More than 100,000 fashion manufacturers and 10,000 retailers have closed in protest of the increase in excise duty on branded apparel announced last week.
By on March 8, 2011
NEW DELHI — More than 10,000 retailers of branded apparel — including small shops in markets and in bigger malls — shut their doors throughout India Monday in an act of solidarity with fashion manufacturers.
Producers in India have been protesting since the government unveiled a 10 percent increase in excise duty on branded apparel last week. On Friday, more than 100,000 factories closed in a protest orchestrated by the Clothing Manufacturers Association of India.
“We have to encourage consumption and not discourage it,” said Kumar Rajagopalan, chief executive officer of the Retail Association of India. The strike is estimated to have caused the loss of about $38 million worth of business in a single day.
As the India Retailers Association takes up the issue, both big and small retailers are joining the protest. “We are approaching the ministry to reconsider the decision and hope to witness positive results out of it,” said Govind Shrikhande, managing director of Shoppers Stop. Other retailers including Pantaloons and Arvind Brands, which operates stores for brands such as Arrow, Izod and Polo, participated in the strike.
There is also anger that the budget did not address the issue of opening up the retail sector to foreign direct investment, which had been widely expected. Currently, overseas companies cannot own more than 51 percent of a monobrand retailer, while FDI is barred in retailers of multiple brands.
“It’s a negative step and we feel it should be held in abeyance,” said Premal Udani, chairman of the Apparel Export Promotion Council, speaking about the government decision on excise duty. “Also, the domestic industry is already reeling under price pressures, and garments are expensive because of the raw-material hike. This will add to clothing inflation.”
Domestic apparel production in India is estimated to be worth about 1 trillion rupees, or $22.22 billion at current exchange, annually, and the textile industry is the second biggest sector in India after agriculture. The apparel industry employs about 600,000 people nationwide.
According to industry estimates, more than 75 percent of branded apparel sales come from smaller players who already deal with seasonal issues, the skyrocketing price of cotton and the capital intensive nature of the business. Industry executives contend the excise duty could cause these smaller companies to fail.
In the past three days there have been strikes and protests in different regions, with more than 10,000 people protesting in Kolkata and more than 20,000 in Mumbai, in addition to separate protests in cities such as Bangalore, Ludhiana and Indore.
“We will fight it till the end. If the government doesn’t respond positively to our demands, we might go for an indefinite strike,” said Sanjay Jain, vice president of the Federation of Hosiery Manufacturers Association of India.
The issue has unified the industry, with the Clothing Manufacturers’ Association of India lending it a larger voice. “The response from the industry for the strike was very encouraging. We are positive that the government will roll back the proposed excise duty after such a reaction,” said Rahul Mehta, the association’s president.
He said a delegation from CMAI would submit a memorandum of demands to the finance and textiles ministries this week.
“The excise duty has been made mandatory by the government, and this will harm customers, apparel makers and retailers. Keeping the stores closed even for a day means loss of revenues for firms. We will collectively talk to the government,” said Thomas Varghese, ceo of Aditya Birla Retail.
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