Deeply concerned with the economic impact of the lockdown caused by COVID-19, CMAI conducted a survey among members to find out how they were facing the current circumstances; what is their forecast for the period post lockdown.
The association analysed responses of around 1,500 members which indicated that a significant crisis is brewing in the domestic garment industry and only a comprehensive government-backed support package can cushion the potential collapse of the industry.
• 20 per cent respondents could close their business post-lockdown
• 59 per cent are expecting a drop in revenue of more than 40 per cent; and 29 per cent a drop of 20 to 40 per cent
• 81 per cent have received cancellation of orders from buyers
• 80 per cent believe they will not be able to sustain current work force without government support
• 98 per cent are expecting payments to be delayed
• 43 per cent expect inventory to increase by more than 40 per cent; and 47per cent between 20 to 40 per cent
Analysis of the survey
Drop in Sales: Over 1,500 CMAI members with sales of about Rs 60,000 crore and employing over 400,000 people have expressed concern that there could be more than 40 per cent drop in demand post lockdown. Based on this, CMAI believes the domestic apparel industry could lose almost Rs one lakh crores due to the lockdown and expected slowdown in economic growth once it’s lifted.
Possible job losses: The estimated drop in sales would mean that almost 50 lakh jobs in the apparel industry are at risk. With a global slowdown, and the cascading effect on other sectors of the textile industry, almost 1 crore jobs may be lost in textiles & apparels alone.
Downsizing of operations: Around 80 per cent indicated they will need to down-size their organisation immediately. A minimum 30 per cent reduction in employee count and about 20 per cent reduction in salaries for all continuing employees is the action that CMAI members are likely to take to ensure survival after the lockdown is lifted.
Working capital crunch and losses due to bad debts, extended credit, and inventory pile up: Almost 90 per cent expect 30-40 per cent increase in inventory due to zero sales during the lockdown. Further 100 per cent are worried about collection from trade post the lock down. Almost 25 per cent of the collections may become bad-debts and members expected a minimum 90 days additional delay in collections. The choking of working capital, will lead to a delay in reviving factories and thus 75 per cent members expect normalcy in the market only in FY 2021-22.
Around 20 per cent garment factories to close down: Almost 20 per cent members may consider closing down business, as they will not have the required additional resources to pay for costs during lockdown and the inevitable slowdown in the economy.
The survey reflects the bleak future that awaits the apparel and textile industry in India, due to shutdown of economic activity in India. The association has appealed to the Central and all the state governments to support domestic apparel manufacturers to overcome the impact of lockdown and reduce potential job losses.