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Textile companies across India’s value chain could see a top line contraction of 20%-25% in the current financial year on back of muted domestic demand and tumbling exports amid the global coronavirus pandemic, according to a new forecast.

The figures from India Ratings and Research (Ind-Ra) are based on the fact the majority of domestic companies are facing massive order cancellations from the US and Europe – their main export markets – along with factory shutdowns, raw material shortages, and delayed delivery of summer apparel. 

India exported US$28.36bn worth of textiles and apparel in the year from April 2019 to January 2020, the credit ratings agency says, with average exports during the first quarter typically around US$8-10bn.

It nots: “The industry is staring at an equivalent revenue loss from exports across the value chain because of the extended lockdown, which would take at least an additional month to resume. 

“Furthermore, the full-fledged resumption of exports would mainly depend on the containment of pandemic in key export geographies. Hence export recovery could take longer, especially given the discretionary nature of these products.”

The agency notes prolonged grim exports and muted domestic demand could lead to consolidation – especially within sub-sectors such as yarn producers, spinning and dyeing.

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It also says government support is critical for the recovery of India’s textile industry post Covid-19.

“The textiles industry being heavily concentrated in medium and small scale enterprises (MSME) [which] are highly vulnerable to the business risks. Subsequently, the resumption of operations for MSMEs heavily hinges on working capital availability and orders from large scale companies as well as exports. 

“The extension of Rebate of Central & State Levies Scheme for readymade garments and made-ups is a step in the right direction in this regard, along with the ad-hoc incentive of 1%. The scheme would assist export-oriented units in these segments to claim a rebate on input costs at different rates for different cost heads.”

A recent survey of apparel exporting organisations from manufacturing hubs across India estimated that India’s apparel industry stands to lose shipments worth more than US$3bn due to order cancellations and delays during the coronavirus pandemic.