Covid-19 impact: Shipments worth more than 3 Billion US$ at stake for Indian apparel exporters

Gurgaon April 17th 2020

To understand the impact of the Covid-19 pandemic on India’s garment export industry, Rajesh Bheda Consulting undertook a quick survey of garment exporters across the country.

The survey was announced on 2nd April 2020

The Methodology: The survey was undertaken using online form filled by apparel exporting companies. The respondents participated voluntarily.

77 apparel exporting organisations from different manufacturing hubs mainly Tirupur, NCR, Bangalore, Ludhiana, Panipat, Ranchi and Chennai responded to the survey.

Out of these 60 responses were usable. Though, the results are based on a relatively small sample, these do provide much needed data reflecting the scale of the challenge being experienced by the respondents and it’s potential impact on India’s USD 16-17 Billion Dollar garment industry.

The key results of RBC Survey, ‘Measuring Impact of Corona Pandemic on Indian apparel export industry’ are as follows:

  • The combined value of orders cancelled and on hold is 1.49 Million US$ per respondent factory
  • More than half the respondents (56%) said payments were delayed, whereas in 19% cases, customers refused to pay for the orders
  • Out of the cancelled orders, in 43% cases no payments were received in 35% cases partial payment for the material was received. Only 22% cases, said that the buyer had paid for the material.

Source: Analysis by Rajesh Bheda Consulting

Speaking about the results Dr. Rajesh Bheda, MD of RBC said “When we extrapolate the results of the survey at the apparel export industry level, this could result in export orders worth USD 4.17 billion being cancelled or put on hold. This amounts to almost 25% of the annual apparel exports from the country.

Since the Indian industry mainly executes spring summer orders, Jan-March months are the peak production months, hence, the impact is severe.

Even if we consider the fact that participant factories are likely to be larger, hence, the results need to be moderated, the total business impacted can be estimated at USD 3 Billion.”

As a result, the apparel exporter community of India is likely to face unprecedented liquidity challenges. The livelihood of 12.9 million of garment workers is at stake. The sector was already struggling with the increased competition from Bangladesh, Vietnam and Pakistan, who have preferential trading relations with the EU.

In neighbouring Bangladesh, as of 16th April 20, orders worth 3.16 Billion US$ were cancelled or onhold affecting 2.26 million workers. However, by collecting and publicising data on order cancellation and orders on hold with speed by the BGMEA helped stakeholders communicate theimpact with international buyers with the numbers effectively. This has resulted in a few buyers like H&M, Marks & Spencer, Inditex, PVH, Kiabi, Target and VF corporation taking a compassionate view and assuring on not cancelling the orders produced and under production.

India too needs to proactively engage with the buyers, international media, trade missions of importing countries to impress upon the need for following ethical trading principles and coming out with viable solution to avoid order cancellations and delay in payments to tide over the crisis. The livelihood of garment workers who have been producing garments for the international brands must be protected.

Mr. Raja Shanmugam, the President of Tirupur Exporters Association, who represents the largest knit wear cluster of the country said “RBC’s analysis is right and estimation is hovering around the same amount of loss that we are anticipating. Tirupur is totally oriented to the Western markets and we have to work on two aspects, tangible loss of 1.5 million US$ per unit and we also need to consider non-tangible loss due to the market closure and the late revival of the market in six months to one year would be a huge amount.There should be a holistic revival package by the authorities to address the needs of the industry and thereby revival of the industry and the entire economy of the country.”

About Rajesh Bheda Consulting:

Rajesh Bheda Consulting (RBC) is a management consultancy organisation focussed on improving the competitiveness of the fashion Industry entities. RBC has been partnering with leading apparel manufacturers, retailers, industry associations, Government departments and UN/ global development agencies with special focus on livelihood programmes, skill development, performance enhancement andpoverty reduction.

For more information please contact Dr. Rajesh Bheda @ [email protected] Ph 9810154829 or Maneesha Sharma @ [email protected] 9810263249

Rajesh Bheda Consulting
#170 C, Tower B1, Spaze Itech Park
Sonha Road, Gurgaon, India.