India’s textile and apparel industry is the second-highest employment generator. Amidst scare of the corona pandemic and subsequent country-wide lockdown, here’s a look at how manufacturers, brands and retailers are trying to cope with the situation, and some measures that the government should be taking.
One of the oldest industries in Indian economy dating back several centuries, India’s textile and apparel industry is the second-highest employment generator. It employs over 100 million workers directly and indirectly. The contribution of textile and apparel sector to GDP in the year 2018-19 was 2 per cent and its share in global trade of textiles and apparels was approximately 5 per cent.
As the nation is undergoing the COVID-19 scare, there is the evident fall in apparel sale. With the closure of shopping malls and stores due to lockdown imposed by the government, and the focus of people shifting from buying lifestyle products to essentials like food and personal care, India’s apparel sector is witnessing unprecedented dip in revenues. This sector, like many others, is in a crisis which must be managed to sustain it.
Double Whammy for Offline Stores
As it is the new coronavirus was plummeting sales, the lockdown too came at a wrong time with regards to supplies and inventory. For most apparel retailers, the spring/summer collection had just arrived in. Now, with the current scenario – inventory levels are high, and footfalls zilch – especially at the brick and mortar stores.
These businesses are looking for ways and means to reduce the financial strain, which can be done by:
Managing vendor payment cycles
Working out the delay in rental pay outs
Grim Situation in South India
South India is famous for its textile industry. Coimbatore, Tiruppur, Salem and Erode constitute the textile belt which generate export revenues of over Rs 25,000 crore. Tiruppur alone generates over Rs 11,000 crore from more than 10,000 manufacturing units. In Tamil Nadu there are 4.50 lakh power looms and it is the second largest to Maharashtra. Official records show that there are 1,232 handloom weavers’ cooperative societies in Tamil Nadu.
Tamil Nadu alone represents roughly 45 per cent of India's entire spinning capability, 22 per cent weaving and 70 per cent of the knitted apparel production capability. Tiruppur singlehandedly contributes to almost 50 per cent of total knitted textile and clothing exports, followed by Ludhiana, Kolkata and Delhi NCR.
However, the COVID-19 has brought production to a halt:
- brands are not paying the manufacturers till their businesses receive new orders
- the older orders are getting cancelled or are on hold indefinitely
This has had a massive impact because almost 36 per cent of the produce from Tiruppur is exported to Europe and 34 per cent to the US, and the remaining 30 per cent to other parts of the world.
Safety of Apparel Factory Workers
While the situation is adverse across the country and migrant workers are losing their daily wages, unions in the Tiruppur textile hub are focused on workers’ safety. Mostly, the workers in Tiruppur live in nearby factories and the Tiruppur Exporters Association has made provisions for their safety and is ensuring good sanitary conditions.
Appeals are being made to the government to support the suffering factories and labour force.
Potential Impacts of COVID-19
Though Union finance minister Nirmala Sitharaman extended the deadline to file income tax from March 31 to June 30, it is not enough to recover from the implications of the lockdown because of the following reasons:
Reduced demand might affect India's textile exports over thenext few quarters
Significant adverse impact on domestic retail market
Employment would take a hit in the manufacturing setupsowing to low demand
Textile and apparel production is expected to decline byapproximately 12 per cent by June
Impacts across various segments
Cotton – Prices are speculated to take a dip
Man-Made Fibre – Prices of imported man-made fibre isexpected to surge by approximately 30 per cent by September 2020 due to China’sproduction on halt
Fabric – Due to decline in exports, production is expected todecrease
Apparel – Due to decline in global demand, production is speculated to decrease byapproximately 18 per cent
Yarn – Accounting for 29 per cent of India’s textile trade(as per ITC Trademap), the demand and production have taken a hit. Itsproduction is expected to decrease by approximately 15 per cent in the comingquarter
Online Retailers Holding Fort
In comparison to offline stores, the situation of fashion e-commerce is a little better. They are coming up with creative ways to navigate through these circumstances and keeping their customers engaged. While some are making up for the delay in deliveries to customers by offering additional discounts, brands like The Label Life have launched a work from home collection to stay topical. To keep customers engaged, they are also giving an option to place orders, adding products to their wishlist and sharing tips and tricks to stay stylish even while working from home.
Since malls across the country are shut, and offline retail may take some time to recover even after the lockdown is removed, it is time to shift the focus to online market. The online stores are operating with an intent to stay connected with their consumers during this tough phase so as to build stickiness.
Undoubtedly, online fashion sales too declined by 15 per cent as the COVID-19 fear intensified. However, stores such as Clarks, Liberty, Gap, Hummel, Adidas, Aeropostale, Asics and Shopper’s Stop are offering up to 70 per cent off on advance orders.
Other strategies that online stores are implementing include:
promoting gift cards
building pre-order strategy
discounting existing stock
creating social experiences via virtual showrooms and livestreaming
Manufacturers Recalibrating Strategies for Utilisation of Excess Capacity
On March 23, the textiles ministry and the health ministry had issued a joint statement that they were working with industry bodies, stakeholders and manufacturers to streamline the supply chain and maintain a steady supply of all healthcare materials.
The multinational conglomerate, Welspun Group, working with government and local authorities in this regard, has diverted the capacities of its textile plant in Anjar, Gujarat to produce disinfectant wipes and masks to meet the demand-supply gap for personal protection, apart from manufacturing products like disposable wipes, wound care, diaper, drapes and gowns.
Early this month, the chief minister of Uttar Pradesh, Yogi Adityanath ordered the production of 66 crore khadi masks. These triple layered masks, made of Indian hand spun fibre – khadi, will be distributed as a measure against the spread of COVID-19.
Not only will the production help overcome the shortage of masks but is likely to give a major boost to income generation during these lockdown times. Moreover, the khadi masks would be washable and can be re-used.
Sitra & PPE
SITRA - South India Textile Research Association, in Coimbatore, is the sole research body testing the samples of PPE that is being manufactured across the country. In the last two months, SITRA has tested 50 samples, approved eight materials and is in the process of testing three more. A few manufacturers claimed to have started making the PPE with the approved fabric.
Policy Recommendations
To protect the textile manufacturers in India from crippling levels of bad debt, what is it that policymakers should do? Some of the measures that the government should take:
Direct Wage Support: While the governmentmay not be able to fund the daily wages in every sector, providing textileindustry the wage support of Rs 5000-Rs 7000 per worker for at least one monthshould be helpful in warding off the problem of layoffs and unemployment to alarge extent.
GST Refund: A faster way toprovide support to a larger group of stakeholders is to refund GST paymentsmade in the last six months. This will cover almost all industries - handloomweavers to shopkeepers and traders.
Reduced GST: Once the lockdown is lifted, thegovernment can offer a cut on GST rate on all textile products until theindustry recovers properly.
Incentives for the Export Sector: Given the pandemic,exports will be worst hit, thereby losing further market share. Incentives suchas duty drawback on exports made in the previous financial year and the currentshould be considered.
Revisedcredit ratings: Guidelines for loan approval on the basis of credit ratingneed to be reviewed.
Taxcompliance: Giventhe nationwide shutdown, deadline for taxes should be extended. Also, becauseof drop in demand, the taxes need to be reviewed to minimise the impact.
Benefits toyarn and fabric: Rebate of State and Central Taxes and Levies (RoSCTL), IESand the Merchandise Exports of India Scheme (MEIS) should include cotton yarnand fabrics since the segment supports more than 60 per cent of the textile andapparel segment jobs and more than 80 per cent MSMEs.
* Please click on bar to drill down and up.
Responsibility:
Fibre2fashion.com does not warrant or assume any legal liability or responsibility for the excellence, accurateness, completeness, legitimacy, reliability or value of any information, product or service represented on Fibre2fashion.com. The information provided on this website is for educational or information purposes only. Anyone using the information on Fibre2fashion.com, does so at his or her own risk, and by using such information agrees to indemnify Fibre2fashion.com, and its content contributors from any and all responsibility, loss, damage, costs and expenses (including legal fees and expenses), resulting from such use.
No Endorsement:
Fibre2fashion.com does not endorse or recommend any article on this site or any product, service or information found within said articles. The views and opinions of the authors who have submitted articles to Fibre2fashion.com belong to them alone and do not reflect the views of Fibre2fashion.com.
If you wish to reuse this content on web, print or any other form, please seek for an official permission by writing to us on editorial@fibre2fashion.com
Subscribe today and get the latest information on Textiles, Fashion, Apparel.