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Indian Textile Hub at Breaking Point as Costs Spiral and Demand Sags

One Indian textile-producing region faces a tale of two fortunes: looking ahead and dealing with the now.

As talks about the urgency of stepping up production of man-made textiles to meet lofty export targets of $100 billion from India by 2030 were being held at a conclave in New Delhi last week, across the country in Surat, the nation’s synthetic textile capital, major meltdowns left manufacturing under siege.

Over the past few months, more than 18 dyeing and processing units have closed down in Surat, casting more than 70,000 laborers into the unemployment line. 

The workforce at any given time has been estimated at 500,000 for this industry in Surat, which is driven mostly by migrant workers from other states, including Bihar, Uttar Pradesh and Orissa. 

The textile sector in India as a whole employs more than 45 million people directly and another 100 million in allied sectors.

The estimated 450 factories in Surat that have made the area into a prosperous production and trading hub for synthetics have mostly continued to operate, albeit at a decreased capacity of 50 to 70 percent, as orders have slowed sharply since September, according to industry analysts.

A small town in the Western state of Gujarat, Surat cranks out an estimated 45 million meters of textiles daily. However, with the recent drop in demand has cut production to an estimated 25 million meters a day, according to Jitendra Vakharia, president of the South Gujarat Textile Processors Association. “The decline has been almost 35 percent less production since October. There is declining demand in the entire cycle from yarn to retail. Many wholesale retailers have shut shop as well,” he told Sourcing Journal, emphasizing the core strengths of Surat, which run from the manufacturing of yarn, weaving and processing to embroidery.

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The sector is facing a multi-pronged attack from inflation, rising raw materials costs, energy shortages, growing labor costs, and the devaluation of the rupee

The local trend towards global fashion—particularly the adoption of leggings in lieu of traditional garb—is another key factor in the drop in business. 

“Previously, every woman wore seven to eight meters of fabric draped around her with sarees. Now, as the fashion has changed for both young and older women toward wearing leggings and [tunic-style] kurtas, the amount of fabric needed has drastically declined to less than two meters per person,” Vakharia said.  

Vakharia added that both manufacturers and laborers are feeling the impact. 

“The workers usually return to their hometowns whenever orders are low and have families in the agricultural sector where they return. There is a continued turnover of workers each year, and training has been a constant need over the past years, and that comes at a cost,” he said. “Meanwhile, as manufacturers find it hard to keep up with all the losses, many are exiting the business and selling off the land.” 

All is not lost, as some fabric from the knitwear hub of Tirupur continues to come to Surat for dyeing and processing, and value-added services. For example, embroidery and other add-ons continue to be a focus in the area. “There are more than 90,000 value-addition machines in the area and these can be used to advantage. Closures are also happening because of the huge shift toward digital printing, which requires newer machines and investments,” said Champalal Bothra, general secretary of the Federation of Surat Textile Traders Association.

He said the number of shop owners had declined dramatically, to an estimated 65,000 in the Surat area, or a decrease of about 25 percent, over the past few months. “In Surat, the sari season was a flop, the purchasing power in villages has gone down,” he said. 

Some are appealing for government intervention.

“If the government takes interest and creates drawback policies, Surat can remain a demand hub.  We are exporting yarn—if we give yarn cheaper to other countries, their apparel will be cheaper. The government should focus on less yarn export, and more on exporting apparel. The import-export policy should be redone to make sure the jobs are created—not lost,” Bothra said. 

It is clear that the migrant workers have been heavily impacted by the changing industry, and Bothra said that the losses must be stemmed as soon as possible.

“There are many challenges. But Surat has been developed with private investment, good business policies and help to maintain this is essential, otherwise all this knowledge and technology will get wasted. This is the time to develop,” he said. “We need support with payments, we need larger orders—we need help.”

Meanwhile the discussions in New Delhi at the 14th annual session of Texcon organized by the Confederation of Indian Industries and the Ministry of Textiles made it clear that unless the focus on man-made textiles was not stepped up, growing the sector exports would be difficult. 

As Ajay Sardana, president and head of strategy and business development polyester for Reliance Industries, said, “If you see the consumption of the Indian consumer, it is 75-80 percent of man-made fiber. All the new applications—whether it is for apparel, home, PPE, masks—man-made fiber is the savior. This industry is part of the solution.”

But he pointed out that “the anomalies were glaring. This needs the same basic building blocks—the same import duty, goods and service tax and export incentives as cotton,” he noted, pointing out that the goods and service tax for man-made fiber was 18 percent versus 5 percent for cotton goods.

While the agreement for both better policies, and the importance of focusing on synthetics is clear, the key factor of consumer demand appears to be a root problem, unsettling labor and the industry. 

“It is difficult—but the main point is: how do we push consumers to purchase more?” Vakharia said.