The huge incentives offered for new investments by several State Governments in India have eroded the competitiveness of existing capacity in the textiles and clothing industry, thus making them unviable. The industry is already struggling with excess capacity due to mismatch in the supply and demand of quality raw materials in required quantities, said KV Srinivasan, the newly elected President of the 119-year-old International Textile Manufacturers Federation.

In a release from Coimbatore, Srinivasan said despite being the second largest manufacturer of raw material in the world, India could not gain any advantage while the countries like Bangladesh and Vietnam that do not have a raw material base have achieved exponential growth rate in exports, at the same time Indian exports are stagnated at $35 billion for more than a decade.

Short-sighted policies

Srinivasan suggested to both the Central and State Governments to stall the short-sighted policies relating to raw materials, power, labour, and new investments until the industry revives. He opined that a one-year moratorium for payment of loans, conversion of short-term loans into long-term loans and extension of additional working capital are some of the financial relief measures urgently required to prevent textile units from becoming NPAs and avoid closures throwing several lakhs of people out of jobs.

Srinivasan stated that appropriate policy measures with a holistic approach is essential to enhance the global competitiveness and take advantage of China+1 policy.

Globally, the textile industry has been facing an unprecedented and prolonged slowdown since the second half of 2022 after witnessing a pent-up demand immediately after the Covid-19 lockdown in almost all the textile manufacturing countries including East Asia, Southeast Asia, South Asia, Africa, Europe, North and Central America and South America.

Weakening demand

The retailers located in the US and the EU, major export markets, have built high-cost inventory during 2021-22 and continue to struggle to clear the stocks due to weakening demand from retailers/brands that are still sitting on too much merchandise in their warehouses. Inflation caused by disruption of the supply chains following the lockdowns caused by the Pandemic as well as geopolitical issues, especially the prolonged Ukraine-Russia war, also had a toll on demand.

The textiles and clothing industry in India is the worst affected due to the added challenges on the raw material front (both cotton and manmade fibre) and steep increase in power cost in most of the textile manufacturing States.

Urgent measures required

Urgent policy measures are required to ensure a smooth supply of raw material at an internationally competitive rate by removing the 11 per cent import duty on cotton, addressing Quality Control Order issues and price issues pertaining to PTA, MEG, Polyester & Viscose and ensuring a level playing field.

The Indian government could have commenced the enforcement of Quality Control Orders from the finished goods as done for technical textiles rather than raw materials that had severe impact on the man made fibre value chain. The Government could have avoided these two short sighted policies when the industry has been facing an unforeseen crisis that had aggravated the global competitiveness and performance of the industry, he said.