Babita (second from right) has been looking for a job as a tailor for eight months now since the last unit she was employed at shut down post-demonetisation. Every morning, thousands of migrant workers land up at the Noida Hosiery Complex in search of casual jobs.
 
“Look, my chappals have worn thin,” said Singh, 30, pointing to her feet. Giving up is not an option. There is nothing left for her or her family of four in Bulandshahr, their hometown in western UP that they left seven years ago in search of a better life.
 
In March this year, the small garment unit where Singh worked for six years shut down in the wake of demonetisation, the scrapping of 86% of India’s currency, by value, on November 8, 2016. There were thousands like her, pleading for jobs at the gates of around 300 factories in the complex or sitting around in groups, hoping for a job tip from passers-by.
 

The ‘Wanted’ boards outside factories listing vacancies have been increasingly sparse since demonetisation
 
Aimed at making the economy less cash-reliant, demonetisation came as a body blow to the readymade garments sector, 80% of which made up of informal units that operated with cash and casual labour, as IndiaSpend reported in December 2016.
 
About 1.5 million jobs were lost during January-April 2017 in the immediate aftermath of demonetisation, according to this analysis by the Centre for Monitoring Indian Economy, a business information company. There have been 35% to 55% job losses in manufacturing and trade since November 2016, according to data collected by the All India Manufacturers’ Organisation (AIMO) as the Indian Express reported on November 8, 2017.
 
There are no clear figures on how many workers have lost their jobs due to the crisis in the unorganised apparel sector. But informal jobs, with little or no social security or benefits, constitute around 92% of all employment in India, as per government data. And the textile industry is the second largest non-farm employer in India.
 
Singh–and thousands of other semi-literate, mostly unskilled workers employed as tailors, packers, helpers and cutters–have been hit hardest by demonetisation. They usually earn around Rs 350 for a day’s work.
 
“I was offered a job with an eight-hour schedule this morning for Rs 6,000 a month,” said Yadesh Kumar, a migrant worker from Etawah in western UP. “I have a family of five, how will I cope?”
 

Many workers, like Yadesh Kumar (in yellow), had opened bank accounts to facilitate cheque payments but now find that there are no jobs to give these accounts any meaning.
 
Many workers opened bank accounts after demonetisation to allow employers to make cashless payments. But with no jobs for the few thousand workers–100,000, the local reckoned–wandering the hosiery complex, there is no money to put in these accounts.
 
Just when it seemed that cashless systems were falling into place by the middle of 2017, the complex Goods and Services Tax (GST) arrived as a second big blow. The tax system demands that companies in a supply chain are linked to one another, but it is too complex for this largely unorganised sector.
 
“Dhandha uth hi nahin paya (the business couldn’t get back on its feet),” said a manager at a export house in Noida. The distress visible on the streets of the factory complex was evident in the wake of demonetisation, when 40% of workers reportedly lost their jobs, but now hopes of recovery are receding.
 
“Business is down by 40% in the Noida-Greater Noida region. My calculation is that about 50-70 units have shut down here in recent months,” said Lalit Thukral, executive member of the Apparel Export Promotion Council and head of the Noida Apparel Export Cluster. “Around 8,000 small garment businesses of the total of 10,000 in the country are gasping for breath now.”
 
This is happening not just in Noida. In Tirupur, the hosiery hub in western Tamil Nadu, too businesses are down by over 40%, the Business Standard reported on November 3, 2017. Surat, the textile centre in Gujarat, is in turmoil. And in Gurugram, at the eastern end of the National Capital Region from Noida, former garment units on prime real estate are being let out.
 
Triple whammy: Competition from Asian rivals, demonetisation and GST
 
Last year when demonetisation hit the apparel sector, it was already stressed by competition from other Asian nations, such as Bangladesh, Vietnam, Cambodia, Sri Lanka and Myanmar. The contribution of apparels to exports of especially Bangladesh and Vietnam rose 6.1% and 9.6% respectively in 2015, the Economist Intelligence Unit, a think tank, reported on February 3, 2016. Bangladesh, now only second to China among apparel exporters, is giving Indian businesses a particularly rough time.
 

Nearly 80% of businesses in the apparel sector consist of small scale units that employ casual labour.
 
“We are simply not productive or organised enough to deal with this competition. And then we bring in something like demonetisation and Canadian model of GST into the industry,” said a mid-scale vendor for top western brands. Speaking on condition of anonymity, he said he shut down one of his two factories with 100 machines and 150 workers last year and is now downsizing further.
 
In the long term, he pointed out, cashless payments and GST could bring good things to the industry–formalisation of a largely unorganised sector, more transparency, less inspector raj and the corruption that goes with it. “But in the immediate future it is going to wipe out an entire generation of businesses,” he said.
 
‘No jobs for men or women, illiterate or educated’
 
The apparel sector, as we said, provides work for men and women with low of no skills from primarily rural areas in Uttar Pradesh and Bihar, where their last occupation was either agricultural labour and small-scale farming.
 
Some said they had not held down jobs for a year now.
 

Workers like Enashi Devi are being turned away at gates by factory managers who cite GST as the reason for the downturn.
 
“Woh bole rahein hain DST (sic) hai, naukri nahin milegi (they say there are no jobs because of DST–meaning GST). Look at the mobs of people searching for jobs, it makes me dizzy. Whether you are a man or a woman, educated or illiterate like me, there is no hope for any of us. Bura haal hai (things are bad),” said Enashi Devi, who had been doing the rounds of Noida the first day of every week in the hope of landing a job as a helper.
 
Feeder businesses struggle to cope
 
Equally impacted are the jobbers who run the micro businesses feeding the industry. These are complex chains of small but critical enterprises such as dyeing, embroidery, printing and zip-making, all finding it hard to comply with the GST. With earnings between Rs 30,000 and Rs 50,000 a month, they are struggling to make sense of it all.
 
Nayagaon, a shanty that is part village and part city, off the Hosiery Complex, houses Durga Dyers. This two-man operation runs out of a room next to a buffalo stable. Its owner, Anil Bansal, is a “local” dyer–someone who can dye small bits of fabric or yarn, the kind of assignment no big business in dyeing will take on.
 

Small feeder businesses like this dyeing unit running out a one room tenement in Nayagaon, off Noida Hosiery Complex, are finding it hard to deal with the complexities of GST.
 
He earns around Rs 50,000 in the peak season and has just acquired a GST account. But he cannot handle its complexities since he is not computer literate, so he now hires the services of an accountant. “It is tough but we are managing somehow,” he said.
 
Not many can afford an accountant’s fees–anywhere between Rs 5,000-Rs 10,000 on average–on such profit margins as small as Rs 15,000-20,000. They opt instead for cash payments to work around GST. “Capital is getting blocked like this because it is hard to claim returns when the entire supply chain is not GST compliant,” said Thukral.
 
To add to the crisis, the sector is furious with the government decision to slash the duty drawback on exportable garments from 7.5% to 2% from October 1, 2017. This drawback is a relief given to businesses by way of refund of custom and excise duties on inputs used in manufacture of exported goods and it allowed the garment industry to stay competitive.
 
Thukral predicted the closure of another 20% units in Noida if the industry does not rally around to take orders for the next season.
 
“Iske baad toh bas ek hi kaam rah gaya hai–haath mein katori leke bheek mangna (there is only one alternative left after this, to beg),” said Singh, the job seeker we met at the start of this story, as she gave up her search for the day.
 
(Nair is a consulting editor with IndiaSpend.)
 

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Casual workers, mostly tailors, arrive at the Noida Phase II bus stand as they begin their daily job hunt. About 80% of the 7 million workers in the textile and apparel industry are temporary, and are paid almost entirely in cash–currently in severe short supply.

 
Almost every factory gate has a board proclaiming “Avashyakta hai (wanted)”. It lists the daily requirement of jobbers–tailors, finishers, ‘pressmen’ (as those employed for ironing are called), packers and so on–needed by the 200 small, export-driven garment units in the complex. The boards have been blank since the factories were hit by the aftermath of ‘demonetisation’–as the invalidation of the Rs 500 and Rs 1,000 currency notes is being referred to.

 

The ‘avashyakta hai’ (wanted) board at factory gates lists the daily requirement of jobbers at the textile and apparel units. These boards have been blank since the factories were hit by the aftermath of ‘demonetisation’.
 
These men and women are among the 92% of India’s workforce employed in the informal sector, which generates about half the country’s gross domestic product, according to the National Commission for Enterprises in the Unorganized Sector. Casual workers enjoy no job security or benefits of labour regulations, and about 79% of them live below the official poverty line.
 
With 7 million workers, the textile and apparel industry is the second-biggest employer in India–after agriculture–and about 80% of these workers are temporary. They are paid almost entirely in cash, currently in severe short supply, despite Reserve Bank of India governor Urjit Patel saying on December 7, 2016, that there was no shortage of currency nationwide.
 
 
Losing even a day’s work, at the minimum wage of Rs 350, is not an option for workers like Chanchala Devi, 35, a native of rural Nalanda in southern Bihar. Devi is a tailor, and has been trudging up and down 2 km for an hour and she has been turned away at every gate. The first shift has begun and gates have shut at 9.30 am. But she is reluctant to return home.
 
“I heard they are looking for workers in D block. I have four children at home and my husband who works as a checker hasn’t been paid in a month. I have to keep looking,” she said.
 
When the peak season turned slack
 
For the textile and apparel industry, November to January is peak season, a time when factories normally send out vehicles to pick seasoned workers like Devi off the street. In these three months, garment factories produce merchandise for the spring-summer lines of fashion houses in the West.
 
This year is different. Demonetisation has created a cash crunch that has sent the small-scale units, which form 78% of the readymade garments sector, into disarray. Nearly 80% of the workforce in this sector is employed as casual, off-rolls labour, and they are paid entirely in cash.
 
Workers like Devi are paid every fortnight–either as dehadi (daily wage), which is Rs 350 in Noida, or on piece-rate basis. Two cycles of fortnightly payment have gone past since November 8, 2016, and the units and workers managed to tide over the cash crunch–mostly by using old currency notes. But now, there is anxiety about where the factories are going to find the cash to pay these workers.
 
“I haven’t had a job since November 10, and I am missing my wage every day that I stand in a bank queue to exchange/deposit cash instead of looking for work,” said Nandan (he uses only one name), a 25-year-old tailor from Umrala in Bulandshahr, western Uttar Pradesh.
 
No jobs as units downsize
 
Nandan worked in one of the most stable units in the complex. Just last week, the factory shut down two assembly lines–each ‘line’ usually employs between 25 and 45 workers.
 
Owners of the small-scale units say they have no choice but to downsize because the seasonal and unpredictable nature of the business and its economies do not allow for permanent staffing and formalised modes of payment to labour.
 
A small to mid-scale entrepreneur, who did not wish to be named, said in an average November-December, he would have at least 1,500 workers at his factory; of them 75% temporary. He has, post demonetisation, cut the numbers down to 500.
 

For the textile and apparel industry, November to January is peak season, a time when factories normally send out vehicles to pick seasoned workers off the street. This year is different. Workers wait at factory gates hoping for openings as shopfloors assess their daily requirement of labour. Most were turned away soon after.
 
“We are in wait-and-watch mode, but if the liquidity crunch remains, we will downsize even more. And others (in the field) are saying that too,” he said. On the shopfloor, there are lines where sewing machines sit unmanned, huge piles of cloth waiting to be stitched.
 
“Productivity has taken a huge hit and if a single link in the assembly line drops, the whole process collapses,” he added.
 
Word of the layoffs spread quickly around the complex. Knots of anxious workers stood exchanging tips about possible openings. “Factriyan band ho rahin hain. Suna hai kala dhan pakad rahein hain. Par amir log nahin honge to haemin naukri dene wala kaun hoga? (Factories are closing. We hear that the rich are being caught with black money. But if they are put away, who will give us jobs?),” asked Javid (he uses only one name), a tailor from Motihari in north Bihar.
 
He has managed to hang on to his job, but has lost daily wages for four days, queuing up at banks to exchange old notes.
 
The hunt for seasonal jobs
 
Like Nandan and Javid, most workers in this complex are migrants, unskilled or partially skilled. Almost all of them come from the impoverished districts of Uttar Pradesh and Bihar, mostly men who leave their families behind. They live in the rural islands that still dot an area being swallowed by high-rise housing estates.
 
Nayagaon, Bhangel, Haldawani, Nangla Charandas, Yakubpur–these are the urban villages flanking the complex where they cram in small rooms, three or four workers to a room. Since the work is seasonal, they have no reason to drop anchor in the city.
 
Labour activists have, for a long time, been criticising the high levels of informalisation or casualisation of the workforce in the garments industry.
 
But small-scale employers insisted that in a seasonal industry with fluctuating demand conditions, this works ideally. “These migrant workers look for seasonal employment and return to their villages in dull months. They are not interested in permanent employment and they prefer nakad (cash),” a factory owner said. “They don’t want salaries in banks, or the headache of ESI (employees’ state insurance) or PF (provident fund) cuts.”
 
He added that if employers add the cost of permanent staffing to their costs, they will have to raise their prices and thus lose the competitive edge in the world market. Jobbers say they prefer the flexibility the arrangement offers, the freedom to look for the best-paying employer in the market and the scope for overtime at any given point of time.
 
The next month will be critical for the industry and if the cash scarcity continues, workers like Devi and Javid may have no option but to return home.
 
(Nair is a consulting editor with IndiaSpend.)

Courtesy: India Spend

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