Impact of pandemic on garment industry

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Last Updated12/02/2022

In Delhi and Haryana, small businesses and daily wagers in the garments sector have been severely impacted by the pandemic even as large businesses and export firms have managed to stay afloat.
Low demand in the domestic market due to frequent COVID-19-induced restrictions has forced the industry to either scale down their operations or cut the salaries of the staff to half or hire them on commission basis.

There have been supply-side bottlenecks every once in a while.
Small businesses are unable to keep up with big businesses with deep pockets.
The government, despite the ‘Make in India’ campaign, has lent little support to entrepreneurs.
The second and third wave shattered consumer confidence that created a sense of uncertainty and fear.
Now the consumers want to save for the rainy day and businessmen too have cut down on stock due to frequent disruptions.
Night curfews and weekend lockdowns have made matters worse.
Pavement dwellers, who are essential for the garment industry, are now not allowed by the civic bodies and this has further affected demand.
Big export firms catering to international brands and clients abroad, mostly in European countries, have stayed afloat.
But small firms targeting the domestic market, which mostly serves the poor and the lower-income segments, have been badly hit.
Garment firms in Delhi and Haryana are hanging by a thread as debt has grown over the past few years while profits have narrowed down.
Increase in input costs, low demand and liquidity crunch have made it difficult for the small players to remain afloat.
Banks are reluctant to sanction loans to small players fearing default.
The raw material suppliers no longer deal in credit.
The input cost has shot up with the rise in the price of raw material.
The cost of fabric alone has gone up 35-40% over the past few months.

The major impact during the first wave was with regard to demand-side shocks like cancellation of orders, heavy discounting on exports by the buyers, and overall reduction in demand due to closure of retail chains in the Western markets.
The second wave added the supply-side shocks too.
The lockdowns in several apparel production hubs, restrictions on the mobility of workers, and other bottlenecks such as non-availability of labour, high freight charges and input cost added to the problem.
As a result, the export performance in 2020-21 was $12.28 billion, a 20.8% decline from $15.50 billion the previous year.

However, the situation on the exports front has improved considerably and is almost on par with the pre-COVID-19 levels.
The preliminary export data up to January this year show that industry has nearly recovered to the pre-pandemic levels with an export performance of $12.68 billion in April-January 2021-22.
There a growth of 33.3% against last year which is also an indicator that apparel exports may surpass the 2019-20 export performance of $15.50 billion.
The demand in the automotive and garments sector has slowly picked up, but production has remained low for different reasons.
While in the automobile sector there is a shortage of semi-conductors, in the garments sector the demand for office wear and school uniforms has been at an all-time low.

Daily wagers are hit the most due to the pandemic as they have either become jobless, or are getting only a partial employment.
There is no overtime as well.
Increasing prices has made it difficult for them to make the ends meet.
For contractual workers, the fall in production due to lack of demand means no overtime wages, which constituted 25-30% of their monthly income, and no increase in regular wages as well for the past two years.

The majority of the garment companies did not pay a single rupee to their workers during the national lockdown.
Landlords refused to waive or defer the room rents and grocery store owners decided among themselves to not sell groceries to the migrants on credit.
In many cases, contractors also disappeared with the wages of the migrants, leaving them stranded and helpless.
Most of the employers, barring a few big companies, paid wages only for the remaining eight days of March after the national lockdown was announced.
Those who paid the workers for the lockdown period later deducted it from their salaries adjusting it as “advance payment”.
Even after the lockdown was gradually relaxed in the first week of May 2020 and the factories allowed to work with a reduced workforce, a large workforce staying in Delhi was not allowed to cross into Haryana for work as the State borders had been sealed.
Desperate to work, men and women would walk several kilometres to cross over to Haryana from Delhi in the early hours of the day to escape the police.

The government, however busy in coping up with the aftershock of pandemic, should focus on small entrepreneurs (through Make in india initiative) as they are the backbone of Indian Economy that is currently dwindling.
Among one of the largest employers in India, textile and garment industry needs to be revived as it contributes to a large portion of exports.