 "Weak exports and swelling inventory hamper job creation")
As one of the largest employers, the textile and clothing industry is under pressure from the global economic slowdown because of unfavourable government policies. This has not only impacted the industry's expansion plans but also the jobs situation in the industry.
According to the 25th Quarterly Report on Changes in Employment, released by the Labour Bureau, job creation declined by almost 70 per cent in the quarter ended March 2015 compared to the December 2014 quarter.
Industry sources say the industry employs over 55 million workers, of which 12 million are employed by the apparel industry.
According to industry sources, job creation has almost come to a standstill across the entire value chain, from yarn and fabric to garments. The handloom and powerloom industry, on the other hand, is witnessing job cuts with 3,000 and 2,000 jobs being cut during the October-December 2014 and January-March 2015 periods, respectively, according to the report.
According to industry experts, recent government policies such as withdrawal of interest subvention and duty drawbacks have rendered the export of cotton and synthetic textiles non-competitive. A bulk of cotton fabric in the country is handled by the handloom and powerloom industry, which has seen units being shut down or capacity utilisation halving in the past few months. Add to that the reluctance among youths to join the industry.
"Coupled with a demand recession, the sector is facing reluctance from the younger generation to join the handloom and powerloom industry. Recent government policies have rendered the cotton and synthetic fabric industry, of which handloom and powerloom form a part, non-competitive on the export front. In the powerloom sector alone, of the 2.4 million looms in the country, around 40 to 50 per cent are either idle or running at half the capacity," said Bharat Chhajer, textile exporter and former chairman of the Powerloom Development and Export Promotion Council (PDEXCIL).
While data for handloom sector could not be ascertained, the PDEXCIL pegs total employment by the powerloom sector at 6.1 million workers.
In the textile value chain, yarn and fabric verticals are hit the most in terms of job creation, with some impact being seen in the garment vertical as well. India's cotton and synthetic yarn exports were dependent on China. However, in recent times, with China reducing its imports from India, an inventory pile-up has resulted in a decline in capacity additions and utilisation, impacting job creation.
Industry sources say the apparel industry has been growing by three to four per cent, in terms of job creation.
"Government policy has not been targeted towards the textile industry. Under 'Make in India', production was expected to rise, but it has not been backed by policy from the Centre. With China reducing cotton yarn imports, rising inventory in the domestic textile sector has also led to a reduction in job creation. There has been an overall five to 10 per cent decline in capacity utilisation," said O P Lohia, chairman and managing director, Indo Rama Synthetics.
"There are several factors that have hampered job growth in the industry, especially in the apparel sector. First, the industry has almost stopped expansion work. Second, the slowdown in exports has dampened outlook. And third, the domestic market, too, is not booming. There has been hardly seven to eight per cent growth in recent times and this rate of growth does not require any expansion to be made. This is why there is no expansion on the labour front as well," said Rahul Mehta, president of the Clothing Manufacturers' Association of India (CMAI).
The other reason why the apparel industry is not finding expansion viable is the rate of return on capital employed. With the central government taking back interest subvention of three per cent, interest rates on capital now cost apparel exporters 10-12 per cent.
"The rate of return on capital employed by apparel exporters has come down from around 18 per cent to 12 to 13 per cent in the past year. This has rendered any expansion unviable," a senior official at the Apparel Exporters Promotion Council (AEPC) stated.
Meanwhile, the textiles industry anticipates a similar trend for the next couple of quarters. However, the apparel industry is hopeful that after November, the scenario should improve on the back of increased exports.
