The current global market scenario is more challenging than it has ever been before, and a famous acronym “VUCA” that stands for volatile, uncertain, complex and ambiguous accurately describes the present state of affairs. Not just textiles but all businesses face uncertainties, and predicting the future of the business environment has become a stupendous task with no assurance of its fruitfulness. Changes in government policies, natural calamities and other factors are contributing to the volatality all over.
Twenty-five years back one could assume certain circumstances and make decisions and even keep back-ups for any possible leak or loop and sail through the storm smoothly. It was easier then to predict the course of events. Today it has become extremely difficult to judge what would happen next and predict the exact the market trend, changing preferences and fashions especially in terms of textile products. These fast-moving conditions are very difficult to tackle, even from the machinery manufacturer’s perspective. There are changes also on the demographic and business fronts alike, and the lack of certainty has emerged as the biggest challenge of all.
Unlike the well-organized spinning sector in India, the knits value chain is mostly decentralized and highly unorganized. One of the main disadvantages of the players in the Indian knits textile segment is their lack of competitiveness both in terms of production cost and quantity. India still does not have volume players who can cater to a range of customers. This is due to the lack of methodical structure, and unless it becomes more organized and efficient in terms of both productivity and quality, the main challenge will be to do so, and do it in volumes.
Investment in the latest technology is also essential to keep up with the global standards. Developing markets like India may follow the example of countries like China that have reached the top through voluminous production. Textiles are a necessity for human survival. The industry is witnessing growth in all its segments, apart from apparel. Uncertainties will always be a significant aspect of the market dynamics, but the demand for textiles is ever growing.
Mr. Abhay Sidham, CEO, Batliboi Textile Machinery Group, said that in order to meet such demand the industry has to be more competitive in terms of volume and faster deliveries to cope with the ever-changing fashion.
Demonetization in India has become a major problem for all businesses and consumers alike. The fact that the retail business was mainly based on cash transactions, especially for smalltime manufacturers as in the handlooms sector, the problem left them perplexed. Such a sudden change in the structure of the economy affected the overall textile value chain.
The Indian economy seems to be recovering from another impactful problem, the Goods and Services Tax (GST) rolled out by the government towards the end of 2016. While new tax systems was implemented for the better future of the country, the present economy is facing difficulties. Before GST, the bottom of the value chain was not tax bound, and paying an immediate tax of 18% has created a major liquid cash crisis. However, from a long term point of view, as the impact of GST wanes out it will be beneficial both for the business and customers.
The impact of GST is evident also on imported goods. When capital goods are imported, their input tax credit is much higher than the tax liability, posing a big challenge to the trade them. Paying the tax amount proves difficult in most case and affects the financial condition of a company. This is a big issue for small entrepreneurs and growing businesses. Small and growing businesses are move adversely affected. As Mr. Abhay Sidham said, “these small firms are not sure how to accommodate that 18% amount in their finances because with capital machinery it could prove really difficult to pay such a huge amount up hand.”
In the past six months the capital investments have declined sharply, and most of the orders received in terms of investment in the OE spinning sector are from the replacement market. Not many new ring spinning projects have been undertaken by companies. The processing side, however, did get some good orders especially for effluent treatment plants. Batliboi recently started representing a company called Danitech from Italy offering Softfow dyeing machines with very innovative concepts resulting in optimized water consumption and much higher productivity.
With the implementation of GST people saw it as another tax burden on the sector players of all the markets across the Indian economy. Many of the companies are still recovering from its impact, and many will face this hardship in the near future as well. Mr. Abhay Sidham rightly said, “growth could be expected in the export market, but the domestic market is sure to face some more hurdles before the growth phase”.
The coming six months will play a decisive part in determining government intentions about the market. Although the textile industry has a lot of potential in all the world markets, the uncertainties faced seem to be a part of the future as well. It might take some time to adjust to these changes, but with time the economy will eventually pick up the pace and flourish.