A report from India Ratings and Research (Ind-Ra) stated that lockdown in India shall impact textile industry’s demand and supply, and that the Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) might drop by at least 15 per cent in 2020-21 across the textile industry.
In continuation, it also said that the prolonged effects of decrease in consumer income and increase in household leverage could be witnessed in FY21.
Though India has a limited dependency on imports, it is still dependent on exports which means that demand from the key markets like US, UK, UAE and China is very important.
Further, as the global textile production and supply chains are prone to the aftermath of lockdown it will impact textile product prices.
Indian textiles industry faces the heat as it exports most of yarn to China. It is estimated that India’s exports will be substantially hit till the first half of FY21, which had already reduced by more than 40 per cent till January 2020 due to the US-China trade war.
Further, cotton prices continued to alleviate in February 2020 because of lower export demand and reduced domestic consumption.
The sudden freezing of global market due to nCOVID-19 and lack of incremental orders from China is now making yarn players face pressure on liquidity, despite the softening of cotton prices.
It has led to an oversupply in the domestic market that has impacted yarn prices, while the demand is not likely to improve because of lockdown in India and other export destinations.
However, the opening of factories in China might improve the present conditions.
Cotton price fell to Rs 111 per kg in February 2020, compared to Rs 118 in February 2019, due to reduced off take by mill owners who are facing the issues of excess production and supply chain disruptions.
Conversely, the Cotton Corporation of India continues to hold up the stock.