The Repo Rate Hike: Inflation Gave the Cover, the Rupee Gave the Reason

~:Imposition of net excise duty of 5 per cent on branded garments in the 2011-12 Budget  is creating lot of problems for the Textile Sector:~

NEW DELHI: Sluggish demand in domestic and export markets, besides heavy debt, weaved a tangled web for India's textiles industry in 2011, resulting in 1.23 lakh job losses during the year.
It was trouble from the start of the year itself. The industry had to grapple with the high cotton prices resulting in increased cost of production. In January, prices of cotton touched an all-time high of about Rs 65,000 per candy (356 kg each) in the local 'mandis.'
In a policy that was seen by industry as a knee-jerk response to the high prices, the government not only restricted exports of cotton, but also yarn.
Units, particularly those dependent on yarn exports, found themselves stuck with huge inventories, which added to their financial woes. While the Commerce Ministry relaxed the restrictions on cotton and yarn exports during the course of the year, the damage was done.
The industry, which employs 35 million people, had to lay off as many as 1.23 lakh workers in the first quarter of the calendar year, as per a survey of 733 units by the Labour Ministry.
Summing up the year, the Secretary General of the Confederation of Indian Textile Industry (CITI), D K Nair, said, "The entire industry, comprising spinning, weaving, processing and garmenting, has seen a tough time on account of sluggish demand both in domestic and international markets like West Europe and North America."
While exports remained stagnant because of problems in European markets, imposition of net excise duty of 5 per cent on branded garments in the 2011-12 Budget came as a bolt from the blue for the industry, which protested the move and even went on strike.
The hike in duty created a panic in the garment sector, which was already hit by weak demand.
An industry expert said manufacturers were forced to raise the prices of their products by up to 30 per cent, which further reduced demand for their products globally and domestically.