The country’s apparel industry could take a hit of around Rs 1 lakh crore due to the lockdown and the slowdown in the economy later, says the Clothing Manufacturers Association of India (CMAI).
Deeply concerned by the economic impact due to the lock down in the country caused by COVID-19, CMAI conducted a survey amongst its members to get a sense of how the members were facing up to the current circumstances and how they were forecasting the period after lock-down is lifted.
An analysis of the first 1,500 responses, indicates the significant crisis is brewing in the Domestic Garment Industry. Only a comprehensive support package from Government can cushion the potential collapse of the Industry.
Several important measures have been announced by the Government, but it is clear that the industry, especially its MSME members which constitute 90 percent of the industry, needs more support. Wage subsidy and working capital support for the long working capital cycle is the need of the hour.
CMAI’s members employ around 400,000 people. The survey says there could be a drop in demand after the lockdown of at least 40 percent.
Almost 80 percent of the members who participated indicated they’d down-size immediately, with a minimum 30 percent reduction in employees and a 20 percent cut in pay.
Around 75 percent expect normalcy in the market only in 2021-22. CMAI has sought a 50 percent wage subsidy, up to Rs 5,000 a month for five months. And, for the provident fund and ESIC contribution of employees and employers to be done by the government for three months, for those getting no more than Rs 15,000. Also, for all banks to offer an interest subvention of five per cent on total borrowing, with 25 percent additional working capital to be made available.
The survey further stated, “90 percent members of the association expect 30-40 percent increase in inventory due to zero sales during the lockdown. 100 percent of members are worried of collection from trade post the lockdown. 25 percent of the collections may become bad-debts and members expected a minimum 90 days additional delay in collections.”
20 percent of the members, have indicated that they may consider closing down their business, as they will not have the required additional resources to pay for costs during lock down and the inevitable slowdown in the economy.