2011 revisited | Weak demand, job losses entangle textiles industry

Sluggish demand in domestic and export markets, besides heavy debt, weaved a tangled web for India's textiles industry in 2011, resulting in 1.23 lakh job losses during the year.

It was trouble from the start of the year itself. The industry had to grapple with the high cotton prices resulting in increased cost of production. In January, prices of cotton touched an all-time high of about Rs 65,000 per candy (356 kg each) in the local 'mandis.'

In a policy that was seen by industry as a knee-jerk response to the high prices, the government not only restricted exports of cotton, but also yarn.

Units, particularly those dependent on yarn exports, found themselves stuck with huge inventories, which added to their financial woes. While the Commerce Ministry relaxed the restrictions on cotton and yarn exports during the course of the year, the damage was done.

The industry, which employs 35 million people, had to lay off as many as 1.23 lakh workers in the first quarter of the calendar year, as per a survey of 733 units by the Labour Ministry.

Summing up the year, the Secretary General of the Confederation of Indian Textile Industry (CITI), D K Nair, said, "The entire industry, comprising spinning, weaving, processing and garmenting, has seen a tough time on account of sluggish demand both in domestic and international markets like West Europe and North America."

While exports remained stagnant because of problems in European markets, imposition of net excise duty of 5% on branded garments in the 2011-12 Budget came as a bolt from the blue for the industry, which protested the move and even went on strike.

The hike in duty created a panic in the garment sector, which was already hit by weak demand.

An industry expert said manufacturers were forced to raise the prices of their products by up to 30%, which further reduced demand for their products globally and domestically.

The US and Europe together account for over 60 per cent of India's total textiles exports.

Exports contribute a little over one-third of the total revenue of the $63 billion domestic textiles industry.

For the 2011-12 fiscal, the Textiles Ministry had fixed a $33 billion target for textiles exports, 32% higher than the $25 billion achievement last fiscal.

In the first seven months of this fiscal, total textiles exports managed to grow by just 30 per cent year-on-year to $16 billion.

The growth remained stagnant in terms of quantity. But in value terms, there was an increase which could be attributed to rupee depreciation against the dollar, coupled with a rise in raw material costs, thus increasing the value of final products.

Due to high input costs, total textiles production was reduced to about 55,000 million square metres in 2011 from 70,000 million square metres compared last year.

Meanwhile, the handloom sector, which was reeling under heavy debt, was provided a financial package of Rs 3,884 crore, including a one-time waiver of overdue loans and interests.

The package is expected to benefit about 3 lakh individual handloom weavers and 15,000 cooperative societies.