India'S Second Wave Of New Outbreak Will Have A Slight Impact On The Textile Industry

According to India's rating and research agency (ind RA), the second wave of new crown outbreak may have a slight impact on the supply and demand dynamics of India's textile industry in the first quarter of fiscal year 2021 / 22. Sustained export demand, lessons learned from the first wave of the new outbreak, and strong balance sheet and cash flow will stabilize the credit position of the industry in fiscal year 2021 / 22.

India's major textile centers such as Tirupur, Ludhiana, Surat, Bhilwara and other major textile centers have been blocked and the textile and garment supply chain has been interrupted. Ind RA said the limited flow of goods meant that raw materials such as yarn and fabric were not available and would have an impact on finished product output in the short term. Labor supply will also be affected. Some factory production lines may still be able to operate normally, but the operating rate is limited.

However, Ind RA reports that most cotton mills are likely to have sufficient stocks due to strong overseas demand in the export market in the first quarter of fiscal year 2021 / 22 and due to new inventory during November March.

Supply chain disruption could result in a 20-30% decrease in revenue in the first quarter of fiscal year 2021 / 22 compared with the same period last year. Compared with the spinning and weaving industry, the export of clothing and home textiles, which are mainly for export, may remain flexible. According to reports, as of the end of March 2021, export orders of Indian garment industry increased compared with the same period of last year. Since the third quarter of fiscal year 2020 / 21, container shortage and rising transportation costs have affected the profitability of enterprises and may continue in the short term.

Ind RA said in the report that after the first quarter of fiscal year 2021 / 22 and the second half of fiscal year 2021 / 22, driven by the release of pent up demand, the demand of various secondary industries will recover, and the growth rate will be significantly increased due to the low base.

Due to geopolitical tensions and stalemate in the Sino US trade war, export demand will remain favorable. Export market demand continues to pick up, accounting for at least 30% of India's total textile production.

Although the price of raw materials rose in the second half of fiscal year 2020 / 21, the prices of products in upstream, midstream and downstream markets have just begun to rise, which leads to the increase of profit margin in fiscal year 2021 / 22.

The report added that capital investment in the industry was constrained by uncertainty in export incentives over the past two years and the details of production related incentives in recent months were pending. However, the textile industry performed well in the third and fourth quarters of fiscal year 2020 / 21, as the debt deferral and credit guarantee program helped the industry manage liquidity.