India’s Covid Crisis Leaves Garment Supply Chain Hanging by a Thread

Date: Tuesday, May 11, 2021
Source: Sourcing Journal

Garment manufacturers facing another huge loss of business as the state of Karnataka in Southern India went into lockdown April 27, heaved a sigh of relief this week as the state government cleared factories to function.

Although retail, malls and shopping centers are closed, and shops for essentials are open for just a few hours each day, garment factories have been allowed to function with 50 percent staff.

Karnataka’s capital city of Bengaluru, one of nation’s larger manufacturing clusters, has more than 1,800 garment factories making goods for global brands including H&M, Gap, Walmart and Uniqlo and makes a sizable contribution to the the $16 billion in garment exports flowing out of India, among the world’s top apparel manufacturing countries.

India continues to reel under a severe second wave of Covid-19 with fast-rising cases and mounting deaths. The weekend saw an additional 400,000 cases on Saturday alone and a daily death toll of more than 3,600. Beginning Tuesday, the U.S. will be restricting travel to and from India, which is battling a highly contagious Covid variant, known as B.1.617 that was first spotted in the country. As of Sunday less than 2 percent of India’s citizens have been vaccinated, according to reports.

While the initial reasoning for the 14-day lockdown as announced by Karnataka chief minister B.S. Yediyurappa was that garment factories needed to stay closed since workers were in close proximity to one another, worker unions and garment factory owners argued that the construction sectors and agricultural activities were allowed to remain functioning and that the garment industry had already suffered enormously over the past year.

Typically, lockdowns have been announced for an initial period in most states, and then extended on a weekly basis, as is the case with New Delhi, which has extended its lockdown through May 10.

A spokesperson for the Garments and Textile Workers Union (GATWU) said that more than 85 percent of the garment workers in the region were women, and the impact of a factory shutdown would reverberate across the industry, making it crucial for them to keep earning during this difficult period.

During the first lockdown in March and April, India’s gross domestic product plummeted 24 percent and manufacturers and labor faced tough choices—economic losses for factory owners, and a huge migration issue for factory workers who made their way home to other states. This could have accelerated the spread of the virus to locales outside of cities. “Another lockdown of factories could put the industry in further trouble by sending workers to their hometowns again,” said B.C. Prabhakar, president, Karnataka Employers Association.

He said that garment factories are the largest employers in the area, after agriculture, adding that more than 800,000 workers were working in the sector in Bengaluru itself.

Each state in India has been making its own decisions about lockdowns and what is permissible. In another one of the big manufacturing hubs in Southern India, Tirupur, known as the knitwear capital of India, close to 30,000 garment manufacturing units and factories continue to function despite the growing pandemic.

“Manufacturing has not been halted here,” said Raja Shanmugham, president, Tirupur Exporters Association. “The Tirupur cluster is coping well to handle this tough situation with strict health guidelines in place and the entire district administration as far as Covid-19 issues are concerned.”

But Tirupur has faced a dearth of garment workers since the first wave of the pandemic last year, when the migrants who make up 40 percent of the state’s workforce fled the region and didn’t return, said Ilana Winterstein, urgent appeals campaigner at the Clean Clothes Campaign. Most of the workers flowing in from other states to make up the shortfall are new migrants, she noted.

Even then, workers are starting to return to their home states fearing health risks and lockdowns, said Apoorva Kaiwar, regional secretary, South Asia, at IndustriALL Global Union. Employers have gone to great lengths to convince workers to stay. In April, the Tiruppur City Police rescued 19 women, originally from the eastern state of Odisha, who were allegedly forced to work against their will at a factory in Tirupur’s Velampalayam district.

In Tirupur and elsewhere, “[the] industry is already facing the impact with reduced orders,” Kaiwar told Sourcing Journal. “Workers worry about increasing Covid cases and the possibilities of another lockdown which might pose difficulty in returning home.” The home-based sector, which lacks formal oversight or safety protections, is also being ravaged by disease. “The [unions are] receiving information about infection and deaths continuously,” she said.

Aseem Singla, owner of Fashion Images Overseas, a factory in the Rajasthani capital of Jaipur, and board of governors member for the Apparel Training and Design Center, said that 25 percent of the state’s migrant workers have already left, and others are thinking of returning to their home villages as well. He expressed hope, however, about a vaccination drive that began this month for everyone above the age of 18 and is “going very fast.” Despite the night and weekend curfews in Rajasthan, garments are considered a perishable good, so factories are able to operate even during restricted hours. “That gave confidence to supply chain and manufacturers to complete the orders,” Singla said.

The Japanese brands Fashion Images Overseas predominantly produces for “are understanding the situation” and have confirmed that they will accept orders after due dates, Singla said. Due to poor sales wrought by the pandemic in general, however, brands are buying smaller units of styles with many color and size options “as they want to play safe.”

“We understand this problem of brands and are trying our best to cater to their demands because in this time everyone has to understand each other problems and cooperate to [the] maximum so [we] can survive in business,” he added.

Overall, targeted lockdowns by state governments, particularly in the garment-manufacturing hubs of Noida, Ludhiana, Bengaluru, Jaipur and areas around Mumbai, which are currently hotbeds of the contagion, pose a risk to the supply of ready-made garments, said Aditi Mittal, Asia Analyst at risk-intelligence firm Verisk Maplecroft. While there have been no massive export cancellations so far, she said, factories at Noida and Bengaluru are operating at 60 percent to 70 percent capacity, according to one on-the-ground source.

“Considering the massive surge in Covid-19 cases, we expect the garment production output to dwindle in the next three to four months due to the movement of migrant workers, delaying exports,” Mittal said. Beyond the current deluge of infections, Indian garment manufacturers are also facing down a 9 percent uptick in yarn prices sparked by an increase in global demand following the United States’ Xinjiang cotton ban.

The undersupply of cotton in the sector, coupled with an increase in packaging costs and continual labor shortages, is set to drive prices up by 30 percent to 40 percent in the next three to four months. “We expect this trend to continue throughout the year,” Mittal said.


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