The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 22 DEC 2020

NATIONAL

INTERNATIONAL

India to witness double-digit growth in next fiscal: Report

Having gone through a rough patch on account of the coronavirus pandemic, the Indian economy is expected to record a double-digit growth at 10 per cent in 2021-22, according to a report. “Economic activity is showing signs of traction. The PMI Manufacturing Index is at its highest since 2008,” said the report titled ‘Voice of Asia’ prepared by Deloitte.

The economy contracted by a historic 23.9 per cent in the first quarter of 2020-21 on account of the impact of the coronavirus pandemic. The contraction, however, narrowed to 7.5 per cent in the second quarter. Stronger car sales, rising production of finished steel and diesel consumption, and higher goods and services tax revenue collections indicate that the economy has bounced back strongly since ‘the unlock’, backed by pent-up and festive season demand, the report said.

Sustaining this rebound could be a challenge next year, if coronavirus infection cases continue to be high, it added. However, it said, “We expect India’s GDP (gross domestic product) to rebound to double digits in FY2022 after contracting in FY2021.”

According to the report, three drivers — inclusive job growth, a robust services sector rebound and a sustained recovery in private demand — will ensure a sustained economic revival and rehabilitation. The government’s effective policy measures together with prudent business strategies should help the economy grow strongly from the next financial year, it added.

Source: The Financial Express

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Night curfew in Maharashtra cities; new rules for European arrivals

Ahead of the Christmas and New Year celebrations, the Maharashtra government on Monday declared a night curfew in municipal corporation areas from December 22 to January 5 as a precautionary step amid growing concerns over a new coronavirus variant spreading in Britain.

According to an official statement, it has also been decided to compulsorily put in institutional quarantine for 14 days those who fly in from European and West Asian countries.

The institutional quarantining of the travellers from these countries will begin from Monday itself, it said.

Passengers coming from other countries to Maharashtra, the worst COVID-19-affected state in the country, will be home quarantined, the statement said.

The decisions were taken after Chief Minister Uddhav Thackeray held a review meeting at his official residence Varsha here in the light of the situation in the UK.

Thackeray has asked officials to ensure strict screening of international passengers, the statement said.

A decision has been taken to impose a night curfew from Monday (December 22) 11 pm onwards to 6 am in municipal corporation areas (cities) of the state.

“It will be in effect till January 5, Thackeray said, according to the statement.

Additional precaution is being taken in the state due to the new variant of coronavirus and we need to remain extra alert over the next 15 days, he added.

Once passengers arriving from European and Middle- Eastern (West Asian) countries are put in institutional quarantine, their RT-PCR test will be conducted on the fifth or seventh day, the statement said.

They will be allowed to go home only after their quarantine period is over, it said.

Thackeray instructed municipal commissioners to arrange for hotels and separate hospitals to quarantine passengers arriving at international airports in their respective jurisdiction.

The chief minister also gave instruction to arrange for separate hospitals for passengers coming from European countries and showing symptoms of the new coronavirus variant, the statement said.

He asked officials to provide PPE kits to all the employees screening passengers arriving at airports from these countries.

Passengers coming from other countries will be home quarantined and stamps will be put on their hands, the statement said.

Passengers, who have arrived from European and West Asian countries, will have to inform government authorities if they have travelled domestically by air, the statement said.

There are growing concerns about an “out of control” new variant of coronavirus spreading COVID-19 at a much faster pace in parts of England.

The new variant is said to be 70 per cent more transmissible than previous strains though health experts say there is no evidence that it is more deadly or would react differently to vaccines.

Source: The Tribune

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Budget 2021: FM holds pre-budget consultations with experts in infrastructure, energy

Union Finance Minister Nirmala Sitharaman on Monday held the 11th pre-budget consultations with experts in the field of infrastructure, energy and climate change, in view of the forthcoming Union Budget 2021-22.

Apart from Sitharaman, Minister of State for Finance and Corporate Affairs, Anurag Thakur, Finance Secretary Dr AB Pandey, Chief Economic Adviser K V Subramanian and other senior officials were present in the meeting.

"Union Finance Minister Smt. Nirmala Sitharaman holding her 11th Pre-Budget consultations with leading experts in infrastructure, energy and climate change in connection with the forthcoming Union Budget 2021-22, in New Delhi today," Ministry of Finance tweeted.

"Along with Finance Minister Smt. Nirmala Sitharaman, MoS Shri Anurag Thakur, Finance Secretary Dr A.B. Pandey; Secretary, DEA, Shri Tarun Bajaj and CEA Shri @SubramanianKri besides other senior officials are also present in the meeting," Ministry of Finance said in a subsequent tweet.

Source: The Economic Times

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An analysis of PLI scheme for textile industry

Recently Government of India approved the Production Linked Incentive (PLI) scheme of Rs. 1,45,980 crore for ten key sectors including textiles. Credit Suisse (investment bank) estimates that the PLI scheme can generate US $ 150 billion in incremental sales by the financial year 2027, adding up to 1.7 per cent to the GDP by FY ’27. The scheme based on disadvantage/disability faced by a sector is a kind of subsidy to the sector and direct payment from the budget to goods made in India. It aims to give companies incentives on incremental sales from products manufactured in domestic units. Though experts also claim that the PLI scheme is a focused scheme, it is not an investment subsidy scheme.

As far as the textile industry is concerned, the manufacturers producing man-made fibres (MMF) and technical textiles (industrial application) shall be given an incentive by the centre from a corpus of Rs. 10,683 crore over 5 years. The objective of the scheme is to promote the building of new facilities and attract investment in the MMF sector under Greenfield and Brownfield investments.

The scheme will be implemented by the Ministry of Textiles (MoT) in the textile sector and the Textiles Ministry has said that MoT is bringing to fore a structure under which this scheme will be rolled out.

As per understanding, MoT has identified 50 key sectors like sanitary pads, tampons, sweaters and jerseys, within which it aims to introduce the PLI scheme.

If market sources are to be believed, the scheme will offer three categories on which incentives will be provided, for already active players in the bracket of Rs. 100-400 crore and over Rs. 400 crore of net turnover exists.

The idea is that if the company in the first category receives a 50 per cent incremental turnover, they will be provided with 9 per cent seed funding from the Government. For the second category, 7 per cent on net incremental turnover will be disbursed. The base year to determine the net incremental turnover will be 2019-20 and the scheme is likely to come into effect from 2022.

While for new companies venturing into textiles, a category called Greenfield will apply, these companies will have to make at least a Rs. 500 crore investment, on which the gains would be 11 per cent to start with.

The guidelines regarding the scheme will be issued by MoT and the proposal will be approved by the cabinet after appraisal by the expenditure finance committee.

Nearly all the stakeholders of the industry feel that the PLI scheme will attract large investment in the sector to further boost domestic manufacturing, especially in the MMF segment and technical textiles.

All in all, the scheme will attract foreign investment, helping local manufacturers achieve scale, and making Indian exports competitive. It aims to enhance exports and make India an integral part of the global supply chain.

Due to lack of size and scale, cost disadvantages often accrue and this is where the Indian industry has been held back. This scheme can play a decisive role in this regard as by incentivising production, the scheme spurs investment as well.

Besides, it will play a huge role in achieving size and scale in manufacturing, as these schemes incentivise incremental production. As per industry estimates, this scheme is likely to create 50-60 world-class global champion companies in MMF and technical textiles segments. As per industry insiders, some of the companies are aggressively looking to take its advantage; for example, leading textile player Indo Rama Synthetics (India) Ltd. is likely to set up additional capacity to utilise benefits under the PLI scheme.

At the same time, the MSME sector is also expected to get benefit of this scheme.

Amitabh Kant, CEO of NITI Aayog believes that the incentives will raise the competitiveness of not just large firms, but also of all firms across the value chain. As a large company will benefit from the PLI scheme, naturally, the orders of its MSME suppliers will also increase.

The industry believes that it will be instrumental in enhancing India’s manufacturing capabilities and exports enabling Atmanirbhar Bharat Abhiyan Scheme. It has been termed as a much-needed step as it will further fuel the V-shaped recovery in the apparel sector. The scheme will give a big boost to exports, investments, domestic capacity and employment.

 

This will go a long way in encouraging apparel exporters to foray into MMF garments for which there is a huge demand globally but for which exports from India are currently low. The impact of this stimulus in generating job opportunities will be maximum in the labour-intensive apparel sector.

Around 40 HS lines in MMF garments and 10 HS lines in technical textiles’ account around US $ 180 billion global trade and, therefore, the scheme would encourage the industry to invest in the manufacturing of these high value-added products.

As India has been lagging in the MMF textile trade due to expensive raw materials and high tariff barriers apart from cheaper imports from neighbouring countries, the focus of the PLI scheme on MMF seems impressive. But other segments are totally ignored in this scheme.

The cotton textile is excluded from this scheme. Industry stakeholders are of the view that India’s cotton exports contracted 18 per cent last year. Isn’t it a clear message that the cotton segment is not a priority for the Government?

“It’s for new high potential areas that is understandable – this being tuned for big players only is disappointing but guess Government’s objective is to incentivise for large investments,” said one of the leading textile players who is associated with leading trade bodies also.

Shankar Acharya, Former Chief Economic Advisor, Government of India has few apprehensions about this scheme and one of them is that if each PLI scheme is to be run by different ministries, it’s easy to envisage a hydra-headed bureaucracy.

The detailed instructions, minute description of goods, ceiling for every company, etc., regarding the scheme will be interesting to see and the detailed assessment of its merits would need a study of the guidelines that are yet to be notified. The Government is working towards notifying this scheme for newly added sectors by April 2021. But one must expect that it will really benefit the MMF and technical textile sector as both are full of opportunities in export and domestic market.

Source: Apparel Online

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‘FM will need to do a fine balancing act’

The Finance Minister will be presenting the Union Budget for 2020-21 under extraordinary circumstances — with challenges brought on by an epoch-making year marked by the Covid-19 pandemic. The GDP figures have contracted for the first time in four decades, and livelihood is a serious concern.

The government has sought to address the uncertain milieu by timely intervention and relief packages. And it speaks of the commitment of the Finance Minister that the economy is recuperating faster than anticipated. Many high-frequency indicators have shown improvement. And we hope that the next year would bring growth back to over 8 per cent by 2021 as predicted by the IMF.

Yet, the challenge arising from the pandemic is far from over. The major economic engines — namely consumption, private investment and exports — are performing below potential. The re-emergence of inflation is another concern, while signs of fiscal pressure are evident.

Hence, the Finance Minister will need to do a fine balancing act to support the nascent recovery on one hand while maintaining macro-economic stability on the other — a fact she is well aware of. To quote her “…100 years of India wouldn’t have seen a Budget being made post-pandemic like this.”

Source: The Business Line

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Investment focus

Given the challenges, it would be imperative for the government to intervene aggressively to accelerate public investment, especially in areas such as physical and social infrastructure, which would have high multiplier effect on growth and a positive impact on employment.

The government should fast-track projects nearing completion, ie, open stretches of new road construction for traffic, commission new railway lines, electrification projects, etc. It could also consider bringing projects that are supposed to be actioned in the next few years to this year. The Budget should also set aside funds for use by the State governments to spend on infrastructure.

The pandemic has exposed the inadequacy of our healthcare infrastructure. India needs to build up government expenditure on health to at least 3 per cent of the GDP by 2025. Funding is required not only for building hospitals, but also for improving the availability of frontline health workers and developing technology and skills in healthcare.

Second, to deal with rising pressure on expenditure, the Finance Minister is expected to focus on revenue-enhancing measures. To generate revenue, the government should constitute a group to come out with a clear implementable roadmap on divestment and on asset monetisation, and use the proceeds for investment in infrastructure.

Financial measures

Third, the Centre’s fiscal deficit may need to be viewed from a medium-term view of three years. A bigger deficit today could boost the economy, resulting in faster growth and smaller deficits in the future. Growth would, in turn, hasten fiscal consolidation. Transparency in deficit numbers is also essential. The government had taken steps in the last Budget towards this, and now could be the opportune time to include off-Budget expenses and present a realistic fiscal deficit.

Fourth, a strong financial sector is a key to sustaining growth. The government should bring down its stake in PSBs to below 50 per cent through the market route, announce a concrete plan for notifying three large DFIs for long-term financing in agriculture, small scale and infrastructure, and constitute several bad banks by enabling AIIFs to take over NPAs, among others.

Fifth, considering the unprecedented economic and humanitarian crisis caused by the Covid-19 pandemic, employment generation has emerged as a key policy imperative. The government should allow a contribution holiday for employers not to contribute to the ESIC. This Scheme would facilitate liquidity in the hands of the employers and encourage them to generate employment opportunities for the younger generation. Another way to encourage job creation would be to fast-track coastal employment zones.

Source: The Free Press Journal

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INTERNATIONAL

Indo-Japan Samwad Conference: PM Modi says discussions on global growth cannot happen among few, table must be bigger

Asserting that growth patterns must follow a human-centric approach, Prime Minister Narendra Modi on Monday said discussions on global growth cannot happen only among a few as the “table must be bigger” and the agenda broader.

Addressing the 6th Indo-Japan Samwad Conference via video conferencing, Modi said in the past, humanity often took the path of confrontation instead of collaboration.

“From Imperialism to the world wars. From the arms race to the space race. We had dialogues but they were aimed at pulling others down. Now, let us rise together,” Modi said.

“Discussions on global growth cannot happen only between a few. The table must be bigger. The agenda must be broader. Growth patterns must follow a human-centric approach. And, be in harmony with our surroundings,” he said.

Modi also called for keeping humanism at the core of policies.

“We must make harmonious co-existence with nature as the central pillar of our existence,” he said. In his address at the conference, the prime minister also proposed the creation of a library dedicated to traditional Buddhist literature and scriptures. “We will be happy to create such a facility in India and will provide appropriate resources for it,” he said.

The library will collect digital copies of all such Buddhist literature from different countries, he said. It will aim to translate them, and make them freely available for all monks and scholars of Buddhism, Modi added.

“The library will not only be a depository of literature. It will also be a platform for research and dialogue – a true Samwad between human beings, between societies, and between humans and nature,” he said.

Its research mandate will also include examining how Buddha’s message can guide our modern world against contemporary challenges, Modi said, noting that Lord Budha’s teachings command the strength to turn the discourse from enmity to empowerment.

Source: The Financial Express

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'Proud moment': Indians rejoice as Trump presents Legion of Merit to PM Modi

US President Donald Trump on Monday presented the prestigious Legion of Merit to Prime Minister Narendra Modi for his leadership in elevating strategic partnership of the two countries and emergence of India as a global power.

India's Ambassador to the US, Taranjit Singh Sandhu, accepted the award on behalf of the prime minister from the US National Security Advisor Robert O'Brien at the White House.

President Trump "presented the Legion of Merit to Indian Prime Minister Narendra Modi for his leadership in elevating the US-India strategic partnership," O'Brien said in a tweet.

Modi was presented with the highest degree Chief Commander of the Legion of Merit which is given only to the Head of State or Government.

He was given the award in recognition of his steadfast leadership and vision that has accelerated India's emergence as a global power and elevated the strategic partnership between the United States and India to address global challenges.

O'Brien in another tweet said that Trump also presented the Legion of Merit to Australian Prime Minister Scott Morrison and the former Japanese Prime Minister Shinzo Abe. The awards were received by their respective ambassadors in Washington DC.

President Trump "awarded the Legion of Merit to Japanese Prime Minister Shinzo Abe for his leadership and vision for a free and open Indo-Pacific," he said.

Trump awarded the Legion of Merit to Australian Prime Minister Scott Morrison for his leadership in addressing global challenges and promoting collective security, O'Brien tweeted.

The United States is the latest country to confer its highest award to the Indian prime minister.

Other awards include Order of Abdulaziz Al Saud by Saudi Arabia in 2016, State Order of Ghazi Amir Amanullah Khan (2016), Grand Collar of the State of Palestine Award (2018), Order of Zayed Award by United Arab Emirates (2019), Order of St Andrew by Russia (2019), Order of the Distinguished Rule of Nishan Izzuddin by Maldives (2019).

Source: The Free Press Journal

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New coronavirus strain hits British pound, euro as investors seek dollars

Sterling fell close to 2% against the dollar in morning trading before Prime Minister Boris Johnson chairs an emergency response meeting to discuss international travel and the flow of freight in and out of Britain.

The British pound and the euro fell on Monday as investors sought refuge in the dollar, after a fast-spreading new coronavirus strain shut down much of the United Kingdom and disrupted international freight amid Brexit talks uncertainties.

Sterling fell close to 2% against the dollar in morning trading before Prime Minister Boris Johnson chairs an emergency response meeting to discuss international travel and the flow of freight in and out of Britain.

Much of Europe has cut off transport with the UK sowing chaos for families and companies just days before Britain exits the European Union.

“The British horror stories of a shortage of goods after a hard Brexit are taking on a whole new drive – for a completely different reason,” said Commerzbank strategist Ulrich Leuchtmann.

Adding to the transport crisis caused by the virus were fears the UK will crash out of the EU without a trade deal on Jan. 1. Britain insisted on Sunday that the EU should shift position to open the way to a post-Brexit trade deal, but there was so far no sign a breakthrough. At 0756 GMT, the pound was down 1.85% at $1.3277.

The euro also sustained losses against the dollar, down 0.74% at $1.2169, but rose 1.26% at 0.9170 pence against the pound. The pandemic stress in Europe overshadowed a weekend deal among U.S. congressional leaders for a $900 billion coronavirus aid package.

The dollar climbed against major peers on Monday with investors seeking its relative safety as many countries tightened COVID-19 lockdowns.

The dollar’s rebound comes after it sank to two-and-a-half-year lows last week, driven by optimism that vaccines would help revive global growth.

The dollar index gained 0.38% to 90.625, after touching 89.723 on Thursday for the first time since April 2018.

The riskier Antipodean currencies weakened at the start of the holiday-shortened trading week as investors rushed for haven assets.

The Aussie dollar dropped 1.24% to 75.295 U.S. cents. The U.S. dollar gained 0.32% to 103.62 yen, another safe haven.

Source: The Financial Express

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Vietnam important partner in India's Indo-Pacific vision: PM Modi

Prime Minister Narendra Modi on Monday said Vietnam is a key pillar of India's Act East policy and a vital partner in its Indo-Pacific Vision as the two sides signed seven pacts across sectors, including defence and energy, and released a joint vision for peace and prosperity and stability in the South China Sea region.

Addressing the India-Vietnam virtual summit, the PM said: “We see our ties with Vietnam from a long-term and strategic view. Peace, stability and prosperity are our common objectives in the Indo-Pacific region. Our partnership can contribute significantly to maintaining stability and peace in the region.”

Vietnamese PM Nyugen Xuan Phuc, on his part, said the upgrading of bilateral ties to a comprehensive strategic partnership in 2016 had bolstered trust and bolstered understanding of other’s vision and interests on international issues. He said the Vietnamese side had also agreed to India’s proposals for a further defence ties at a time when both countries are grappling with China’s aggressive actions in the region.

Source: The Economic Times

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