The shift to making PPE products, and a delay in exports orders led to the significant decline, says Clothing Manufacturers Association of India
New Delhi: India’s apparel manufacturers are not doing well for a plethora of virus-related reasons. A slump in domestic demand for apparel, closure of malls, the shift to making PPE products, and a delay in exports orders has led to a 84% year-on-year dip in sales in the month of May, the Clothing Manufacturers Association of India (CMAI), which represents over 4,000 manufacturers, said in a survey.
CMAI members surveyed in the month of May spoke about "a stunning decline of sales".
“Compared to the corresponding period of May 2019, the members surveyed indicated a drop of 84% over last year–and that too, primarily because some factories had started manufacturing masks and other PPE products," the association said in a note.
With retail being shut for most part of May, and opening up gradually, retailers have moved to liquidate existing stock that had been lying in stores since end of March.
As a result, manufacturers faced shortage of fresh orders.
“The domestic apparel business has reported almost zero production of regular products in May 2020," CMAI said in its note.
CMAI’s survey showed that only 22% of the garment factories resumed operations by end of May.
“Factories are operating at an average 25% of their capacity. Close to 40% of the factories that have started functioning, are engaged in the manufacture of current essential products like Masks and PPE products," the association said.
Rahul Mehta, chief Mentor, CMAI said that with retail opening up only now, there could be some uptick in demand.
“Ground-reality there isn’t so much production. We opened too but retail had not opened up fully in May, it is now opening up gradually and malls haven’t opened and high streets have opened sporadically. Even if retail opened up they are carrying inventory for the next two to three months," he said.
Mehta said factories that rely on export orders fared better, “but they are also facing cancellation and non payment of dues".
Recovery in demand for India’s apparel retailers could be sometime away as consumers remain wary of venturing out.
Moreover, as they stay at home, demand for fashion wear is likely to take a backseat. Additionally, with households facing uncertainty over their future finances, consumers are likely to turn frugal and cut back on any discretionary expenses such as on apparel.
Mehta expects recovery for apparel manufacturers to be delayed till the end of the ongoing financial year.
The survey revealed that as of 15th May, members of CMAI who had applied for the additional working capital loan (COVID Line) as directed by RBI, only 26% had actually received assistance from their bankers. The balance 74% still had their applications in the ‘processing’ stage, the association said in its note.
Over the last few days, India has moved to open its markets and shops; retailers expect pent-up demand for surface.
The government has also issued standard operating procedures for opening up of malls, albeit left it to states to reopen them, as it moves to the phase-wise "unlock".
“The above findings clearly indicate that the garment Industry is going through an unprecedented crisis, and unless immediate steps are undertaken to permit unfettered and uniform opening up of all shops, market complexes, and malls, as well as factories, and the banks step in to assist the industry," CMAI said.
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