Fewer footfalls and poor business: Inflation has brought Erode's textile business to its knees

Rising Inflation has made several commodities dearer, but not many saw the sharp spike in cotton prices coming. The price of a candy has surged from Rs 43,000 in April 2020 to a whopping Rs 1.1 lakh today. The surge has brought many wholesale establishments in Tamil Nadu's textile hub of Erode to a standstill.

In some cases, wholesale stores have had to double their procurement budgets to buy raw materials. Others have not had that luxury. At Dhanalakshmi Mohan’s shop, located within Erode's famous Texvalley shopping complex, for instance, sales have more than halved in the last month, forcing her to cut procurement, and still take a hit on margins.

"A piece of fabric that we used to buy for Rs 150 now costs Rs 250," says Dhanalakshmi who owns Angalamman Tex, "We have no option but to cut our margins by 20 percent and sell, because that's the only way we can do business."

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For the last few weeks, textile manufacturers along the Tiruppur-Erode belt have been asking for a ban on exports in order to balance the supply situation and bring prices back in check. But wholesale traders in Erode say that a ban on textile exports could spell doom for their business. While some wholesale stores in the town have absorbed inflationary pressures into their margins, others say they can’t help but pass it on to the customer.

Since prices started rising in April, shopping complexes and wholesale stores have seen footfalls drop by 60 percent. Despite the poor turnout, merchants say they will have to pass on higher costs to protect already thin margins, even if it deters customers.

"My margins are going to remain unchanged," says MV Maruthapillai, Proprietor, Harsan Home Tex, "If I'm selling three meters of fabric for Rs 1,000, and have to contend with a Rs 75 price-hike in procuring that fabric, I'm going to sell it for exactly Rs 1,075."

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Just next door, Erode-based textile mill, and wholesaler, Vijay Mills, has also hiked prices. "Prices have been increased by Rs 200 to Rs 300 per product, depending on the product and the product value," says RE Vinothan, proprietor, Vijay Malls, “That is about 15 to 20 percent per product."

So far, the government has not done what it did with wheat and sugar — restrict textile exports or ban it altogether. But the nudges have been coming. A week ago, union textiles minister Piyush Goyal called on weavers to cater to the domestic market before thinking about exports. Experts say this reluctance to ban exports is largely because of the industry's heavy reliance on export-led revenues and a mounting order book.

"It (price hikes) is a cyclic thing. It will be there for a moment, and it will get resolved," says C Devarajan, vice chairman, Texvalley Market, "The Indian textile industry is being recognised worldwide. Many people are looking at India as a potential supplier. This will get resolved soon."

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Clearly, the situation does not have an overnight solution. As faltering sales and inflation continue to plague these textile markets, it is becoming more apparent that the consumer will also have to pay a lot more for their next cotton shirt or saree.