Demonetization of INR500 and INR1000 Currency Impact on Textile Sector of India

RBI announcement regarding demonetization of INR500 (USD7.7) and INR1000 (USD 15.4) currency notes would impact the textile manufacturers of India

India: RBI verdict of scrapping INR500 (USD7.7) and INR1000 (USD15.4) currency notes is receiving mixed responses from textile sector. The organized textile sector has welcomed the decision as the demonetization decision by RBI would streamline the transaction system and would result in transparent business transaction with overseas traders.  The decision would increase the usage of electronic clearing system for making payments and would reduce the black transactions significantly. On contrary, this decision is setback for unorganized textile sector of the country who is dependent on domestic market for revenue generation. Restriction of withdrawals from bank is expected to impact the weekly payment to contractual workers in textile sector. Additionally, constraints on cash withdrawals would negatively influence the procurement of new cotton, yarns and fabric in India.

TechSci Research depicts that the decision of demonetization of INR500 (USD7.7) and INR1000 (USD15.4) currency notes would temporary halt the purchase of new cotton in India which deflationary pressure would come into force and reduce the prices of cotton for short duration. Additionally, topsy-turvy in business environment of India is expected to reduce the textile related export order for short duration.

 According to the recently published report by TechSci Research, “India Textile Chemicals Market by Product Type (Auxiliaries and Colorants), By Application (Apparel, Home Furnishing, Technical Textile), By Region, Competition Forecast & Opportunities, 2011-2021”, the textile chemicals market in India is projected to cross US$ 2.5 billion by 2021, on account of increasing industrialization, surging consumption of textiles in engineered products and rapidly rising awareness about the benefits of using textile chemicals. Apart from this, rising disposable income and increasing living standards are expected to significantly augment demand for textile chemicals in India over the next five years. Government of India has been increasingly focusing on taking initiatives to make the country’s textile industry more competent on the global landscape.