Indian Handmade Carpet Industry Biting Dust

Posted by Writer at 4:39 AM

The once flourishing Indian handmade carpet sector is presently reeling under tremendous pressure on account of the global economic slowdown and an unfavourable tax policy.

Dwindling demand, shrinking profit margins and lack of adequate government assistance have made it difficult for small scale industries (SSIs) in the handmade carpet sector to perform efficiently and sustain their businesses.

Rising taxes have further added to the woes of small handmade carpet manufacturing and export units, who have already been hit hard by the contraction of export orders by overseas clients.

The export-oriented handmade carpet industry has a major share in the international markets, and provides employment to millions of people in the country. More than 2 million rural artisans depend on this industry for their sustenance. Over Rs 35 billion worth handmade carpets are exported to various countries by small and mid-sized carpet manufacturing and supplying units.

However, the declining demand and withdrawal of orders placed by the international clients have led to an uncertain future for the carpet weavers and exporters. According to an All India Carpet Manufacturers’ Association (AICMA) report, export orders worth about Rs 3 billion have been cancelled recently.

Besides, delayed payments and reluctance of banks to offer credit assistance to the carpet industry has further made it difficult for them to sustain their production and export operations. Stiff competition from neighbouring countries like Pakistan, China and Nepal among others is also leading to erosion of profit margins of carpet exporters thereby rendering them less competitive. The stringent financing norms of banks for lending to this sector are the other major obstacles for small units to get easy access to loans.

To rescue the carpet industry from the ongoing crisis, the government needs to undertake important initiatives and introduce tax exemptions. Marketing and credit support from the government and banks can help garner adequate revenues for the industry.Technology upgradation, enhanced duty drawback rate (DDR) and low interest charges on export finance can help revive the fading industry.