The cancellations and postponement of shipments have eroded packing credits and impacted exporters’ fund-liquidity position as cash flows have completely dried up.
“With cancellation of over 50% of orders and gloomy forecast for the future, we expect 15 million job losses in exports and rising NPAs (nonperforming assets) amongst exporting units, hitting the economy very badly,” said Sharad Kumar Saraf, president, Federation of Indian Export Organisations (FIEO).
Most of the retrenchment will be in labour-intensive sectors such as leather, gems and jewellery, handicrafts and textiles.
The apparel exports sector estimates 2.5-3 million job losses because of order cancellations and buyers not clearing dues. “We expect around 2.5-3 million jobs both direct and indirect to get lost because of order cancellations and buyers not clearing our dues,” said Apparel Export Promotion Council (AEPC) chairman A Sakthivel.
The apparel sector employs about 12.9 million people and around 70% of apparel units are MSMEs.
While the handicraft sector has pegged job losses at 2 million, a representative of the gems and jewellery export sector said that there will be retrenchment even though the estimate is yet to be finalised.
‘India is Losing Markets to China’
The engineering exports sector could lose an estimated 50,000-75,000 jobs.
The textiles and garments sector employs around 32 million people. The bulk of this employment is unorganised and includes workers on contract, working through labour agencies, permanent and temporary staff. It is the second largest employer after agriculture.
Sakthivel said labour is the largest cost in the industry, with wages amounting to 25-30% of the cost of production. “Further, units operate at thin margins of 3-4% and are completely dependent on export benefits granted by the government,” he said. These estimates come days after the International Labour Organisation said about 400 million workers in India’s informal economy are at risk of falling deeper into poverty during the Covid-19 crisis.
“We are left with very (few) orders and if factories are not allowed to work with a minimum work force to execute them (in a) timely (manner), many of them will suffer irreparable losses and bringing them to the brink of closure as they are saddled with fixed costs, which in any case have to be absorbed by them,” Saraf said.
He said India is losing markets to China as it has resumed work and said the country needed to restart factories without delay. “Small economies like Bangladesh and Sri Lanka too have announced relief packages,” he added.
Calling for a balance between life and livelihood, Saraf asked the government to immediately announce a relief package for exports. FIEO has asked for export-related manufacturing to be allowed to resume immediately with a minimum workforce adhering to safety, sanitisation and social-distancing norms.
It suggested interest-free working capital term loans to exporters to cover the cost of wages, rental and utilities. It also asked for waivers on EPF and ESIC payments for three months from March to May.
The grouping also sought extension of pre- and post-shipment credit by 90-180 days on maturity, rollover of forward cover without interest and penalty, automatic enhancement of limit by 25% to address liquidity challenges and extension of interest equalisation benefits.
A representative of the cotton textile industry said layoffs could be avoided if banks are lenient in offering working capital to the sector and provide support when contracts in foreign currency collapse.
“The issue of layoffs can become serious if banks don’t show forbearance,” the person said. “This is crucial so that we can retain labour especially because they are trained labour.”
This an opportunity for India to mitigate the risks associated with products from China and capture market from competitors such as China, Bangladesh and Vietnam, the person said.