In dire straits

The fiscal year 2020-21, is likely to be one of the most challenging years in recent decades. However, governments can minimise the impact of COVID-19 and the possible recession by being proactive and micro-managing situations. For instance, the Indian apparel sector is in deep trouble, as large retailers in the US and Europe are cancelling current and future orders, since the retail outlets in their countries are shut, due to lockdowns. India apparel exporters have large inventories of finished products, raw materials, etc., which will have to written off.

Garments are almost a “perishable” product, for they are made against specific orders, dictated by prevailing fashion trends. Production in many of the apparel factories is grinding to a halt.  However, the units are required to pay full salaries to all employees. Now salaries constitute 25- 30 per cent of the cost of a garment, as compared to about 7-8 per cent in any other industry.

Many of the units are in danger of having to shut down completely. The apparel sector needs the active support of the government. For instance, the wages of the staff can be paid from the ESI, which the units have been paying. The government could also pay the EPF of the staff for about three months. Banks can contribute by increasing the working capital limits of manufacturing units by 25 per cent, without additional collaterals. GST payments should be deferred for a period of three months, without any penalties.

These steps may help the garment manufacturers to survive the current crisis. It will also help them to keep their workers during this lean period and provide them with food, accommodation, etc., during this grim patch.

With the lockdown in India, millions of workers, not sure if the lockdown will be extended and whether they will have jobs later, are trying to get back to their villages. Whenever the lockout is lifted, many of the workers may not return immediately to the cities and their jobs. This will cripple manufacturing units.

It is therefore critical, that governments across countries take proactive steps to ease the pain of manufacturing units, to ensure growth in 2020-21. Tough times come and go. However, we can never lose our humaneness and hope.

Rajendra Aneja — Mumbai, India