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Indian denim mills face overcapacity

The Indian denim industry has been operating at 60 per cent to 70 per cent capacity due to a slowdown in demand and over capacity.

If the situation continues there can be more production cuts. Denim needs to be cut, sewn and washed before it can be marketed. These upstream activities are majorly done in the unorganized sectors of Delhi, Ulhasnagar and Bellary. These hubs mainly slowed down due to the liquidity crunch in the economy since demonetization and the slow acceptance of GST by small players. As 85 per cent of the fabric is sold in the domestic market, denim fabric mills are badly hit.

Since the upstream activities of garment sewing and washing will take a while to work smoothly with the formal banking system, no recovery of the market in the near future is foreseen.

The denim fabric manufacturing industry used to be the sunrise industry in the entire textile value chain of India. Over the last decade, it was growing at a healthy rate of 15 percent CAGR. Currently the industry has an annual installed capacity of 1.5 billion meters, which is the world’s largest, after China. The sales turnover of the industry is estimated to be around Rs 15,000 crores. This industry gives direct employment to five lakh workers.

At present there are 46 denim fabric mills operating in the country. The current domestic consumption of Indian denim fabric is 750 to 800 million meters. Denim fabric export is 200 million meters.

 
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