The business disruptions caused by COVID-19 have dealt another bruising blow to small and medium enterprises just when some of them were beginning to claw their way out of trouble.
Vinod Thapar, 66 Chairman, Knitwear Club, Ludhiana. Photo: Sandeep Sahdev
For the knitwear industry, 70 per cent of fibre and almost all accessories come from China. But given the supply uncertainties, many players have started sourcing from the domestic market, which is more expensive. Also this is a labour-intensive industry and much of the work is done by casual labour. With the industry in the grip of a severe liquidity crunch, manufacturers are forced to engage fewer hands and run far below capacity.
An extended winter had allowed manufacturers to clear inventories. But now, when readying for the next season, they just can’t make a move on because supply of accessories from preferred sources is choked and poor liquidity makes it a challenge to work at the usual capacity. The biggest worry, though, is the uncertainty of demand, says Vinod Thapar, chairman of the Ludhiana Knitwear Club. Much of the MSME sector faces a similar predicament.
Meanwhile, Onkar Pahwa of Avon Cycles in Ludhiana says distributors of their cycles are backing out of orders. The cycle industry generally sees an uptick in demand around March-end. Having quickly resolved the supply glitches with Chinese vendors, either because the vendors are back up or because replacements had been found, cycle manufacturers were hoping to tap the seasonal demand. But with the pandemic spreading far and wide, and the EU becoming the new epicentre, panic seems to have set in, freezing demand.