The financial crisis at non-banking financial companies (NBFCs) has hit India’s textile industry, as unavailability of working capital has restricted companies from capacity expansion and made difficult the servicing of existing loans.
Largely comprising micro, small and medium enterprises (MSMEs), the industry largely used NBFCs for working capital —commercial banks were slow in extending credit.
Mr Premal Udani, managing director at Kaytee India said, “Textile players, big or small, are facing a credit squeeze, with sluggishness in sales.”
Mr Rahul Mehta, president of the Clothing Manufacturers Association of India (CMAI) said, “There is a sluggishness in apparel sales, set to continue for at least the next three months. We hope it would bounce back with a robust Diwali.”
The industry says sales in the domestic market have slumped by 20-25 percent in recent weeks. To enhance liquidity from existing resources, many brought forward the usual ‘end of season’ sale by two weeks, to around the second week of June this year as compared to the first week of July or even after in past years.
Rising import from Bangladesh has also been an issue; CMAI says the cumulative average growth rate of apparel shipment from that country is 52 percent.
Large retailers are allegedly importing apparel made of Chinese fabric from Bangladesh at nil duty, under our free trade agreement with the latter country. However, the same agreement does not permit duty-free export from here.
Mr Mehta said, “We have a good market of ethnic and seasonal wear in Bangladesh but apparel export attracts 125 percent of import duty there. Hence, the textile Industry wants the government to make a mandatory provision to prompt Bangladeshi exporters to source a portion of fabric requirement from India.”