Geopolitical Impact on the Cotton and Textiles Sector
April 13, 2022 Ongoing political crises in Europe, Sri Lanka and Pakistan are influencing the global cotton and textiles sector, manufacturing, and the global economy.
A rise in prices, inflation, and political turmoil in some parts of the world are having a direct effect on the recent Presidential election in France. Worries about the increase in energy costs due to a probable embargo on Russian gas and oil by EU countries is genuine among consumers who are making buying decisions on non-essential items.
Ripple effects from COVID-19 are still seen in different sections of the society, which is more evident in Sri Lanka. With the decrease in foreign tourism, the economy of Sri Lanka has taken a severe hit, which has been in decline due to mismanagement for over a decade and to heavy foreign debts. In addition to economic fallouts, political crises in Pakistan and Europe due to the Russian invasion of Ukraine is adding to the pain as well.
All these instabilities are showing its impacts on the global cotton and textile sectors. This is immediately felt in a major textile producing country like India. The economic and political crisis in some parts of the world should result in favorable conditions for textile manufacturing in India, but this is not the case. The steady increase in cotton prices is creating havoc in the Indian textiles sector, resulting in decreased production and reduced work weeks (by a day) in textile mills.
Sri Lanka is a leading garment producer supplying many global brands. Lack of power and the ongoing political crisis is affecting many sectors of the country. “While orders from Sri Lanka are getting diverted to Tiruppur in India, the steep cotton price in India is not helping the situation,” stated Velmurugan Shanmugam, a 30-year industry veteran and the general manager of Jayalakshmi Textiles.
In many mills, production has been slashed by 20%, resulting in losses. Higher cotton prices are not absorbed by upstream products like yarns. “Weavers are not willing to pay higher prices,” added Shanmugam.
Cotton prices have doubled in a year, and the present situation is worse than 2011 when the cotton price was steep. Textile mills in India are demanding the Indian government to slash the 11% import duty on cotton, which will create a level playing field with competing countries like Bangladesh, Vietnam, and Indonesia.
Cautious stock maintenance, negotiating with the government for adequate support, efficient workflow management, and watching global situations carefully are a few near term solutions for the global textiles sector.
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