Textile industry in India holds a significant place as it provides one of the fundamental needs of the people. Afterthe cyclone of rupee appreciation hit the textile industry drastically, now; inflationhas put the country in jeopardy. Prices of all inputs are skyrocketingcurrently; thereby increasing the cost of doing business. Ultimately, this putsimmense pressure on the economy of the country. Due to this; India is facing a tough competition from countries like China, Sri Lanka etc.
Textile industry generates themaximum number of employment opportunities in India next to agriculture. It isa labor intensive industry, and employs approximately 40 million people. India was able to perform well over its counterparts in the textile sector during the pastdecades, due to the abundant and cheap availability of labor force. Currently,labor is getting very expensive. This affects the cost advantage of thecountry. People of the poor masses are also hit badly, as textile industry ismore labor intensive, and is the second largest employer of the country. Semiskilled and unskilled rural people, who were not able to get profits in agriculture,have moved from the villages to work in textile industries. Due to the rise inlabor cost, several million people in textile industries have lost their jobs. Arecent survey states that four million workers in the textile industry havelost their jobs over the past six months, and another four million jobs areestimated to be at stake in the next six months.
Textiles account to around 30percent of the countrys exports. India exports $30 billion worth of goodsevery year, of which garments account to $8.9 billion. This is very less ascompared to its Chinese counterpart who exports around $350 to $500 billionworth of garments every year. In the past 15 months due to rupee appreciation,Indian currency has gained 15 percent against the dollar value. This has alsoaffected Indias export dependent textile economy.
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Import policies in India are very liberal consequently affecting the domestic market for its products, particularly garments. It imposes a low duty on the imported garments. As a result, penetration of foreign textile products in the domestic market is very high. Markets are flooded with garments imported from Thailand, Indonesia, China, and Vietnam. Pakistan has the best quality stitching, and knitting machines, among its competitors in South Asia. This enables them to manufacture garments quickly and also sell them in the market at lower prices.
The stock market is now facing a bearish trend. Along with this, the added burden of inflation will push the consumers to curtail their expenditure on life style products like shoes, perfumes etc. Sale of these products will have a drastic fall in the coming months. A survey states that, due to the escalating prices, 42% of an average middle class consumers income is being spent on food items, which is the bare necessity of living. Food and grocery market will not be affected much, but the results of inflation will be seen on other industries like garments, luxury products etc. Consumers will spend their income on essential products despite the price rise by compromising on the lifestyle products.
The Government should aid the affected companies by providing incentives and other remedial measures. Though some actions have been taken by the Government, companies expect further assistance. While speaking about the initiatives taken by the Government, Ms.Chandrima Chatterjee feels that, There is no textile specific policy being followed by the Government to make the industry competitive in face of the rising costs. However, the recent depreciation of the rupee, continuation of fiscal incentives like DEPB, interest subvention, trade policy changes etc have been helping the industry. Also, the relatively higher rate of inflation and currency hardening in China has given some space to the Indian exporters in US and EU markets.
Inflation is a challenge to the growing potentiality of the Indian Economy. Particularly, textile industries are more affected. Increasing cost of doing business subsequently increases the price of the product. On the other hand, low import duty invites an increase in the inflow of imported goods specifically apparels. Textile industry is now facing a serious test by the dramatic jump in prices. Proper actions should be taken to reprieve the consumers from the skyrocketing prices.
References:
1) http://www.tradingmarkets.com
2) http://www.business-standard.com
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