Textile hub Tirupur still reeling from demonetisation blow
‘Employees Required’ signboards outside garment-making units in Tirupur have been replaced by ‘To Let’ signs, such has been the impact of demonetisation on the town’s textile industry
Tirupur: “Employees Required” signboards used to be a common sight outside small garment-making units in Tirupur, the textile hub of Tamil Nadu. Now, they have been replaced by “To Let” boards.
Many garment units have shut in recent months, said K. Thangavel, a former Communist Party of India (Marxist) member of the state legislative assembly from Tirupur. That’s because they couldn’t overcome the impact of the cash crunch that followed the 8 November invalidation of high-value banknotes.
The textile industry used to directly employ around 500,000 workers and log yearly sales of around Rs40,000 crore. The cash crunch brought the industry, mainly comprising micro, small and medium enterprises (MSMEs), to a grinding halt. A year after the note ban, many small units are still struggling.
“There was no business for three to four months,” said Raja M. Shanmugham, president of the Tirupur Exporters’ Association (TEA). MSMEs just couldn’t withstand the impact of something like the note ban, which took out 86% of the currency in circulation by value.
Even as the textile industry struggled on, it was hit by another disruptive event: the goods and services tax (GST), which kicked in on 1 July. “The implementation of the GST without any dry run has led to a chaotic situation,” said Thangavel.
According to TEA, the textile industry of Tirupur had been expected to earn Rs30,000 crore from exports alone in the year that ended on 31 March. It ended with Rs26,000 crore in exports, besides Rs16,000 crore from domestic sales.
The December quarter of the year is the busiest time of the year for Tirupur’s textile industry because of Christmas and New Year demand from the European and US markets. Last year, because of the withdrawal of high-denomination currency, it was a “real testing time”, says R. Veni, who works at one of the garment units in the city.
Recalled a job worker who runs a small knitwear-cutting unit: “A worker who would earn Rs500- 600 per day had to lose a day’s salary to stand in the queue to exchange a sum of Rs2,000.” He added that at least 30 garment units have shut down in his ward alone.
Garment units getting closed and new ones opening is part of an annual cycle in Tirupur. But no new units have sprung up in the past year, claim business owners here. Note ban and GST have only aggravated the situation in Tirupur, which is a self-evolved business cluster that has been facing a slow decline over the years. “In 2004, India was a global leader in knitwear, just next to China. With the growing global market in Bangladesh, Cambodia, Vietnam, Sri Lanka, Myanmar and Ethiopia, we are no longer in the top position and it is very difficult to sustain if there is no policy intervention from the government,” said TEA’s Shanmugham.
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