers foretell an unpleasant market condition. Sales figure during the festival season of October was 20% lesser as compared with the previous year's figures during the same period. Those who are involved into export business are facing adverse situation. In the present scenario, those who manufacture only quality goods would manage to make a ransom. Manufacturers who are able to produce high quality of products and are willing to sell them at a competitive price, alone will be able to sustain themselves in the market.

 

While the serpent of global crisis keeps pressing down the economy, questions about retrenchment and Government's initiative to curb the turmoil will arise in everyone's mind. Fibre2Fashion spoke with eminent personalities and requested their opinion regarding the same.

 

Ashok Bhagat, Independent Job Consultant:

 

  • Is this retrenchment a temporary or a permanent phase in the industry?


Jobs losses are temporary, but for some it will too long and short to some. Probably some have to switch over to various portfolios and may have to accept additional responsibilities but within textile segments. Those who can easily switchover may be comfortable. This applies to all the segments right from fibres to marketing. But for at least 6-7 months, it will be a difficult situation. The situation may improve after the mid of 2009.


  • What is India's stand in Job losses compared to its peers overseas like China, Bangladesh, Srilanka, and Pakistan?


Compared to the neighboring countries except China and Bangladesh, we may be better-off.

  • What according to you is the support required from the Government to overcome this situation?

 

For the third query, which is very relevant and important to consider very seriously by industry, Government authorities and institutions to set up or introduce schemes for Training to all the categories to upgrade the level of skill and expertise not only the production segments but from fiber to marketing, including production support services, management, finance, logistics and specially to unorganized and exclusive traditional Indian products. This is apart from considerations of environment and eco-friendly requirements. This will cover value additions not only in products but in services also. Overall complaints from the textile companies is not getting the well trained and right kind of technicians and Managers when the industry is changing technology and locations.

 

Mr. Sampat Kasairajan, MD, Hydra Consulting, feels that the economic impact may continue right through the next year and year after with 2009 experiencing some very intense set backs. In that respect, the retrenchment will continue with labor intensive, export dependent industry suffering the most. It is not permanent but when the economy begins to be pick up the mosaic may look different


While sharing his thoughts about the situation in the neighboring countries, he states that, the Industry which is heavily dependent on Exports and totally labor intensive will suffer the most. In that regard, all the 4 countries are heavily reliant on exports. Chinas export is about 600 billions plus. In relation to India, these countries will suffer more.


When F2F asked him, the inevitable question, What steps are being taken by your company to overcome the recent crisis? Mr Kasirajan listed them out.

 

Step 1:

Putting our entire focus on offering our best of services to our existing clients.

Step 2:

Re-look product and service mix.

Step 3:

Focus and follow up on business leads that are close to translating into a deal, if required, re- negotiate requirements.

Step 4:

Focused Marketing efforts rather than spreading the resources thin.

Step 5:

Reduce or eliminate all non-value adding tasks and activities and wherever possible re-engineer core processes to achieve cost efficiencies.

Step 6:

Reduce fixed costs components and wherever possible turn fixed costs into variable costs by outsourcing non critical / clerical work.

Step 7:

Begin research, and work on new innovative products and services with higher perceptional value

Step 8:

Reduce pipeline investments.


Elaborating on his context, Mr. Kasirajan further listed out his expectations from the Government to overcome this crisis. He said that the task should be undertaken in three phases.


Phase - I Insulate the weaker section of the society from the impact of this crisis:


  • Slash price/ subsidize price of all essentials being distributed through the PDS.
  • Increase no, of days under NREGS and make it a 365 days work guarantee in the most sensitive and vulnerable areas such as those in Orissa. The Government cannot have an across the board 100 day programme for all locations.
  • Increase public expenditure on Infrastructure generating enough work for the weaker section, while pumping more money circulation into the economy.

Phase II Ensure that the Economy stays active:


  • Speed up SEZ approvals especially those that carry higher FDI component.
  • Remove Tax for the next 2 years on essential commodities (if Government can introduce cess they can consider doing a reverse cess under these extraordinary conditions).
  • Reduce diesel, and railway freight price.
  • Increase procurement price for all farm products.
  • Ensure liquidity in the market which it is doing in any case.
  • Fund flow to the SME sector should not slow down this could be considered through SME consortium whetted for all parameters.
  • Establish a special Public Procurement System to enable SMEs partake of Government business this will offer a level playing field for the SME while competing for Government tenders.


Phase III Increase consumers spend:


  • Use fiscal and non-fiscal measures to increase consumer spend.


F2F also had a chance to speak with Mr. Rajendra Hinduja, Director, Gokaldas Exports. While no industry player seems comfortable to speak about the job cuts, Mr. Hinduja said that they have no plans for layoff.

 

  • Next, F2F asked him about India's stand in Job losses compared to its overseas peers.

 

"As regards job losses of India vs. other countries, I think China and Pakistan are in a bad shape, worse than India. Bangladesh has fared better because of its cheap prices and cheap labor costs".

 

  • F2F: What according to you is the support required from government to overcome this situation?

 

"I think the government should immediately restore the facilities offered, before September, '08, i.e.

    

    • Subvention of 4% in the bank interest.
    • Duty Drawback level should be increased to the rates prevailing before September,'08.
    • Longer duration of credit should be allowed by the bankers to the exporting community.

 

These are the 3 immediate steps the government should take."

 

With layoffs of the existing employees, and a freeze in the hiring of new staffs, job security becomes a meaning less word. Despite the Government saying that Indian economy is firm, the naked truth is that thousands of people have already lost their job. In the wake of the global crisis, Indian Government is also taking initiatives from its side to strengthen the textile sector. If the global economy does not pick up, more pink slips could be expected in the forthcoming months.

 

References:

 

  1. "Apparel exporters start firing workers on US woe", Apparel Views, Vol-VII, Issue 11, November 08.
  2. "Global meldown hits fashion and textile industry", New Delhi Bureau, Images Business of Fashion, November 08
  3. http://timesofindia.indiatimes.com
  4. http://www.thestatesman.net
  5. http://www.ndtv.com
  6. http://ibnlive.in.com