Global Textile Industry Needs Demand Revival
July 25, 2023 With economic rebounds expected in the United States and Europe, the global textiles industry needs strong demand revival.
The past 18 months has seen a rocky economic climate including anomalies such as high inflation, strong labor market, and weak consumer demand. Most citizens in developed economies such as Canada feel pessimistic about their future. Just this week, Canadian Prime Minister Justin Trudeau is expected to make a major cabinet shuffle to put new ministers in key positions to help boost job growth and revitalize the economy.
The export-oriented textiles sector in countries like India have been hit hard by weak export demand, which, in turn, impacted the domestic market as export-oriented companies have been forced to dump products into the market. In India normally, spinning mills maintain stock of 1-2 weeks of production. But due to low demand, many companies are holding stocks worth one month or more of production, leading to crisis.
The Indian textile industry has been demanding the waiver of the 11% custom duty on cotton imports to help reduce the cost of raw material, stated Velmurugan Shanmugam, General Manager of Jayalakshmi Textiles.
In my opinion, given the sensitivity regarding the farmers’ livelihood in India and the ensuing parliamentary elections next year, it is highly unlikely that the Government would do anything about waiving tariffs on cotton imports. Mumbai-based Cotton Analyst Gnanasekar Thiagarajan agrees with my view and opines that with inflation expected to have a soft landing in the United States, demand may pick up in the next quarter.
Overcapacity in certain segments of the textile sector, excessive stocks of yarns, and weak global demand are all contributing to the current crisis in India’s textile sector.
Product diversification, strategic stocking of raw materials, automation, and better labor retention policies are strategies the industry can adopt. Jayalakshmi Textiles has been manufacturing varied products and utilizes solar and wind power to help control costs.
“It is important to modernize and not go on expansion in the current times,” stated Shanmugam.
With economic revival expected and no recession on the horizon, demand may pick up. “The downside will be limited from now,” said Thiagarajan.
The textile industry has to revitalize depending upon regional needs and strategic strengths such as enhancement of crop yields in India, and manufacture of sustainable textiles at affordable prices in developed economies. Importantly, there needs to be better communication across the supply chain and better engagement with policy makers and consumers.
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