CMAI survey projects grim Q2 for garment industry

The 3rd survey conducted by Clothing Manufacturers Association of India (CMAI) amongst its members indicates a disastrous first quarter for the domestic garment industry with 74 per cent respondents showing 90 per cent drop in sales. The second quarter projections are no better as 95 per cent respondents expect operating at less than 50 per cent of capacity.

Pic: CMAI

In the first quarter of 2020-21 ending June 30, the domestic garment industry saw a more than 75 per cent drop in their revenues, the survey indicated.

For the July-September quarter, as many as 68 per cent of the respondents anticipate using less than 25 per cent of their production capacities in the next three months, CMAI said in its survey results.

The respondents do not see much improvement in the next 12 months either, as 21 per cent of the respondents expect to operate at less than 25 per cent of their capacity in the coming 12 months, and 46 per cent expect to operate at between 25 per cent and 50 per cent. "This means almost half of the industry expects to operate at less than 50 per cent of capacity in the coming 12 months," CMAI said in its findings of the survey.

What is obviously adding to the worries of this largely MSME dominated sector, is the drying up of working capital funds, with manufacturers not receiving payments from the equally stressed retail sector. It is because 91 per cent of the respondents have received less than 25 per cent of their dues in the last quarter – and close to 85 per cent are not expecting their dues to be cleared in the next 3 months. In fact, 44 per cent of the respondents fear that 20-50 per cent of their dues will turn in to bad debts, and another 10 per cent expect even a higher percentage of bad debts.

“All these findings reflect an extremely grim future for the garment industry, and survival of many of the smaller players looks extremely doubtful’, said CMAI president Rakesh Biyani.

“It will take at least another year for our members to reach back to the normal business conditions,” Rajesh Masand, vice president, CMAI, added.

CMAI chief mentor Rahul Mehta cautioned about the severe job losses in the industry. “Looking at the survey results, I would not be surprised if close to 25 to 30 per cent of units shut down. I am also expecting job cuts of 25 to 30 per cent even in the companies that somehow survive this year.”

The Indian garment industry currently has around 85,000 factories, largely in the MSME sector. The industry employed around 12 million workers in the pre-COVID era.

Source:Fibre2Fashion News Desk (RKS)