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MSMEs

Published on: June 3, 2020, 7:10 p.m.
The domestic textiles and apparel sector see tough times ahead
  • Demand has fallen for textiles and apparels. Photo credit: Sanjay Borade

By Arbind Gupta. Assistant Editor, Business India

The domestic textile and apparel sector has expressed its reservations of the government’s recently announced Rs20-lakh crore stimulus package, even as it has welcomed the measures particularly put out to revive the MSME sector. Industry players are of the view that most of the initiatives in the stimulus package are long term in nature and there is no concrete move in the immediate term to revive the economy in general and the industry in particular.

The demand for textiles and apparels in April and May was significantly down by more than 60 per cent in the domestic market, even as export orders have been getting cancelled or put on hold. As the lockdown restrictions continue with some calibrated relaxations across domestic and global markets, experts say that the demand in the current fiscal is likely to be down by at least around 35 per cent and this low demand situation will severely impact the domestic textiles and apparel industry that has already been in difficult times for the last few years now.

The Clothing Manufacturers Association of India (CMAI) has said that the whole effort to revive the garment sector by way of the MSME package will not yield the desired results as one of the key links of the value chain – retailers and traders – is not registered under MSME and hence they will not be able to avail the much-needed benefits of the package.

“Since the entire value chain is impacted, the support package has to be made available to the entire textile and apparel value chain. The ongoing restrictions have already crippled businesses and hence they are the ones who should be bailed out or else in the absence of demand from retailers, the supply side will not see the recovery,” says Rahul Mehta, immediate past president and chief mentor at CMAI.

 

Experts are also of the view that the Rs20 lakh crore stimulus package doesn’t offer any specific measures for the textiles and apparel industry which generates the largest employment after the agriculture sector. Moreover, they also believe that restarting the manufacturing process going forward will be adversely impacted due to the labour shortage that is arising on account of migration of labourers from urban locations to their native places.

“Being one of the major industries, the textile sector, already under severe pressure for some time now, was desperately looking for some specific measures and sops. But since that has not come, and on the other hand demand has been considerably affected, the industry is finding it difficult to reboot itself. Shortage of labour will be a big issue for the capital incentive segment of the business,” says Sanjay Jain, immediate past president, CITI.

Meanwhile, CMAI, representing the interests of close to 4,000 members from the garment sector and servicing over 20,000 retailers, has also urged the Union government to consider levying a temporary Additional Covid Duty on all imports of apparel and readymade garments, including on those garments imported from countries with whom India has a Free Trade Agreement, especially Bangladesh.

CMAI for long has been drawing the government’s attention to the dangers posed by the duty-free imports of garments from Bangladesh, and with it the back-door entry of Chinese fabrics into India, and its subsequent impact on the MSME-dominated domestic garment industry. Based on a recent study done by CMAI, it is estimated that more than 20 per cent of domestic units may face closure, being unable to survive the current crisis. The reduction in demand and revenue levels will lead to downsizing of operations, closure of units and job losses in the Indian textile and apparel industry to the tune of Rs1 crore (across the entire textile value chain).

“In this crisis situation, it is important to think of innovative ideas and policies to support the industry. We have suggested that such a measure may be undertaken only for a limited period of time of 12 months, after which we can go back to our current agreements in force,” stated Mehta.

The garment industry is of the view that such an additional duty will result in a level playing field for domestic manufacturers, and help them compete with countries like Bangladesh, which currently has at least a 15 per cent cheaper production cost.

“This will have a great positive impact on the domestic industry and will result in the quick recovery of hundreds of MSMEs, which are today on the verge of collapse, and the possible savings of hundreds of thousands of jobs. Additionally, this will enable the government to collect around $100-150 million for its fight against Covid-19 (depending on the quantum of duty imposed),” says a CMAI release.

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