The Indian textile industry, contributing roughly around 15 percent of India's total exports and employing more than eight crore people directly and indirectly, was being battered by the current global financial crisis but the central government had not taken any confidence building measures, Arun Churiwal, chairman and managing director of BSL, complained here today.
Churiwal, a major exporter, said “Rupee depreciation against dollar which experts claimed to be a boon have not helped the textile industry in any manner. Total textile exports are down with many bulk export orders being cancelled from US, a major market for Indian textiles.”
More than 30 per cent of the spinning capacities across India had closed down in the last six months due to this.
Many weaving, garment making, and other downstream units were facing extinction because of the crisis, Churiwal added.
The current credit crisis in the United States and the European Union, which absorbed 70 percent of Indian textile exports, had led to this slump but there were some domestic factors too, he added. Exporters of readymade garments and yarn had not seen any growth in demand as compared to last year. The home furnishings and textile made up segments were getting smaller orders. Under the current circumstances, textile exports would fail to contibute 15 percent this year, cautioned Churiwal.
Textile exports in 2008-09 were in the best case scenario likely to remain flat compared to 2007-08. Lower orders would lead to further job cuts and closure of units, warned Churiwal. To help the industry and boost textile exports, the government should assist in diversification of export destinations from US and Europe to west asia, Latin Amercia and Africa. These areas had huge population and large domestic markets besides offering opportunities in processing and garment manufacturing.
Government should enlarge its market asistance programme for textile exports to these areas, said Churiwal. Export credit was needed at a rate of interest of 2 per cent above LIBOR rate against 10 per cent now. Continuation of export benefits and incentives available on September 1, 2008, till March 31, 2010, were needed too to beat the crisis. Indian exporters faced problems like delayed disbursal of Textile Upgradation Fund (TUF), paid till last year by the central government on a quarterly basis and but virtually stopped this year.
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The government had cut back export benefits, like reducing the DEPB by almost half for textile exports. These had led to fall in exports and impacted balance-sheets of textile companies. The fall in raw material prices had not help the Indian textile industry because prices of finished product fell much faster pace owing to lower demand, lower purchasing capacity overseas and competition from cheap Chinese goods.
Every fall in raw material prices had eroded value of inventory of raw material and finished products held by exporters, he added. Exports of yarn, representing bulk of exports by the sector, had been down for more than a year. Since August 2008, fabric and garment exports were hit by the meltdown. All segments of the industry, be it spinning or weaving or garment manufacturing, could see shrinkage of business for a year, said Churiwal.