1.OVERVIEW
The manufacturing and market conditions in India s Textile and apparel industry sectors continues to be at the bottom of `U `curve with no significant pick up in domestic demand
or international export orders, with exports down by almost 60% in April 2020. Despite the much hyped economic Relief package of the govt. for the MSME industry; nearly 30-35% of smaller and medium size units are expected to go under despite only 3 months away from the traditionally high demand and market turnover period of Festivals season from mid October. The key downturn factors continue to be the drastically reduced retail and export demand, and big cut down in the `disposable/surplus` incomes due to millions of job losses amidst Covid crisis.
In terms of numbers, the market size of India s overall T & C sector is approx. $110 to 120 Billion,and of which only $ 35 billion accrues from exports,which owing to Covid 19 impact took a hit of $10.36 billion for financial year ending April 2020 alone.In contrast, both Bangladesh and Vietnam too took a 30% down hit on their T&C exports which averaged to approx. $35 billion each .Even the market access they got due to GSP+ access to Europe and, incase of preferential access of Vietnam into the USA markets has not helped much to pep up their exports considering that the retail store and high street retail selling itself is down 30-35% in both Europe and the USA.While Vietnam is yet benefitting immensely with the preferential FTA pacts, India has lagged behind to the serious handicap to its textile and clothing industry exports.
There is now urgent and dire need for India s FTA pacts esp. with EC, Japan, ASEAN and also with the new large market blocks of Euroasia and Africa under the 49 country AcFTA common market.
Sectorwise woes,and Issues
GARMENT INDUSTRY
As per trade body,CMAI, only 25% garment units have resume working despite easing of lockdown by end of June. However,the resumed factories are operating at an average 25% of their capacity. Considering that the ongoing Summer period is typically a low season for both domestic retail and exports, No substantial demand enhancement can be expected for atleast next 1 to 2 quarters by when the `traditional` Festival period from mid Oct.to mid November will be over without any significant Domestic market revival.
Owing to the slow and limited domestic demand ,the Indian fabric and garment making sector is witnessing a drastic shift from traditional products to new ones, such as PPEs, N-95 masks and technical textiles incl. production of Meltblown fabrics.
Incase of exports and, in the short-term, Indian apparel exporters are fearing missed deadlines – with key inputs like apparel trims etc from China either stuck at Indian customs or not shipped at all following military tensions between the two neighbours.
Indian garment industry is presently also suffering due to import ban on Chinese goods,as per the case in point:
1) The garment industry could suffer severe repercussions if India’s unofficial slowdown on customs clearance and ban on Chinese imports continues. Items such as garment fabrics and trims,machines parts, buttons, sewing machines, metal accessories and spares are largely imported from China.
2) Case in point: Garment hub Tirupur is dependent on China for 90% of ‘crucial accessories’ such as sewing machines, fasteners, needle lapel pins, buttons and textiles.This import content makes nearly 3% to 5% of Tirupurs export value turnover of usd 3 billion per year.
3) Case in point: Indian knitwear exports to lose out due to stand off with China
Knitwear manufacturing units in Tirupur, the largest textile hub in India and Tamil Nadu’s industrial life line that employees more than 0.6 Million workers, are in trouble because of the intransigent attitude of the customs officials, according to office bearers of Tirupur Exporters Association.
Due to relapse of resurging of Covid cases in fabric processing cluster of Surat,in western India, the output of `polyester` based woven fabrics has taken serious hit and dip. With restrictions on ,and slow customs clearing procedures for shipments from China, the fabrics market in general and the Polyester materials market in particular are at the lowest.
This has impacted the fabric needs from marginally working Garment making units.
Amid this dire and deteriorating situation for India s garment exporting units.the
Apparel exporters’ apex body ( AEPC) has called upon the Govt. for sealing free-trade pacts expeditiously.The AEPC body has urged to expedite free trade agreements (FTA) with high potential markets such as the European Union, UK, US,and also with Japan, Korea,Australia and Canada which could lead to exports growth in three years’ time and considering future fall in exports to the USA vis a vis growing competition from suppliers like Vietnam,Cambodia,Turkey and new common AcFTA zone for Africa.
Textile industry seeks govt aid as exports plunge 53% by June,20
1) Cotton textile exports plunged 53% last month to $758 million, against the $1.62 billion logged in May 2019, while apparel exports fell 66% to $1.27 billion ($3.15 billion) as economies across the globe reeled under the pandemic with disruption of both market demand and input supply chains that brought manufacturing down to 25-30%.
2) while readymade garment shipments dropped 66% to $517 million ($1.53 billion).
COTTON ,and YARN SPINNING SECTOR
Cotton yarn and fabrics exports slipped 47% to $465 million ($885 million) in May
Globally, ICE Cotton futures surge helped by a positive US federal jobs report rose more than 3% en route to its best forecast at $0.63/LB for future contracts for end Dec. 2020, and which was helped by a positive federal report that bolstered for an early economic recovery and in turn, demand for the natural fibre.
However, cotton scenario as of yet does not augur well for Indian spinning mills.As per recent study by ICRA ,the govt `s politically mooted move of increasing the MSP price for raw/farm cottons does not augur well for leading export segment of Yarn Spinning mills. Higher cotton MSP bodes well for increase in acreage by the farmers eg. For cotton state of Punjab but unfavourable for spinners considering that the 5% increase in minimum support price (MSP) of cotton will lead to mill gate price for the mills and, is likely to be unfavourable for domestic spinning sector in the times of low yarn demand.
RENEWAL STRATEGY v/s ISSUES [POST COVID 19 FUTURE [Quarter 4 onwards]
- IMMEDIACY OF RETURN OF MIGRANT WORKERS TO TEXTILE HUBS
With partial lift of lockout conditions, the textile and apparel industry are trying to re open and restart their factory and mills albeit with `minimal` market demand,both domestic and for exports. However,the capacity utilisation at this opening juncture are as low as 25 to 35% of the installed capacities due mainly to non-return of the required complement of `workforce` which is migratory in nature and is staying back yet for some months more in their rural villages mostly in eastern provinces of UP, Bihar, Jharkhand and Orissa amidst the factors of Covid fear and monsoon floods.
With their options for tilling their small farm lands, and or getting construction work under Govt ` s MNREGA scheme for local employment etc; possibly 30 to 35%of erstwhile industry workers may not return for atleast till end of year 2020.This will not allow the industry s capacity utilisation or output to go beyond 60-55% of installed capacity,even till end of 2020.
- Indeed, India s textile and apparel products need to move up in the value chain with value added products in Polyester fiber,and to new diversified markets of Japan,S.America,Korea and into newly formed mega common markets like AcFTA in Africa and Euroasia_Rusia common market zone.
In summary, the headwinds for India s textile and clothing industry continue to be strong and hot for next 2 years facing competition from strong competing countries like B.Desh, Vietnam,Cambodia, Ethiopia/Kenya/Jordon and China always.India direly needs new FTA pacts to enter new markets very aggressively.
By,Munish Tyagi,
International Textile & Apparel industry consultant
