Textile businesses in Gujarat are facing high costs and low demand as the effects of the recession in Europe and the US. This has caused many businesses in the state to lay off employees or put them on unpaid leave.
Naresh Sharma, owner of a Narol-based processing unit, told TNN, "Due to low demand and high cost of raw materials, the units are facing liquidity crunch." “We have been forced to reduce shifts and cut down on labor costs. We are currently operating with 60% of our actual workforce.
Some businesses are using labor contractors to find workers and paying them on a pro rata basis as per attendance. As many clothing businesses are either downsizing or replacing at least 30% of their workforce, about a third of employees will find themselves out of work at any given time. This will also affect the purchasing power of a large section of Gujarat's population.
ET Bureau reported that inventory storage has become more expensive for apparel businesses. High costs and low demand have led to a pile-up of inventory, further depressing demand.
Since Gujarat's textile industry directly and indirectly employs around 70 lakh people, lakhs of people are being affected by the layoffs. Due to the decline in demand for textiles, there has also been a decline in the demand for dyes and chemicals used in the textile manufacturing process.
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