The way the game used to be played before the coronavirus pandemic changed it all with its consequent lockdowns, supply chain issues and cashflow crunches today seems distant memory.
What has made life more complicated for buying houses is that there are too many other factors that are also at play now, some of them interconnected, others having a cascading effect this way or that: oil crisis, rising cotton prices, stagnating growth. The Russia-Ukraine war has made the entire terrain difficult to tread. All these put buying agents in an unenviable position as they need to deal with two sides of the manufacturer-brand equation, in the backdrop of US sanctions on Russia.
Vishal Dhingra, President of Speciality Merchandising Services and Chairman of Buying and Sourcing Consultants, agrees about the tightrope walk. “Not only we are bound towards our clients, but equally towards our factories. We are always trying to bring a semblance to quality and pricing at both ends. For the client we are constantly feeding them with the raw material pricing, labour costs, shipping costs, etc, and for the factory we are trying to teach them economies of scale, better inventory management and better production techniques and investment in updated technology.”
According to Sanjeev Jain, President and CEO of Noida-based TQM Global Buying, the whole outlook has changed since the COVID-triggered crisis. And now, “the Russia-Ukraine war has created uncertainties and insecurities among European buyers and the problem has started to reflect on oil prices—petrol and diesel being the mother of energy sources for the industry. In the coming days, Ukraine being a source of many metals, the prices of raw materials are expected to rise manifold thereby crippling the already affected sector.” There are too many factors to keep an eye on.
“As a global sourcing agency, we have to review and juggle several countries in our bag. Geo-political events impact different regions differently and we try to minimise losses in some regions while maximising gains in the others,” says Venky Nagan, retired Chief Executive Officer of the Hong Kong-based Asmara Group. The rising cotton prices are one. “Due to the domestic cotton crop and supply drop, drop in Chinese imports and freight cost escalations, cotton costs shot up during 2021. However, the emergency measures by the government to remove import duties on raw cotton is a laudable support measure,” says Nagan.
He believes, “The Indian readymade garment (RMG) exports sector has benefited because customers realised that India is the second largest cotton production country in the world after China. Besides, China as a country was re-positioning its economic strategy to a domestic--first policy. Global customers realised these implications and decided to pitch strongly for India.” Nagan adds a cautionary note here: “Simultaneously, China was voluntarily reducing its RMG exports and the Indian government was encouraging the industry through ‘incentives’ to add more power to a cotton industry which was already number two in the world.”
Among recent “incentives” are the removal of tariff for six months on raw cotton imports and approval of lucrative Production Linked Incentive (PLI) Scheme projects.
Nevertheless, there is a need to stride carefully. Jain argues: “As buying consultants, we should cautiously work together in intelligent ways to achieve the overall growth and benefits for our entire export community and customers. We are witnessing an upward trend in business of late and we should focus on the long-term situation and look past the current global situation as the pricing of raw materials will come down, freight will settle down, and the negative situations will get better.”
But, MS Alam, President and CEO of Global Sourcing India, based out of Moradabad in Uttar Pradesh, is not exactly on the same page as he feels ground realities at home are a tad different. “There is a decrease in the production of goods, the goods are not going out on time, and prices are touching the sky, due to which there is a considerable amount of losses.” He minces no words.