Reports add that demand for garments has been lower than expected due to the global economic slowdown. This is said to be affecting domestic consumption. Data are quoted to show that the country’s apparel shipments inched up by just 1.5 per cent to $1.28 billion in February, the third worst monthly performance in 2011-12, as the crisis in Europe intensified. Apparel exports between April 2011 and February 2012, however, rose 19 per cent to $12.14 billion, due to an initial pick-up and a 16 per cent depreciation of the rupee against the dollar that made overseas dispatches more remunerative. Apparel exports account for nearly half of the total shipments by the textile and garment industry.
It is stated that mills were caught off guard by a fall in local yarn prices last year after they had bought their main raw material, cotton at record high prices following a global shortage and large volumes of exports. They could not sell yarn locally at a profit, nor could they ship out products due to poor demand as well as export restrictions, resulting in huge losses.
To prop up the cash-starved textiles sector, the Commerce and Textile Minister had taken up the matter with the Prime Minister and the Finance Minister in November for restructuring of loans as well as interest subsidy to the garment and knitwear sectors which were grappling with economic slowdowns of their biggest export markets – the US and the EU. A moratorium for two years from July 2011 on repayment of the principal amounts by the capital-intensive textile units, which account for 10 per cent of the industry’s loans, and a one-year moratorium for other textile segments were sought.
However, since dozens of mills had already been granted loan restructuring during the sub-prime crisis in 2008-09 the Reserve Bank was not keen to tweak the prudential norms that stipulate any repeated restructuring of loans be declared non-performing assets. It is stated that the textile industry accounts for around 14 per cent of industrial production and more than 10 per cent of the country’s total exports. It is the country’s largest jobs generator after agriculture, employing around 55 million people across various segments.
Courtesy: The Textile Magazine