Irfana Farook

B.A Political Science I (20BPS014)

ECONOMIC IMPACTS OF
COVID-19 IN TIRUPUR
Abstract
How did a health crisis translate to an economic crisis? Primarily the city Tirupur was known as
the knitwear capital of India. The spread of corona virus encouraged social distancing which led
to shut down of industries and also led to flight to safety in consumption and investment among
international trade partners. The textile industry in Tirupur stares loss due to Covid-19.
According to the survey of Tirupur Exporters and Manufacturers Association, there is a
reduction in exports and domestic sales. The city was exposed to western markets particularly
European Union and America. Both markets were dwindled because of Covid-19 crisis. Another
important is that, majority of the migrant workers deserted the city. Since the factories resumed
production few come out of the hit, the increasing number of cases did not have a significant
effect on the level of economy.

Introduction
People in Tirupur district in Tamil Nadu, India’s largest knitwear manufacturing and export hub,
face different levels of hardships mainly on the economy due to the Covid-19 pandemic. This
article details the difficulties faced and the coping strategies of garment export, loss of textile
industries, power loom, downfall of economy in Tirupur.

The Knitwear Capital of India

The city Tirupur is known as the Knitwear capital of India accounting 90% of India’s knitwear
exports. Tirupur is the knitwear cluster of India. It has emerged as the knitwear capital of country
in the three decades. Popularly referred as “Dollar City” or “Small Japan” or “Banian City”, it
excels in knitted ready-made garments. In the 1970’s, as a result of collaboration with an Italian
cluster, Tirupur began to exploit opportunities in the export market. Over the last two decades,
Tirupur has emerged as a leading export cluster in knitwear and has established its presence in
Europe, US and in the Pacific. Knitting to the city was brought by Gulam Kadar in 1937 who
established “Baby Knitting Industries” in Kaderpet area of Tirupur. During 1990’s the exports
have been increased in Tirupur and the infrastructure and other basic amenities available is not
enough. Therefore, the people of the region demanded separate corporation. The Tirupur
Municipal Corporation was established in 2008. The latest change occurred in 2009 when
Tirupur district was carved out of Coimbatore and Erode. Presently, Tirupur city was exposed to
the Western markets, particularly European Union and America.
Economic impacts of Covid-19
The textile industry was bleeding since demonetisation, GST then struck and made matters worse
and now the Covid-19 has delivered a big blow. A Relief package is eagerly anticipated by the
textile company owners of the city. It is not likely to provide a big boost to their flailing
businesses, but any relief, they say, is better than none at all. The global economic crisis had
already reduced Tirupur’s exports by half in the last two years. Before that, demonetisation and
GST added to its woes. Rewind further to 2011 and the Madras High Court’s ban on all dyeing
plants that were polluting the river Noyil, brought the industry to a grinding halt. And in the year
2008 global financial crisis when large banks in the US turned turtle, Tirupur went under along
with them. The Coronavirus is the latest in a series of hammerings taken by the gritty
businessmen and women of the southern city. The government has given orders to make masks.
Of course, it may not make up for the entire loss of their business but it gives very minimum
profit. There are no estimates that how many Tirupur’s textile companies will gain from the
Tamil Nadu government through this. Tirupur stands in grand isolation at present. Residents of
neighbouring districts like Coimbatore are wary of entering or associating with people from
Tirupur due to fear of the Coronavirus. And this is simply because the city was a proudly busy
business hub. The lifelines of Tirupur – Palladam, Somanur, Mangalam and
Thirumuruganpoondi up to Kangeyam – now paint a stark and desolate picture as its bee hives of
small and medium sized enterprises and 10,000 workers have come to a halt. In the last fiscal
year 2019, Tirupur Exporter’s Association (TEA) has reported an 8.3% growth in its exports at
Rs.26,000 crore. The textile industry provides employment to over six lakh people and
contributed to exports worth 200 billion INR in 2014-15. During the pandemic,Tirupur textile
industry is reeling under the shock of virus. When the corona virus first hit China in December
2019, the impact was felt by the textile industry but not to a very large extent. Actually, when the
epicentre was in China, the city suffered because there was no supply of certain raw materials for
dye and certain accessories for the garments and fabrics. Most of these transactions are handled
through online communication. On March 7 2020, Covid-19 hits Tamil Nadu. In a most
populous city like Tirupur, the spread of virus resulted a great loss in the economy. The spread of
corona virus encouraged social distancing which led to the shutdown of industries, businesses
etc. On March 24, the Managing Director of DSP Garments, a well-known innerwear brand in
Tirupur, Surya Prakash, took his life. He was only 34 years old. He had been undergoing
treatment for depression. The reason – teetering losses in business, thanks to a series of
unfortunate events, culminating global Coronavirus situation. It is not known how much of a loss
Surya Prakash had to bear. But what is for sure is that the textile industry of Tirupur is reeling
under the shock of the virus. Even before the Section 144 was imposed on March 24 across the
state of Tamil Nadu, Tirupur wore a deserted look. The spread of virus heightened uncertainty
about the situation. It led to the flight to safety in consumption and investment among
international trade partners. According to the survey of Tirupur Exporters and Manufacturers
Association (TEAMA), there is a reduction of about 60% in exports and 80% in domestic sales.
Employment of hinterland villagers and migrant workers

The rural population of the city Tirupur, India’s largest knitwear manufacturing and export hub
are heavily dependent on the garment and textile sectors for employment. The Manchester of
India or the Dollar city, famed for its large textile industry, is usually a crowded congested city
with Tamil and Hindi ringing out together as migrant workers and locals work side by side to
make a living. Allapuram and Manapalayam are the two hinterland villages of Tirupur city
which are mainly focused in this article. The lockdown had paralysed the rural life across the
social spectrum, albeit with diverse outcomes shaped by pre-existing socio-economic positions.
Even before the lockdown was announced, most of the factories in the Tirupur region were
shutting down as orders from Western Countries were being cancelled. On March 25 almost
employment in the hinterland villages were ceased. Apart from Kongu Vellalar Gounder
community, most of the hinterland villages comprises a number of intermediate castes. Most of
the labour force commutes to Tirupur garment factories which are mushroomed within villages.
A few factories in Manapalayam use more advanced looms (Sulzer) that run with an entirely
different labour force of young male migrant workers from Bihar and Odisha. There were
migrant workers who are largely from North India have settled in Tirupur with their families.
There were approximately hundred such migrant workers per Sulzer unit. They are trained
workers who are seen as a valuable resource by the owners of textile firms. There were around
6000 migrant workers in the city. When the lockdown was announced, these workers were stuck
in their dormitories where employers arrange basic food and provisions however was later
deducted from their wages. Already excluded from village life, unable to return home and
deprived of local state support, the labourers were particularly vulnerable and dependent on
employees for their survival. On 6th April, panchayat distributed Rs.1000 as relief to each
household with ration card. Ward members went door-to-door delivering the cash and handing
out a token with day and time slot to collect free food items from ration shops. Those with Jan
Dhan bank account, the government financial inclusion programme received an addition of
Rs.500. While the migrant workers from North India were wholly dependent on the goodwill of
their employers to keep them housed and fed. As the restrictions become more stringent the most
migrant workers headed right back home.

Around 129 lakh people’s livelihoods depend on the industry. As per the statement by workers
and trade union leaders, more than 25% of these jobs have been lost.

Impacts and current situation

Tirupur textile industries stare at Rs.15,000 crores loss due to Covid-19. The industrialists and
owners of the garments are suffered a lot and stare a great loss. The city used to do around
Rs.25000 crore worth of exports. Now the town expects a Rs.12000 crore loss during this
pandemic. Amid the ongoing coronavirus outbreak which is taking a toll on several businesses,
Tirupur Exporters Association (TEA) on Monday (March 16) wrote to Union Finance Minister
Nirmala Sitharaman seeking help to bail out the textile units from the financial crisis. In the
letter, the association’s president Raja M Shanmugham urged the finance minister to take
proactive steps and with immediate effect advice the banks not to categorise the units as non-
performing assets (NPA) for being unable to repay the loans and provide at least one-year
moratorium which helps MSMEs to sustain the business amidst the crisis. Shanmugham cited
examples of European countries, including Italy and Spain asking their members not to export
garments to them for a minimum period of one or two months till the situation resume to normal.
“Some of the buyers, apart from cancelling the orders, they are differing the payment against the
promise for already sent goods,” he said. A slew of financial measures, including the reduction
of bank interest rates and cash reserve, debt moratorium provided to MSMEs, deferment of loan
and tax payment without interest, announcement of new bridge loans and credit guarantees, have
been taken by the several developed nations such as the United States of America, Germany,
Italy, France, United Kingdom, and Japan. According to Shanmugham, these countries have
pumped in “billions of dollars” to bring the industries back to normalcy and the US Federal
Reserve has, in fact, cut its key interest rate to virtually zero. Even before the exporters feel the
heat, it was the small-scale industries and dyeing units in Tirupur, who were forced to take the
burden of a rise in the price of the dye making products after the import of raw materials for dyes
were stopped from China. According to the small-scale industries, the price of the dyes has gone
up to 30% which is also impacting the cost of production. Shanmugham said that apart from a
year of moratorium, the stimulus financial package measures are also required to reenergise the
market economy at this critical juncture. “The quantitative easing methodology is required in the
hour of crisis to revive back the economy and uplift the business confidence of entrepreneurs,”
he said. Many of the migrant workers have already left the city. Bringing them back is a big task.
These workers have already learnt the job. So, they can go to Gujarat or Uttar Pradesh to work.
The small units in the districts have stopped their operation. There were around ten thousand
manufacturing units in Tirupur, which employs over six lakh people are now struggling to
maintain their workforce. The industrialist and the owners of the garments are suffered a lot and
stares a great loss. They are cash startled as the units have not received their dues from overseas
and domestic suppliers. During the month of June, the factories started to manufacture masks and
PPE’s as India fights against the spread of novel corona virus. Nearly six months after Covid-19
outbreak, the city has resumed operations, catering to export orders from several parts of the
world.

Conclusion
However, the Covid-19 crisis collapsed the city. The positive sign is that, the months of June,
July and august are usually considered as the lean season and the industries of Tirupur are
already started getting orders. As the factories resumed production, exports to countries such as
the US, Australia and all of the European Union have begun. Though the city is trying to come
out of the hit, the increasing number of cases did not have a significant effect on the level of
economy. It may take at least one year for the city to come out of this hit. into their economic
system. When developing countries are taking such proactive steps to safeguard the economy to
their countries, a developing country like India needs to show much more vigour to come
forward and help the textile industries to tide over the crisis. Otherwise this crisis is going to
have a cascading and catastrophic impact all across the country. Unless and until government
and banks come forward to extend a helping hand, it is not going to be resolved by the industries
alone. All the western countries have already started infusing fresh funds. The government of
India should take necessary steps for the welfare of workers and should provide a working
capital liquidity and loan for the industries.

References
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