The recent strike by garment manufacturers against the levy of 10% excise duty on garments affected the denim and fabric producers badly.
The recent strike by garment manufacturers against the levy of 10% excise duty on garments affected the denim and fabric producers badly. So much so that it created a huge glut of fabric in the market. Garment manufacturers were on strike for almost a month.
India produces about 800 million metres of denim. "But due to the strike by garment manufacturers, there has been a glut of more than 100 million metres denim fabric.
On other side, the demand has not yet started," said CMD of Arvind Ltd, Sanjay Lalbhai.
The situation was bad as supply was much more than the demand. "During April to June every year, around 18% of the production takes place. And with the situation of oversupply due to strike and falling cotton prices, the impact seems larger," said Vikram Oza, director (finance) Jindal Worldwide. However, Ashish Shah, MD of Aarvee Exports, said, "The impact of strike on the demand was felt in
March. The current situation of glut is due to crashing of cotton prices."
Agreeing with him, Deepak Chiripal, director of Nandan Exim, said: "The prices of cotton crashed by almost 35% in a month. And, in the situation of excess supply there are chances that prices will fall by 10% to 15% in a month."
But the industry is expecting a good demand after monsoon. With around 60% of the production taking place during October-March, the demand is likely to revive.
"The situation of glut will slowly phase out after a good monsoon," Oza said.
And in anticipation of the market reviving with good demand, Arvind Ltd is investing around Rs80 crore to Rs100 crore on opening 100 retail outlets. "As the demand usually rises after May, we are expecting the domestic demand to rise after May and before monsoon," said Lalbhai.
However, Gujarat Garment Manufacturer's Association president Vijay Purohit said, "With the levy of excise duty and increased input and labour cost, the situation ahead would be difficult."
(With inputs from Himansh Dhomse)
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