The biggest impact from the recent budgetary proposals in the textile value-chain segment is expected to be without doubt, on the clothing retail category.
To add fuel to the already raging fire of abnormal hike in raw material prices like cotton, the finance minister delivered another blow by imposing mandatory excise duty of 10 percent on branded garments.
In a recent exclusive interview given to fibre2fashion a few days before the budget, Mr Govind Shirkhande, CEO of Shoppers Stop had said that clothing brands may hike prices by 10-15 percent, due to surge in cotton prices.
Now, they have been saddled with a 10 percent excise duty, which in turn will mean more increases in prices of apparels, unless the retailers are able to absorb part or full of the proposed duty levy.
Speaking exclusively to fibre2fashion, Mr Arun Sirdesmukh, CEO – Reliance Trends said, “We will have to raise prices because of this levy. Top this up with flare-up in raw cotton prices and the net effect is for everyone to see.
“I do not foresee any clothing brand being able absorb such abnormal hike in costs, which means retailers will have no alternative but to pass on these augmented costs to consumers. I am yet to come across anyone who has said they will absorb these increased costs.
“May be, the summer season might not witness hike in retail prices, but the same can be expected July or August onwards. We will have to wait and watch, whether it will impact demand and if consumers will accept these prices”.
Explaining further he said, “When cotton prices go up, we have some choices like changing the product mix or blends of the clothing fabrics. But, when 10 percent duty is imposed, there is no way to escape the impact. The only way forward is increasing retail prices”.
“We exist because there is a consumer. I hike prices and the consumer says, 'sorry last year I bought so much but this year I cannot buy as your prices are too high'. What happens? The retailer is directly impacted by this consumer attitude”, he added.
When asked if there were plans to approach the government to reconsider the levy, he said, “Clothing Manufacturers Association of India (CMAI) led by Mr Rahul Mehta has already sent a protest letter to the finance ministry, with a request to hear our side of the story”.
“Rather than protesting, we will have to rationally and powerfully explain that this decision will impact the market in more ways than one. One of the other questions raised by the sector is why 10% when another 120 articles have been proposed a levy of just one percent”, he concluded.
Fibre2fashion News Desk - India
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