As Per Ministry of Textiles, India, the Textile and Apparel (T&A) sector directly employs around 45 million (4.5 crore) people in India. When you include allied / related activities (raw-material production, handloom, handicrafts, ancillary supply-chain, etc.), the number often cited rises to as much as 100 million+ (10+ crore) people depending on definitions.
India competes with countries like China, Vietnam, Cambodia, Bangladesh, Pakistan, Turkey and Sri Lanka in the Textile sector for exports to the US market. The US market is very organized with limited Brands which don’t default on payments & give large orders – hence everyone wants to sell to the US. But the US Customer is also price-sensitive and hence price increases cannot be passed on to them so easily.
India has been slapped with 50% tariffs as compared to other countries which are in the 19-25% Tariffs bracket. The difference is a minimum of 25%!
No manufacturing company in this world can compete when their Competitors have a price advantage starting a minimum 25%!
How are Indian Textile Manufacturers coping up with this? US Brands are asking most Manufacturers for discounts saying that the US Consumer cannot absorb the tariff price hikes by much. So the thinking of the Indian Manufacturer is that to stop losing the US Customer, give a discount for now and pray and hope that the Indian Government settles the matter with the US and the 50% “punitive” tariffs are scaled back in some time.
So the Indian Manufacturers are giving 7-35% discount which is not a fundamentally sound decision and not sustainable for any Business in the long term.
The other repercussion which has been happening is that Indian Exporters are not wanting to loose the US Customer and themselves getting the Indian Manufacturers to set up Manufacturing Units in neighboring Sri Lanka & Vietnam. Many US Buyers, to their surprise, are discovering that their Business can be serviced equally efficiently minus the Indian Manufacturer – This type of thinking is a death knell for Indian Textile Industry!
The US Market comprises of roughly 30% of the Indian Textile Exports and Indian Manufacturers will take time to find & align new markets – nothing can happen overnight!
Think of it – Even if 50% of 4.5 crore people i.e 2.25 crore people working in the Indian Textile industry are affected, how huge is that number! There are families to feed for a person for whom the only skill he or she ever learnt is Textile!
There is blood on the streets which can only be stopped once the Indian Government solves the Tariffs issue between President Trump and PM Modi ji.
Else our neighbors are making merry at the expense of the Indian Manufacturer!
Contributed By: Tushar Kansal-CEO, Kansaltancy Ventures. The content has not been edited and reviewed by us.
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