India’s $200-billion textile and apparel industry is facing a crisis as consumers in the US, Europe and other big markets have cut spending on clothing following a surge in inflation after the war in Ukraine, industry officials said.

While the overall economy is relatively strong and is outperforming major economies, the textile sector is a notable exception and orders suggest the downturn will continue well into 2023, raising the risk of layoffs in an industry that employs more than 45 million people. Exports, which constitute about 22 per cent of the industry, have fallen for five months in a row — declining over 15 per cent year-on-year in November to $3.1 billion.

Domestic sales are sluggish despite strong growth in the overall economy because of high costs and cheap imported garments, manufacturers say. After bumper sales earlier this year, local textile factories are now cutting production — contributing to a 4.3 per cent contraction in manufacturing output in the July-September quarter that has raised concerns among policymakers.

The shock comes as the government struggles to create employment for millions of youngsters each year. After 18 months of robust growth through mid-2022, global retail sales of clothing have been dragged down by high inflation and depressed consumer sentiment, and prospects for 2023 look gloomy, a McKinsey report said last month.