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Indian denim industry paralysed with slow demand

Over the last decade, denim manufacturing saw 15 per cent CAGR. Currently, the industry has an annual installed capacity of 1.5 billion meters, which is the world’s second largest after China. Sales turnover is estimated at Rs 15,000 crores. The industry gives direct employment to four lakh workers, excluding indirect employment. Currently, the total number of denim fabric mills operating in the country has touched 46 as against 30 mills in 2012, an increase of 50 per cent. The installed denim fabric production capacity has also increased from 800 million meters in 2012 to 1,500 million meters with a capacity expansion of 150 million meters.

The current domestic consumption of Indian denim fabric is 750 to 800 million meters, growing at an annual rate of 12 per cent. Further, denim fabric exports are estimated at 200 million meters. As per the Ministry of Commerce records denim exports for 2016-17 were $316 million, registering a total of 11 per cent as against 2014-15 which it was $355 million.

DMA Chairman, Sharad Jaipuria warns, “Post-GST, the denim industry has temporarily closed down 30 to 40 per cent capacity across the board and at present is operating at 60 to 70 per cent capacity due to slowdown in demand and over-capacity in the industry. If the present trend continues there can be more production cuts,”

And Akhilesh Rathi, Director, Bhaskar Denim says besides over capacity, the industry has also been paralysed due to the reasons that denim needs to be cut, sewn and washed before it can be marketed. These upstream activities are majorly done in the unorganised sectors located at the SSI hubs of Gandhi Nagar and Tank Road in Delhi, Ulhasnagar in Mumbai and Bellary near Bangalore. These hubs mainly slowed down due to the liquidity crunch in the economy post demonetization and the slow acceptance of GST by small players to become part of the formal economy. As almost 85 per cent of the fabric is sold in the domestic market, denim mills are badly hit.

Amit Dalmia of R & B Denims feels since upstream activities of garment sewing and washing in SSI hubs will take a while before they change for working smoothly with the formal banking system, we are not foreseeing any short-term recovery of the market. This has led to shutdown / slowdown of many denim mills and loss of jobs in this industry.