Dark cloud with a silver lining?

Dark clouds of lockdown are back
with the Tsunami of Covid 19 cases
resurfacing across the country. With
major textile producing states –
Maharashtra, Tamil Nadu and Gujarat –
under lockdown, the industry is staring
at huge losses again this year. Last
year’s lockdown had led to a contraction
in business activity. After lockdown was
lifted in 2020, textile industry had
started to recover back with an increase
in yarn prices and hitting around 90 per
cent capacity by March 2021. With fresh
Covid restrictions, the industry fears
decline in production capacity again.

In Surat, a major textile hub in the
country, fabric production dipped by 22 per cent by the third week of April
2021 compared to March 2021. Lockdown in Maharashtra is likely to
affect the textile mills in Tamil Nadu (the largest yarn producer in the
country) as nearly 40 per cent of the yarn produced in the state are sold to
weaving clusters such as Bhiwandi and Ichalkaranji in Maharashtra.

According to ICRA Ratings, the full recovery for Indian apparel players is
likely to be delayed to 2022-23 amid rising COVID cases in the country.

Even exports of textiles and apparel, which picked up in recent months
after decreasing for the period January-November 2020, will take a hit.

Exporters in the textile hub of Tiruppur (Tamil Nadu), who have a strong
export order book, fear lockdown to hurt production (even though the
state government has kept apparel units out of covid restrictions order).

Already, exporters have appealed to the Union Finance Minister for the
extension of Emergency Credit Line Guarantee Scheme (ECLGS) to the
apparel sector to help it come out of the crisis. The ECGLS 3.0 – extended
at present only to the hospitality and tourism sectors – provides 40 per
cent of credit outstanding.

Now, coming to the bright side of the story. Unlike 2020, this year
lockdown restrictions (so far) are regionally focused and companies are
better prepared to respond to restrictions and minimise loss of
operations. ICRA expects Indian apparel players to perform better in
2021-22 compared to 2020-21 with a shift towards online shopping by the
consumers and increase in vaccination speed. It projects the Indian
apparel companies to report double-digit growth in the FY 2022 albeit on
a low base.

Thanks to geopolitical factors and ban by developed countries on
products made from cotton grown in Xinjiang region of China, India has
gained hugely in exports as many top global textile brands moved their
orders to Indian companies. More orders are expected India’s way as
vaccination picks up pace in the key export destinations like the US, EU,
UK, etc, leading to improvement in the market conditions and demand in
those countries.

For now, we need to be patient and follow lockdown SOPs so that we
the opportunities coming our way once second Covid wave ebbs in India.