Textile and Clothing Industry Severely Hit by COVID-19

By Tanveer Ahmad Khan | Aug 31, 2020

In the fall of 2019 when the virus hit China, Indian firms began to feel the brunt as India imports various raw materials from China. When the lockdown was announced and within no time became a universal instrument to fight the virus, it brought disastrous economic effects as a by-product. Textile and apparel producers began to press for the relief package.


The novel coronavirus has challenged the world on every front, be it economy, healthcare, politics, planning or social values at large. This is unprecedented in human history. It is the worst nightmare of the policymakers, who on the one hand are trying to slow its spread and on the other, are trying to make it less deadly in terms of its social and economic impacts. When it struck, the world was totally unprepared to deal with a contingency of such magnitude. In a bid to slow the spread of the virus, a lockdown seemed to be the only viable option. India also announced a nationwide lockdown on March 21, 2020, which is regarded as one of the most stringent lockdowns in the world. As per the Average Stringency Index, prepared by OxCGRT (Oxford COVID-19 Government Response Tracker), India ranks third only after France and Peru. The brunt of this lockdown was borne by the migrant workers who in no time saw their dreams and livelihood shattered as factories closed down. With no work to do, migrant workers started to move back to their native places and India saw a mass exodus of workers unseen in post-partition era.

The textile and clothing sector has been most severely hit by the unholy duo of the lockdown and the pandemic. It is one of the most important sectors in terms of its contribution to GDP, export earnings, employment and industrial output. It contributes 13% to India’s total exports, 7% to industry output in value terms, 2% to India’s GDP, 15% to its export earnings and provides employment to around 60 million people directly or indirectly (Annual Report, 2018 – 19, Ministry of Textiles). It was estimated to be worth US$100 billion industry in January 2020. It includes a wide range of players, including manufacturers, retailers, wholesalers and exporters of cotton, handloom and woollen textiles. It also includes those engaged in the manufacturing of capital goods, such as textile machinery and equipment, dyes and raw materials, delivery of finished textiles, fabrics and garments. Exports from India were projected to reach US$ 82 billion in FY2021 from US$ 39 billion in FY2019.

The pandemic has not only impacted the demand in the textile and apparel sector but also its supply. India is one of the major textiles and apparel exporters (around 60% of country’s exports) to US and EU markets and these markets are hit hard by the pandemic. As of July 16, US has 36,34,461 confirmed coronavirus cases and 140367 deaths while 16,02,930 cases were reported in EU. The buyers from these markets have either cancelled their orders or put them on hold because the final consumers are locked inside, shopping malls are closed and access to online marketing is restricted. A report by Wazir Advisors titled, Impact of COVID-19 Scenario on European and US apparel Market’ has estimated that that the combined US and EU apparel consumption might fall by about US$ 308 billion, around 45% lower than projected in 2020. T Rajkumar, Chairman, CITI (Confederation of Indian Textile Industry) said that, ‘…the spread of the virus in China and which later got spread to EU and USA has majorly impacted us as they are huge markets for Indian textile products.’

The cascading effect of external demand shock along with domestic demand slack resulted in lower production. Firms were shut down and production fell drastically. D L Jha in an article in the Business Standard, projected that textile units will see a spike in unit costs by around 25% even if the lockdown is lifted immediately. The retail prices will see a jump because sanitization and social distancing are going to add to the costs of the products, which will be ultimately transferred to the consumers. This will make the deficient demand a perennial phenomenon for the industry. The virus has shattered the supply chain at each level and presented itself as the worst crisis the sector has witnessed in centuries.

The Textile and Clothing Industry occupies an important place in the manufacturing sector in terms of its contribution to employment. It is the largest employer after agriculture and employs around 45 million to 60 million people directly or indirectly. Most of this employment is in the informal sector which accounted for 88% in total employment in apparel in 2010-11 and the paid wages amounting to half of that of the formal sector. While the pandemic has affected both formal and informal sectors, the impact is going to be more disastrous for the workers in the informal sector, which is characterized by the lack of social security provisions, paid leaves, healthcare provisions and other safety nets for the employees. This has further added to their vulnerability. In the formal sector, the increasing contractualisation of workforce, a post-liberalization phenomenon, has helped the employers in retrenching workers with ease during the pandemic. This has led to a mass exodus of workers from cities back to villages. The CMAI (Clothing Manufacturers Association of India) in April has projected that there could be a job loss of one crore in the textile sector due to the COVID lockdown. In Bangladesh, it is estimated that the textile industry alone will suffer a loss of £2 billion due to the pandemic. Workers in Bangladesh were also laid off because western retailers cancelled their orders. On May 3, The Hindu, published an article on the textile industry in Punjab and pegged the losses at around INR 2,000 crore so far.

Structural changes triggered by coronavirus

The virus has shown us that the global supply chain is highly fragile and fundamentally susceptible to disruptions. The weak links in the supply chain can pose a great threat to the entire ecosystem on which the textile business rests. The industry across its supply chain needs reorientation and restructuring towards a more sustainable and resistant web. Andrew Busby, in an article published in Forbes, argued that prior to the pandemic, the only talk in town when discussing the fast fashion, was sustainability. He is of the view that it was expected to be achieved by 2030 but coronavirus has reduced the timeline to just weeks. Robert Antoshak, a textile consultant, in his blog argues that, the pre-virus apparel industry was not sustainable. It was only a matter of time before the ailments in the sector caused the industry to either falter or, worse, collapse. It doesn’t matter: COVID-19 has elected the latter.’

The virus will end sooner or later. The post pandemic world will be altogether different. Most industries, such as automobile, pharmaceuticals etc., will see a sharp rise in demand but it will not be so for the textile industry. Its nature and the customer-product relationship are such that makes it more susceptible to a post-pandemic recession. McKinsey, a leading global consulting firm is of the view that once the dust settles on immediate crisis, the fashion industry will face a recessionary market and the industrial landscape will undergo rapid structural transformation. It further argues that the textile and apparel industry will see a period of recovery which will be characterized by a lull in spending and slack in demand across channels. Enrique Silla, the founder of Jeanologia, explains that after the crisis is over, consumers will feel uncomfortable to touch and feel garments in retail stores. They will be nervous about who would have touched the garments before them. The psychological damage brought by the virus will make people less likely to spend as nobody will like to fill their wardrobe just to feel better when they cannot enjoy wearing the clothes outside. If social distancing becomes a norm, people will stay out of retail stores. It also connotes long queues outside shopping malls, an implicit tax on consumers. If the textile industry has to sustain in the post-pandemic era, it has to regain consumer trust. However, the damage done will take generations to bring back the consumer confidence back to pre-pandemic levels.

During the pandemic, the demand for protective masks and other health textiles increased beyond their supply and the Ministry of Textiles has issued guidelines and encouraged firms towards the production of these products. However, this shift in demand is not enough to compensate for the havoc the virus has created in the industry. There will also be a shift from purchasing lifestyle needs towards basic commodities. The apparel industry has already lost the summer cycle of sale and given the current situation it is almost certain that the virus will hit the winter collections as well.

Government response

In the fall of 2019 when the virus hit China, Indian firms began to feel the brunt as India imports various raw materials from China. When the lockdown was announced and within no time became a universal instrument to fight the virus, it brought disastrous economic effects as a by-product. Textile and apparel producers began to press for the relief package. The industry being the significant employment player in the entire manufacturing sector has multiplier effects on the economy. A sector specific stimulus package will have spill-over effects across other sectors.

Keeping in view the precariousness of the sector and the mounting pressure, the Government announced a relief package for the Micro, Small and Medium Scale enterprises (MSMEs). The reform package, though scant, covers a lot of areas, including redefining of MSME, collateral free loans with moratorium of 12 months on principal repayment and interest payments, 25% reduction in TCS (Tax Collected at Source) and TDS (Tax Deducted at Source) to improve liquidity and a marginal reduction of 2% in employer’s and employees’ contribution to the Employment Provident Fund. These reforms are expected to benefit the textile and apparel industry in a big way as more than 80% of textile firms are micro, small and medium enterprises. It is expected that around 45 lakh small businesses will get benefited from the INR 3‑lakh crore collateral free automatic loans for businesses. The long-awaited demand of textile and apparel producers for redefining the MSMEs was also fulfilled. The government has increased the turnover limit up to INR 100 crore and investment limit up to INR 20 crore for medium-size units. The revised investment (turnover) limit for Micro and Small units is up to INR 1 crore (less than INR 5 crore) and INR 10 crore (less than INR 50 crore) respectively. Ashwin Chandran, Chairman, The Southern India Mills’ Association (SIMA) said that this will benefit around 60% of textile units across the value chain. The government had also announced some labour reforms, which were guided by the questionable theoretical stand that flexible labour laws will promote growth and employment. In order to meet the seasonal demand in the garment sector, contractualization was encouraged. The government, aided by the liberal doctrine, has criticized the textile producers and asked them to shun lethargic behaviour. Smriti Irani, Textile Minister said in a webinar, It is time for the industry to introspect. The textile industry had been looking for packages or supports. Now, it is time for a new direction and new thinking.’ The textile producers are complaining about the lack of credit and high interest rates. These units need loans at lower interest rates as well as export support from government to be able to overcome the coronavirus stress.

These reforms, though necessary, are not sufficient to push the textile sector to its potential level. The anti-Chinese sentiment that has grown due to the virus has brought fresh opportunities for Indian textile and apparel producers. They need to improve their productivity and quality in order to replace China as the supplier of choice’ in international markets. Along with this, China is fast losing markets on account of rising unit labour costs and Bangladesh and Vietnam are filling the lacuna. The Government should come forward to help the textile units in terms of technology upgradation, export promotion and provide tax incentives to them. This will not only bring forex into India but will also help India in its fight with poverty and unemployment.

Disclaimer: The views and opinions expressed in this article are those of the author/​s and do not necessarily reflect the official policy or position of Azim Premji University or Foundation. 


Tanveer Ahmad Khan, Research Scholar at Institute of Development Studies, Kolkata