India held a global monopoly over the manufacturing of cotton textiles for about 3,000 years — from 1500 BC to 1500 AD. It served as an ideal medium of exchange in the barter economy during the ancient period. During the middle ages, it was exported to Eastern and European markets. This was followed by the establishment of cotton mills by imperial powers in the modern period.
The first cotton mill in India was established in 1818 at Fort Gloster near Calcutta. It was a commercial failure. The second was set up by KGN Daber in 1854 and was named Bombay Spinning and Weaving Company. This mill is said to mark the true foundation of the modern cotton industry in India. In Ahmedabad — also referred to as the ‘Manchester of India’ — the opening of Shahpur mill in 1861 and Calico mill in 1863 marked the city’s spectacular rise as one of the world’s prime cotton manufacturing locales. The muslin of Dhaka, Calicos of Calicut and embroidered cotton work of Surat and Vadodara were famous in the world for their fine quality, design and pattern.
The Indian Textiles and Apparels (T&A) industry accounts for approximately 4% of the global T&A market. The T&A industry is one of the largest and most important sectors for the Indian economy in terms of output, foreign exchange earnings and employment. It contributes approximately 7% to industrial output in terms of value, 2% to the GDP and 15% to the export earnings. The industry is the second largest employer in India, next only to agriculture, employing 45 million people. Besides, another 60 million are engaged in allied activities. India is the largest exporter of yarn and has a share of 25% in the world cotton yarn export market.
Cotton production in India increased from 33.36 lakh bales in 1947-48 to 354.91 lakh bales in 2019-20. Nearly two-thirds of production comes from Gujarat, Maharashtra, Telangana, Haryana, Rajasthan and Punjab, collectively known as the Cotton Basket of India. In 2019-20, India contributed 36.56% to the total global harvested cotton area with a production of 35.49 million bales of 170 kg (29.3% to world production). Cotton is being grown traditionally in Telangana and its production increased from 35.83 lakh bales in 2014-15 to 68.58 lakh bales in 2019-20.
But, the 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% of total apparel exports from India in value terms), causing order cancellations/deferral resulting in inventory build-up and expectation of slower realisation of export receivables leading to higher working capital requirements. Domestic consumption too is impacted.
Cotton is freely exportable to Bangladesh, China, Vietnam, Pakistan, Indonesia, Taiwan and Thailand. Bangladesh has been the largest importer of Indian cotton since FY15. However, restricted international trade due to the pandemic has increased the world and Indian stocks to the extent of 132.93 million bales and 27.4 million bales, respectively for 2020-21.
According to the Confederation of Indian Industry, due to Covid-19, the slowdown in yarn exports has reached 50%, 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% even if the lockdown is lifted immediately. The retail prices will see a jump because sanitisation 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.
Shattered Supply Chain
The virus has also shattered the supply chain. The weak links in the supply chain can pose a great threat to the entire ecosystem on which the textile business rests. The industry across its supply chain needs reorientation and restructuring for a more sustainable and resistant web. Robert Antoshak, a textile consultant, in his blog argues that, “the pre-virus apparel industry was not sustainable. It was only a matter of time before the ailments in the sector caused the industry to either falter or, worse, collapse. It doesn’t matter: Covid-19 has elected the latter.”
Global consulting firm McKinsey is of the view that once the dust settles on immediate crisis, the fashion industry will face a recessionary market and the industrial landscape will undergo rapid structural transformation. It argues that the T&A industry will see a period of recovery, which will be characterised by a lull in spending and slack in demand across channels.
Enrique Silla, the founder of Jeanologia, which develops sustainable and eco-efficient technologies for the finishing industry, says ‘the psychological damage brought by the virus will make people less likely to spend as nobody will like to fill their wardrobe just to feel better when they cannot enjoy wearing those clothes.’ If social distancing becomes a norm, people will stay out of retail stores. It also connotes long queues outside shopping malls, an implicit tax on consumers. If the textile industry has to sustain in the post-pandemic era, it has to regain consumer trust.
During the pandemic, the demand for masks and other health textiles increased beyond their supply and the Ministry of Textiles encouraged production of these products. However, this shift in demand is not enough to compensate for the havoc the virus has created on the industry. There will also be a shift from purchasing lifestyle needs towards basic commodities. The apparel industry has already lost the summer cycle of sale and given the current situation, it is almost certain that the winter collections will be hit as well.
Both the Central and State governments are implementing support schemes and relief packages for the resumption of the T&A industry to normalcy. These reforms, though necessary, are not sufficient to push the textile sector to its potential level. The anti-Chinese sentiment has brought in fresh opportunities for the producers. They need to improve their productivity and quality to replace China as the ‘supplier of choice’ in international markets. China is also fast losing markets on account of rising unit labour costs, and Bangladesh and Vietnam are filling the lacuna. India’s textile units need technology upgradation, export promotion and tax incentives to survive. This will not only bring foreign exchange but also help India in its fight against poverty and unemployment.
(The author is Secretary, Telangana Agriculture and Co-operation)
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