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Textile and Automobile Markets in India

Textile and Automobile Markets in India

Student’s Name

Institutional Affiliation

Course

Date

Table of Contents

Cover Page1

Introduction3

FDI in Textile Markets3

FDI in Automobile Markets5

Comparison of Textile and Automobile Markets5

Conclusion6

References……………………………………………………………………………………………………………………………………………7

Introduction

Covid-19 has led to many losses being made in most of the markets worldwide. This is due to the new protocols and policies imposed in most of the nations such as total lockdown and curfew. As a result, most of the industries could not transport their products to different international markets. Besides, these companies did not have enough employees since there are those diagnosed with the disease hence forced to stay at home. This is the same case as it is in the Automobile markets. There were many challenges experienced when importing machineries and car spares from nations put under total lockdown. Some automobiles companies such as VolksWagen that have branches in different nations could not conduct their routine activities in the usual way and some of the business activities were forced to be paused. Covid-19 pandemic has seriously affected the growth of the textile industries. Most of the textile units were forced to stop the production processes and many collapsed. The crisis has pushed these industries’ entrepreneurs to take tough decisions such as introducing pay cuts, lay-offs and even asking employees to go on unpaid leaves. This essay will evaluate the impact of Covid-19 on Textile and Automobile markets in India and how the FDI in both markets have changed before and after the Covid-19 pandemic.

FDI in Textile Markets

It is evident that the India Textiles industry has around 4.5 crore employees and includes 35.22 lakh handloom employees workers all over the nation. The industry has contributed to 7% of the industry output between 2018 and 2019. On the other hand, the textile industry in 2018 and 2019 contributed to 2% of the GDP, 5% of the global trade in textile and 12% of the export earnings. Exports of the textiles between April and October 2021 stood at US $22.89 billion. This indicates that the market has a great influence in the economy of the nation and the upkeep of a large percentage of the citizens (Mishra, et al. 2020). The market was however, greatly affected by Covid-19 pandemic that led to many individuals being fired to minimize the production of the cloths as a result of the decrease in the number of people purchasing the cloths. The textile sector has witnessed a spurt in investments during the last five years. The textile industry that includes the printed and the dyed attracted Foreign Direct Investment (FDI) that is worth US $3.75 billion. This was recorded between April 2000 and March 2021. India clothing and textile exports have been predicted to reach 65 billion dollars by 2025. This typically expands at an 11% CAGR.

There is a drop in the amount generated from this sector during and after the pandemic than before the pandemic. For instance, the sector market generated $103 billion in 2020-21. It is however, estimated that the market will generate more in the coming four years which are expected to rise up to $190 billion. Before the pandemic struck completely in the region that is between 2019 and 2020, the industry generated $108 billion. In this amount generated, $75 billion was used domestically in the country while the remainder that constitutes to $28.4 billion was exported to the global market (Nguyen & Vu, 2021). This implies that during and after the pandemic, the textile market in the nation was affected adversely leading to a drop in the amount of money generated. On the other hand, it is evident that the industry had grown before the pandemic and had constituted a large percentage of growth in the national economy. Besides, the industry provides millions of job opportunities to the citizens of the nation hence participating in reducing the poverty rate in the nation. The minister of States for Textiles informed Sabha that the industry’s FDI equity inflow into the nation tallied to $298.67 million in the financial year 2020-2021. This accounts to 14% less than the previous financial year. This implies that since the Covid-19 kicked in, the industry has not being growing as it should be. The foreign investors most probably were stuck in their nations abiding by the covid-19 lockdown rules. Therefore, it became a challenge for the industry ton manage its production costs.

FDI in Automobile Markets

In India, 100% of Foreign Direct Investment is allowed in the Automobile industry. It is evident that the production level of the automobile has gradually increased from 2 million in 1991 to 9.7 million dollars back in 2006 after the industry started participating in the global players in the sector. The automobile industry in India was greatly affected during the pandemic. In 2019, the FDI received in the automobile sector was $2.62 billion, $2.82 billion in 2020 and $1.64 billion in 2021. In 2021, the nation recorded the highest number of people infected with the virus that led to many activities in the nation being shut down. This did not leave aside the automobile industry that was also affected by the pandemic leading to a slightly lower FDI being recorded in the sector (Patnaik, et al. 2020). The amount of FDI recorded in 2021 was lower than any other one from 2015 apart from 2017 which it was recorded to be $1.61 billion. There are many investors in this sector from different nations but due to the situation the covid-19 pandemic had put India into, most of them failed to invest in this market. In 2021, India was put under total lockdown as a result of the new mutant of the pandemic that had killed many people and affected a very large population in the main centers in the nation.

Comparison of the Textile and Automobile Markets

From the analysis, it is evident that the Covid-19 pandemic had adverse effects on both markets. A lower FDI was recorded in both markets during and immediately after the pandemic when compared with the one recorded before the pandemic. This drop was a result of the covid-19 protocols that deterred people from going to public gatherings such as markets, travelling outside and inside the nation even if it is for business purposes and most of them being fired to cut down the production cost and the cost associated with many employees (Dhinakaran & Kesavan, 2020). As a result, there was a low sales rate in the nation both to the citizens in the nation or even in the international markets. However, after the virus was put into control, there is a great improvement as there are more investors from international markets in these sectors that could possibly lead to a positive impact to the markets.

Conclusion

To sum up, Covid-19 pandemic had a negative impact to the economy of most nations all over the world. This is because protocols and policies meant to control spread of the virus deterred people from interacting with each other that constitutes to the biggest part in the business world. Affecting the businesses going on in a nation typically leads to a drop in the economy. Therefore, the drop in FDI in the textile and Automobiles sector influenced the drop of the national economy in India.

References

Das, D., Kumar, K., & Patnaik, S. (2020). The impact of covid-19 in Indian economy–an empirical study. International Journal of Electrical Engineering and Technology, 11(3).Debata, B., Patnaik, P., & Mishra, A. (2020). COVID‐19 pandemic! It’s impact on people, economy, and environment. Journal of Public Affairs, 20(4), e2372.

Dhinakaran, D. D. P., & Kesavan, N. (2020). Exports and imports stagnation in India during COVID-19-A Review. GIS Business (ISSN: 1430-3663 Vol-15-Issue-4-April-2020).

Nguyen, H. K., & Vu, M. N. (2021). Assess the impact of the COVID-19 pandemic and propose solutions for sustainable development for textile enterprises: An integrated data envelopment analysis-binary logistic model approach. Journal of Risk and Financial Management, 14(10), 465.


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