TIRUPUR, India – When Alan Greenspan ran a consulting firm and wanted to know where the economy was going, he often analyze men's underwear sales It is a guide.
Greenspan, who later served as president of the Federal Reserve, believed that when times were tough, men would stop exchanging worn underwear that no one could see before making other purchases.
As a result, India is in serious crisis.
"Sales are down 50 percent," said Jeffrin Moses, gesturing toward the boxed underwear and cotton blouses on the shelves of the Tantex underwear emporium in Tirupur, the southern city where most knitwear in the country is made.
It's not just underwear. Car sales fell 32 percent in August, the biggest drop in two decades, and automakers are warning of a million layoffs as buyers refuse to raise prices and struggle to borrow from elusive lenders. Macrotech, a major real estate developer that joined President Trump in a residential tower in Mumbai, just dismissed 400 employeesThat's how the demand for new housing sinks.
Families are saving on 7-cent Parle cookie packages, which are the staple food of India's morning milk and tea. They are opting for even cheaper snacks made by local food vendors, according to Mayank Shah, Parle's executive. Cookie sales were down about 8 percent, he said, and if current trends continue, the company could cut as many as 10,000 jobs.
In addition, India's outlook is obscuring the global economic slowdown, the recent rise in oil prices and the impact of Trump's trade battles – including one with India.
On Friday, the Indian government, which spent months minimizing evidence of slowing, finally acknowledged the depth of the problem, announcing a surprise tax cut for all companies and additional incentives for manufacturers.
And this weekend, Prime Minister Narendra Modi is traveling to Houston to meet Trump and try to settle some of his trade disputes.
Until last year, India, with a population of 1.3 billion people, was the world's fastest-growing large economy, routinely registering growth of 8% or more. Now the government attributes the country's growth to 5%. And the dismissal notices are piling up, with unemployment by 8.4 percent and rising, according to the Center for Monitoring Indian Economy.
India's reversal of luck, partly driven by domestic problems such as neglected farmers, is threatening to other developing countries in Asia, Africa and Latin America that are trying to navigate both Trump's weakened global economy and the meltdown of trade conflicts.
"India is potentially a benchmark," said Per Hammarlund, chief emerging market strategist at Swedish bank SEB. "It's a sign of the global economic trend right now: growth has slowed even more this year than last year."
As elusive global investors crowded into dollar security, India's rupee and other emerging market currencies fell in value. This made vital imports of energy, electronics and industrial equipment more expensive. Last weekend's attack on Saudi Arabia's two oil facilities, which raised the global oil price, underlined how vulnerable India and other developing countries are facing external factors beyond their control.
Like China and Indonesia, India is facing the consequences of years of state-sponsored excessive lending. In the case of India, excess of bad bank loans, coupled with recent delinquencies by nonbank financial companies, have restricted lending to consumers and businesses.
India's central and state government policy decisions have worsened India's crisis, according to economists and business leaders.
Carmakers, for example, have been hit by a triple blow: new safety and emissions standards have increased car costs, nine states have raised car sales taxes and banks and finance companies that finance dealers and 80% of car companies. Car purchases were stalled. by the credit crunch.
"All of this in a year has resulted in a normal cyclical recession becoming a deep depression in the auto industry," said R.C. Bhargava, president of Maruti Suzuki, India's largest automaker.
Now some manufacturers are begging the government to cut taxes on new car purchases or get old gas drinkers off the streets through a money-exchange program.
Modi was criticized in his first term for ignoring early evidence of slowdown. After he won a major reelection victory in May, many economists expected him to approve a short-term stimulus package and address long-standing issues such as agricultural poverty and land reform.
Instead, it struck the economy with an unexpected increase in taxes on foreign investors, prompting them to dump Indian stocks and bonds. The rupee staggered.
More recently, the Modi government has recognized the need for action. In addition to tax cuts on Friday, Finance Minister Nirmala Sitharaman recently pledged that the government would step in to help automakers and speed up infrastructure spending, and she ordered public banks to lend more. The government also reversed the new investor taxes.
The textile industry, which employs about 45 million people and is India's second largest employer after agriculture, is emblematic of the country's distress.
One afternoon in early September, Tirupur's market for wholesale, overstock, and slightly defective clothing was deserted. Moses said shopkeepers and distributors used to travel around India to mass order shirts, pants, dresses and fabrics before the festival season from September to November.
"Now people don't come," he said.
The region's spinning mills, which wrap cotton in yarn, are cutting production. While world cotton prices have fallen due to higher US tariffs on Chinese textiles, homeowners say yarn prices have also fallen, making mills' profit difficult.
At Dollar Industries, which has been producing men's underwear for nearly half a century, a 4% decline in sales last quarter was a shock.
"I didn't see a slowdown like that," said Gaurav Gupta, son of one of Dollar's founders, as he strolled through the company's factories. "For a customer who used to buy six pairs of clothes, now he's probably four."
Still, Dollar's Italian cutting machines continue to cut colorful sheets of fabric for T-shirts and underwear six days a week. About 100 workers separate the pieces and tie them into bales, ready for the contractors who sew them into finished clothing.
The dollar has not laid off anyone yet, although it has reduced working hours by 10 to 20 percent – and paychecks. Gupta said his factories are moving to make thermal underwear for the cold winters of northern India, and expects the festival season to mark the start of a sales turnaround.
Sambhu Karwar, a 22-year-old employee who smooths the fabric before cutting, said the job was better than working at his family's bakery in eastern India. Dollar pays him a monthly salary of Rs. 12,000, or about $ 167, and provides lodging and some subsidized food.
"It's nice to live here," said Karwar, whose brother also works at the factory.
The outlook is bleaker at Siva Exports, a contractor who sews some Dollar underwear.
Most sewing machines in the two-story factory are idle. Siva's owner, V. Murugesan, said he had to lay off about three-quarters of his tailors in the last six months after losing his two largest customers – clothing brands in Italy and France. He said he could not match the prices they could get in Bangladesh, where salaries are much lower.
"It's a buyer's market," said Murugesan. "Orders are too slow." He asked the government to help small exporters like him with subsidies or other support.
Dollar said its distributors and retailers were having trouble lending money to fund inventories. The government's long delays in paying small business tax refunds are compounding the cash crisis.
So Dollar is trying to break the gap by allowing its partners to buy a few weeks of stock at a time, instead of requiring them to buy three months of stock as they did before.
"We're trying to work differently," said Shashi Agarwal, Dollar's senior vice president of corporate strategy.
With the cheapest rupee and the highest US tariffs on textiles imported from China beginning September 1, India has the opportunity to export more garments to the United States.
That is the theory, at least.
C. Anand, director of RTW Renaissance Asia, a Tirupur clothing manufacturer that focuses on exports to the United States, said India could not compete solely on price against exports from Bangladesh or Vietnam or free trade zones like Jordan or Haiti. .
"You need to bring innovation to the market," he said. For example, he said, his company has devised a way to process cotton yarns and fabrics for an American company's work uniforms so that they can withstand at least 50 washes without significant wear.
Innovation may not be enough, however.
Vijay Varthanan, once a quality control manager at a garment factory and now runs a small grocery store in Tirupur, predicted that times would get worse before they got better.
Sales have dropped about 50 percent in his store, he said, and many people are buying food on credit. Varthanan said many workers would return to their villages next month for Diwali, India's biggest holiday – and would not return.
"It's all over," he said. "People are just waiting for their Diwali bonuses."
Ayesha Venkataraman contributed research from Mumbai, India.