INTERNATIONAL CONFERENCE ON

ADVANCES IN TEXTILE MATERIALS AND PROCESSES (ATMP) 2019

EFFECT OF DEMONETIZATION ON TEXTILE INDUSTRY

Madan Lal Regar1, A I Amjad1, Sufia Azim2 Aakash Jaiswal3
1
Department of Textile Engg., Uttar Pradesh Textile Technology Institute Kanpur, UP, India
2
Department of Basic Science, Uttar Pradesh Textile Technology Institute Kanpur, UP, India
3
Department of Textile Tech.. Uttar Pradesh Textile Technology Institute, Kanpur, UP, India
Abstract:
The withdrawal of a coin, note, or precious metal from use as legal tender. In 2016, the Indian
government decided to demonetize the 500- and 1000-rupee notes, the two biggest denominations in
its currency system. With little warning, Prime Minister of India has announced to the citizenry on
Nov. 8, 2016 that those notes were worthless, effective immediately, and they had until the end of the
year to deposit or exchange them for newly introduced 2000 rupee and 500 rupee bills. The
government also introduced new Rs 500 and Rs 2000 notes and urged people to move towards cash-
less economy.

India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries.
Even today, textiles sector is one of the largest contributors to India’s exports with approximately 11
per cent of total exports. The Cotton Textile Industry contributes nearly 30% of the value of exports,
and employs more than 55 million labors. The Indian textiles industry, currently estimated at around
US$ 108 billion, is expected to reach US$ 223 billion by 2021. Domestic Textile and apparel industry
contributes 2% to India’s GDP and accounts for the 10% of industrial production 27% of the country’s
foreign exchange inflows and 11% of the country’s export earnings. The industry is the second largest
employer after agriculture, providing employment to over 45 million people directly and 60 million
people indirectly. Demonetization and GST affected the textile sector in different manners, and their
timing had a significant impact as well. Its impact on textile industries was deep and impactful.

The timing of demonetization had adversely affected winter sales, which saw a sharp decline in
contrast to its growth over the preceding periods. The winter sales have been impacted by 30 to 40
percent leading to stock accumulation at all levels in the chain. A lack of card payment acceptance
mechanisms further escalated the problem. As per a study conducted by Edelweiss securities, Aditya
Birla Fashion and Retail (ABFRL) lost about Rs. 100 crores in sales across all segments due to
demonetization, while Monte Carlo suffered an 18% decline in revenues during Q3 2016-17. The
share prices of several companies saw a sharp decline post demonetization period as well. Raymond’s
share price, for instance, declined by 24% from Rs. 604 on 8 November 2016 to Rs. 460 on December
26, 2016, while Siyarams fell 20% from Rs 1480 to Rs 1175 on November 23.

The overall impact on the sector, however, was limited as one third of the Indian textile industry and
was estimated to export focused.