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INDIA: Meltdown Hits Textile Industry

Paranjoy Guha Thakurta

NEW DELHI, Feb 1 2009 (IPS) - While the Indian economy has been relatively insulated from the international financial crisis, one particular sector that has been badly hit by the ongoing worldwide recession is the textiles and garments manufacturing industry.

Current indications are that at least 1.2 million workers in this industry are going to be without jobs by the end of March. Assuming four others depend on each individual rendered jobless, the total number adversely impacted in this labour-intensive sector would reach six million.

The textiles and garments industry is the second-largest employer in India after agriculture as it directly employs 35 million people and indirectly provides a livelihood to an additional 88 million.

Two years ago, the Indian textiles industry was supposed to have been on the threshold of rapid growth. Today it is in urgent need for resuscitation. Even the figure of 1.2 million job losses put out by the association, the Confederation of Indian Textiles Industry (CITI), could prove to be an underestimate.

Roughly half the total production of textiles and garments in India is exported, 60 percent of it to markets in the United States, Japan and the European Union. The recession in the West had adversely impacted these economies the most as a result of which exports from India are projected to fall sharply in the coming months.

Rising prices of raw cotton have become a contentious issue for the industry. The government is reluctant to reduce the prices paid to cotton farmers as suicides have been widespread in cotton-growing areas.

India is the world’s second-largest producer, exporter and consumer of cotton. With cotton prices rising by 30 percent over the last year, cotton textiles and garments are being priced out of international markets. A number of textile mills have begun ‘voluntary retirement schemes’ for workers.

India’s junior minister for commerce Jairam Ramesh announced last week that India will be joining the global supply chain, meaning, the country will be sending both workers and garments to countries like Bangladesh, which has overtaken India in apparel exports.

Whether India’s skilled textile industry workers will find jobs outside the country remains to be seen.

Union commerce and industry minister Kamal Nath estimated that in the financial year that ended in March 2008, approximately 800,000 garment and textile employees had lost their jobs, almost half of the two million lost in export-oriented industries.

The Indian currency, the rupee, started weakening against the US dollar from the middle of 2008. But exports did not pick up because from around this time, markets in the U.S., Western Europe and Japan began shrinking.

Food comes before underwear. As debt-fuelled consumer spending declined in the rich nations, the markets for Indian textiles and garments started shrinking.

Exports of textiles and garments from India to the U.S. in the January-August period came down from 3.9 billion US dollars to 3.8 billion dollars – this was before the Wall Street meltdown in September. The overall drop in value terms was 1.6 percent, with the drop in exports of garments a much higher 4.8 percent.

The situation has become worse since then. The total output of the textiles sector came down by nearly 10 per cent in the month of October. A study conducted in November by the Federation of Indian Chambers of Commerce and Industry (FICCI) pointed out that investments in the textiles industry were falling and so was its profitability.

When arriving by train in Ludhiana, the largest city in the agriculturally prosperous northern Indian state of Punjab, a recorded voice boasts proudly over the loudspeakers that the city’s textile factories account for 80 percent of the country’s wool production.

Some of the city’s major garments making companies, which create 400,000 jobs in the Ludhiana alone, have suffered more than a 50 percent loss in sales, specifically exports, over the last year.

“Thirty to fifty percent of the business in the garment industry has been lost,” S. A. Jain, chairman for the Knitwear and Apparel Exporters organisation, based in Ludhiana, told IPS.

He added that “twenty to thirty percent of the jobs in the industry have been lost. But the exports is a big business, it feeds a lot of other businesses, so it won’t stop there. Naturally, if the US and Europe are facing a crisis, it affects us”.

The states of Gujarat in western Indian and Tamil Nadu in the south, two of India’s largest textile producers, have been hit badly by the slump in exports.

“We have already seen a decline of about twenty percent in the last two months in exports of jeans, shirts and trousers,” said Sachin Sahni, vice president, marketing, Cotton Country, a division of Oswal Woollen Mills Limited in Ludhiana.

Sahni said that his the company he works for is feeling the pinch despite domestic sales not doing all that badly –the company’s products are marketed through 600 retail outlets spread across India.

“Unemployment in our sector has gone up,” said Jain, adding: “All segments in the industry, every process will be hit – knitters, dyers, everyone.”

Indian exporters of textiles and garments are facing stiff competition not only from manufacturers in Bangladesh but also from low-cost goods being produced in China, Vietnam and Sri Lanka.

“The [economic] stimulus package announced by the [Indian] government on Dec.7, 2008… has failed to cheer the industry, since it did not address all the major issues,” wrote R.K. Dalmia, chairman, CITI, on the industry association’s website.

A crucial issue not addressed, according to Dalmia, is the need to restructure the loan repayment plans for textile companies. Along with many industry leaders, Dalmia is demanding concessions for the industry.

A recent study conducted by the Economic Times newspaper of eleven major textile corporations in India found that while the total debt among the companies has quadrupled in the last six years, their ability to cover debt had not increased since 2003.

A number of speakers at a seminar on the impact of the economic slowdown on small and medium enterprises that was organised in November by the State Bank of India in Ahmedabad, capital of the western Indian state of Gujarat, called for easier terms for bank credit and reduction in taxes on textiles.

Ram Krishna Mundra of Mahendra Tora Pvt.Ltd. put it plainly at the seminar: “The textiles industry is dying…”


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