The Indian T&A sector is now going through its worst crisis in centuries. The nationwide lockdown led to a temporary closure of factories and lay-offs, mostly low wage workers. The pandemic has affected majority of India’s export market (the US and EU together account for approximately 60 per cent of total apparel exports from India in value terms, causing order cancellations/deferral resulting in inventory build-up and expectation of slower realization of export receivables leading to higher working capital requirements. Domestic consumption too is impacted.
According to the Confederation of Indian Industry, due to COVID-19, the slowdown in yarn exports has reached 50 per cent, severely impacting spinning mills. Textile units are unable able to repay annual interest to financial institutions. This, in turn, is affecting farmers’ revenue.
The cascading effect of external demand shock, along with slack in the domestic market, has resulted in lower production. A Business Standard report projected that textile units will see a spike in unit costs by around 25 per cent even if the lockdown is lifted immediately. The retail prices will see a jump because sanitization and social distancing will add to the costs of the products, which will eventually be transferred to the consumers. This will make the deficient demand a perennial phenomenon for the industry.