Indian Textiles and Apparels (T&A) industry, contributes to 4% of the global T&A market. T&A industry which is one of the highest employment generation industry also accounts for approximately 7% to industrial output in value terms, 2% to the GDP, and 15% to the country’s export earnings.
But this industry will definitely have the Corona Lockdown impact for long for sure. How? Let’s discuss the downside of this:
1. Labor force and employment: 45 million daily life is dependent on this industry but due to temporary closure of units and factories, layoffs have already started. The migrant labor also faced undefinable problems in production cities due to the non-availability of food and shelter as a result of no payouts. Hence most probably they might not return to these cities fearing the same can happen again.
2. Import & Exports of raw material and ready-made garment: The pandemic has caused cancellation and deferrals of processed orders in March. All the export orders numbers are destined to fall due to low consumer spending, deferrals of payments, working capital issues, and lack of clarity on duties and incentives side.
3. Cash Flow constraints: Due to a consistent decline in yarn exports and cheap imports, this constraint will aggravate the current pandemic crisis. As a business owner you still have to pay salaries, EMIs, rent, etc. It is important to arrange and manage finances and cash flow currently. The old economy is going to be shattered, I don’t think it’s coming back to how it was, anytime soon.
4. Consumer sentiment: The fear and apprehensions have already impacted the footfall in retail markets and marketplaces. People are more concentrating on essentials and not on extra spending. So the buying will restrict to need and not want. The sentiment is bleak. It is already a question of survival and almost all businesses have shut down their operations (except essential services). Force majeure is being revoked.
5. Shrinkage of supply and demand: It is going to be the survival of the fittest. Businesses with weak fundamentals like poor cash flows, over-dependence on passive “referral”, high overhead costs, weak marketing, and sales skills shall be wiped out Business with strong fundamentals, sharp marketing, and sales strategies will get bigger and better chunks of markets.
Though there are some positive outcomes/opportunities which we will definitely see in the long run post COVID
1. Anti China sentiments: This has helped India to be considered as the most attractive alternative destination for business and manufacturing. According to USISPF, about 200 US companies seeking to move manufacturing base from China to India
2. Government relief packages: To minimize the impact, the Confederation of Indian Textile Industry (CITI) has requested the government to immediately announce a relief package for the textile and apparel sector to mitigate the crisis being faced by the capital and labor-intensive textile Industry, post the coronavirus spread.
3. Digitization and automation: With Technology and automation evolving every day, day to day work is done in more productive ways saving a lot of man-hours expenses. The Indian garment industry has already started investing in automation to meet global standards and increase overall productivity.
4. Increase in Foreign Investment in India: Make in India push, increase in FDI in some sectors are generational policy shift. This will increase industrial infrastructure and make India more attractive and more investment-friendly which will result in the generation of employment and hence consumer spending.
Looking at both the side of COVID lockdown, there is no doubt that the Indian textile and apparel industry will have an unbearable adverse impact on a medium-short run. We can expect that we will be standing at the same position on 21st March 2021 as we were on the first day of lockdown which happened to 21st March 2020, declaring loss of 1 year of man-hours and productivity. But these impacts and losses can be overcome in the long run starting from DY 2021-2022 with so many positive outlooks as mentioned above. As rightly said by one of my most respected associates, that this is a lockdown and not a knockdown. Hence, FY 2020-21 is the year to survive and stay healthy. Post that, we can expect every business and entrepreneur to ride high on India’s 21st-century vision of being the Golden Bird (Sone ki Chidiya).