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India’s textile industry faces tough times as consumers cut spending, Retail News, Retail ET


India's textile industry faces difficulties as consumers cut spending

India’s $200 Billion Textile Industry skin Industry officials say the textile industry is facing a crisis as consumers in the US, Europe and other major markets cut spending on clothing after inflation spiked after the war in Ukraine. .

Although the overall economy is relatively strong and is outperforming the major economies, textile sector is a notable exception, and orders suggest the recession will continue into 2023, increasing the risk of layoffs in an industry that employs more than 45 million people.

Exports, which account for about 22% of the industry, fell for the fifth straight month – down more than 15% year-on-year to $3.1 billion in November. Manufacturers said sales in The country is slowing down despite strong overall economic growth due to high costs and cheap imported apparel.

After bumper sales earlier this year, local textile mills are now cutting output – contributing to a 4.3% drop in production output in the July-September quarter, which has led to a decline in production. cause concern for policymakers.

The shock comes as Prime Minister Narendra Modi’s government struggles to create hired employees for millions of young people to enter the job market each year.

After 18 months of strong growth through mid-2022, global clothing retail sales have been dragged down by high inflation and depressed consumer sentiment, while the outlook for 2023 looks bleak, a McKinsey report said last month.

In India, the manufacturing sector, which contributes 16% of GDP, has been hit by rising raw material costs and weak demand, despite good growth elsewhere. Manufacturing showed no sign of growth in the first half of the current April-March fiscal year while the overall economy, thanks to agriculture and services, grew by 6.3%.

Textile manufacturers, along with footwear, furniture, electronics and electronics manufacturers, have been hit as companies struggle to pass on rising input costs, while consumers cut spending on these products as they spend more on food and fuel.

inside textile industryProducers say higher domestic cotton prices and other costs have hit margins, while overseas orders for next summer are down about a third and domestic demand remains weak.

Naren Goenka, Chairman, Apparel Export Promotion Council said: “We see difficult times at least for the next 6 months as orders from major markets including EU and US drop significantly. “. .

Sahid Khan, a garment manufacturer in Ahmedabad, the textile hub in Modi’s home state of Gujarat, said that although cotton prices are down about 40% from the record high reached in 2022, the billion Profit margin is still down due to the decrease in sales in the domestic market.

“Bank lending rates went up along with labor costs, but my sales fell,” he said, adding that domestic cotton prices remained high relative to global prices and producers could not compete. compete with cheap imports from Bangladesh.

Atul Ganatra, President of the Cotton Association of India (CAI), said that local cotton is at least 10% more expensive than by global standards.

“The government needs to eliminate the 11 per cent import tax on cotton so that local textile mills have a level playing field,” said Ganatra. “This will give mills the option of importing cotton from abroad at a price nearly 10 cents a pound cheaper than the local supply.”

Stocks of leading textile companies such as Arvind Co., Ltd, Textile Vardhmantrident and Nahar . Spinning Mill has fallen between 20% and 40% this year, while the Nifty benchmark is up more than 7%.

The industry has sought to import duty-free cotton, subsidize interest on bank loans, and expand production relative to incentives to face the crisis.

A government official with direct knowledge of the matter said he requested anonymity because he was not authorized to speak to the media.

WILL BE CLOSED
Many textile manufacturers, who have stopped hiring workers, have warned of job cuts if the government does not come up with relief measures soon.

In Tirupur, a knitwear manufacturing hub in southern India that employs more than 600,000 workers, many small businesses have cut their workforces when they say they are operating below 50% capacity.

Raja Shanmugham, former president of Tirupur Exporters’ said that with an annual output of more than $8 billion for domestic and foreign markets, the local industry is concerned about a third reduction in exports in the coming year. this year from $4.5 billion in 2021/22. Combination.

“There are very few orders for next summer,” he said, adding that major retailers are asking for steep discounts to lift previously placed orders.

He said sales in the domestic market, which usually increase during the festive season and marriages starting in October, have been weak this year.

Chandira Kumar, head of Sentinel Clothing in Tirupur, said he has laid off two-thirds of his workers and left only 150, because he finds it difficult to survive with low margins and few orders. row.

“If the current trend continues, I may soon have to close the factory,” he said.

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