The Indian textiles and apparel industry which accounts for almost 24% of the world’s spindle capacity and 8% of global rotor capacity has been struggling due to the impact of demonetisation and goods and services tax (GST), according to a report by Investment Information & Credit Rating Agency of India (ICRA).
Disruptions caused by demonetisation and transition to GST regime have narcotised the Indian apparel and fabric industry, he report stated.
Production declined by one per cent in the first quarter of fiscal 2017-18 in the highly fragmented fabric segment, which witnessed “de-growth” — a phase of planned and equitable economic contraction — of two per cent in the previous fiscal.
The report also stated that “India's apparel exports continue to remain volatile with global trade not showing any signs of improvement amid subdued demand trends in the key importing countries”.
Stating the causes for this volatility and de-growth, the report mentioned that, “Apart from the demand pressures, high raw material prices and currency movements continue to weigh on the industry's performance, which has been visible in the profitability of manufacturers over the past three quarters.”
Incidentally, the textiles industry has been a major contributor to the national economy in terms of direct and indirect employment generation and net foreign exchange earnings. The sector contributed about 14% to industrial production, 4% to the gross domestic product (GDP), and 27% to the country's foreign exchange inflows, the previous year.