Politico-Economic Crisis is Weighing on Global Cotton Textiles
October 24, 2022 The politico-economic crisis, war in Europe, and dampening demand seem to have an upper hand on the economy.
The crisis deepened with the Oct. 20 resignation of Liz Truss, Prime Minister of the United Kingdom, making her the shortest-serving Prime Minister ever in the United Kingdom.
The political and economic crisis in the U.K will have ripple effects on the global economic situation. The 44 days of high drama in the United Kingdom is highlighting the fragile economic and political order in certain parts of the world. With recession expected around the corner, these unstable situations add pain to the global geo-political and economic situations.
Where is Britain – and hence the global order – heading now? It’s a loaded question and needs serious thinking.
In a discussion last week at Texas Tech University, Dr. Glenn Hubbard, who served as the Chair of the Economic Council of Advisers under President George W. Bush, stated, “The economy is going to witness substantial pain.” When asked about the end game for inflation, Hubbard said that “with the target to bring down the inflation to 2%, we must expect economic slowdown.”
Bloomberg recently predicted the probability of recession to be 100% in the next 12 months.
Consumers have less to spend on non-essentials, with mortgage rates as high as 7% in the United States. The borrowing rate has increased sharply from 3% to 7% within a year, displaying the pains of inflation.
In June 2022, at the Textile Association (India) event in Coimbatore, I articulated the need for the global cotton textile industry to consider both the supply and demand sides of the equation. This is what has come true with sliding demand while we have a tight supply of commodities like cotton.
“Advance booking for yarn is down in this festive season,” stated Velmurugan Shanmugam, General Manager of Jayalakshmi Textiles. While domestic demand is there, the export market has slowed down, he added. India’s yarn manufacturing is at a saturation level and needs about 40% of its cotton yarn production to be exported to avoid job losses in the sector.
Global politics are currently under the grip of economic woes and the war in Europe, as is evident from the high drama in the United Kingdom.
The textile sector needs good introspection and must look forward to opportunities beyond the commodity sector such as health care, production of products with a competitive advantage, and enhancing its product basket.
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