The crisis still looms large over the industry that deepens the fears despite some relief they gained from switching over to making masks and personal protection materials. There have been huge demands for these items from both home and foreign markets.
When will it end?
Three shocks in four years crippled the apparel industry more severely than anybody could imagine. The only hope that some of the organized players could get was the revival package by which the banks opened more credit facilities and repayment moratorium for companies. But the industry’s big contributors, who happened to be unorganized players, continue to suffer demand slackness and job-work inquiries.
Early March this year, just before the Covid-19 lockdown was declared, apparel retailers had said, the three and half years long crisis had not yet boiled over. Most of the apparel makers were reeling in long-drawn troubles. Being already in deep trouble, how far the lockdown might have
impacted them further could be beyond any one’s guess. The industry would continue to be in deep crisis, because, as some entrepreneur s said, the demonetization in 2016 had washed away demands quickly wherefrom the industry did not recover.
Several months after the demonetization, while the industry was yet struggling to revive, the implementation of the Goods and Services Tax (GST) further inflicted damage. It was not because of sudden evaporation of the two high-value banknotes that landed the apparel business into a crisis, but the sudden stop on cash-based backend works involved in fabric processing and stitching. The Covid-19 pandemic and lockdown further ruined them. The workers in the cash-driven sector had suffered a huge setback by the loss of a job.
Post-demonetisation, too many small brands had to close their shops. In clusters, roughly half of them had pulled down their shutters. Half of the survivors were teetering on the edge after the implementation of GST. Eventually, contract manufacturers were forced to lay off their laborers.
Some apparel Manufacturers could find temporary relief from switching over to making personal protection items and masks. Nevertheless, sustainable growth in demand is yet to show.
India’s apparel industry has an odd structure with a large number of small and micro enterprises collectively playing a big role. These players have no strength to withstand even a minor tremor. That reduced the purchasing power of a small section for a brief period. A lion’s share of the readymade apparel business was driven by the vast unorganized sector with too many micro players contributing to the business. Their roles are unrecognized, so are their concerns. However, by January 2020, the market was expected to rebound.
A year ago an exhibition, hosted by the Clothing Manufacturers Association of India (CMAI) in Mumbai attracted members’ participation like any other previous years. It seemed, they participated in the event only as an annual
exercise and also to hide their low morale, of course with an anticipation that the crisis would get over by the time the winter gets over. However, by the end of winter, the Covid-19 pandemic began to steal their hopes as a third shock.
The crisis still looms large over the industry that deepens the fears despite some relief they gained from switching over to making masks and personal
protection materials. There have been huge demands for these items from both home and foreign markets. Still, a sustainable turnaround in the prevailing atmosphere is not easily predictable as the Covid-19 lockdown continues, though with great ease. At the same time, the lockdown induced six months embargo on purchase by people may end by the forthcoming festival season. Indian’s newly found defiance to China’s products on one side and Europeans’ and Americans’ growing disenchantment with China may fuel India’s apparel industry. Manufacturers and brand owners were sitting on huge unsold stocks by March 2020, which had deepened their troubles. Their piling inventory had hit their cash flow and loan repayment. But many of them may have come out of the problems of inventory as the production stopped while a marginal demand has been visible since
September. The revival bonanza declared by the government even for
those with default history might have brought relief to a large number of
troubled companies. But the bottom is choked adding to their troubled legacy.
Never in the history of India, a crisis was drawn for so long a period of more than three years in any industry. However, the textile industry remained an exception. The textile industry had a history of endless crises for three reasons such as overcapacity, poor technology up-gradation, and tight competition in the global market. As the largest employment generator, the government has been taking good care of the industry with many incentives and subsidies. Still, problems and new challenges continued to haunt it.