70,000 textile workers may lose jobs

MUMBAI: For lakhs of employees in the textile sector, the wolf is literally at the door. About 70,000-80,000 workers are expected to join the ranks of the unemployed within a month, as the rise of the rupee against the dollar makes textile exports uncompetitive and drives workers out of jobs.

This figure is in addition to the 80,000 who have already lost their jobs, says the Clothing Manufacturers’ Association of India (CMAI). The Indian apparel industry, worth approximately Rs 1,16,000 crore, exports clothing worth Rs 36,000 crore.

The domestic apparel market, which includes ethnic wear and hosiery in the organised and unorganised sectors, is worth around Rs 70,000-80,000 crore while the readymade garments segment accounts for about Rs 30,000 crore. The labour-intensive industry, which is practically on its knees, is looking to the government for help.

“Rupee’s appreciation has hit exports badly. No country can hope to survive a 10-15% appreciation without any government help,” CMAI president Rahul Mehta told ET recently. “The margins in this industry are 7-9% and with a depreciation of 5%, the balance becomes very low for the industry to survive,” he added.

Growth in local textiles sales has also slowed as is evident from the fiscal second quarter financials of companies in the industry. The government recently announced a Rs 5,000-crore relief package for the beleagured sector. But the industry feels it is too little, too late.

The package, the industry feels, is not a relief measure but a reimbursement. CMAI feels that being an export-oriented sector, it should be tax-exempt. The interest rate subsidies are yet to percolate to the industry. Shrinking margins have forced the industry to turn more competitive. It is now moving towards higher productivity by exiting low-margin products and making value-added goods and introducing modern technology.

Tirupur, the knitwear hub of India, too has a similar story. Textile makers had earlier cut almost 10,000 direct jobs so far and are expected to take that number to 50,000 by the end of this year. Tirupur houses over 1,000 textile exporters and last fiscal year totalled revenues of Rs 11,000 crore, a growth of 15% over the previous year. But this year, revenues are expected to fall by 10%.

As the US and European markets turn more uncompetitive, textile exporters are increasingly turning their attention to untapped Asian countries. Apart from finding newer markets, this also helps them reduce dependence on the West. There is greater focus on the domestic market too. “If the domestic market is tapped properly, market growth cannot go below 25-30%,” said Mr Mehta.

However, for the textile sector, turning around won’t be an easy task. The industry, claimed Mr Mehta, is hit by labour laws that force units to retain employees despite inefficiencies. Besides, in India, companies retain employees even while they run a loss, said industry executives.

According to CMAI, for every 35 people re-employed in the industry, the government has to spend around Rs 1 crore. That puts the total losses incurred by the sector at around Rs 4,000 crore. In 2005, the apparel industry grew around 35%, which dropped to 14% in 2006. The industry fears that this year, the growth rate might plunge to negative 10%, i.e. around a 24% drop in the growth rate.

According to Mr Mehta, in textile exporting countries such as China, domestic prices are higher than export prices, which in turn, makes exports cheaper, increasing their global competitiveness.