Abstract
The Indian textiles sector has been one of the worst hit sectors due to the COVID-19 crisis. In the context of its socio-economic primacy for the Indian economy, which is second only to agriculture, the industry must be given sufficient attention in academic and policy circles. This perspective is an earnest attempt at filling the void in scholarship on the issue of linkages between the Indian textiles sector and the COVID-19 crisis. The unprecedented crisis in the form of COVID-19 flu pandemic has threatened to derail the socio-economic life of people globally. In the current context, this article discusses the impact of COVID-19 on the globalized Indian textiles sector, given the primacy of the same with regard to social and economic realms of the country. The study employs the method of assessing the impact of crisis from both demand and supply sides, which in turn generates a combined impact. It is found that the crisis has manifold implications for this vital industry. Be it from the angle of consumer demand or production networks, the calamity has made its presence felt across different processes of the sector. Given the multiplicity and depth of these influences, it becomes imperative for the stakeholders, namely government, industry and the citizens to evolve innovative and valuable measures to contain the negative fallout from the crisis on this vital business. Failure to do so could imperil scores of jobs and livelihoods and impede economic growth. While the exact impact and combative strategies may be dynamic and evolutionary as and when the crisis unfolds, the study pieces together diverse aspects of the fallout of COVID-19. The analysis emphasizes on the need to think ‘out of the box’ for tackling this unprecedented crisis. Some of the probable solutions to tackle the crisis could be relaxation of tax compliance deadlines and rules, especially for the lower economic strata, so that consumer demand conditions do not deteriorate precipitously. Also, a more comprehensive financial package than the ones already announced (read: Atmanirbhar Bharat Abhiyan), factoring in labour and export-intensive sectors of the likes of textiles, could be announced to stem the negative fallout of the pandemic on the sector. The other major step could be concessions to exporters against the Remission of Duties or Taxes on Export Products scheme so that they are reimbursed for the hitherto unpaid duties and taxes.
The Pandemic
India, like the rest of the world, continues to reel under the COVID-19 crisis on an unabated rate and scale. The virus has infected over 2,836,925 people in India and killed as many as 53,866 till 20 August 2020. The corresponding global figures stand at 22.41 million and 787,701, for people infected and killed by the virus. These figures aid in understanding the gravity of this pandemic, which while not the first flu pandemic to have afflicted humankind, happens to be one of the worst in terms of its impact on the socio-economic landscape of not just India but the entire world, given the greater global interconnectedness among different economies. The outbreak threatens to derail trade and commerce for months and years to come, as also jeopardizing employment of millions. It is in this context that this article discusses some of the issues, challenges and prospects of the COVID-19 outbreak with regard to the Indian textiles sector, one of the major industries from an employment and trade perspective (The New York Times, 2020).
The Impact of COVID-19 on Indian Textiles: Study Design, Issues and Challenges
Given the pre-existent challenges in the demand and supply sides of the industry, an acquaintance with the same shall be helpful for the upcoming analysis in the context of COVID-19. The Indian textile sector is besotted with issues such as lack of technology upgradation, inefficient infrastructure, fragmented industry structure, sluggish demand in major export markets like the USA and the EU due to the vestigial impact of the Global Financial Crisis and rising competition from countries such as Vietnam, Bangladesh, China and Turkey in areas such as apparels, cotton fabric and carpets (Anthony & Joseph, 2014; Dhiman & Sharma, 2017; Kathuria, 2013, 2018; Kumar, 2001).
All these factors only sought to provide a weak foundation to the sector when it came to weathering the storm of COVID-19 that further complicated the overall impact on this already beleaguered sector.
This section describes the methodology of the study and the implications of COVID-19 for the Indian textiles sector.
The Study Design
The flowchart provided in Figure 1 outlines the design of this study. This theoretical analysis makes use of both demand and supply side factors as well as their combined effect in determining the impact of COVID-19 on the Indian textiles sector, given the interdependence among these.
As depicted in Figure 1, the study describes the demand and supply side factors and their combined impact on the Indian textiles industry due to the outbreak of the pandemic. The demand side factors have been identified as social distancing, consumer demand and exports, while the supply side factors are production, supply chain, employment, prices of essential raw materials and imports. Together these factors interact with and influence each other to produce a combined effect of the pandemic on the textiles sector; for instance, the demand side factors such as social distancing, consumer demand and exports are closely tied to the supply side factors such as production/manufacturing, employment, supply chain and the prices of vital textiles input imports in more ways than one.
Analysing the Implications of COVID-19
The effect of COVID-19 on the Indian textiles industry is manifold. Be it demand or supply, inputs or output, the flu pandemic has impacted almost all facets of the Indian textiles industry. Needless to say, the issues and challenges presented by this pandemic need a proper discussion to mitigate and contain its impact not only on the industries but also on the entire economy, given the pre-eminence of this sector within India’s economic landscape. The primacy of the sector could be gauged with the aid of some simple statistics. As of 2018–2019, the industry employed over 105 million people both directly and indirectly, contributed about 12%–13% towards total industrial output, 12% towards total exports and 2%–2.5% towards the country’s gross domestic product (GDP). In fact, the sector is the second most important employment generator after agriculture. The country exports a large part of its production to the USA, the EU and the Middle East (PIB, 2020).
In light of the above facts and explanation of the significance of the sector for the Indian economy, it is important to be cognizant of some of the issues and challenges before it in the wake of COVID-19 outbreak. Quite briefly, these issues and challenges could range from low consumer demand owing to job losses and wage reductions of buyers, illness of workers and consumers and supply chain disruptions, thanks to the ‘stay at home’ quarantine measures taken by the government. Even though these self-isolating steps are important for containment of the disease, their impact on the socio-economic well-being is at best questionable. The Indian textiles sector, which is one of the major employment providers, is undoubtedly bearing the brunt of this pandemic, largely in part due to its integration with the global economy. With depressed worldwide demand for consumer goods such as textiles and disrupted supply chains, it is all too apparent that this globalized sector is facing one of its worst crises in recent times.
Perhaps one of the foremost immediate effects of COVID-19 on the Indian textiles industry has been the slump in sales due to widespread mandatory salesrooms closures. With sellers and potential customers following strict social distancing norms, the most proximate impact of this crisis has been on the overall sales of textiles and clothing. Arguments are being made as to the efficacy of online retail in such times. However, during such crises, with ‘non-essential’ goods and services debarred from being transacted through online retail, the option of online trades may not seem to be that viable an alternative that could salvage the sector from its crisis of plunging sales (Majumdar et al., 2020).
The other major impact of COVID-19 has been on the production segment of the Indian textiles industry. With rampant government-mandated textile factory closures all across the globe, for these do not fall under the category of ‘essential’ goods and services, the sector faces one of its worst crises in the century. Whether it is India, China, Bangladesh or Vietnam, the industry faces the prospect of significant disruptions in supply chains as well as halted manufacturing activity, thanks to cancelled orders and difficulty in procuring raw materials from the source nation, China (Bown, 2020; Javorcik, 2020).
Yet another fallout on the domestic textiles industry has been of reduced trade (export and import) transactions with the rest of the world. With low global demand, most textiles and apparels brands are witnessing a surge in their inventories and low volumes and values of trade. Even though input supply from China may improve over the medium term, India’s major export destinations of the likes of the USA and the EU, are also engulfed in the crisis. This has adversely affected their demand orders for textiles and apparels, most notably from major global exporters like India (ILO, 2020).
In the wake of falling production and global sales, it is quite evident that the employment and wage conditions of the Indian textiles sector employees take a negative turn. Factory closures and non-payment of wages are perhaps the biggest threat to the socio-economic well-being of textiles employees. Also, the sector is an employment provider to several women. Hence, from the point of view of socio-economic welfare, the government could ill afford to ignore the same, given its importance for women empowerment. To worsen the problem, lack of adequate social security measures proves to be an additional game spoiler for the already vulnerable and disadvantaged communities employed in the same, thanks to a majority of them being part of the informal sector (Anner, 2020; Majumdar et al., 2020; Narula, 2020).
Tables 1 and 2 explicate these issues and challenges in a concise manner.
As described in Table 1, the triple factors of social distancing, consumer demand and exports have important implications for the Indian textiles sector, from a demand side. Table 2 explains the effect of COVID-19 in terms of the supply side factors.
The Impact of COVID-19 on Indian Textiles: Issues and Challenges (demand side)
The Impact of COVID-19 on Indian Textiles: Issues and Challenges (supply side)
As described in Table 2, the supply side factors such as production, employment, supply chain and prices of crucial raw material imports have important implications for the Indian textiles sector. Together with the demand side factors such as social distancing, consumer behaviour/demand and exports, COVID-19 is impacting the textiles industry in multiple ways, thanks to the inter-linkages among these factors. Hence, while social distancing has been considered as a demand side factor for the purpose of this analysis, it has repercussions in the realm of supply in terms of its effect on production (factory workers staying at home, thus, manufacturing activity suspends), employment (employees being fired or asked to stay at home due to social distancing norms), supply chains (disruption in supply chains due to social distancing norms) and prices of raw material imports (social distancing causing factory closures, in turn causing supply chain and manufacturing disruptions in source countries, thereby raising raw material prices for the importer nations). These interconnections are replicated for other factors as well in the Indian textiles industry. Given the pre-existent challenges before the sector in terms of technological backwardness, low demand in major export destinations and stiff competition from major textiles exporters, the negative impact of COVID-19 is to be magnified unless suitable policy measures are taken.
The next section describes the prospects and strategies for an effective tackling of the fallout on the textiles sector due to the COVID-19 crisis.
Prospects and Strategies
Given the grim prospects of COVID-19 outbreak for the Indian textiles sector, it is imperative to evolve a comprehensive and all-encompassing strategy that factors in the various inter-linkages and dimensions of the crisis. A two-pronged approach that accounts for employment and social security of the textiles sector employees, especially those in the informal segments of the industry and support to small-scale textiles businesses is the need of the hour. In this regard, rigorous implementation of the International Labour Organization (ILO) guidelines on work, occupational safety and wage security must be undertaken by the government in collaboration with its industry partners. Such measures are called for since it is often observed during crises like these that the private companies breach labour and occupational safety standards so as to reduce their costs and retain competitiveness. It must be borne in mind that if labour welfare is compromised, then it would have negative repercussions on demand for textiles products, as also the worker productivity aspects (ILO, 2017; IMF, 2020).
Some of the other strategic choices adopted by the Indian government to contain the impact of COVID-19 on the textiles sector could be relaxation of tax compliance deadlines and rules, especially for the lower economic strata, so that consumer demand conditions do not deteriorate precipitously. Also, a more comprehensive financial package than the ones already announced (read: Atmanirbhar Bharat Abhiyan), factoring in labour and export-intensive sectors of the likes of textiles, could be announced to stem the negative fallout of the pandemic on the sector. The other major step could be concessions to exporters against the Remission of Duties or Taxes on Export Products scheme so that they are reimbursed for the hitherto unpaid duties and taxes.
While it is quite important for the Indian textiles sector to follow some of the measures suggested above so as to weather the storm of COVID-19, it is all too significant to pay attention to other aspects pertaining to gender and sustainability within a triple bottom line context. This shall ensure that the industrial growth and performance of the sector is sustainable. Factoring in the demands of the female workforce and environment shall surely make the sector more resilient towards any such future pandemic.
Together these strategies would aid this distressed sector in reducing the negative impact of COVID-19.
Conclusion
This study seeks to locate the Indian textiles sector within the ongoing COVID-19 crisis in a globalized framework by discussing its sectoral linkages, repercussions and probable coping strategies.
The Indian textiles sector has been one of the worst hit sectors due to COVID-19. Even prior to the pandemic, the industry suffered from some challenges on both demand and supply sides. In addition, it is due to its socio-economic primacy for the Indian economy, which is second only to agriculture, that the industry must be given a comprehensive financial package to ameliorate its distress. Failure to do so could imperil millions of already precarious jobs and livelihood.
Future Implications of the Study
While the exact impact and combative strategies may be dynamic and evolutionary as and when the crisis unfolds, the study pieces together diverse aspects of the fallout of COVID-19. The analysis emphasizes on the need to think ‘out of the box’ for tackling this unprecedented crisis.
Perhaps no other quote sums up the arguments in this article better than this, ‘desperate times call for desperate measures’. It is true that COVID-19 is a grave crisis that calls for novel and desperate solutions on the part of all stakeholders of the Indian textiles sector—government, industry and citizens. Only then could we hope to meet this challenge effectively.
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author received no financial support for the research, authorship and/or publication of this article.