Spotlight: Destination India

India Has Left Behind Pandemic Blues, But China Still Far Ahead

The force majeure cancellations and payment battles that socked Indian exports after the first 2020 lockdown are mostly a thing of the past. But if Indian industry has to rise from the COVID-19 ashes, it will have to boost capacities and need the requisite resources too.

Long Story, Cut Short
  • India as a country has many challenges as it is still mainly import-dependent.
  • India loses the initiative simply because it does not have enormous resources like China does, but the Indian government is trying to ensure that the industry gets all the requisite resources.
  • Unless India equips itself with factories with larger capacities which can cater to volumes, it will be difficult to emerge as a big manufacturing hub.
The Chinese factories have huge capacities as compared to Indian ones. Manufacturers in India could not cope with their supply and hence kept losing the initiative.
Stay Away The Chinese factories have huge capacities as compared to Indian ones. Manufacturers in India could not cope with their supply and hence kept losing the initiative. Viktor Talashuk / Unsplash

The way things stand, the current phase of India’s apparel export history—for that matter, anyone else’s too—starts with the beginning of the COVID-19 pandemic. It has been two years since the first major lockdown of late-March 2020 when life and businesses came to a standstill.

Payment issues and force majeure cancellations had then rocked the global textiles-apparel-fashion, and no manufacturing country was left untouched. As allegations and counter-allegations flew around, caught in the crossfire were hapless buying houses, left to tread a thin line.

The global textiles-apparel-fashion industry stands much sobered up now, and yes, the cancellations and payment delays are a thing of the past, says Venky Nagan, retired Chief Executive Officer of the Hong Kong-based Asmara Group. “Brands have had a serious review of their buying practices, reliable sources, shipping tie-ups and financing arrangements. Based on these, we have not seen or heard of bankruptcies, cancellations, postponements, or payment hiccups.”

Nagan says: “Some brands which had to take bankruptcy-protection surrendered the entire project to the nominated legal companies who administered the bankruptcy and explained to every vendor about the true situation and paid up whatever little money that could be salvaged. The decision to continue with the brand in its new avatar was left open to the vendor.”

The force majeure cancellations were the initial kneejerk reactions as the world was trying to get a grip on the pandemic, says Vishal Dhingra, President of Speciality Merchandising Services and Chairman of Buying and Sourcing Consultants. “No one knew what was happening and how to react. That’s a thing of the past now. The Western world, after initial hiccups, reacted maturely and kept the momentum going.”

Sanjeev Jain, President and CEO of Noida-based TQM Global Buying still remembers it well. “Consumer purchases were hit badly due to the global lockdowns and economic recession. The global consumptions were estimated to have shrunk by a huge margin. All economic activities except for the essential goods & services came to a standstill. Customers were forced to cancel orders and payments were held up. Factories suffered a lot of losses during that period. Somehow things have been opening back to normal now and those cancellations and payment things are certainly a thing of past now. Orders are flowing in, and the economy is trailing back on to the roads.

“Big brands and other western countries slowed down their buying pattern in the beginning, but slowly gathered momentum owing to the increased demands due to depleting inventories. As a buying/sourcing consultant, we have been balancing between factories and buyers to reduce the losses on either sides and also maintain a balance in keeping the business flowing in.”

MS Alam, President and CEO of Global Sourcing India, based out of Moradabad in Uttar Pradesh, cannot forget the last two years. The after-effects of the force majeure cancellations and payment issues still remain since “most customers have not still fully recovered. At times, we feel embarrassed in getting caught between customers and sellers. But, what could we have done at all? Even the suppliers knew that the clients did not have any money, but they would confide only in us.”

Big brands and other western countries slowed down their buying pattern in the beginning, but slowly gathered momentum owing to the increased demands due to depleting inventories. As a buying/sourcing consultant, we have been balancing between factories and buyers to reduce the losses on either sides and also maintain a balance in keeping the business flowing in.

Sanjeev Jain
President and CEO
TQM Global Buying
Sanjeev Jain
The after-effects of the force majeure cancellations and payment issues still remain since most customers have not still fully recovered. At times, we feel embarrassed in getting caught between customers and sellers. But, what could we have done at all? Even the suppliers knew that the clients did not have any money, but they would confide only in us, says MS Alam, President and CEO of Global Sourcing India.
Momentary Tiff The after-effects of the force majeure cancellations and payment issues still remain since most customers have not still fully recovered. At times, we feel embarrassed in getting caught between customers and sellers. But, what could we have done at all? Even the suppliers knew that the clients did not have any money, but they would confide only in us, says MS Alam, President and CEO of Global Sourcing India. Hamza Nouasria / Unsplash

When India Lost the Initiative

In very early 2020, China was in the dumps, and the first wave had not yet hit India. There were many who then asserted about it being the right opportunity for India to overtake China. But life comes with its own set of ironies. China was quick to recover (though Shanghai has been a drawback), and Indian industry across the board was battered. What gives?

Nagan believes China was pure and "simply lucky" that the virus did not grow rampant in the first two waves. “Thereby, China went all out and captured the global PPE (personal protective equipment) business either for complete made-ups or at least for the RM component of the PPEs made elsewhere. These were multi-million-dollar contracts.”

On the other hand, India was "plain unlucky" that something called the Second Wave happened after March 2021 and ravaged the population and industries/economy.

Says Nagan: “The Indian government scored a humongous success through their damage-control measures, communication & educational measures, vaccine R&D, vaccine supply chain management and CoWin app, achieving a superfast vaccination coverage over a challenging spread of provinces blessed with effective-vaccines like Covaxin and Covishield. These are more effective than Sinovax and this helped India reach herd immunity. This has prevented an attack from coronavirus variants BA.1, BA.2 and XE.

“The Indian government and people were not complacent or lethargic. They were pro-active, agile, driven and achieved a re-opening of industries, markets, schools, transport-sector very strategically. Luck being like a toss of the coin, then turned its fade-away from China which has been hit by COVID-19 Fourth Wave from March 2022. This time their Zero-Covid strategy and harsh lockdowns in several cities did not go down well with the people while key business districts in several cities and East Shanghai's Pudong-port were locked down impacting business. The Chinese leaders are left embarrassed by rising case numbers, death numbers, and GDP impact due to their lockdowns.”

Jain’s understanding of the subject is a bit different. He contends: “China went into dumps in the First Wave in early 2020, however they recovered soon. Their COVID-related goods gained volumes and they were fast back on track. India was not hit by COVID-19 till late March 2020. India had a great chance to capitalise on the China situation, but they could not and succumbed to COVID-19 soon after. India did make lot of comebacks with COVID goods but that was too late, and the government banned the exports of such items to ensure supply to Indians first. The Chinese factories have huge capacities as compared to Indian ones. Manufacturers in India could not cope with their supply and hence kept losing the initiative. Unless we have factories with larger capacities and are able to cater to volumes, it will be difficult for India to emerge as a big manufacturing hub.”

Dhingra adds to the discussion: “We as a country have many challenges as we are still mainly import-dependent. The price of oil and gas and then cotton all have contributed for us to keep up the lower trajectory in our sector. Overall, the country surpassed the USD 400 billion export target of goods which is a fantastic achievement under the current regime. Also, just today (14 April) the government exempted cotton imports from duties. This will result in better pricing from India for apparel and home products.”

Alam treads a similar line, and believes India is losing the initiative simply because it does not have enormous resources like China does, but feels the Indian government is trying to ensure that the industry gets all the resources that are needed. Global Sourcing India is a buying agency and works as service providers for import and export services from India.

What gives? The government can only do so much. It is for the stakeholders across the integrated value chain to restrategise to work together, build on each other’s strengths, bolster each other’s weaknesses to ensure that ‘missing the bus’ is no longer the leitmotif it chases time and again. Time it is to reshore their capacities.

Venky Nagan
Venky Nagan
CEO (retired)
Asmara Group

Some brands which had to take bankruptcy-protection surrendered the entire project to the nominated legal companies who administered the bankruptcy and explained to every vendor about the true situation and paid up whatever little money that could be salvaged. The decision to continue with the brand in its new avatar was left open to the vendor.

We as a country have many challenges as we are still mainly import-dependent. The price of oil and gas and then cotton all have contributed for us to keep up the lower trajectory in our sector. Overall, the country surpassed the USD 400 billion export target of goods which is a fantastic achievement under the current regime.

Vishal Dhingra
President
Speciality Merchandising Services
Vishal Dhingra
Note: With inputs from Richa Bansal.
 
 
 
  • Dated posted 19 April 2022
  • Last modified 19 April 2022