Indian textile and apparel industry is already staring at 1 crore (10 million) job losses owing to the COVID-19 pandemic, and going forward, it can face even worse effects.
In domestic sector, 20 per cent apparel manufacturing companies are expecting to close down. 80 per cent companies feel that they are unlikely to retain the current work force without government support. Around 59 per cent of the industry expects 40 per cent drop in business, and 81 per cent apparel manufacturers have received order cancellations. This eye-opening information has come out in a survey conducted by the Clothing Manufacturers Association of India (CMAI) on 1500 apparel manufacturers. CMAI is India’s most respected association of apparel manufacturers and brands.
More than 1500 apparel manufacturers (who are also CMAI members) with sales of about Rs. 60,000 crores and employing over 4,00,000 people have reported that there could be more than 40 per cent drop in demand after the lockdown. Based on this, CMAI which has close to 4,000 members primarily in the domestic branded apparel manufacturing believes that the domestic apparel industry could take a hit of almost Rs. 1 lakh crore due to the lockdown and the expected significant slowdown in economic growth once the lockdown is lifted.
The estimated drop in sales would mean that almost 50 lakh (5 million) jobs in the apparel industry are at risk. With a global slowdown, and the cascading effect on other sectors of the textile industry, almost 1 crore (10 million) jobs may be lost in textile and apparel sectors alone.
The survey also says that 29 per cent of the respondents believe that their business will drop between 20 and 40 per cent. There are 98 per cent companies that are expecting their payments will be delayed.
As orders are cancelled and lockdown continues in India, 43 per cent apparel manufactures expect their inventory to increase by more than 40 per cent, while 47 per cent companies believe that the same will be between 20 and 40 per cent.
Majority of the companies (80 per cent) hinted that they will need to downsize their organisations immediately. CMAI members are likely to make a minimum of 30 per cent reduction in employee count and about 20 per cent reduction in salaries for all continuing employees to ensure survival after the lockdown is lifted.
The situation is going to be even worse, as 90 per cent companies expect 30-40 per cent increased inventory due to zero sales during the lockdown. All companies are worried about the collection from trade post the lockdown. Not only that, 25 per cent of the collections may become bad debts and members expect a minimum 90-day additional delay in collections. The choking of working capital will lead to a delay in reviving factories, and thus, 75 per cent of the companies expect normalcy in the market only in FY 2021-22.
Rahul Mehta, Chief Mentor, CMAI, informed, “We have appealed to Prime Minister, Ministry of Textile, Finance Ministry, and various State Governments to provide support to the domestic apparel manufacturers to overcome the impact of lockdown and reduce the potential job losses.”
The association seeks Government support on various points including wages, electricity, GST and finance. To mention a few, it seeks 50 per cent wage subsidy of up to Rs. 5,000 per month for 5 months from March 2020 to July 2020. Regarding electricity, it seeks the waiver of minimum demand load charges for 4 months from March 2020 to June 2020. As for GST, the Government should allow additional 90 days for depositing GST dues for March 2020 and 30 days each for May and June 2020.
All banks should offer interest subvention of 5 per cent on total borrowings, and 25 per cent additional working capital must be made available on a mandatory basis, subject to available drawing power on revised norms.
Though RBI has already allowed 3 months moratorium on term loans and working capital loans, CMAI believes this needs to be extended by 6 months, considering the long working capital cycle. Further, purchase bill discounting and letter of credits dues must also be given a moratorium of 90 days.
“The survey is the reflection of the bleak future that awaits the apparel and textile industry in India due to shutdown of the economic activity in the country,” asserted Rahul.
Meanwhile, Union Textile Minister Smirti Irani has assured full support to all CMAI members. In a message, she said, “We together will ensure that we go through this challenging time with the minimum damage to the industry and to the economy. On every challenging circumstance, you will not find yourself alone. The Ministry of Textile will work with you shoulder to shoulder.”