Effects of Demonitization & GST on Chikan

My friends ask me that i have not been active on WordPress from a long time while so many happenings have taken place in the meanwhile on which my insights were much expected.

I’ve myself been very busy to understand & work according to the laws of the government. This took a little time to respond. Sorry for that.
I know that my friends have 2 things in particular on which they want to draw my attention to. First demonetization and second GST (Goods and Services Tax) and its impact on Chikan industry.
DEMONETIZATION was a good step to tighten the noose on black money which failed due to many reasons mainly:
1. Financial & Legal Advisors.
2. Bankers
3. Security Staff
4. Commission Agents &
5. Help from friends and dependents

FINANCIAL & LEGAL ADVISORS devised ways to deposit black money in banks, insurance & other investment sectors or pay demonetized currency to suppliers & other outstanding govt. bills as electricity, water tax, house tax, etc.
BANKERS on day 1 worked in military style – NATION FIRST. Clearks worked with full devotion till 3-4 days. Then when bankers understood how they may benefit from demonetization, they started working the anti-national way which included the roles of SECURITY STAFF & COMMISSION AGENTS.
In a bizarre incident SECURITY STAFF refilling ATMs flew away with cash van. Other instances of delivering new currency at “customer’s” doorsteps in “collaboration” of COMMISSION AGENTS have also come to light.

COMMISSION AGENTS charged from 15% in the start to 40% to 60% by the final date (for depositing old notes). Some COMMISSION AGENTS were also caught by tip – off by authorities of railways, roads & by intelligence and police with huge sums of demonetized currency.

FRIENDS & DEPENDENTS deposited some money in their accounts which they paid back in later months. They also stood in queue to change the currency everyday for long hours.
Queuing for long hours to change currency of known or even unknown persons fetched these ‘line-mans’ 300 to 500 rupees a day. These were labourers who used to work as rickshaw pullers, masons & porters.

IMPACT OF DEMONETIZATION ON CHIKAN-KARI

The time was for 2017 season’s production which failed flat on the face as all the money went inside the bank not to come back soon. E-payments of any amount was permissible but the artisans had no bank accounts.
The government of Narendra Modi can’t be blamed for this as it had given ample time to the citizen to open ‘Jan-Dhan’ bank accounts which the artisans (like many other citizen) did not.
However, with the current situation the artisans stopped bringing ready goods as they knew they would be paid off in old currency which also put the brakes on acceptance of material for new production.

Point to be noted here, the artisans who had bank accounts in their villages took payment through cheques but they did not clear even in 30-40 days. Clearance (of cheques) in cities were taking more than 15 days in that time due to the rush in banks which was not giving clerks sufficient time to look in matters other than cash dealings.

So a cheque became useless a useless piece of paper for poor artisan during those days.

An instance that the Mahajans (money lenders) were taking 30%- 40% commission to pay cash right away against those cheques which was not a good bet for an artisan was also reported.

Overall, Chikan production fell to zero in those 2 months. It affected both the manufacturer & the retailer. For the manufacturer it was a GOOD period because no stock was produced, season came good, their old & stagnant stock got sold out. On the other hand it was BAD for the retailer.

Stocks were selling out due to the good season & the retailer was left with nothing else to clear the stagnant stock of the manufacturer. It was really very hard to convince the customer with the dead stock. Salesmen got a hard time & the customer was also not very satisfied.

The above statement can be understood well with sales in yearly Hyderabad exhibition where Hyderabadi people rejected them & did not give even 35% sales as in previous years. Hyderabad & Vijaywada exhibitions are places where almost all the dead stock of this season of a manufacturer gets sold out at very cheap prices (sometimes even cheaper than from Lucknow’s price).

This impression of that period on the customers’ minds is a very negative signal for the industry. Not all may understand but that will become a wound which can take a lot of time & effort to heal.

It must also be noted that Chikan roughly covers just 1% of garment industry in India so a customer has many other options whereas Chikan walahs have none.

IMPACT OF GST ON CHIKAN-KARI

Chikan & other hand-made goods like zardozi & Benarasi Saree were exempted from any kind of tax (even registration) to promote local craftsmen & trade since 1947 when India gained independence.

Traders of fabrics (uncut cloth) & Sarees were also exempt from registration & tax. Under GST these came under 5% tax. Surat in Gujrat state is the main supplier of fabrics & sarees to the entire country. It went on strike for 30-40 days. Benaras was on strike for 15-20 days. Chikan traders downed their shutters for 2-4 days. Zardozi traders took out a march in old city area against GST. But this all fetched no results.

We are talking here on Chikan trade, it got impacted. No fabric (base material) was coming from Surat in these 30-40 days. Morever, Chikan traders – in the hope that GST will not be implemented on them, did not register till 20th July. Till today just 50%-65% have registered themselves.

Due to this fabric from Surat is still not being sent to the traders here as it is mandatory to have a GST number for the goods to move from one state to the other though for the time being.

The timing of GST has affected Chikan production for Dussehra & Deepawali when it gets sold the most in Bengal, Maharashtra & some parts of southern India.

Retail buyers (customers) are getting bored by the same stuff. This scenario is going to stay for some months. Its not very easy to predict if all’s going to end well as the prices are bound to increase by almost 20% in Chikan.

Its not new that 15%-20% price hike has never touched Chikan sales. Chikan has got dearer by at least 100% in the previous 5 years by rate increase in price of cloth or workmanship, so it may be said that customers will absorb such hike for their love for Chikan-kari. But its also our duty to give them back the love they give us by offering new designs of garments & prints (blocks) and better quality & workmanship.

Once again a big THANK YOU, dil se.. to all the Chikan Lovers for standing by us in these difficult times.

BRANDING & PRICING

Its a query of my clients abroad especially in the U.S. which i address through this blog. Its also addressed to people of Gujrat and Southern States of India.
The common belief of these friends of mine is that Chikan (or like many people wish to put it as, Chikan kaari) is a garment which is popular item of Lucknow which is good to be worn as a beach / summer wear and also that many designers are using it so it ought to be something so unique that will sell off at their stores giving them margin as well as a upper hand on their competitor(s).
As has been written on many sites and blogs that Chikan is a hand craft, etc., etc.,etc. is the first reading that one must read before getting into this trade. Its a first hand experience of Chikan.
As many of my readers might have read through my blogs, that Chikan is an art. Between 1970s to 2010 it went through a phase of cut throat competition which degraded this art form to merely a household business.
With the intervention of few good people Chikan has risen to almost its past glory. I say almost its past glory because many stitches are still to be recreated and also because the patience in the maker and the wearer is not what it used to be in those fursat ke (enjoyment of being idle) days. Now what used to be prepared in say six months can be prepared in a month now. The buyer is ready to shell out more and the artisan is willing to speed up. This materialistic approach to life has arisen in this trade due to the rising prices, dreams of a better lifestyle and the foremost of the list is education of the artisans’ children.
The people of my time who used to study in any school now wish their children to study in good schools. So that when they come out from these schools they must not be deprived of better chances in life which we had suffered.
Coming back to the subject, these good people, who are just a handful, have unknowingly made themselves into a brand. Buyers from outside wish to buy from them only not because they sell fast but because their reputation increases the worth of their stores.
I recall an occasion. It was a final day function at my son’s school. Unknowingly i had put a Parker pen on my T-shirt, i usually clip a pen in my pants’ left hand pocket when i am wearing a T-shirt. The teacher was guiding parents to the seats. Be it my misunderstanding but she was guiding them to the back rows and she offered me the 3rd row which is generally for the distinguished guests.
What i want to say here is that, maybe its my misunderstanding, did this golden arrow of the Parker pen got me to the front rows? Maybe yes.
So these handful of good people who unknowingly transformed themselves to a brand have to constantly work hard to be on that position and trust me its not an easy job. Continuous R & D, management (of people, time, accounts & taxes), public relations and expenses relating to these issues make their products slightly expensive.
A general or new boy can make the same product at least 20% lower than their price but on the backstage, if we see, he has not paid the taxes, he has not created the design (just copied it), his team consists of new employees of whom he is not liable to understand or undertake responsibility.
Another point that i wish to clarify to my friends is that Chikan is still a household job, its based locally so people here know as to almost what will be the cost of a product. Tourists are generally and can be generally cheated but locals are difficult to land in cheaters’ nets.
The rising cost of living has no doubt pushed these good people to increase their margins but what my friends consider that we enjoy a good profit margin is not true. This feeling has arisen in them from the branded ready made garment indusrty which offers a 40% margin on the sale price.
A normal printed top that you buy for 1800 something, is it really for 1800 something? A top will take maximum 1.5 – 2mts of fabric, stitching cost and buttons / hooks, zip etc.
A normal perspective will calculate it to 600. Rest 480 (excluding 40% margin of the retailer) is branding, different expense heads and profit margin.
This is not the case with Chikan. Expecting good sales is better than expecting good margins from the sale of Chikan goods.
Whatever friends i have made till now wish to sell these products for satisfaction, satisfaction that they are helping the artisans, satisfaction that they are keeping this art alive, satisfaction that they are doing something useful, something that is keeping their heart beating, something that is of their land, a satisfaction that their life has a meaning.
Finally i address to their last issue. A garment or piece is first printed with delible ink using wodden blocks. sometimes overuse tends these blocks to break. These wodden blocks are also made by hand so vary slightly when reproduced. Friends who give an order of 5000-10000 pieces of the same design must keep in mind this aspect of Chikan kaari. This does not happen often, but if it happens, it can take up the production time of your order by almost a month.
Concluding this issue i’ll wish to pray that there are many fruitful businesses in this world like investments in properties/stocks, hospitality, etc. or even politics that one must take up if she/he wishes to make good money.
Chikan, as a business, is definately not good for these people.
You have to have that love in your heart for it, it has not let anybody down.