Capture Commerce with Compassion

One would be surprised to know that textile industry is one of the major reasons for the tragedy in Italy due to coronavirus, which originated in far-off region (Wuhan, China) in another continent. Nearly 1 lakh Chinese workers (mainly from Wuhan province) work in Italian textile industry. When Chinese workers returned to Italy after celebrating Chinese New Year 2020 in Wuhan, Italian authorities -instead of testing and restricting these people – launched a “Hug a Chinese” campaign in February. They are now paying the price.

Even India has a strong trade connection with China, which is one of the leading importers of cotton yarn from India. Already, the business performance of cotton yarn exporters has been impacted in the fourth quarter of fiscal 2020 because of disruption in supplies to China. With other key export markets such as the US and the EU facing headwinds, there could be significant demand pressure for exporters.

On production front also manufacturers are facing the challenge. The textile industry predominantly employs migrant workers from different States and,with travel restriction being imposed by governments, majority of the workers are not reporting for work. This situation is resulting in mass stoppage of production in the industry.

The prevailing situation in China, along with the uncertainty over production commencement, is posing a major issue for Indian manufacturers who are dependent on supply of raw materials from China. India imports $460 million worth of synthetic yarn and $360 million worth of synthetic fabric from China annually. It also imports over $140 million worth of accessories like buttons, zippers, hangers and needles. India does not have the domestic supply base to cater to such a huge demand of these raw materials.

If the outbreak continues, Indian garment manufacturers will need to look at other alternatives, including local sourcing, which in turn may increase the finished goods cost by 3 to 5 per cent. In addition to this, identifying vendors in such a short time can take a toll on lead times, quality and cost.

As an urgent interim relief to overcome the coronavirus crisis, industry has requested the government to grant a six-month moratorium on payment of interest rates and instalments of loans taken by textile mills.

On the long-term basis, one of the positive outcomes from Covid 19 pandemic could be that companies will be forced to diversify their supply chain away from China (as a mitigation measure for disruption in the future) and India could possibly offer an alternate manufacturing destination to the global apparel brands.

If India plays its cards strategically by limiting Covid 19 impact in the country, Indian textile exporters have potential to earn $2-3 billion worth of incremental orders in FY2021 when normalcy returns. Smriti Irani, Union Minister of Textiles, has appealed to Buyers Houses & Buyers that they should not cancel orders. “Delivery schedules can be reworked and payment plans can be extended,” she tweeted.

The government must prioritise its scarce resources towards industries which can win rich rewards post-COVID19 crisis. Textile industry needs your compassion, Minister!