Thanks to the demonetisation, the Indian textile and apparel industry has lost 30-40 per cent of business. Apparel sale in domestic markets had stopped in the initial days and recovered gradually. Consumers continue to face liquidity tightness, resulting in deferring of purchase. Hence, further recovery might take some time. As the wedding season is on, this would affect the revenue and profit of manufacturers, as apparel purchase is seasonal or occasional.
"The effect on denim sales is even worse. While exports are not affected, the decline in domestic retail sales would definitely hit sales and profit," says R K Dalmia, chairman, The Cotton Textiles Export Promotion Council. Market participants believe output needs to be curtailed to control supply and avoid long-period discounting and stock clearing sales.
Meanwhile, the apparel sector, however, has hailed the overall demonetisation scheme as good for the long term, on expectations of transparency in the entire value chain. Many handloom, powerloom and cottage fabric manufacturers continue to operate largely in cash. Any business with retail connections generates unbilled amounts; in garments, a large section of retailers at the bottom of the pyramid deals largely in cash, without generating bills. Demonetisation is expected to curb all unbilled sales.