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“The elephant in the room is cash-flow management and crisis management”: Dr. Koshy

Dr Darlie Koshy, Academician, Industry Expert, Author ‘Garment Exports: Winning Strategies’

Dr Darlie Koshy"The elephant in the room is cash-flow management and crisis management. For cash-flow management, except exemption package to file returns or reduction of interest on delayed payment, there is very little the government will do at this stage given the huge fund requirement and reduction in tax collection with bottom of pyramid's social and health costs taking predominance. Many SMEs will shut shop and consolidation and constriction will happen. There will be constriction in operations and consolidation of big becoming bigger with deep pockets and select buyer support."

The key issue with 40 days lockdown is the Indian consumer has realized the need for preserving cash and therefore, postponed most purchases till October2020 festive season. This could be transient in nature. But there will be huge upsurge in discounted merchandise. Globally, with the meltdown of large format stores and department stores already facing a decline will see Chapter 11 and Chapter 7??? surge. As a domino effect, there will be huge setback for apparel exports from India which will continue to shrink the whole year and beyond. The ‘wheel of fashion’ will come to a standstill and be reset and fashion merchandise will transcend seasons.

Meanwhile, to recommence manufacturing full scale complying with new COVID-19 protocols will take long. Various backlog clearing and dispute settlement with buyers, employees and government agencies including court cases can take up to September 2020 or more.

The elephant in the room is cash-flow management and crisis management. For cash-flow management, except exemption package to file returns or reduction of interest on delayed payment, there is very little the government will do at this stage given the huge fund requirement and reduction in tax collection with bottom of pyramid's social and health costs taking predominance. Many SMEs will shut shop and consolidation and constriction will happen. There will be constriction in operations and consolidation of big becoming bigger with deep pockets and select buyer support.

Besides paralyzing daily lives of people the most important issue that has come up due the lockdown is that of migrant labor as seen in Delhi’s ISBT Terminal, Mumbai’s Bandra railway station and on Surat’s roads. The focus on local labor or decongesting to rural areas where agriculture labor displacement is happening may accentuate. More importantly, acceleration in automation and multiskilling, productivity enhancement and seeking higher value goods, including new focus on Australia, South America and Eastern European countries may take place along with new interest in technical and industrial garments.

India’ domestic market will shrink with either negative or 1.5 per cent GDP growth therefore, affordable fashion will be in focus and online shopping will grow exponentially.

As formal travel, desire for luxury, ostentatious marriages might take a hit the entire fashion orientation will shift structurally both for domestic and exports. The aftermath of global pandemic will also lead to a backlash to some extent against China as Japan and the US indicate. If Indian textile and apparel industry whose biggest enemy is its own fragmentation and turf battles, can come together, it might give a powerful farm-to-fashion integrated approach as a part of global fashion supply chain and can convert this adversity to a once in a century opportunity. However, if past is an indication, Indian textile and apparel industry have often missed the bus!

Views expressed are personal and do not represent the organization he works for as DG and CEO of ATDC or its parent body AEPC.

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