India’s textile industry is taking a hard hit from the nation’s latest currency dilemma.
After the cancellation of Rs 500 and Rs 1,000, Indore textile units are axing production from 20 percent to 30 percent, The Times of India reported. Due to the rupee cancellation, local textile units are unable to resume manufacturing, resulting in major layoffs for contract workers.
“Demonetization has led to severe shortage of funds for regular operations in the textile industry hitting day to day business operations,” Vippy Spinpro managing director and Madhya Pradesh Textile Mills Association chairman Piyush Mutha said.
According to vicinity sources, about 20 percent of non-perennial job holders are contract workers. Contract workers in the textile industry are not paid on a salary basis and do not have access to bank accounts for wage deposits.
“The main worry is how to dispense payment to workers next month,” ssociation secretary M C Rawat said. “Textiles is a cash intensive industry where cash is required for running daily activities.”
India’s legal tender removal also impacts other areas of the garment industry, including finished product sales, facility equipment purchases and routine factory expenses. Raw material availability is also limited, since many farmers are contributing less produce after the currency cancellation.
Apparel sales have also slowed throughout the nation. The cash crunch caused consumers to curb their spending on many essential items, including clothing and footwear. Unable to pay for products in cash, many shoppers are minimizing their retail engagement until India’s financial situation improves.
“Sales have gone down drastically as purchasing power of consumers have declined,” Maharaja Tukojirao Cloth Market Merchants Association president Hansraj Jain said. “Rotation of money has stopped and businessmen are not in a position to accept new orders.”