Following the demonetization, mills want the working capital limit to be enhanced by 50 per cent. Stocks have started piling up across the value chain of the industry and textile units say they are not in a position to collect any receivables. The result is that the cash flow of the textile industry has been seriously affected.

The industry assumes it would take at least six months to reach normalcy but in the meantime cotton prices have increased by around Rs 2,000 per candy as arrivals in the market came to a grinding halt during the first ten days after demonetisation.

The spinning sector was already reeling under a recession due to a sharp fall in yarn exports and now the withdrawal of around 86 per cent of the currency in circulation has led to a severe shortage of funds for regular operations such as purchasing the raw material, that is, cotton, and the sale of finished goods.

Textile retail showrooms and shops across the nation have been hit by the cash-crunch and low sales as customers have been saddled with Rs 2000 notes which they don’t know what to do with.

A two month moratorium has been granted for loans up to a crore, but the textile industry says it needs at least a year’s moratorium for repayment of the dues and interest.