Fabric Suppliers Facing Unprecedented Crisis

There is something going wrong with the India's fabric industry. Media reports suggest, this could be one of their worst ever crisis. All the stake holders like fibre producers, knitters, weavers, dyers, designers and retailers are flummoxed with the recent developments as this could mark the beginning of a long lasting struggle.


Experts cite two main reason for this - First one is the exodus of a large number of labour force to their home towns. Fibre industry depends a lot on the migrants and their exodus from the city means heavy loss to the entire textile chain. Sources say, these workers are not likely to return any time soon, which could result in losses to the tune of Rs 30,000 crore to the industry.


Industry insiders further reveal that over 15 % of the workforce, especially from Bihar and Andhra Pradesh, has migrated to their hometowns since September 2009 following large-scale industrial development and huge employment opportunities provided under NREGA scheme by the central government. Another state, Orissa is on a similar crossroad, which employs around 80% of the workers in the weaving sector and holds the potential to severely impact the overall fiber production.


Second reason, precipitating the current crisis is the massive decrease (around 40%) in the production of polyester fabric in the last two months. This has happened for the first time in the industry's history and is threatening the existence of SMEs in the weaving and processing sector.


The rise in the cost of other raw material has increased the cost of production substantially, which many weavers are unable to bear and in turn shutting down their units.


Fabrics manufacturers say that, the fibre prices were increased last year when the crude oil was around $70 per barrel and the prices will keep on rising as it is predicted to touch the $100 mark. Most of them are seeking government's interference about the same, with no luck so far.


The crisis isn't just India bound. Globally too, the news isn't very positive. First, the Walmart phased out their fabric department, then a similar action was followed by Hancock fabrics and its six subsidiaries.


The textile industry plays a significant role in Indian economy by providing direct employment to an estimated 35 million people. It also contributes more than 4 per cent of GDP and accounts for around 35 % of gross export earnings annually. Fabric industry is an important contributor in this big picture and any imbalance could disturb the entire ecosystem. From the Indian economy's perspective, it is very important to devise a long term strategy to counter this crisis as soon as possible.


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