The Ministry of Finance today announced additional financial assistance of Rs 1,004 crore for Madhya Pradesh and Andhra Pradesh. Both states received additional funds after completing three out of the four citizen-centric reforms stipulated by the government. The two states have completed the One Nation, One Ration Card reforms, Ease of Doing Business reforms, and Urban Local Bodies reforms. While Andhra Pradesh will get an additional amount of Rs 344 crore, Madhya Pradesh will get Rs 660 crore for capital projects.
It is to be noted that under Prime Minister Narendra Modi’s flagship Atmanirbhar Bharat package, the scheme for ‘Special Assistance to States for Capital Expenditure’ was announced. This is in addition to the permission of Rs 14,694 crore issued to the states for extra borrowings for completing the reforms.
The scheme is aimed at boosting capital expenditure by the state governments, who are facing a difficult financial environment this year due to the shortfall in tax revenue amid the pandemic. Since capital expenditure has a higher multiplier effect and it enhances the future productive capacity of the economy, the government had decided to extend the scheme despite the adverse financial position of the Centre.
So far capital expenditure proposals of Rs 9,880 crore of 27 States have been approved by the finance ministry and an amount of Rs 4,940 crore has already been released to the states as the first installment under the Scheme. The capital expenditure projects have been approved in diverse sectors of the economy such as health, rural Development, water Supply, irrigation, power, transport, education, and urban development.
Meanwhile, Andhra Pradesh, Goa, Haryana, Karnataka, Kerala, Telangana, Tripura, and Uttar Pradesh are the states that had successfully rolled out the PDS reform. On completion of reforms, additional borrowing permission of Rs 23,523 crore were issued to these states.
Source: The Financial Express
Prime Minister Narendra Modi will interact with leading economists and sectoral experts on Friday to deliberate on measures that may be included in the upcoming budget for promoting growth, amid uncertainty on multiple fronts caused by COVID-19.
The meeting, being organised by the government think tank Niti Aayog will be held virtually and will also be attended by Niti Aayog Vice Chairman Rajiv Kumar and Niti Aayog CEO Amitabh Kant.
“The Prime Minister will meet economists on Friday to seek their inputs for the next budget,” said a government official on condition of anonymity.
The meeting assumes significance as according to the Reserve Bank of India (RBI), India’s economy is projected to contract 7.5 per cent in the current fiscal ending March 31, 2021, while the International Monetary Fund (IMF) and World Bank estimates the contraction at 10.3 per cent and 9.6 per cent, respectively.
India’s economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent and held out hopes for further improvement on better consumer demand.
India’s economic growth stood at an estimated 4.2 per cent in 2019-20.
The upcoming Union Budget is likely to be presented on February 1, 2021.
Source: The Financial Express
The Income Tax department on Wednesday said it has issued refunds worth over Rs 1.64 lakh crore to over 1.41 crore taxpayers so far this fiscal.
This includes Personal income tax (PIT) refunds amounting to Rs 53,070 crore and corporate tax refunds of over Rs 1.10 lakh crore during this period.
“CBDT issues refunds of over Rs. 1,64,016 crore to more than 1.41 crore taxpayers between 1st April,2020 to 04th January,2021.Income tax refunds of Rs. 53,070 crore have been issued in 1,38,85,044 cases & corporate tax refunds of Rs. 1,10,946 crore have been issued in 2,06,847cases,” the Income Tax department tweeted.
The Department on Tuesday had said that over 5 crore income tax returns (ITRs) for fiscal year 2019-20 have been filed till January 4.
The government has extended the ITR filing deadline for individuals till January 10, and for companies till February 15.
Source: The Financial Express
Today, India along with many other countries stands at the turning point of its economic regrowth, while still reeling from the lasting impact of the global pandemic of COVID’19. The year 2020 has been an unprecedented one, with many learnings and unlearning at the same time. Reflecting back on this exceptional year, it is apparent that Indian manufacturing has gained on many grounds as the Government of India continued its thrust towards ‘Make in India’ and pushed the country to truly, ‘Go Local Vocal or become Atmanirbhar or Self-reliant’. All this is evident, as the domestic manufacturing sector and many companies in India have begun to reconfigure their sourcing and footprints for greater reliability and resilience.
Unmistakably on its path to becoming the global epicenter for hi-tech manufacturing the 3 E’s that are propelling the Indian manufacturing sector are – economy, employment and efficiency. These are pushing the sector to claim a place for itself on the world map. Prime Minister Modi’s call to ‘find opportunity in times of crisis’ has certainly set the nation on a growth trajectory. This is also visible with the confidence exhibited by global giants like GE, Siemens, HTC, Toshiba , Boeing etc , as they are biting into the growing pie of Indian market sized over a billion consumers and their increasing capacity to spent. All these brands have either set up or are raring to set up manufacturing plants in India, thereby localizing their offers.
11 manufacturing value chains, a $300 billion of GDP potential
According to McKinsey analysis, there are 11 categories in India’s manufacturing value chains that can generate, within the next seven years, about $320 billion more in gross value added (GVA). Out of this about 80 per cent potential resides in the six value chains of: chemical products and petrochemicals, agriculture and food processing, electronics and semiconductors, capital goods and machine tools, iron ore and steel, and automotive components and vehicles.
So, what is India’s boon?
Although some of India’s manufacturing value chains are reaching levels of high global competitiveness, there still remains many a slips. According to the Centre for Monitoring Indian Economy (CMIE), estimates are that GVA in manufacturing has grown 0.9% year-on-year in the September quarter. The return to growth from a steep 39.3% contraction in the preceding quarter has been attributed to an extraordinary profit performance by listed manufacturing companies during the pandemic. This has made India an even more attractive destination for investment in the sector.
The actual potentiality of this growth is coming from – India’s advantage in raw materials, manufacturing skill, and entrepreneurship. India’s natural resources pool (for example, iron ore, bauxite, high solar insolation, and cotton) and low-cost labor are a boon to the makers of basic metals, textiles and apparel, renewable energy, and chemical products. The country’s large pool of skilled and trained workers, powers up its skill-intensive value chains such as pharma, capital goods, and automotive components.
Secondly, the potentiality of four market opportunities of: export growth, import localization, domestic demand, and contract manufacturing gives India a new-level of competitiveness and scale. Having said this, its also noteworthy to mention that from fiscal year 2006 to fiscal year 2012, India’s manufacturing-sector GDP grew by an average of 9.5 percent per year. After this, over the next six years, growth declined to 7.4 percent. And now, in fiscal year 2020, manufacturing generated 17.4 percent of India’s GDP, little more than the 15.3 percent it had contributed in 2000.
So, what is making India’s manufacturing ecosystem a bane despite opportunities ?
Although there are huge upsides to Indian manufacturing however the sector still remains cloaked with its set of challenges and/or limitations. There are several factors that help to explain why Indian manufacturers, despite great potential, are creating limited value. A few, have to do with the costs of infrastructure and key inputs. The others are, poor logistics that cause delays and raise inventory costs; high prices for power and credit inflate operating expenses. The small, fragmented companies that make up this value chain, are the ones, which cannot operate productively, leave aside peak efficiency; these can neither innovate quickly to keep pace with competition; nor command price premiums because of the lack of strong brands and marketing.
What can be the front-runners of Indian Manufacturing and why?
With the growth of domestic sales ($180 billion of additional GVA), it is obvious that Indian manufacturers can tap into more healthy consumer markets for products such as fast-moving consumer goods, consumer durables, food products, automotive products, metals and renewables. To capture this opportunity, manufacturers can consider focusing on offering quality products at different price points. Several of these consumer markets can grow provided that factors like consumer credit and attractive retail interest rates are in place. Export growth ($70 billion to $75 billion of additional GVA). Exports of manufactured goods can increase from 14 percent of manufacturing GDP to more than 25 percent. Much of this increase can come from sectors where Indian manufacturers are already competitive.
To compete in foreign markets, manufacturers must achieve economies of scale, meet international quality standards, comply with foreign regulations, and sustain R&D investments. Import localization ($55 billion to $60 billion of additional GVA). India’s manufacturers can challenge foreign competitors for market share in a few strategic sectors too. An opportunity to reduce India’s spending on imports from 30 percent of all manufactured goods to 15 to 20 percent is indicated here. To capture this, domestic manufacturers need to upgrade the technology and quality of their offerings while lowering prices.
Contract manufacturing for global markets ($4 billion of additional GVA). Indian manufacturers are operating well below their maximum capacity, with utilization ranging only 60 to 70 percent across sectors (according to the Reserve Bank of India). In select value chains, Indian manufacturers can fulfil overseas orders in the near term through contract manufacturing.
Road Ahead
To sum it, the manufacturing sector of India has the potential to reach US$ 1 trillion by 2025, implementation of the Goods and Services Tax (GST) will further make India a common market with a GDP of US$ 2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors. According to the United Nations Conference on Trade and Development (UNCTAD), India ranked among the top 10 recipients of Foreign Direct Investment (FDI) in South Asia in 2019, attracting US$ 49 billion—a 16% increase from the previous year.
This is just one of the many indicators, which speak of India’s potential to turn into a manufacturing powerhouse. Keeping in line with this, the Government of India is quick to act as it is, aiming to generate 100 million new jobs in the sector by 2022. With impetus on developing industrial corridors and smart cities, the Government is looking to ensure holistic development that will further assist in integrating, monitoring, and developing a conducive environment for industrial development and will promote advanced practices.
A focussed approach to industrial policy, to lower input costs, improvised ease of doing business across sectors will specifically help in catalyzing the growth of India’s manufacturing value chains by helping them lift their productivity, secure know-how and technology, and gain access to capital. With these reforms, and complementary actions by manufacturing companies, its estimated that the above-identified value chains can more than double their GDP contribution to $500 billion in years to come.
While on one hand, the COVID-19 pandemic has exposed the fragility of not only India but the world’s supply chains. On the other, it has also led global companies and countries across the world, pivot their game by setting up more locations, lessening their dependence on fewer geographies; establishing more manufacturing units and automating processes (with AI integration etc).
These are a few steps, which have tipped the scales in favour of the economies which have been quick to adapt and bounce back however, some nations are yet not ready to take full advantage of these shifts and India is certainly ‘not’ amongst those!
Source: The Financial Express
India’s economy is on course to perform better in the second half of the fiscal buoyed by sustained improvement in high frequency indicators while approval of emergency use of two Covid-19 vaccines will provide tailwinds to a V-shaped recovery, the government has said.
“The sustained improvement in high frequency indicators ignites optimism of an improved performance in the second half of the year,” the finance ministry said in the monthly economic review issued on Tuesday.
The impending vaccination against the coronavirus would spur momentum in economic activity globally, it said. Post-vaccination, resumption in economic activity and increased mobility are expected to drive the economic recovery in the aftermath of the pandemic, the government said.
So far, two vaccines – Serum Institute of India’s Covishield and Bharat Biotech’s Covaxin – have been approved for emergency use while various other vaccines have successfully hit trial status in India.
The country has prepared a blueprint of a mega vaccination drive with plans to first immunise 300 million health workers.
Source: The Economic Times
Income inequality in India, which is a long-debated topic, is expected to rise further in 2021. As many as 61 per cent of urban Indians expect income inequality to increase; however, they also expect pay parity for women with men, according to a survey. On the other hand, around 76 per cent of Indians predict the global economy to emerge stronger in the current year, and 84 per cent are optimistic that this would be better for them, the survey by Ipsos revealed. “2020 was a difficult year for everyone, with the pandemic impacting jobs, economy, and health. Urban Indians per se have shown a lot of resilience to brace and fight the pandemic,” said Amit Adarkar, CEO, Ipsos India.
Now, with the vaccine available, there is a glimmer of hope surging for 2021, to turn the tide and ring in better days for the economy and the citizens, Adarkar added. Three-fourths of Indians expect a successful vaccine for Covid-19 to be widely available this year, while 43 per cent fear about lurking of a new pandemic with a new virus.
Among other estimates, 63 per cent of Indians expect life to get back to normal; 50 per cent of Indians are bullish of the global economy recovering from the impact of Covid-19, and nearly 62 per cent of Indians expect the world to change for the better because of the pandemic. With the changing world, consumer behaviour is also expected to change. 6 in 10 urban Indians believe they will be spending more money buying things online than spend buying things in stores.
As far as the stock market is concerned, less than half of the Indians (43 per cent) expect that it will crash in 2021. Meanwhile, the work from home culture is expected to reduce the need for the working class to migrate to big cities. Nealy 45 per cent people expect that living in big cities will shrink this year.
Source: The Financial Express
Currency in circulation (CIC) went up by a record Rs 5 lakh crore in 2020 as Indians joined the global dash for cash in the wake of the Covid-19 pandemic. With gross domestic product (GDP) expected to shrink by 7.5% in FY21, the currency-to-GDP ratio could cross 15%.
According to data released by the Reserve Bank of India (RBI), currency in circulation grew by Rs 5,01,405 crore between January 1, 2019, and January 1, 2020. Overall, it has gone up to Rs 27,70,315 crore, up 22% from the previous year. This is the sharpest increase to date, if the post-demonetisation surge due to banknote replacement is excluded.
While currency in circulation shrunk nearly 20% in FY17 due to demonetisation, it jumped 37% the following year when fresh notes were issued. The average growth for the last decade was 12.6% and for the last 50 years 13.8%.
According to a paper published by the RBI, in the last 50 years there were only four occasions when currency growth was higher than 17% for three-four consecutive years. On three occasions, ie, during 1987-90, 1993-96 and 2005-09, higher currency demand was caused by relatively high nominal GDP growth. The recent surge is despite GDP shrinking.
In 2020, it was uncertainty brought about by the pandemic that drove people to hoard more cash over fears of medical or financial emergency. While currency in circulation does rise with the increase in GDP, a recent paper published by RBI staff said the high growth in currency during the last three years was despite low nominal GDP growth.
As Covid-19 cases in India rose last year, deposit growth slowed and year-on-year growth in currency with the public accelerated from 11.3% as on February 28, 2020, to 14.5% by end-March 2020 and to 21% in June 2020.
News reports this week said that 35% of all US dollars in circulation were printed in the last 10 months — money created as an outcome of central bank easing.
According to the RBI, this is a global phenomenon. In its August annual report, the RBI pointed out that the increase in currency in circulation was particularly sharp in Brazil, Chile, India, Russia and Turkey, as well as in advanced economies such as the US, Spain, Italy, Germany and France, where the use of cash is less.
“The rise in currency in circulation in these countries occurred concomitantly with liquidity injecting measures undertaken by their central banks. They were also impacted by the Covid-19 build-up of precautionary balance,” the RBI had said.
Source: The Economic Times
Sanjay Garg, President, Northern India Textile Mills Association (NITMA), has applauded the Government and designated authority with regard to recommendation of DGTR to levy the anti-dumping duty (ADD) on viscose spun yarn originating in or exported from Indonesia, Vietnam & China and imported into India.
It had been causing considerable amount of injury to domestic manufacturers and same was being sought after by the industry for quite a while.
Sanjay also advocated levying the ADD on polyester spun yarn (PSY). The country-wise data on import of virgin polyester spun yarn from 2015 to 2020 explains the urgent need for imposition of ADD on PSY.
It is pertinent to mention here that monthly average imports of virgin polyester spun yarn (under the PUC) have increased by 972 per cent from 2015 to 2020.
Imports from Vietnam alone have increased by mammoth 10,512 per cent, that is, 107 times.
Average monthly imports for 2020 were 5,212 tonnes per month out of the total domestic monthly consumption of 22,000 tonnes per month. This means that imports enjoy 25 per cent of the total market share. Moreover, this trend is increasing with great speed.
Import numbers have been growing substantially year after year due to extremely and unreasonably low prices offered by Indonesian & Vietnamese spinners on account of huge idle capacities created owing to their Government’s incentives.
Sanjay also expressed his deep concern over the rise in import quantities being dumped into India, which can potentially cause an irreparable injury to domestic PSY spinning sector with the cascading effect, from closure of mills to NPAs, and eventually resulting into massive loss of employment.
Source: Apparel Online
The finance ministry has provided additional financial assistance worth Rs 1,004 crore to Andhra Pradesh and Madhya Pradesh for capital expenditure after they completed three of the four citizen-centric reforms.
The two states have completed the One Nation, One Ration Card Reforms, Ease of Doing Business Reforms, and Urban Local Bodies Reforms, a finance ministry statement said on Wednesday.
While Madhya Pradesh has become entitled to receive Rs 660 crore for capital projects, Andhra Pradesh will get an additional amount of Rs 344 crore, it said, adding they have become the first group of states to complete three out of the four citizen-centric reforms.
In October last year, the government had announced the scheme for special assistance to states for capital expenditure under which it would offer Rs 12,000 crore interest-free 50-year loans to the states, as part of the Atmanirbhar Bharat Package 2.0.
“The Scheme has got a very warm response from the State Governments. So far capital expenditure proposals of Rs.9880 crore of 27 States have been approved by the Ministry of Finance. An amount of Rs.4940 crore has already been released to the States as the first instalment under the Scheme,” the statement said.
The additional financial assistance for the capital expenditure was in addition to the Rs 14,694 crore extra borrowing permission issued to these states for completing the reforms.
Capital expenditure has a higher multiplier effect, enhancing the future productive capacity of the economy, and results in a higher rate of economic growth, the finance ministry said.
“Therefore, despite the adverse financial position of the Central Government, it was decided to extend a special assistance to the State Governments in respect of capital expenditure, in financial year 2020-21,” it said.
Projects under the scheme have been approved in diverse sectors of economy like, health, rural development, water supply, irrigation, power, transport, education and urban development.
Source: The Economic Times
The country’s infrastructure investments seem to have largely kept pace with the targets for FY21 despite the pandemic and cutbacks in budgetary expenditure. According to data provided by nine ministries to the department of economic affairs, investments to the tune of Rs 3.83 lakh crore have been made till date in the sectors they oversee; this is 62% of their combined annual target, a creditable achievement given how Covid-19 hit the economy.
Even though Budget spending remained sluggish (against gross budget support target of Rs 2.45 lakh crore for FY21, just Rs 1.2 lakh crore has been achieved so far by the nine ministries), funding of infrastructure projects through extra budgetary resources (EBR) and public-private-partnerships (PPPs) remained strong (see chart below). According to the DEA note reviewed by FE, the ministry of housing and urban affairs (MoHUA), which implements the government’s flagship Pradhan Mantri Awas Yojana and the smart cities mission, received just a little over Rs 19,000 crore from Budget but managed to mobilise Rs 1.08 lakh crore in EBR (borrowed funds). Also, at Rs 1.05 lakh crore, the projects under the MoHUA saw 96% of all private investments reported by the nine ministries.
The railways, which is at the cusp of a transformation with string response received from private investors into passenger trains business, has been the second-biggest investor, as it pulled in Rs 94,718 crore or 25% of the total achievement by nine ministries. The railways received Rs 57,176-crore budgetary support, borrowed Rs 34,105 crore (EBR) and catalysed Rs 3,436-crore private investments. The rural development ministry, which implements the popular rural employment guarantee scheme, reported investments of Rs 40,785 crore till date, against the FY21 target of Rs 85,889 crore.
The nine ministries — railways, shipping, atomic energy, telecom, rural development, housing and urban affairs, steel, school education and youth affairs — have also firmed up plans to mobilise Rs 7.14 lakh-crore investments in FY22 compared with an earlier projection of Rs 6.61 lakh crore, an increase of 8%. Though the DEA sought update of infrastructure investments from 23 ministries, only the above nine have supplied the data thus far. In FY22, MoHUA is envisaging a whopping Rs 3.62-lakh-crore investments with nearly 80% of it expected to be funded through EBR and private investments. The railways also plans a massive Rs 2.9-lakh-crore investments in the next fiscal and estimates Budget support of over Rs 1 lakh crore.
To augments resources for new projects, 11 infrastructure ministries have identified core assets for monetisation. The existing pipeline of core assets (of PSUs) include over 100 assets valued at about Rs 4 lakh crore. For monetisation of assets, PPP concession models, infrastructure investment trust (InvIT), real Estate investment trust (REIT) and toll operate transfer (TOT) models have been identified. “Infrastructure ministries to prepare a pipeline of potential assets for monetisation over FY21-24,” the department of economic affairs said in a recent presentation to finance minister. Other steps include creation of national monetisation pipeline to provide visibility to investors and ministries. An asset monetisation dashboard will be maintained for tracking progress of asset monetisation by ministries.
According to an official statement, of the total projected capital expenditure of Rs 111 lakh crore in five years through FY25, projects worth Rs 44 lakh crore (40%) are under implementation, projects worth Rs 33 lakh crore (30%) are at the conceptual stage and those worth Rs 22 lakh crore (20%) are under development. Infrastructure investment in India during FY08 to FY17 was estimated at ~Rs 60 lakh crore ($1.1 trillion), according to a report of the task-force on the national infrastructure pipeline. The infrastructure investment in the 11th Five Year Plan amounted to Rs 24 lakh crore and that in the 12th Five Year Plan through FY17 stood at Rs 36 lakh crore. However, infrastructure investment, as percentage of GDP, fell to ~5.8% during the 12th Five Year Plan from ~7% during the 11th Plan period. As per estimates, India’s infrastructure investment for FY18 and FY19 are about Rs 10.2 lakh crore and Rs 10 lakh crore, respectively.
While infrastructure investment was predominantly made by the public sector (the Centre and state governments had a share of over 70%) between FY08 and FY17, the share of private sector was ~30%. However, the private sector’s share dropped to about 25% in FY1 and FY19, it added.
Source: The Financial Express
The United States Trade Representative (USTR) has determined that digital services taxes adopted by India discriminated against American companies and inconsistent with international tax principles, in a report issued Wednesday, but stopped short of taking specific actions saying it "will continue to evaluate all available options."
The USTR, in its findings, said that India’s 2% equalisation levy is imposed on revenue generated from a broad range of digital services offered in the country, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service, and several other categories of digital services and applies only to “non-resident” companies.
“The US Trade Representative has determined that India’s Digital Services Tax (DST) is unreasonable or discriminatory and burdens or restricts US commerce and thus is actionable under Section 301,” it said in the report.
It also determined that “India’s DST is unreasonable because it is inconsistent with principles of international taxation, including due to its application to revenue rather than income, extraterritorial application, and failure to provide tax certainty”.
It issued similar reports for Turkey and Italy. Last year, the US initiated investigations into 10 nations and blocs including India that have imposed such digital services taxes or are in the process of doing so. They include the UK, Brazil and the European Union.
The USTR said it requested consultations with India on the issues involved in the investigation and consultations were held on November 5, 2020.
The 2% equalisation levy, or so-called Google tax, came into effect from April 1, 2020. The government had earlier imposed a 6% levy on digital advertising aimed at taxing digital companies based overseas on the business they do in India.
Source: The Economic Times
The four textile units – Winsome Textiles, Auro Textiles, Auro Dyeing and Auro Textile-II in the Baddi industrial area (Himachal Pradesh) – have been directed to close operations of their dyeing processes as their effluents have rendered the common effluent treatment plant (CETP) defunct.
This is being looked as a major crackdown on polluting industries.
An environmental compensation worth Rs. 1.86 crore has also been imposed on them for violating the provisions of the Water Act, 1974, and Environmental Protection Act, 1981 by the State Pollution Control Board (SPCB).
Three textile units have been levied environmental compensation from 25 July 2020 to 31 December 2020 (160 days), while Auro Textiles has been levied it for 140 days.
The regional officer of the SPCB has also been directed to ensure compliance within 7 days by the member secretary, SPCB.
These were neither complying with the prescribed discharge standards nor notified inlet quality standards and caused water pollution in its orders.
It is important to mention here that this issue was under process majorly from last year as an inspection committee of the National Green Tribunal (NGT) had observed in November 2019 that these textile units engaged in dyeing processes generate category-IV effluents comprising concentrated dyes.
The pipeline carrying these effluents was found non-functional and choked as they carried concentrated effluents from these units. Not only this, a major portion of this effluent got mixed with category 1 effluent and could not be treated appropriately.
The CETP was not found fit for treatment of fixed dissolved solids (FDS) measuring around 22,000 mg/litre being received from these textile units. This was causing considerable pollution to the Balad river as all treated effluents are finally discharged into it by the CETP.
The NGT had expressed concern over pollution in Balad river in Baddi and had directed the SPCB to close polluting activities and recover environmental compensation from the polluter in June 2020 after receipt of this report.
The state board had issued show cause notices to these units in June 2020 and had asked them why their power supply should not be disconnected and an interim environmental compensation may not be imposed on them as per the laid norms.
The textile units were directed to chalk out action plans and install their own treatment system to treat these effluents and follow inlet and treatment quality standards.
The textile units challenged the order in the high court which while disposing their petitions had directed the State Government to take appropriate directions as per law against the polluting units while observing that no industry can be allowed to pollute water bodies.
Source: Apparel Online
In less than a month, the finance minister will be presenting Budget 2021-22. What needs to be on her agenda? Before turning to my reform suggestions, let me note a very welcome step that the government has just taken to restore normalcy: Approval to two vaccines for emergency use with approval to another two likely to come any time, according to minister Prakash Javadekar.
It has been my view that as long as a vaccine is shown to be fully safe and more than 50% effective, the government should move ahead with approval. It should also spend public funds without hesitation to rapidly bring the vaccine to all, especially in cities and towns that are disproportionately vulnerable to the coronavirus.
Vaccine is a classic case of a “public good”, for which the use of public funds is as justified as for national defence. Additionally, given that Covid-19 induced slowdown is costing the economy billions of dollars in lost GDP each month, rapid vaccination would create far more value in extra GDP than its cost.
Turning to Budget 2021-22, I confine myself to four recommendations for the finance minister.
First, with vaccination poised to restore normalcy to the movement of people, prospects of a fiscal stimulus translating into effective demand and for effective demand into supply response are excellent. Therefore, it will be wise at this point to give the economy a hand through fiscal expansion in two forms.
One, in the next six months, the government must speedily clear the payments it owes in the form of pending tax refunds, overdue GST revenue to states and payments for goods and services received from private companies. Two, the government must allow for a fiscal deficit in 2021-22 that is 1-2% larger than would have been the case absent the pandemic. The expansion at this stage would be just as wise as the restraint in spending by the government in the early part of the pandemic was.
Second, the government must recapitalise in advance public sector banks (PSBs) on a sizeable scale. With revenue flows interrupted wholly or partially, notwithstanding the respite through temporary holiday on repayment of interest and principal on existing loans and one-time costless restructuring, many weaker companies will be unable to survive in the post-corona world. Resulting bankruptcies would resume the process of accumulation of non-performing assets (NPAs) and adversely impact credit growth, especially at PSBs, which have carried the burden of the repayment holiday and loan restructuring.
In its first term, the present government was slow to act on the NPA front and the economy paid a high price for it. Credit growth at PSBs collapsed during 2016-17 and with the weakening of non-bank finance companies in quick succession, growth slowed down to 6.1% in 2018-19 and 4.2% in 2019-20. Recurrence of similar outcome needs to be avoided, especially since the coronavirus crisis has already weakened the economy. The government can avoid any adverse fiscal implications of recapitalisation by swapping debt for equity with PSBs.
Third, there is now little excuse for foot dragging on privatisation of a large number of public sector enterprises (PSEs). The need for additional fiscal resources is acute. Equally, future growth demands that the enterprises operate at the highest level of efficiency, which cannot happen as long as they are headed by CEOs who are invariably selected from amongst sitting or retired bureaucrats.
Being subject to the threat of investigation by vigilance agencies for any missteps, they have little incentive to run the enterprises on a commercial basis. Unsurprisingly, all evidence points to abysmal returns on PSEs in comparison to their private sector counterparts. If I may be permitted to be blunt, PSEs have been sources of outright plunder of taxpayer money for decades.
Given that the Cabinet has blessed privatisation repeatedly since 2016, it is a reasonable inference that the bottleneck is at the bureaucratic level. Therefore, it is now time for Prime Minister Narendra Modi to return to a separate disinvestment ministry, which had yielded impressive results under PM Vajpayee but was disbanded by the successor UPA government. Modi should place an outside technocrat of unimpeachable integrity and proven ability, such as the former CEO of HDFC Bank Aditya Puri, in charge of the ministry – with a clear mandate to move the privatisation project forward at a rapid pace.
Finally, in the Budget, the government must commit to a programme of phased tariff reductions such that the average tariff comes down to 10% from its current level of 14% by 2024. Under the programme, it should considerably compress peak tariffs such as those applying to auto, auto parts, toys and textiles and clothing. This is the only effective way for India to exploit and benefit from the vast global markets.
With several key reforms – new labour codes, new farm laws, Insolvency and Bankruptcy Code, low corporate profit tax, single nationwide GST and widespread digitisation – already in place, the addition of privatisation and trade liberalisation would nearly guarantee a double digit growth and millions of additional well-paid jobs for the masses in the post-Covid-19 decades. India can ill afford to miss this golden opportunity.
Source: The Economic Times
There are numerous fraud cases involving GST Fake Invoicing which implies claiming Input Tax Credit (ITC) fraudulently and unscrupulous refund claimants. The issue of fake invoicing may not have a serious impact on the economy in the short run, but it has an impact in the long run unquestionably. Generally, the GST Fake invoices frauds are largely carried out by the non-existent taxpayers & by using a network of firms set up to usurp (illegally) ITC.
At a time when the government is already struggling with low revenue collection due to the COVID-19 Pandemic Virus, cases of GST Fake invoicing fraud are making a further dent in the government’s pocket and its ability to spend. According to the Finance Ministry sources, the Directorate General of GST Intelligence (DGGI) & CGST Commissionerate has so far arrested 48 persons including one woman and 3 Chartered Accountants, and have booked 648 cases besides identifying 2385 entities, in just ten days of the nationwide drive against GST Fake invoicing frauds.
The very attempt of this article is to aware the taxpayers of the consequences of “Generating Fake invoices & Indulging in the related frauds”. On the same side, the actions/measures suggested by the Law committee of the GST Council to curb these cases, are also conversed here.
Firstly, it is very imperative to know the exact meaning of “Fake Invoice”. When a registered person issue a tax invoice without actual supply of goods or services or payment of GST then such invoices are presumed to be “Fake Invoices”. And this act of the taxpayers would imply “Fake invoicing fraud”. After the nationwide drive against the GST Fake Invoicing Frauds through which various defaulters came into the eye of GST authorities, the main course observed is that GST Fake invoices are not issued only to pass & avail the Fake input but also used for nefarious activities leading to tax evasion & massive bank loan fraud.
The manifold objective/purpose of the taxpayers behind issuance of fake invoicing may involves:
GST Council has also adopted few standard operating procedures for “how to detect and tackle the fake invoices”. It is very important to identify the generators and users of fake invoices and check the authenticity of the invoice. Not only the ones who generate fake invoices but also those who use fake invoices are responsible for leading to these kinds of frauds.
For identification of generator and user of fake invoices following steps can be used:
Final action to be taken by the Government after investigating the genuineness of the supplier who generated the fake invoice and buyer who used that invoices for the taking unnecessary tax benefit. Once the forgery is proved then the following steps to be taken as below:
Two-pronged measures are suggested by the GST Law committee to Curb GST Fake invoicing frauds:
There are about 600,000 dormant registrants in GST. About 35,000 such dealers who were given registration in 2018-19 and 2019-20, having annual GST liability of more than INR 50 lakh, 99% of which is paid through ITC have no credential in income tax (did not pay income tax even of Rs 1 lakh in last three years. Since GST fraud has become an increasing problem both in terms of the number of cases reported and the scale for the amount being involved under this.
Hence, control measures are needed to mitigate and minimize fraud that’s why the Government took a wonderful step to avoid frauds i.e. implementation of e-invoicing and planning to introduce new returns in the upcoming fiscal that will help in curbing evasion. Further, an honest taxpayer should be aware of his duties and compliance provision of GST law and should take all possible steps to stay away from any frauds of GST law.
Source: The Financial Express
Commerce and industry minister Piyush Goyal on Wednesday said India is on the path of recovery and things are falling back into place, and asked industry to focus on quality and productivity as they impact both manufacturing and services.
“We are on the path of recovery and things are falling back into place…The resilience and determination that our Indian industry has shown over the last nine months of Covid-19 is truly very encouraging and has shown the world capacity of India and Indian industry,” he said at a webinar on Udyog Manthan organised by the Department for Promotion of Industry and Internal Trade.
The department is organizing Udyog Manthan - a marathon of focused sector- specific webinars to promote quality and productivity in Indian Industry in association with Quality Council of India, National Productivity Council, and industry bodies from January 4-March 2, 2021. Comprising 45 sessions, it will cover various major sectors in manufacturing and services.
High frequency indicators like PMI, exports and GST proceeds have shown an improvement in economic activity.
Referring to Prime Minister Narendra Modi’s call for Indian products to win the hearts of people across the world, Goyal said that this is possible by adopting high quality and improving productivity.
“These two elements- quality and productivity-impact not only manufacturing, impacts services as well and impacts governance,” Goyal said.
The minister said that a liberalised framework for foreign direct investment has been provided for promoting investments in different sectors, including single-brand retail, coal, mining and manufacturing.
“We are opening up rapidly in a number of sectors and encouraging investment into India. We are working on more investments in defence, space,” he said.
FDI equity inflows into India grew 21% to $35.33 billion in the April-October period of fiscal 2021 from $29.31 billion a year earlier.
Source: The Economic Times
Finance Minister Nirmala Sitharaman on Wednesday reviewed the progress of projects worth Rs 3.6 lakh crore under the National Infrastructure Pipeline (NIP), an official statement said.
The projects are being implemented by the Ministry of Health and Family Welfare, and the Department of Water Resources, River Development and Ganga Rejuvenation.
During the meeting, the finance minister asked the two ministries/ departments to push infra expenditure by effectively implementing all NIP projects in time and ensure quick resolution of issues in coordination with state governments and other ministries.
Secretaries of these two departments were asked to promote investible projects by holding discussions with prospective investors, the finance ministry said in the statement.
This was the second review meeting by Sitharaman with various ministries and departments to monitor and accelerate NIP project implementation.
"In the review meeting, in addition to infra spending along with annual targeted and achieved expenditure by these two ministries/departments, various initiatives taken by them to expedite were also discussed.
"24 projects worth Rs 80,915 crore under the Ministry of Health and 10 large projects worth Rs 2,79,604 crore under the Department of Water Resources were reviewed in detail along with bottlenecks, if any, being faced in the project implementation," it said.
It was explained in the meeting that despite the pandemic, the NIP has managed to achieve substantial progress.
The NIP was launched with 6,835 projects, which has now been expanded to more than 7,300. Projects identified under the NIP require investment of a whopping Rs 111 lakh crore during 2020-25.
Many ministries/departments have shown substantial progress in project implementation and expenditure, especially in the second quarter of 2020-21, the statement said.
In addition, the majority of ministries/departments have targeted substantially high infra expenditure in the current fiscal than the actual expenditure of FY'20.
Ministries were also asked to update the National Infrastructure Pipeline dashboard regularly to allow seamless online monitoring.
Source: The Business Standard
Union Budget 2021-22 Expectations for MSMEs, startups: As per the data released by the MSME ministry, India has close to 6.8 million Udyog Aadhar registered MSMEs and close to 63 million MSMEs in total. MSME related products accounted for 49.81 per cent of the total exports made during the FY 2019-20 and the sector provided employment to close to 110 million people in India. As per an estimate, currently, there are close to 30 unicorn Indian startups, and 18 out of the 30 unicorns have major foreign direct investments. India had a record $73 billion FDI during the FY 2019-20 as per the Commerce Ministry. As per the Startup India portal, India has more than 40,000 DPIIT registered startups. These numbers show the level of importance and impact MSMEs have on the Indian economy and the importance of FDIs to make unicorn startups in India.
In the last several years, the MSME ministry, Commerce and Industry Ministry, and the Finance Ministry of the Government of India, through various budgets, schemes and notifications have come up with various schemes and incentives to boost Make in India and boost the local industry, MSMEs and startups like:
Expectations for Budget 2021
Finance Minister Nirmala Sitharaman has raised the Budget 2021 expectations by stating that this budget shall be ‘unlike anything in past 100 years’, however, there are still some real pain points that MSMEs and startups expect to be addressed urgently in Budget 2021:
Easing FEMA Laws & inflow-outflow of foreign exchange funds inside, outside India
All inflows and outflows of funds into and outside India must go through stringent RBI Scrutiny, reporting, and limits. They become a blocker for foreign investments into India as investors worry about the extant compliance not only during inflows but also when the funds are to be repatriated back, either the original investment amount, interest, or dividend. The institutional investors and investees still have the resources at their disposal to carry out the compliances, however, many times it becomes a deal ‘breaker’ for smaller investors impacting the smaller MSMEs / startups seeking such funds.
The same applies to compliances around the import and export of goods and services. Compliances around regularisation of export revenue and filings required for foreign payments for import of services, including CA certification requirements, increase compliance time and cost at times making business non-viable for small business. For instance, if a business makes a small monthly subscription fee to a foreign service provider, they cannot do it directly from a credit card/debit card through an auto-debit facility, without non-complying with the income tax provisions. They will have to undergo a bank visit and a CA visit before making even a small payment for say $10 subscription fee to be paid outside India. This is a real pain faced by many small and large businesses, but especially to small and medium enterprises. At times, the foreign service provider, whose services are critical for running the Indian business, do not even give options or provide documentation to carry out such compliances at the India level. In the end, the Indian business has to either let go of the critical service or live with a risk of non-compliance, interest, and penal liabilities.
A complete overhaul of the system of foreign exchange inflows and outflows is required to ensure that Indian MSMEs and startups can seamlessly work with global customers, suppliers, investors, and other stakeholders and are able to compete globally.
LTCG taxes on unlisted shares, dividend taxes & additional surcharge
Companies, businesses, and individuals pay income tax on their income. Again, charging capital gain taxes (On capital appreciation over a period from tax paid money) or dividend taxes (On the distribution of tax paid profits) are nothing but double taxation on the same profit. Many global business centres like Singapore do not have capital gains and dividend taxes at all.
India has an extremely high rate of capital gains taxes and dividend taxes. Resident individuals and HUF’s end up paying dividend taxes at an effective rate of 35.88 per cent and non-residents at a rate of 23.92 per cent. Long term Capital Gain taxes also attract an effective rate of 28.50 per cent taxes for high-income groups and short-term capital gains taxes at 42.74 per cent. Taxes which were already higher have been increased by surcharges for super-rich from last year onward. Similarly, taxes are on the higher side for investment funds, REIT’s AIF’s and FPI especially for unlisted shares, which is the most common case for smaller and medium-sized businesses.
These higher taxes demotivate the domestic/foreign investors either to not invest at all in Indian businesses or they force the Indian business to move to a structure wherein the Intellectual Property (IP) and other core ownership moves to some other low tax jurisdiction. Again, for India to attract more foreign investors and a booming MSME and startup sector and to retain the talent and ownership of know-how, patents, and other important intellectual property in India, the tax rates must be low and the avenues attracting double taxes like capital gain taxes and taxes on dividends should either be done away with or reduced considerably. This will stop the IP and capital drain and attract more capital investments both domestic and foreign.
Simplification of GST & labour laws
With every passing day, GST laws are becoming more draconian instead of being simplified. As per the latest government notification, if the monthly taxable sales are more than Rs 50 lakhs, it has been made compulsory to pay 1 per cent of GST liability in cash (with few exceptions) and not allowed to be set-off against input tax credit. The time limit of allowing GST registration has also been increased with a requirement of physical verification of office address by the GST officer. GST officers have also been provided additional powers to cancel GST registration in several cases. Several state governments are also coming with GST department audits and scrutinies as per respective State GST laws.
These amendments and newer requirements shall not only increase time and compliance costs for MSMEs and startups but will also give rise to harassment and corruption. MSMEs and startups are expecting more simplified and automated tax laws and not such complicated and officer driven laws.
ESOP Taxes on unlisted Companies
Employee Stock Option Plans (ESOP) are not only a cost-effective tool for startups and MSMEs who have limited financial resources and still want to tap the best talent in the industry, but it also increases the sense of ownership and entrepreneurship for the employees of the Company.
Shares of companies allotted under an ESOP plan attract taxes as perquisites (salary) at the time of allotment of shares, based on the difference between the Fair Market Value (FMV) and the actual exercise price. However, those unlisted shares do not have an available market for resale. Hence, the employees end up paying taxes on such share valuation without getting direct cash inflows and with the absence of short/medium term liquidity of such shares.
Budget 2020 deferred tax deducted at source (TDS) requirement for such ESOPs share allotment for registered startups. However, this deferment comes with two riders that again makes this deferment un-attractive. First, deferment is limited to five years. Most of the time, startups take more than five years to list themselves in the stock exchange and become a listed company or carry out an exit or sell-out. Second, it does not apply to an employee who is exiting a company as an employee. So, a person who has invested several years in a company and wants to change the company, his ESOPs earned during employment will not be eligible for deferment of taxes.
The startup Industry and its employees expect the riders to be removed and be made more inclusive. Also, this benefit of deferment of taxes should be rolled out to more MSMEs in the traditional sector and not just to the registered startups.
We are confident that the government and its various ministries are working hard to make Budget 2021 one of the best in more than 100 years and take the pandemic-stricken country and economy to a fast-paced bounce back and sustained long term growth. This is to make India an economic superpower and a supply chain hub. We hope these suggestions will also be taken into consideration to bring down the practical difficulties and ensure seamless global integration and competitiveness.
Source: The Financial Express
B2B e-commerce startup Udaan’s fresh fund-raise from Chinese player Tencent is set to face intense government scrutiny as it needs approval even if the technology conglomerate is among the smallest investors in the latest round of investment.
While company sources indicated that investment below a certain threshold does not require government approval, officials clarified that when it comes to neighbouring countries, the proposal will need a clearance even if the sector is under the automatic route for foreign direct investment (FDI). Besides, Udaan’s parent firm Trustroot Internet is registered in Singapore.
“We will have it checked but if the money has flowed into the company without government approval then it is a violation of the FDI norms. We have received proposals for even one share transfer involving entities from neighbouring countries,” said a government source.
The government is keen to ensure that companies do not float multiple layers or route funds via a third country to circumvent the new regulations.
In April, the government had made changes to the FDI policy to scan all investments from neighbouring countries with an eye on Chinese inflows that had begun to dominate certain sectors, especially those related to technology.
At that time, the press note from the department for promotion of industry and internal trade (DPIIT) had not mentioned any threshold and had said that a company with “significant beneficial ownership” by entities from the neighbouring countries will need approval.
The government is yet to define “significant beneficial ownership” amid a debate on whether the threshold should be 10% as is the case under the Companies Act, or 25% provided under FEMA.
Recent media reports had suggested that over a hundred proposals involving Chinese entities were awaiting a green light from the government.
Under the current regime, once a company signs a term sheet, it then files a Foreign Currency-Gross Provisional Return form with the Reserve Bank of ndia, which then scrutinises the case.
Source: The Economic Times
India frequently changing tariff rates and using other trade policy instruments, suchasexporttariffs and minimum import prices, to manage demand and supply and protect its economy, create uncertainties for trading partners, the World Trade Organization (WTO) Secretariat has observed in its latest trade policy review of India.
The WTO, in its 175-page report on developments in India’s trade policy since the last review in June 2015, said India continues to be an active user of anti-dumpingmeasures and is currently the main user in the WTOsystem.
The seventh review of India’s trade policies and practices , which began on January 6, will continue for three days, and will be based onthe report by the WTO Secretariat and another by the Government.
In its report, India said the fundamentals of its economy were strong and this had ensured macroeconomic stability. “During the period under review, the government has focussed on carrying out structural reforms and ensuring inclusive growth. These reforms, along with a host of measures taken by the government after the outbreak of Covid-19, should enable the country to bounce back on its targeted growth path,” the report said.
Strong economic growth
The WTO Secretariat, too, observed that India’s strong economic growth had led to improved socio-economic indicators such as per-capita income and life expectancy. It, however, said that given India's continued need for better infrastructure, subsidies will need to be reduced and better targeted to free up resources for investment.
On India’s use of anti-dumping measures, the report pointed out that during 2015-19 (as of December 2019), India had initiated 233 investigations, as opposed to just 82 in 2011-14 (June). “Most of the investigations initiated during the review period relate to products originating in China, followed by those originating in the Republic of Korea andtheEU-28,” the report said.
Source: The Hindu Business Line
Bangladesh’s export earnings have plummeted once again due to the coronavirus pandemic as a second and larger wave of infections has continued to shatter its major markets in the West.
The country has exported goods worth $3.31 billion in December with a 6.11 per cent year-on-year drop and missing the target by 6.13 per cent, reports bdnews24.com.
The drop in the last month of the year also contributed to an overall 0.36 per cent fall in exports to $19.23 billion in the first half of 2020-21 fiscal year. Before December, the exporting industries had a 1.0 per cent growth in the first five months of the financial year.
The export earnings in the six months from July to December missed the target by 2.25 per cent.
Readymade garments contributed $15.54 billion to the total of export earnings of this period, according to Export Promotion Bureau data. The total exports figure in the sector missed the target by 4.12 per cent with a 3.0 per cent year-on-year fall.
A nearly 4.0 per cent growth in cheap knitwear exports contributed $8.52 billion to the earnings from the apparel sector, while overseas sales of woven products plummeted by 10.22 per cent to a little over $7.0 billion, missing the target by 14.39 per cent.
The pharmaceutical sector posted a 17.15 per cent growth and jute 30 per cent while export of handicraft increased by 48.7 per cent.
But earnings from leather and leather products fell by 17 per cent, and frozen fish 3.71 per cent.
Bangladesh’s readymade garment manufacturers hoped exports would boost by December, buoyed by a surge in the demand in the Western world ahead of Christmas, after a huge slump in the early months of the pandemic.
Their expectations were hit heavily when export earnings slipped back into the negative territory with the second wave of coronavirus infections surging in Europe and the US.
Finally, exports returned to growth on cheap knitwear amid hopes raised by the roll-out of coronavirus vaccines in the West.
After the pandemic began in China in late 2019, Bangladesh’s export earnings dipped to as low as $520 million, including $360 million of the apparel industry, in April 2020.
Export earnings rebounded somewhat in May, growing almost three times over the April receipts, as factories began reopening with relaxed restrictions. But it still marked a 61.56 per cent year-on-year drop.
Exports bounced back to grow in July and continued the trend steadily in the following two months, beating the targets. A subsequent slump in October was followed by another spell of growth in November.
“People in the US and Europe aren’t buying things that are not essential after being hit by the second or third wave of COVID-19. It seems that this negative trend will continue until the situation normalises,” said analyst Ahsan H Mansur.
He, however, sees no reason to be worried as Bangladesh has been able to keep the drop in exports to as low as 0.36 per cent amid the pandemic crisis after a 17 per cent fall in the last fiscal year. “The negative trend had been there before the pandemic hit,” he said.
Anwar-Ul-Alam Chowdhury Parvez, a former president of Bangladesh Garment Manufacturers and Exporters Association, also thinks the situation in the country’s export will continue for several more months.
“The buyers have products in their stocks due to plummeting sales amid lockdowns in several countries. I think orders will drop further in future,” said Mohammad Hatem, Vice-President of Bangladesh Knitwear Manufacturers and Exporters Association.
The government has set an export target of $48 billion in the 2020-21 fiscal year aiming a 19.79 per cent year-on-year growth.
Source: The Financial Express Bangladesh
The Cabinet on Wednesday approved an MoU between India and Japan on a mechanism for cooperation between the two countries to facilitate the employment of skilled Indian workers in 14 specialised sectors in Japan.
“The present Memorandum of Cooperation would set up an institutional mechanism for partnership and cooperation between India and Japan on sending and accepting skilled Indian workers who have qualified in the required skill and Japanese language test, to work in 14 specified sectors in Japan. These Indian workers would be granted a new residence status of ‘Specified Skilled Worker’ by the Government of Japan,” an official statement added.
A joint working group will be set up to look into the implementation of the MoU.
“The Memorandum of Cooperation (MOC) would enhance people-to-people contact, foster mobility of workers and skilled professionals from India to Japan,” the statement added.
The 14 sectors identified include nursing care, materials processing; industrial machinery manufacturin,; electric and electronic information, construction, shipbuilding and ship-related industries, automobile maintenance, aviation, lodging, agriculture, fisheries, food and beverage manufacturing and the food service industry.
Source: The Hindu Business Line
The Emirate of Dubai has announced a new stimulus package worth 315 million dirhams ($86 million) to help the economy cope with the effects of the coronavirus pandemic.
The package, its fifth, takes the total economic stimulus from the government of Dubai, part of the United Arab Emirates, to 7.1 billion dirhams since March last year, Dubai Crown Prince Sheikh Hamdan bin Mohammed said on Twitter.
Source: The Financial Express
Chad and several other countries are already in deep debt distress and more will join their ranks this year, given the severity of the global recession triggered by the Covid-19 pandemic, World Bank Group President David Malpass said.
The African oil producer Chad may need a deep reduction in the net present value of its debt, and creditors would need to work with the country to find a viable solution to its debt overhang, Malpass told reporters on Tuesday.
“For some countries, it’s a red alert,” he said during a teleconference. “We need to find ways to adjust the debt burden, so that the burden of debt on people in poorer countries can be reduced dramatically.”
He said Zambia had already defaulted on some of its debts and restructurings were under way in Angola and Ecuador but declined to name other countries facing acute problems. He said the Bank and the International Monetary Fund were currently assessing the debt sustainability of countries facing problems.
The novel coronavirus, which has killed more than 1.85 million worldwide, has hit emerging market and developing countries particularly hard, exacerbating heavy debt burdens already faced by many countries before the crisis.
“Unsustainable debt levels are a major obstacle,” Malpass said. “It was made worse by the pandemic - substantially worse, both in terms of domestic and external debt burdens.”
He said it was critical to reduce the debt burden on poorer countries to foster investment and support the global recovery.
China, the biggest creditor by far with 65 per cent of official bilateral debts, had to focus on its response, given sharp declines in countries’ ability to service those debts, he said.
Adjustments were clearly needed to ensure debt sustainability assessments reflected lower short-term and long-term interest rates, Malpass said, noting that debt reductions could occur through cuts in debt stocks, but also by lowering interest rates on existing debts.
In addition, Malpass underscored the need for legislative changes in major financial centres to expedite the restructuring of private sector debt. The current system favoured creditors and made it very difficult for debtor countries to “achieve the reduction in debt that’s needed in this new environment.”
Malpass said a common framework for debt treatments adopted by China and other Group of 20 major economies in November, and extension of a freeze in official bilateral debt payments through June were good steps, but more work would be needed.
He said he had already spoken with Italian officials and they were committed to continuing efforts to help heavily indebted countries during Italy’s year at the helm of the G20.
Source: The Financial Express Bangladesh
According to the feedback from cotton traders and overseas entrepreneurs located in Qingdao, Zhangjiagang, Shanghai and other places, enquiries for bonded cotton and customs clearance cotton (imported cotton) have been showing signs of recovery since mid-December.
In particular, imported cotton has attracted the attention and favour of cotton textile mills and middlemen that has resulted in continually active transactions.
The rebound in imported cotton transactions was mainly due to the factors such as the widening of the price difference between domestic and foreign cotton as well as the early overdraft of 2021 cotton import quotas by some buyers.
What’s more interesting is the fading China and India trade tussle, as claimed by companies in China post-October 2020.
According to a renowned cotton company based in Jiangsu, the sales of high-quality Indian cotton have gradually improved since October ’20 (the quality and grade of lint cotton produced by CCI are more secure), and it has gradually squeezed the loss of Brazilian cotton ranked second in China’s cotton imports in October and November, second only to the cotton sourced from USA.
On the one hand, in the past 2 months, the price difference between Brazilian cotton and Indian cotton – which is the same as the commodity inspection index – has widened to 800-1000 RMB/tonne, and the price of Indian cotton has become more competitive; on the other hand – due to the short transportation distance and the increase in freight costs – the impact of the epidemic on ships is relatively controllable, so the shipment and delivery of Indian cotton is normal compared with Brazilian cotton and American cotton.
By the end of December ’20, the total amount of bonded cotton in China’s main ports may have reached 410-440 million tonnes which is largely contributed by US cotton, Brazilian cotton, Australian cotton, Indian cotton, African cotton, Central Asian cotton and European cotton.
Source: Apparel Online
Finance Minister AHM Mustafa Kamal on Wednesday came down heavily on the World Bank (WB) and the International Monetary Fund (IMF) for frequently changing the forecast on gross domestic product (GDP) growth.
"Why the World Bank says so I know and the World Bank knows too. You also can assume why it says so," he told reporters, in response to a question about the World Bank's latest forecast on Bangladesh's GDP growth for the fiscal year 2020-21.
The World Bank on Tuesday released its report titled 'Global Economic Prospects', saying Bangladesh's GDP growth may stand at 1.6 per cent in the current fiscal year.
"Both the organisations are situated in one building. Both of them change their forecast every week. How many times they change forecast in a month," Mr Kamal said, adding: "There is no similarity (in forecasts) between one and the other."
The minister was briefing newsmen after the virtual meetings of the cabinet committee of economic affairs and government purchase.
In response to another question about legalising the undisclosed money, the minister said that in last six months, over Tk 100 billion has been whitened, increasing the flow of money to our economy.
"We want to legalise the undisclosed money and that's why it happened," he said.
The minister said that due to the high fees and stamp duties, many show apathy in registration of properties. So, the government was not getting the revenue properly.
In many cases, the proper value of properties while changing hands is not often shown, he said, adding that is why the stamp duty has been reduced.
He also said that incentive is given for the remitters who use legal channel. That is a reason why some Tk 400 billion came in remittances in last six months. By the end of the current fiscal year, the remittance inflow will stand nearly Tk 800 billion, he said.
"This money will go to the stock market," he said, adding that the multiplier effect of this money on the economy is very high.
Mr Kamal said he wanted legalisation of undisclosed money since this are being created due to the lack of proper policy.
In Bangladesh, he said, the tax rate was very high. "It needs to be brought down to a competitive place."
Regarding the interest rate on bank loans, the minister said the rate was very high here, but was brought down for the sake of industrialisation.
Replying to another query, he said, many people have tax identification number (TIN), but the government is not getting revenue properly.
"We are thinking of only one area, that is automation of tax collection. We have to go for full automation. Until and unless we are successful in digitising our system, the problem will remain," he added.
Source: The Financial Express Bangladesh
Prime Minister Narendra Modi on Thursday expressed his distress at the rioting and violence by angry supporters of outgoing President Donald Trump in Washington DC, asserting that democratic process cannot be allowed to be subverted through unlawful protests.
Orderly and peaceful transfer of power must continue, he said in a tweet.
In an unprecedented attack on democracy, thousands of angry Trump supporters stormed the US Capitol and clashed with police, resulting in multiple injuries and forcing a delay in the constitutional process to affirm Joe Biden's victory in the November presidential election Modi tweeted, "Distressed to see news about rioting and violence in Washington DC. Orderly and peaceful transfer of power must continue. The democratic process cannot be allowed to be subverted through unlawful protests." Leaders around the world condemned the incident, expressing shock at the chaos unfolding in a country they once relied upon for global leadership.
Source: The Tribune
