Textile Sector in Deep Crisis
The textile industry previously anticipated some market recovery at the end of February 2009. However, the current scenario reflects that it may have to wait a while. According to official estimates, the export segment in the textile sector is likely to witness a flat growth this year as compared to the previous year. Forecasts reflect that the industry might witness one million job losses in the next financial year, as business volumes of textile companies continue to decrease.
Effect on the SME textile units
Contracting export volumes perpetuated by the global economic downturn and custom delays have made it difficult for small and mid-sized exporters in the textile industry to maintain a healthy export growth.
Government initiatives to boost the domestic small-scale textile companies have also failed to yield desired results. Despite the two stimulus packages introduced by the government and extension of the interest subvention on export credit, textile manufacturers and exporters are failing to cope with the unprecedented economic crisis.
Prakash Bhatia, Proprietor, Trade Centre, a leading Kolkata-based textile company, says, “Small units like ours have so far not received any benefit from the government. Even though it is peak season now, we are still facing reduced demand in the market and a lower sales growth as compared to the past few years. Moreover, the problem of delayed payment is also affecting our top-line growth.”
Achieving export growth looks doubtful
As stated earlier, exporters in the textile industry have been affected the most by recession. And, given the worsening scenario, there are chances that the industry may miss its export target of $40 billion for the next financial year. India’s total textile exports have reportedly fallen by over 21% in February 2009.
Gulpreet Singh, Manager, Digvijay Textiles, an Amritsar-based textile SME, says, “Our export volumes are down by 20% to 30% as compared to the previous year. The reduced purchasing power of our high-end clients in the western markets has resulted in contraction of export volumes.”
What should SMEs do?
In the current market scenario, where relief seems far from sight, SME textile exports and manufacturers need to adopt a‘wait and watch’ policy. The textile exporters should also expand their export base to accommodate new markets like the Middle East, South Africa and South American countries like Brazil and Argentina.
Tapping into new markets will reduce the dependence of textile exporters on conventional markets like the US and Europe. Availing the benefits of the various credit programmes introduced by the Indian government can also help small textile companies to mitigate the impact of the downturn.
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David Parks is a well known author and has written articles on B2b Website, B2B Portal, Measurement Calculator, suppliers, Manufactures and many other subjects.
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