VARANASI, India, Oct 4 (Businesshala) – The narrow streets of the Hindu pilgrimage city of Varanasi, the center of the famed silk-weaving industry, show little sign of the nascent economic recovery trumpeted by India’s policymakers.
Locals say that sales of heavy brocade silk sarees made in the ancient city on the Ganges River are currently down 70% from the pre-pandemic period. Many weavers have closed their looms, others have sold them and some workers have thrown their children out of school, unable to afford the fees.
“The prices are skyrocketing and I am not getting even a third of what I used to earn before the pandemic,” said Mohammad Qasim, a weaver who sold two of his 16 looms.
Rise in global prices of petrol, diesel, cooking gas and other commodities like steel and copper is hurting millions of Indian homes and businesses, already hit by the pandemic.
India meets 80% of its oil needs through imports, and the government taxes more than 100% on fuel products such as petrol and diesel. Consumers and businesses end up with higher fuel and transportation rates than in other emerging economies.
In addition, demand for price-elastic goods is threatened by declining consumer incomes after the outbreak of the pandemic early last year.
Brocade with gold, silver and copper, heavy Banarasi silk saris made in Varanasi, also known as Banaras, are sold all over India and abroad for women to wear at weddings and special occasions.
Weavers say they are battling dwindling demand as expensive sarees made by them are replaced by cheaper varieties as well as high prices of raw silk and brocade.
Raw silk prices have risen from Rs 3,500 to Rs 4,500 ($61) per kilogram in the past four months, Qasim said, while brocade materials such as copper and silver have become costlier by up to 40% – profit margins in saree making less than 10%. It is done. %.
Qasim is among millions of Indians in small manufacturing and services – which account for 90% of jobs – who are complaining of the double whammy of high prices and weak demand.
Retail inflation has crossed the central bank’s upper limit of 6% twice a year this year, though it eased to 5.3% in August.
It poses a risk to the nascent recovery in Asia’s third-largest economy after the worst contraction of 7.3% in the previous fiscal ended March.
The economy grew 20.1 per cent annually in the April-June quarter, and the government’s chief economic adviser, KV Subramaniam, said: “India is poised for strong growth”.
But Bengaluru Ambedkar School of Economics University vice-chancellor NR Bhanumurthy said inflationary pressures from global supply chain issues and sluggish domestic demand are likely to have a long-term impact on Indian manufacturing.
“With rising risks of high inflation in the short term and massive unemployment in recent days, I don’t see a full recovery likely anytime soon,” he said.
no consumer demand
Wholesale price-based inflation, a proxy of producers’ prices, rose in double digits for the fifth straight month to 11.4% year-on-year in August, on concern companies could pass rising costs to consumers.
Unlike some advanced economies, where governments have offered massive stimulus packages, India’s pandemic relief has focused on credit guarantees on bank loans and free food grains to the poor.
Rajan Behl, general secretary of the Varanasi Textile Traders Association, an organization of around 800 wholesalers, said most businesses were reluctant to take new bank loans, though the government had promised to provide guarantees.
“We would have happily mortgaged our properties for loans if there was consumer demand,” he told Businesshala.
He said the handloom and powerloom sari manufacturing industry, which employs 1.5 million people in Varanasi and surrounding cities, with an annual turnover of Rs 700 billion, is facing an “undeclared crisis”.
Mohamed Siraj, 45, a powerloom worker, said his family was surviving on free food grains – two-thirds of the 1.3 billion population offered by the federal government as pandemic relief. Still, the cost of the house was high.
Siraj said, “I have thrown my daughters out of school because I cannot pay the fees now.”
Traders in Varanasi, which is also a major Hindu pilgrimage center, are now praying for a surge in tourist influx and demand for apparel during the festival and wedding season starting this month.
“We are dipping into our life savings or taking loans to survive,” said Rahul Mehta, president of the local tourism welfare association, a trade body of around 100 establishments.
He said the annual tourist flow of around 6.5 million in 2019/20 before the pandemic, income from an estimated Rs 50 billion, could revive to Rs 10-15 billion in this financial year if there is no increase in virus cases.
But any estimate of an increase in demand is hostage to a price increase.
“We may have survived the coronavirus, but we will not be able to bear the burden of rising prices and declining demand,” Mehta said. The shop will have to be closed forever. (Additional reporting by Aftab Ahmed in New Delhi; Editing by Sanjeev Miglani and Raju Gopalakrishnan)