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They were not prepared to take the blow of drastic reduction in incentives given to exporters and stringent GST norms. While bigger companies can at least sustain the crises, small players are the ones who are the worst hit. Though government says GST for textiles is only 5 per cent, there are hidden taxes and they pay up to 13 per cent tax, which becomes a unbearable for small and new players. The most worrying factor is that the negative growth trend in exports is continuing in the current financial year and the average decline of knitwear exports in the month of April and May was 34 per cent. The exports declined as much as 21 per cent during the second half of 2017-18. This was evident from the continuous decline of knitwear exports month after month since October 2017, after three months transition period was over. The knitwear export sector has been passing through a challenging business environment. At the same time, banks and private lenders have tightened their purse strings when it comes to helping small businessmen in crisis.

This has led to a severe tightening of liquidity for exporters which, in turn, has led to a contraction in demand for downstream processing units, leading to their inability to pay back loans on their capital.

However, most have still to receive their GST refunds or the promised refund of State levies that were part of the incentive package. The Centre had promised 90 per cent of GST would be refunded within nine days from the date of export, with the remaining being refunded in 90 days. GST has increased costs, not only of compliance but also of materials, services and working capital. The combination of demonetisation and a hurried, faulty GST implementation has brought Tirupur to its knees.ĭemonetisation completely decimated domestic demand by removing all liquidity from the market. While Tirupur’s exporters managed to overcome external shocks in the past, and ride through periods of slowdown such as the 2008 crisis, the cause of Tirupur’s pain this time is domestic policy.

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Similarly, Vietnam is currently negotiating a free trade agreement with the EU and is already part of the Trans-Pacific Partnership. Bangladesh has already signed an FTA with the EU, which has given them a 10.5 per cent cost advantage over India. This has been primarily due to the FTA-related revenue losses for domestic manufacturers in sectors such as auto and winery. Further, in the new era of bilateral free trade agreements where countries across South and East Asia are rushing to sign agreements with the biggest export markets, India has faltered. It’s hard to compete on a cost basis with lower income countries such as Bangladesh. On the external side is the emergence over the last several years of strong competitors such as Bangladesh and Vietnam. Then contact René Falkenberg on +45 27132551 or fill in your contact information here and we will get back to you as soon as possible.The reasons for Tirupur’s woes are both external and internal.

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