Textile MSMEs see uncertainty in production capacity ahead after recovering to near pre-Covid levels

The cotton prices surged by 7 per cent – 10 per cent month-on-month during January 2021, led by strong export demand for cotton yarn, according to India Ratings & Research.

Ease of Doing Business for MSMEs: MSMEs in the textile sector, which had recovered to up to 90 per cent of their pre-Covid production capacity before the second wave struck in March this year, are staring at business uncertainty in the coming weeks. Post lockdown, which led to a contraction in business activity, MSMEs had started to recover back in September with an increase in yarn prices. The recovery had hit around 80 per cent of the production capacity by December last year. However, with fresh Covid restrictions including lockdown, night curfew, weekend curfew, etc., across the country, MSMEs are fearing a decline in production capacity again.

“Covid will impact textile MSMEs but we don’t know how much the impact will be this time. More than 60-70 per cent units, which are MSMEs in the sector, were able to recover back to the pre-Covid level. They are now operating at a production capacity of around 70-80 per cent while it should have been 100 per cent till now,” Ashok Juneja, President, The Textile Association (India) told Financial Express Online. Founded in 1939, the association represents has over 23,000 members.

India’s domestic textiles and apparel industry has a share of 2 per cent of India’s GDP and 12 per cent of the country’s export earnings, according to government data. During Covid, India became the second-largest manufacturer of personal protective equipment (PPE) kits in the world with over 600 companies in India certified to produce PPEs currently. The global market for the same is likely to be more than $92.5 billion by 2025. “The export of textiles and apparel also decreased for the period January 2020 to November 2020 due to the pandemic. But now export orders have started increasing,” according to a statement by Textiles Ministry in February this year.

However, with lessons from last year, Juneja expects MSMEs to ensure labour doesn’t migrate back to hometown again. “This time there won’t be much labour issue as entrepreneurs seem better prepared than last year to take care of them, pay complete salaries without deductions, and avoid any layoffs.” The sector is largely unorganised with no comprehensive information regarding the impact of last year’s lockdown even as the level of production fell in jute, silk, etc., the ministry had said. As per Udyam Aadhaar Portal, the total textile manufacturing MSMEs registered between September 2015 to June 2020 were 6,51,512 while apparel MSMEs were 4,28,864. According to Udyam Registration, which replaced Udyam Aadhaar in July last year, 1,15,855 textile manufacturing MSMEs and 85,564 apparel MSMEs were registered between July 1, 2020, and February 9, 2021.

Also read: ECLGS: How Modi govt’s Rs 3-lakh-crore credit scheme put Covid-hit MSMEs back on recovery track

“Up to March last year, all textile units were running up to 80-90 per cent of their capacity before they contracted in production capacity to 30-40 per cent. The activity picked up in September and by December it scaled to 80-90 per cent production capacity. Cotton and synthetic yarn made great profits with the increase in prices. However, the performance has been sliding again from March 2021 due to Covid and currently, it stands at 60-70 per cent. If there is a complete lockdown, the production capacity might decline to previous year levels,” TK Sengupta, immediate past president, The Textile Association (India) told Financial Express Online.

The cotton prices surged by 7 per cent – 10 per cent month on month during January 2021, led by strong export demand for cotton yarn, according to India Ratings & Research. As per India Brands Equity Foundation, the production of raw cotton in India is estimated to have reached 35.4 million bales in FY20. A cotton bale is a standard-sized and weighted pack of compressed cotton lint after ginning.