Garment Industry in Crisis: New Payment Rule Sparks Alarm

06 February 2024, Mumbai

SIGA Urges Repeal of Rule, Stakeholders Propose Solutions

The South India Garment Association (SIGA) has sounded the alarm on a new payment rule for Micro, Small, and Medium Enterprises (MSMEs) that they claim poses an "existential threat" to the garment industry. Introduced as part of the MSMEs Development Act, Rule 43B(H) mandates prompt payment to small businesses by buyers, with late payments now deemed income for the seller and attracting taxes on the buyer.

Industry in Peril: Threatens Jobs and Exports

• SIGA President Anurag Singhla warns of "lakhs of jobs" at stake, calling the rule a "big blow" to an industry already facing competition.
• Naresh Lakhanpal, SIGA Vice President, calls it the "worst crisis in 50 years," with clients canceling orders due to the rule's "unsustainability."
• Industry experts highlight the impracticality, as the average payment cycle is 90 days, making the 45-day limit crippling.

Potential Catastrophe:

• Estimates suggest over 50,000 garment units could be affected, jeopardizing millions of jobs across the value chain.
• Potential consequences include lower production, increased costs, and shifting orders to countries with more relaxed payment regulations.

Stakeholder Solutions:

• Industry-specific exemptions, exemptions for the garment industry, extending payment timelines, and financial support are proposed solutions.
• Phased implementation to allow businesses time to adjust is also suggested.

The Stakes are High:

The garment industry significantly contributes to the Indian economy, employing over 12 million people and accounting for 2% of GDP. 

The government's response is crucial to protecting jobs, industry stability, and the sector's contribution to the nation's economy.

Latest Textile Events