Coronavirus diverts orders from China to India

During this time of the year, buyers from the western markets usually travel to China to negotiate deals with garment exporters for the next season. But this time, due to the Novel Coronavirus most of these buyers have cancelled their trips and have started discussing with exporters from India and other countries. While this is good news, the flip side is exporters say they are not in a position to convert the enquiries into orders as they are not able to match the price. What’s more, many exporting units here are stuck as they aren’t able to import accessories from China.

As the 2019 Novel Coronavirus (2019-nCoV) continues to spread across China, many textile factories there have halted operations, disrupting exports of textiles and raw material from the Dragon nation.

T Rajkumar, chairman, Confederation of Indian Textile Industry, said export of finished textile goods, clothing and fabrics can grow by at least 20-30 per cent, providing immediate relief from the drop in shipments last year, due to the virus issue in China.

But the flip side, is cost and capacity. Today, made-in-India products are costlier by around 10-15 per cent compared to competition like Bangladesh, Vietnam, Cambodia and others. Exporters noted that since most of these countries source 90-95 per cent of their raw materials from China, India can still gain an edge if the government responds quickly and offers some tax benefits.

Recently, the textile industry withdrew four per cent incentive given under the Merchandise Export Incentive Scheme (MEIS) on made-ups and garments, with retrospective effect from March 7, 2019. Further, it was said that all incentives under MEIS granted to the exporters of made-ups and garments on exports till July 31, 2019 will be recovered. Further, MEIS of four per cent was also frozen for made-ups and garments from last August. Moreover, there are some pending claims under the erstwhile ROSL scheme that was discontinued on March 7, 2019.

“Enquiries may have started, but with our current infrastructure and pricing, I am not sure if we would be in a position to take advantage. Yes, accessory supply will be impacted but not in the immediate future,” said Rahul Mehta, president of Mumbai-based Clothing Manufacturers Association of India.

“Accessories manufactured and bought by Indian manufacturers are getting struck badly. There were no deliveries after the Chinese New year and all units there remain closed. This will impact on-time delivery to our customers,” said Tirupur Exporters Association general secretary T R Vijayakumar. “We have to start with local sources, but immediately making ready and meeting the quality standards will be tough for us.”

Around 10 per cent of fabric and 20 per cent of accessories make their way from China to India.

The Association estimates over Rs 1,000 crore worth of accessories, including plastic and metal buttons, zips, hangers and needles are imported by garment units in the country from China, as they are 40-50 per cent cheaper than sourcing domestically and from other countries.

T Thirukumaran, managing director, Estee Exports said, “This is the biggest problem we are facing as many accessories are imported from China and if they don’t open factories soon, we will face huge delays. In fact 12 og my own items have been stuck in Guanzhou since January 21”.

He added that for some styles, they rely solely on China for accessories, and for all labels and hangtags, the dependence is almost 90 per cent production. Under these circumstances, the client began to explore alternatives. Thirukumaran says he can run up to March With the existing stocks.

A leading apparel exporter said that when the SARS virus hit China in 2003 and later spread to 17 countries, it did not lead to significant damage. “This time, it could be a cause for worry if the situation doesn’t come under control and continues for a longer time,” the official said.

Source: Business Standard