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FICCI paints grave scenario in meeting with Cabinet Secretary

18
Dec '08

Mr K M Chandrasekhar, Cabinet Secretary, today called FICCI members to discuss the measures to stimulate the growth in Indian Economy. The FICCI delegation led by Sr Vice President Mr Harsh Pati Singhania met the Cabinet Secretary and forwarded a comprehensive note (copy attached).

The discussion ranged across all sectors. For the textile sector the following was discussed:-

Textile Sector:
The highly labour intensive and export oriented textiles and clothing (T&C) industry of India has been facing serious problems continuously for the last two years. With direct employment of around 35 million workers and exporting more than half of its total production, the industry is extremely important to the economy and vulnerable to fluctuations in both costs of production and demand trends.

Problems:
The present crisis in the industry started with the steep and fast appreciation of Indian rupee against US dollar from the beginning of 2007. Before rupee started depreciating, cotton prices sky rocketed in the international and domestic markets, registering an increase of over 40 percent in India within a period of less than 6 months ending September 2008.

Increasing interest rates and steep power cuts are the other issues that our T&C industry has been grappling with for several months now. Tamil Nadu accounts for around 40 percent of India's spinning activity and over 25 percent of our total T&C activities. With a 40 percent power cut, substantial reduction of T&C production is likely in Tamil Nadu this year. There are also power cuts of varying percentages in many other major textiles producing States.

However, the global economic crisis which has severely impacted our major markets of the USA, EU and Japan in recent months is undoubtedly the most damaging of the series of problems faced by this industry. That the global crisis has started impacting our own economy only adds another dimension to this problem.

Impact on Production:
The impact of the global and domestic economic slowdown is now clearly discernible in the performance of the industry. While costs of raw materials and inputs remain uncompetitive in comparison to competing countries, the output and profitability of the industry have taken a nose dive in recent months.

Wholesale Price Index based rate of inflation for the textiles group for the week ending 29.11.2008 was 10.8 percent, whereas for raw cotton the inflation was 21.4 per cent during this period. Index of Industrial Production (IIP) data released by the Central Statistical Organisation (CSO) show a dismal picture of textile production.

In fact, the decline in IIP for textiles started from June this year onwards. After a reasonable growth of 6.1% in May 2008, the growth in the Index declined to 4.5% in June, -1.8% in July, -4.5% in August, -4.9% in September and -7.1% in October 2008. By now, the cumulative position has alsobecome negative.

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