We Need To Learn Some Lessons From This Crisis

Economy

We Need To Learn Some Lessons From This Crisis

Novel Coronavirus! It is a war with an invisible enemy. The virus that started in Wuhan, China has now impacted almost all parts of the world & is seen as one of the worst periods in human history. The lockdown of almost all major economies including China, US, Europe and now India, has not only shaken up human race but also the global economy. It is almost like World War 3 where the fight is not with any state or country but with an invisible enemy that can attack anytime, anywhere irrespective of caste, religion or country. For the past few weeks, what we as a country and world have seen is unimaginable. We have been part of many conversations on what happened; how did this spread; was China at fault; why did the government not take appropriate steps from the beginning; Italy pays big price of callous attitude and many more theories. Amidst all this, our concern is about the future of the textile industry. The demand for textile products, as also domestic sales of textiles and apparel have come to a grinding halt, due to the lockdown. As we all know textile industry is a very unique industry, characterised by various segments, having their unique business interests, which sometimes clash with each other. Due to the lockdown, all factories, small and big, in all sectors - spinning, weaving, garmenting and all allied segments, are closed and it cannot be said clearly when they will be allowed to operate again. We all witnessed how migrant labour has been running helter-skelter amidst all the confusion, in a desperate attempt to safeguard his family from hunger. We have more than 2000 spinning mills pan India. The bigger units which are controlled by big corporate houses have their workers residing in the allocated residential units adjoining the factory premises. Majority of the workers have migrated from Bihar, UP, Orissa, etc. and are being taken care of by employers. It is worth pondering whether workers have stayed back of their own free will, or were forced to stay back once the lockdown was announced, and there was no means of transportation to go back to their home town. Further, it is a question mark once the lockdown is lifted whether they will stay to work or rush back to their homeland to check on their families. Also, workers who have already gone back may or may not return to work. The daily wage worker forms 80% of the workforce in garment factories. At present, may be only raw material and electricity expenses are not being incurred by the mills. But they have to bear all other expenses, which results in direct loss to a mill. There are various other issues - what happens to material in process, it may have to go as second quality. All shipments are held up, LCs will expire, there may be renegotiation of prices, etc. Clearly, restarting factories will not be an easy task. Social distancing will have to be practiced for some time even after the lockdown ends. This will again be a challenge in textile and apparel factories. Apparel industry will be severely hit as all over the world, stores are closed and no sales are happening. Almost all buyers are cancelling orders or postponing orders, to avoid further stockpile, and they may not place further committed orders in the next few months. The virus has severely impacted India's major export destinations - US and EU. These regions will witness high levels of unemployment. It is difficult to say when these countries will return to normal life; and when consumers will start spending on apparel again. A recent survey by ITMF paints a bleak image - orders in the global textile value chain could fall by 31% in 2020, compared to 2019. And turnover in 2020 could fall by 28%. Machinery manufacturers too, have suspended their operations. Neither are they in a position to produce the machines nor are customers in a position to accept delivery. Mills may be able to accept deliveries only 3-4 months after start of operations. Right now, challenges in front of the industry are safety, lack of supply and demand, in addition to liquidity. Medical textiles is certainly an opportunity and some textile mills are now shifting production to manufacture face masks and other personal protective gear. Indians are a resilient people, who adapt to situations quickly. We also know that tides will turn and take a different path. Most of the world was dependent on China, now that dependency will change, and it will benefit countries like India. If India succeeds in this lockdown period and fights back without much loss then it will be back to business soon because ultimately food and clothing will remain the key purchases. Volumes may go down but orders will not disappear completely. Once life is back to normal people will shop, also as months of lockdown and depression will motivate them to buy something new, look good and feel good. Many are seeing this as a correction period, but we hope that this correction does not take away livelihoods. In these tough times, we all are together and keeping you updated about industry and global scenario is our duty. So, to conclude, as of now, the situation does not seem good for any one; it may not be easy to restart operations, given the many challenges. It's difficult to estimate the direct losses at present and it's difficult to foresee the issues that may arise after the lockdown is lifted. We, however, should start preparing to face the challenges that we can foresee, without much dependence on government relief, which will help us to only some extent. We also need to learn some lessons from this crisis - not depending upon only one source of supply, shift towards localization, move towards variable cost models. And make better strategies for the times ahead. (Ashok Juneja is National President, TAI)