The Finance Ministry on Monday released the 11th instalment of Rs 6,000 crore to states and UTs to meet the GST compensation shortfall, taking the total amount provided so far under this window to Rs 66,000 crore.
The Centre had set up a special borrowing window in October 2020 to meet the estimated shortfall of Rs 1.10 lakh crore in revenue arising on account of implementation of GST.
Ministry of Finance in a statement said it has released the 11th weekly instalment of Rs 6,000 crore to states/Union Territories to meet the GST compensation shortfall.
Out of this, Rs 5,516.60 crore has been released to 23 states and Rs 483.40 crore to the three Union Territories (UTs) with Legislative Assembly (Delhi, Jammu & Kashmir and Puducherry), who are members of the GST Council.
The remaining five states, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation, it said.
“The amount has been borrowed this week at an interest rate of 5.10 per cent. So far, an amount of Rs 66,000 crore has been borrowed by the central government through the special borrowing window at an average interest rate of 4.72 per cent,” the statement said.
The borrowings under the special window have been done in 11 rounds and the amount borrowed so far was released to the states on October 23, November 2, November 9, November 23, December 1, December 7, December 14, December 21, December 28, 2020, and January 4 and January 11 this year.
Out of this, Rs 60,066.36 crore has been released to states and Rs 5,933.64 crore to the 3 UTs with Legislative Assembly.
In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the Centre has also granted additional borrowing permission equivalent to 0.50 per cent of gross state domestic product (GSDP) to states to help them mobilise more financial resources.
Permission for borrowing the entire additional amount of Rs 1,06,830 lakh crore (0.50 per cent of GSDP) has been granted to 28 states under this provision, the statement added.
Source: The Financial Express
Reserve Bank of India Governor Shaktikanta Das has once again reiterated the growing disconnect between financial markets and the real economy. Das said that this growing disconnect poses a risk to the stability of the financial sector.
“The disconnect between certain segments of financial markets and the real economy has been accentuating in recent times, both globally and in India,” Das wrote in the foreword to the financial stability report. “Stretched valuations of financial assets pose risks to financial stability. Banks and financial intermediaries need to be cognisant of these risks and spillovers in an interconnected financial system.”
To be sure this is not the first time the RBI has flagged this off as a risk. In August last year Das had hinted that there could be an imminent correction in the buoyant stock markets.
The regulator in its financial stability report also said that while the active intervention by central banks and fiscal authorities has been able to stabilise financial markets, there were potential spillover risks due to this disconnect between certain segments of financial markets and real sector activity.
“In a period of continued uncertainty, this has implications for the banking sector as its balance sheet is linked with corporate and household sector vulnerabilities,” the RBI said.
Abundant liquidity across the globe has led to investors reaching for higher returns, growing the disconnect between financial markets and real sector activity, it said.
“Within the financial markets spectrum too, the divergence in expectations in the equity market and in the debt market has grown, both globally and in India,” the regulator noted.
The RBI which has taken several support measures due to the onslaught of the pandemic has warned about unwinding of these measures and the resultant impact this could have on the markets.
“The support measures may have unintended consequences as reflected, for instance, in the soaring equity valuation disconnected from economic performance,” the RBI said. “These deviations from fundamentals, if they persist, pose risks to financial stability, especially if recovery is delayed.”
Source: The Economic Times
Against a 30% year-on-year jump projected for FY21, budgetary capital expenditure by state governments may have dropped by a quarter in April-November, going by an FE review of data from 12 states. Among them, these 12 states — Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Andhra Pradesh, Karnataka, Rajasthan, Odisha, Telangana, Kerala, Chhattisgarh, Haryana and Jharkhand — reported combined capital expenditure of Rs 1,09,860 crore in April-November FY21, compared with Rs 1,48,571 crore in the year-ago period, down 26%. The annual capex target for all states as per their budgets is Rs 6.5 lakh crore.
Compared with this, the Centre has managed to spend Rs 2.41 lakh crore as budget capex during April-November, up 12.8% on year, even though the FY21 target is Rs 4.12 lakh crore (up 22.4% on year).
The slippage in states’ capex is sure to have been unprecedentedly steep.
If public-sector fixed capital formation has held up in recent years even amid a worrisome, prolonged decline in private investments, the contribution of state governments has been vital; state capex is also seen to have a higher growth multiplier potential than Central Budget/CPSE capex.
Reversing a decline seen in the first six months of this fiscal, a conscious effort is being made by the government to accelerate capital expenditure in H2FY21. The Centre’s capex in November at Rs 43,803 crore was up 248.5% on year, though the April-November data showed only a 12.8% rise.
With states’ capex seeing sharper fall, the Centre is also prodding the central public sector enterprises (CPSEs) to ramp up investments in this fiscal.
The Centre, states and central PSEs among them will likely spend Rs 7.5 lakh crore on capital investments in the second half of this fiscal year, up 80% over such expenditure in the first half, according to an FE analysis based on official projections and information gathered from different sources.
The curbing of capex by the states is primarily due to the acute revenue constraints they are facing. While the low revenue buoyancy was evident last year itself, the situation has aggravated due to the pandemic. Even after liberal transfers by the Centre from the divisible tax pool in the initial months of this fiscal, tax revenues of the 12 states declined by 16% on year during April-November.
To be sure, many states have in recent months seen a rise in own tax revenues (OTR) from the lows witnessed in the lock-down period. From the range of 25-50% of normal in May, OTR of most states in October either surpassed or was on a par with the same in the year-ago month.
Capital expenditure undertaken by states, which accounts for more than 60% of general government capital expenditure, is generally prone to adjustments, conditional upon revenue generation. In 2017-18 and 2018-19 as well, capital spending was reduced from budgeted levels, but not to the extent this year.
Borrowings by the 12 states whose finances were reviewed by FE rose 23% on year to about Rs 3 lakh crore in April-November of this fiscal compared with a 26% increase witnessed in the year-ago period.
What is more worrisome for the states is that the Centre which transferred budgeted amounts to state governments as their tax share from divisible pool in April-May, has since found this practice unsustainable — November transfers were a fifth less than envisaged in budget, at Rs 37,233 crore. The customary pattern is the Centre makes adjustments on state tax transfers based on actual receipts only during February-March, the final two months of a financial year. With tax devolution likely coming down drastically in the remaining months of this fiscal, the states are sure to further accelerate borrowings to make up partly for revenue shortfalls.
According to Icra, the shareable tax pool may turn out to be Rs 13.4 lakh crore in FY21, 30% lower than the budgeted amount of Rs 19.1 lakh crore. The agency has projected the central tax devolution to the state governments at about Rs 5 lakh crore (after adjusting for Centre’s extra transfers of Rs 48,400 crore in FY20) in FY21, a substantial Rs 2.8 lakh crore lower than the Rs 7.8 lakh crore budgeted.
As per state budgets, their combined fiscal deficit stood at 2.6% of GDP in FY20 and 2.4% in FY19. FY21 will, however, likely see a record spike in the fiscal deficits of both the Centre and states.
Source: The Financial Express
India’s economy is expected to see double digit growth at 10.1% in the FY22 according to ICRA, however the rating agency cautioned that in absolute terms the country’s gross domestic product (GDP) would only “mildly” surpass the levels of FY20.
“The seemingly-sharp expansion will be led by the continued normalisation in economic activities as the rollout of Covid-19 vaccines gathers traction, as well as the low base,” said Aditi Nayar, principal economist at ICRA, in the report released on Monday.
The rating agency had projected a 7.8% contraction for the ongoing fiscal, in line with the recently released first advance estimates of GDP by the Centre, which pegged the shrinkage in FY21 at 7.7%.
In terms of sector-wise recovery, ICRA saw contact-intensive sectors, discretionary consumption and private investment lagging behind during the coming fiscal.
“We expect a multi-speed recovery in FY2022, with the contact-intensive sectors, discretionary consumption and investment by the private sector trailing the rest of the economy, in the arduous march back to attaining, and sustaining, pre-Covid levels,” Nayar said.
According to the report, the twin deficits in the fiscal and current account, would see divergent trends in FY22, with the former declining while the latter would reverse the likely surplus in the current fiscal.
As the revenue shock ebbs, we project India’s general Government (Centre + states) fiscal deficit to moderate to 8.5% of GDP in FY2022 from the 12.0-12.5% of the GDP expected in the current year,” Nayar said.
“However, with imports expected to revive in tune with the anticipated recovery in domestic demand, the current account balance is forecast to slip back into a modest deficit of US$15-20 billion (or 0.6% of GDP) in FY2022 from a surplus of US$35-40 billion in FY2021,” she added.
On prices, the report forecast headline retail inflation at 4.6% for the upcoming fiscal against the projected 6.4% for FY21 on the back of a favourable base effect that would moderate food inflation at 4.7%.
Source: The Economic Times
We are an EOU. We have an order to supply our finished goods to a SEZ unit. Rule 36(14) of SEZ Rules, 2006 says that we must follow the procedures prescribed in Rule 36(12) of the said Rules that apply to clearance from bonded warehouses to SEZ. Rule 36(12) requires us to clear the goods under an ex-bond shipping bill duly passed by the bond officer. When we are not under bonding procedure, how can we comply with the same?
EOUs were de-licensed as bonded warehouses with effect from August 13, 2016, through notification 44/2016-Cus dated July 29, 2016. CBEC Circular no. 35/2016-Cus dated July 29, 2016, explains the changes consequent to issue of that notification. It appears the Commerce Ministry is unaware of the changes. So, you may draw its attention to the changes and ask for amendment in the Rule 30(14) of the SEZ Rules, 2006.
Freight consolidators act as agents of foreign airlines and shipping companies. They accept freight and other charges from exporters for shipments made through them. What are the FEMA or other guidelines for remittance of freight and other charges by them to their principals, as per their agreements?
These are current account remittances, and based on suitable documentation, the banks can remit the payments. In this connection, please refer to Para 7(v) of Annexure 1 to A.D. (M.A. Series) Circular no. 11 dated May 16, 2000, issued by the Exchange Control Department of the RBI.
We design and develop samples for buyers abroad. We send them to the buyers as free trade samples. But, we do invoice them for design and development charges. Can we treat the transaction as export of services and zero-rate the transactions under the GST laws?
The essential nature of the transaction is service, and the trade sample only represents the results of your design and development service. Under GST laws, it will qualify as export of service, if you fulfill all the conditions prescribed at Section 2(6) of the IGST Act, 2017. You can zero-rate the services in accordance with Section 16 of the IGST Act, 2017.
We have running export packing credit (EPC) facilities with our bank. At present there are no overdues in the EPC account, as we get all our export bills discounted and get the proceeds credited to the EPC. In the post-shipment credit facility, some bills are overdue. Now, for some shipments we have not availed of EPC and we want the export proceeds to be credited to our current account. Can the bank agree to this, or will it adjust the funds after discounting these bills against overdue export bills?
It depends on the documents you executed with the bank for the credit facilities. If the documents give the rights to your bankers to appropriate your funds towards the overdue bills, then you cannot object to their exercising their rights.
Source: The Business Standard
With number of active COVID-10 cases falling sharply, India's economy is expected to clock the fastest growth among Asian peers with higher than 11.5 per cent growth in FY'22, according to a report by UBS global research.
" The COVID situation in India has stabilized for now. We expect India's real GDP growth to rebound to +11.5% y-o-y in FY'22 (consensus +9.2% year-on-year or y-o-y)" said Tanvee Gupta Jain, Economist, UBS Securities India in the report. " While economic growth in FY'22 could be at a multi-decade high, this largely reflects the rebound from deeper contraction in FY' 21 GDP (-7.5% y-o-y).
In its earlier research, UBS had estimated that the Indian economy would have lost close to Rs 20 trillion ($270bn), 10.6% of its GDP due to pandemic-related mobility restrictions. However, since then, economic activity has recovered more than expected (in the September and December 2020 quarters). The actual loss of output due to the pandemic could therefore be smaller at about Rs14trn.
The UBS-Financial Conditions Indicator (UBS India-FCI) suggests financial conditions have eased to levels better than those registered during the pre-COVID period (January/February 2020) and this is also helping support economic recovery.
The output gap- the difference between actual and potential output- will remain negative throughout- and actual economic activity will still be 8% below the level if growth in FY'22 had been closer to the trend or if there had been no pandemic, the report said adding that growth will moderate to 6% y-o-y in FY'23 as domestic and global financial conditions begin to normalise.
Four key to drive growth would be consumption, global growth, vaccine and reforms. UBS expects the bounce-back in India's economic growth in FY22E will be largely led by continued improvement in consumption with employment and income growth to recover further in FY'22, Stronger global growth, success in rolling out a COVID-19 vaccine, the focus on growth supportive reforms. " Of these, the corporate tax rate cut, incentives for manufacturing, easier labour laws and encouraging FDI inflows bode well for India's medium-term growth, in our view." Gupta said in her report
But the biggest uncertainty in addition to the risk of rising global crude prices is the evolution of the pandemic, the implementation and effectiveness of vaccines and the impact on global growth. There is also a risk that India's consumption does not recover as strongly as expected, possibly due to the risk of a new wave of infections and ensuing mobility restrictions and/or disruption to labour markets being deeper than earlier envisaged.
Source: The Economic Times
There is a disconnect between booming markets and economic activity, Reserve Bank Governor Shaktikanta Das said on Monday, warning that the stretched valuations of financial assets pose a risk to financial stability.
"The disconnect between certain segments of financial markets and the real economy has been accentuating in recent times, both globally and in India," Das said in his foreword to the bi-annual Financial Stability Report (FSR).
"Stretched valuations of financial assets pose risks to financial stability," he warned.
The RBI Governor asked banks and financial intermediaries to be cognisant of this risk, given the interconnected nature of the financial system.
After a sharp 40 per cent correction in March last year following the COVID-19 outbreak, the Indian markets have grown by over 80 per cent in a rally which continues. The number of new demat account openings are also at a record high.
Das had made similar comments on the disconnect earlier as well but this is for the first time he is linking it with the broader aspect of financial stability.
The sharp rally in stock markets has come even as the GDP is set to contract by 7.5 per cent this fiscal, as per RBI's estimates, primarily because of the pandemic and resultant lockdowns.
Easy liquidity conditions across the world are said to be the prime reason for the market rally, with overseas investors chasing higher yields.
However, some market participants say the markets are taking a longer term call on the Indian economy, beyond the near-term negative news flows.
Source: The Mint
India will soon announce more measures to speed up economic recovery from the impact of the pandemic and is shortly set to begin the world’s largest anti-Coronavirus vaccination programme, home minister Amit Shah said on Monday.
“The lockdowns had adverse effect on all economies including India. But the economists are now talking about V-shape recovery in India. We have taken large number of policy initiatives in all sectors including education, pharma, space, fertiliser, infrastructure and ease of doing business during the course of the pandemic. Some measures have been announced while others are yet to be announced,” Shah said.
India has been fighting war against the virus and also preparing itself to brace the economic slowdown due to the pandemic. “Corona can slow down our $5 trillion vision but will achieve the target successfully,” Shah said at an event to mark signing of pilot commercial coal mining agreements and launch of single window clearance system.
Amit Shah said the mortality rate and virus spread rate in the country is lower than countries like the United States, England, France and Italy which are believed to be developed than India. “India was believed to be a country with poor health infrastructure but we made ourselves self-dependent during the course of the pandemic,” he said.
Shah said the government has been striving to bring transparency in the coal sector and unleashing its potential. The coal sector was non-transparent, complex and in favour of few corporates. “The coal sector will be the biggest contributor to the $5 trillion economy vision. There are many small trading companies now getting into coal but six years ago they did not have that opportunity,” he said.
Shah said coal PSUs envisage investment of Rs 2,50,000 crore investment in the sector by 2030. India is a country with one of the largest coal reserves and high demand but ironically still imports vast quantities of coal. India imported 250 million tonnes coal in 2019-20 but it is very important for our economy that we reduce import dependence.
Coal, mines and parliamentary affairs minister Pralhad Joshi said commercial coal block auctions would pave the way for Aatmanirbhar Bharat as it will help reduce India’s coal import by about 20%.
India should not crush its energy aspirations in quest to follow the West, coal minister Pralhad Joshi said on Monday adding the country should make maximum use of its coal reserves while shifting to cleaner forms of energy.
Joshi said some groups often irresponsibly argue to shun coal, without assessing its implications.
He said the second tranche of commercial coal mining will begin this month.
Joshi said presently about 19 major approval or clearances are required before starting a coal mine in the country. Single Window Clearance Portal is in the spirit of minimum government and maximum governance and would be a milestone for ease of doing business in the Indian coal sector.
In the absence of a unified platform for grant of clearances, the companies were required to approach different departments leading to delay in operationalisation of coal mines. Now, the complete process shall be facilitated through Single Window Clearance Portal in a phased way,” he said.
Source: The Economic Times
The Financial Stability Report of December 2020 has made it crystal clear that capitalisation woes of banks may have just begun, especially for state-run banks.
State-run banks are seen being the worst affected among bank groups, with their gross-non-performing asset (GNPA) ratio expected to increase to 16.2 per cent by September 2021 under the baseline scenario, from 9.7 per cent in September 2020, and to a high of 17.6 per cent in a severe stress scenario. State-run banks are worse off, when compared to a systemic baseline and severe stress GNPA ratios of 13.5 per cent by September 2021 and 14.8 per cent.
In the case of private and foreign banks, the deteriorations are fewer. In the case of private banks, the baseline slippage is to 7.9 per cent, from 4.6 per cent, and a severe stress scenario at 8.8 per cent. For foreign banks, these ratios stand at 5.4 per cent (from 2.5 per cent) and 6.5 per cent.
The low valuations of state-run banks also make it difficult for them to tap the market. Between 2015-16 and 2019-20 (FY20), the Centre had pumped in Rs 3.56 trillion into these banks, through both direct subscription of equity shares and recapitalisation bonds.
Their market capitalisation stands a tad above Rs 4 trillion, or 13.48 per cent more than the sum infused during the past five years. It was well below what was infused for much of this period. In the case of state-run banks, it is much lower than the amounts infused. In any case, recapitalisation bonds give a misleading picture of the health of these banks — the net profit has to be adjusted for the interest income earned on the bond.
The RBI in its Report on Trend and Progress of Banking in India (T&P: 2019-20) released last month said a few major private banks have taken the lead in raising capital. But smaller private lenders, especially ones with weak balance sheets, are conspicuous by their absence. This partly reflects uncertainty as to whether they will be able to raise resources in prevailing market conditions.
In FY20, the amount raised by state-run banks through qualified institutional placement and bond issuances on a private placement basis was almost double that of a year ago. Both state-run banks and private banks raised higher capital through private placements in 2020-21 so far (up to November) than a year ago. Many of these bonds come under the category of Basel-III-compliant tier-2 bonds, which help shore up banks’ capital positions.
The T&P: 2019-20 observed that except for Andhra Bank, Punjab and Sind Bank, and Syndicate Bank, the Centre’s shareholding in other state-run banks in FY20 either increased (due to recapitalisation) or remained static. The amalgamation of 10 state-run banks into four, effective from April 1, 2020, brought about significant changes to the ownership structure.
The Centre’s shareholding in Canara Bank, PNB, Indian Bank, and Union Bank of India significantly increased due to high government share in the merged entities. The foreign investment limit in state-run banks and private banks are at 20 per cent and 20 per cent, respectively. While the maximum foreign shareholding in state-run banks was 9.8 per cent, it was more than 50 per cent in five private banks at the end of March 2020.
Source: The Business Standard
The Central Board of Direct Taxes (CBDT) has said it will not grant further extensions for filing return for cases where audit reports need to be filed.
The last date for filing the audit report is January 15 and for filing returns is February 15, for such cases.
“All representations for further extension of the due date are hereby rejected,” the Board said in an order dated January 11.
The order was passed in compliance with the directions of the Gujarat High Court that had directed the finance ministry to look into the issue of extension of the due dates, in an order dated January 8. The Court had passed the order on the petition of the All India Gujarat Federation of Tax Consultants last year. The body had made a representation in October 2020 seeking extension of due dates.
The Board has said in the order that the due date was extended three times – from October 31, to November 30, January 31 and now to February 15 – and any further extension would postpone revenue collection which in turn will hamper government’s efforts to provide relief to the poor during Covid 19 pandemic.
“The tax collections assume great significance in these difficult times and the government needs revenue to carry out relief work for the poor and other responsibilities. Any delay in filing returns affects collection of taxes and other welfare functions of the state for the vulnerable and weaker sections of society which is funded through the revenue collected,” the Board said.
Any further extension would adversely affect the return filing discipline and shall also cause injustice to those who have taken pains to file returns before the due date, the Board added in the order.
The Board further noted that sufficient time has already been given to the taxpayers to file their returns and a large number of taxpayers had already filed their returns of income.
Source: The Economic Times
Merchandise exports grew 16.2%, year on year, in the first week of January, while imports rose 1.1%, a senior commerce ministry official said on Monday.
However, hit by the pandemic, exports have already witnessed a roller-coaster ride this fiscal. Rising 6% in September, the first expansion since February, outbound shipments faltered by 5.1% in October and 8.7% in November before the contraction narrowed again, to 0.8%, in December. Also, weekly growth can quickly reverse as well. Nevertheless, it’s an encouraging sign.
Engineering goods exports rose as much as 51.8%, accounting for over 75% of the incremental exports between January 1 and 7. Petroleum exports rose by 17.3%. However, exports from some of the labour-intensive sectors continued to bleed. For instance, exports of garments dropped by 26% and yarn by 22% in the first week of January. Chemicals (both organic and inorganic) exports also dropped, by 5.5%.
Source: The Financial Express
Despite being full of negative experiences, for Indian apparel manufacturers, 2020 had few positive aspects also and that too in various directions – be it large scale manufacturing of Personal Protective Equipment (PPEs); thrust on medical textiles; adoption of quick as well as short-term but effective strategies; investment in innovative technologies; focusing more on efficiency to mention a few. On a positive note, it will not be wrong to say that 2021 should be a good year for Indian apparel manufacturers.
As far as production of PPEs is concerned, around 1,000 factories added PPEs as a new product category into their product basket. The speed and scale was a perfect example of collective efforts of Indian Government and apparel manufacturers. Though as usual on the export front, there were a lot of policy issues which could be resolved with more prompt planning. Whatever, the good thing is that for some of the companies, body coverall is a regular product category while few are doing well in health segment. India has become the world’s second medical textile exporter. On the other hand, it was good to see that some of the exporters invested in 3D technology which ensures their smooth coordination regarding sampling and approval during the difficult time of lockdown. Digital measuring tape, monitoring app, auto cutters were also the focus of garment manufacturers.
Though the majority of garment manufacturers followed the ‘wait and- watch’ strategy, interestingly some of the exporters not only adopted different strategies but also executed them impressively. Some such examples are adding new product categories (apart from PPE), coordinating very well with the vendors and utilising their strengths, focusing more on product development.
Few of the domestic brands also took up initiatives like changing their logo, bringing new TV commercials, etc.
Though some of the top-level export houses suffered badly and shut few of their units, few of the companies announced to expand and in coming months, they will be adding capacity. So, it will be interesting to see how Indian apparel manufacturers grab the market share specially vacated by China as buyers are reducing their dependency on China now.
As many technical experts and honchos have rightly said that, this is now or never situation for garment manufacturers who are still lacking in terms of better efficiency as this is the only way to survive in the ‘new normal’. The good thing in this aspect is that many technical experts have come forward to support the garment manufacturers with easy payment terms.
In terms of Government support, the apparel manufacturers have had a majorly negative experience. There has been no specific help given for the garment manufacturers’ moratorium period, Covid loan and PLI scheme especially for technical textiles and MMF segment.
However, since vaccination has already started in many countries across the world, global issues are gradually settling down. Retail giants like Walmart have assured to increase sourcing from India in a big way. 2020 has been a year of maximum uncertainty but as usual, one should be hopeful that in the new year, things will be in favour of apparel manufacturers. Thrust on technology (right from zoom calls to virtual fair and much more) and working with minimum available resources will also help them to get, what they missed so far.
Tirupur has already shown positive indication as demand for knitted garments has increased – anti-China action from buyers, favourable Euro are few of the reasons behind the rising demand.
Many buyers across the world have given indication to the Indian exporters that in future they will have orders for sure.
At the same time, in domestic market, there is information that leading retailers are geared up for upcoming season and sourcing on large level. Last month, one of the biggest Indian apparel retailers (having equally strong offline and online presence) sourced 3 million pieces from Jaipur. And it is further in the process to increase its sourcing multi-fold. Though the retailers’ sourcing is also increasing from other hubs, comparatively it is more as far as Jaipur is concerned. Similarly, the hub has good demand from wholesalers and other segments of domestic markets.
Looking at the overall condition, one can expect that the industry will not only survive but will grow also. No doubt, there are challenges and even in future, there will be more challenges but Indian apparel exporters have the strength to survive and they will grow.
Source: Apparel Online
The Reserve Bank of India has raised concerns on the increase in assets of money market mutual funds (MMMFs) in the past few months. The central bank observed that the infusion of liquidity in the wake of the pandemic had led to a sharp decline in term rates. Even as deposit yields fell, assets under MMMFs have grown, indicative of a search for yield.
“Such risk taking among institutional investors, specifically in illiquid investments to earn targeted returns, may lead to build-up of financial vulnerabilities, with adverse implications for financial stability,” the RBI said in its financial stability report released on Monday.
Average net assets under management of such money market funds rose to Rs 96,210 crore in December, up 61 per cent over Rs 59,512 held in April, the data from Association of Mutual Funds in India shows.
The central bank said excess returns of MMMFs had started to normalise after turning negative in the previous quarter, reflecting increased proportion of liquid assets in their investment corpus. The share of liquid assets in debt mutual funds’ portfolios has surged since March and constitutes 39 per cent of the aggregate AUM by end-November 2020, reflecting precautionary allocations, it observed.
The RBI said MFs showed a marked preference for long-term debt while also holding equity shares. Such simultaneous holdings in debt and equity allowed transmission of risk from equity market sell-off to the debt markets and vice versa. Given their interconnected nature, however, such sell-offs can potentially transmit asset market shocks across the financial system.
The central bank reiterated that the dominant positions occupied by mutual funds and insurance companies in the non-banking space needed to be assessed as NBFCs and housing finance companies remain the largest borrowers, with systemic implications.
Source: The Business Standard
When Nirmala Sitharaman presented her first budget in July 2019, which was also the first Budget of the Narendra Modi 2.0 government, she began with an optimistic outlook for a “New India” that was on its path to become a $5-trillion economy in a few years. In the events that have transpired since then, especially with the shock of COVID-19, the goal has taken a significant setback. As Sitharaman prepares to deliver her third budget this year in the backdrop of the pandemic, she shoulders the unenviable responsibility of extricating the economy out of its worst crisis and putting it back on course to the targets that the government had set for itself.
There have been recurrent themes in Nirmala Sitharaman’s approach in her past budget documents and stimulus packages, which could provide crucial learnings for the upcoming budget. First, is the focus on infrastructure spending as a means to provide a fiscal stimulus to the economy.
In 2019, the budget laid out a blueprint of large-scale infrastructure activities including improving the country’s transport infrastructure by constructing water grids, i-ways, highways, and regional airports. A similar approach was adopted in 2020 when a big infrastructure push was made through the National Infra Pipeline for a range of infrastructure projects.
The upcoming budget will most likely provide a similar boost in infrastructure spending to revive demand in the economy. But the government needs to do more to make its investments effective. The problems in infrastructure lie beyond investment alone. Data from the quarterly reports released by the Ministry of Statistics and Programme Implementation (MoSPI) show that over the last six years, central government infrastructure projects have run into significant time and cost overruns. The leading causes for these issues have been regulatory clearances, land acquisition, and fund constraints.
There have been murmurs that the upcoming budget might unveil a large development financial institution (DFI) that could address issues of access to capital since such a body will have a larger risk appetite than banks. However, the functions of such a body should not end there. It should function as an arm of the government that can cater to all infrastructure-related issues and provide advisory services as well. It is crucial for the Indian economy to address the challenges that ail its infrastructure investments as successes on this front can significantly bolster its job creation efforts.
Second, the Modi government has always adopted a fiscally conservative approach and made a conscious effort to gradually work towards the targets set by the Fiscal Responsibility and Budget Management (FRBM) Act. In Sitharaman’s first budget presentation, she had committed to a fiscal deficit target of 3.3 percent for FY20. We had written at the time that the target was optimistic and would be missed. In the following budget, the data showed a fiscal deficit of 3.8 percent during FY20. It was the advisable thing to do since the economy was slowing down. In the current financial year, as the growth figures are poised to dip into negative territory, the upcoming budget should cut the fiscal restraints as much as possible under the stipulations of the FRBM Act. Such an approach to provide the necessary stimulus to the economy that can help ameliorate the pandemic pains.
Finally, Sitharaman’s budgets and the stimulus packages that she has introduced during the pandemic have been disproportionately focussed on supply-side measures. The first two budgets had substantial tax incentives for the middle class and corporates while the stimulus packages had several credit incentives including collateral-free loans and repayment moratoriums. While such measures are useful to drive economic activity, they need to be complemented with demand-side initiatives. The supply side measures such as loans at a discounted rate will only help the economy grow if there is adequate demand.
In the upcoming budget, the govt needs to move beyond supply-side interventions and develop innovative ways of boosting demand in the economy. The role of the government on this front has become essential given the soaring unemployment levels in the country. A possible solution in the short run can be tied with the pandemic itself. India can take a leaf out of the US stimulus package announced last month. One of the deals in the package comes in the form of the Supplemental Nutrition Assistance Program (SNAP), which is the federal programme that provides food purchasing assistance to low-income people. Food stamps are not just a way to tackle hunger among the poor and jobless but provide the best boost to the economy when compared to other kinds of stimulus spending. As per Moody’s estimates, every dollar spent on SNAP has increased economic activity by $1.73. On the other hand, every dollar of tax cut has yielded a benefit of $1.29. It has been found that beneficiaries spend their food stamps quickly, which boosts demand in local businesses. Such policies also benefit the most distressed sections of the population more directly than other stimulus interventions like tax cuts.
As Sitharaman rises to present her most challenging budget document yet, the country will hope that she draws learnings from her past experiences and delivers a comprehensive financial plan.
Source: The Economic Times
In 1996, Chowdhury started his own company named Eastman Technocrafts Ltd. intending to provide complete solutions in the apparel manufacturing process with the best technology.
As for the educational background, Chowdhury completed his B.Sc (Hons.), M.Sc in Mathematics from the University of Chittagong.
Recently he has shared his experience and industry overview with Textile Today. Here is a glimpse of the discussion.
Textile Today: As one of the leading technology providers for the textile and apparel industry in Bangladesh, how Eastman Technocrafts Ltd. is contributing to automate the industry?
Manik Lal Chowdhury: Eastman Technocrafts Ltd. provides a complete range of textile and apparel technology solutions from cutting to sewing, finishing, packing, inspection and all related processes by the world’s leading – premium branded manufacturers from Japan, USA, Italy, Sweden, Spain, Germany and China – technology.
For cutting room solutions, we are providing complete advanced technology from Italian brand Morgan which offering a complete automatic spreading and cutting solution which ensures customers around 93% of efficiency and increasing profits radically. With more and more challenges with squeezing profits and increasing production costs, this state-of-the-art solution gives better results in spreading and cutting of fabrics than any other available solutions present in the market.
For CAD (Computer-Aided Design), Eastman Technocrafts Ltd. offering the CAD-MD900 of Morgan. A modern, versatile, complete and easy to use, 360⁰ working system from A to Z that is working from the pattern digitizing, ensuring proper visual package with a digital camera, or creation of the pattern directly on the screen up to the marker launch for production, going through the pattern modification and adjusting, allowing proper size grading, measurements checks and technical sheets. Morgan Spreader making 100% fabric alignment side by side. Also, have a unique solution in Labelling to denote the pattern name by using Thermal Stickers which is less costly to put stickers on the top layer of the fabric.
For washing and finishing operations, we are providing the world’s leading technologies from BRONGO, an Italian branded automatic robust washing & dying machine with 6mm solid thickness of inner drum, made out of premium 316L grade stainless steel. BRONGO is the best in laundry productions because of its unique design of the bitters, super-efficient holes of the drum with only 2.0 cm Drum to Shell depth which ensuring the savings of water, chemical & process time of every batch compared to others.
With BRONGO, factories will require a minimal quantity of water with zero discharge, low liquor ratio, 40% less space, less chemical, fewer energy consumptions, minimum water consumptions, and needs 20% less time than any other similar class machines available in the market.
PFT is the only dependable high-quality sewing machine to use in the denim line. It saves Cost, Time with flexible & easy handling with superb production output and also thanks to its easy to source spare parts which are available in local markets. PFT ensures productivity with very high quality. PFT automatic pocket setting with double heads and double colors – the cold folding device, sewing device hardware parts are separated, and the software part is coordinated to improve the efficiency along with the quality output.
Eastman Technocrafts also offers PEGASUS, one of the best Chain Stitch industrial sewing machines which is saving 70% electricity along with the saving of time; KANSAI special sewing machine which is also Chain Stitch for special operations, BROTHER industrial sewing machine for lock stitch from Japan, cuTex Lebel Velcro Cutting machine from Taiwan, OSHIMA International Apparel Machinery – waste fire boiler, USA based Eastman Worldwide machinery, Svegea Band Cutting Machine of Sweden, HASHIMA Fusing Machine from Japan, NAOMOTO Vacuum Table for Electric Steam Iron Trouser Topper, Italy based MACTEC double conveyor dryer with automatic loader for trousers which saves 80% energy with 18,000 pieces trousers production a day, Macsa id is fully automatic double conveyor/CMT table ultra-fast laser machines for textile applications with advanced technology & software, TONGXIN brand machinery is one of the best brand side loading industrial washing machines with 30% energy saving dryers.
Textile Today: What are the recent innovations of Eastman Technocrafts Ltd. has brought for its valued customers? And how Eastman Technocrafts’s technologies are bringing sustainability and profit in terms of minimizing the process, time and cost of textile mills?
Manik Lal Chowdhury: As we know that technology in the textile and apparel industry is moving fast after the Industrial Revolution 4.0. Industry 4.0 creates what has been called a “smart factory” And there is no alternative other than to adopt automation and up-gradation, we always bring the latest solutions as our partners introducing those through their intensive and continuous research on technologies and trends. In every aspect, from cutting to finishing, we always offer the latest solutions for our valued customers.
For example, BRONGO introducing automatic NANO bubble technology for sustainable washing through B-Cloud systems along with revolutionary B-SAFE. B-SAFE is an automatic filtering system is using to prevent NANO bubbles to come out from the washing machines when the door of the washing machines needs to open during the processes. Without B-SAFE, the hazardous mist of NANO bubbles with chemicals can spread in the working environment and can go inside the human body during breathing. B-SAFE providing a better and safer working environment for the users. Thanking BRONGO for bringing this revolutionary SAFE Technology.
In the conveyor dryer, the MACTEC dryer saves up to 80% energy compared to normal rotary dryers. It is suitable for environmentally friendly eco greenwashing factories for mass productions. Besides, it helps to minimize the use of chemicals, controls fabric shrinkage, increases fastness and improves the cleanness of the garments.
BROTHER has the world’s first lock stitch sewing machine which adopts the Electronic Feed Control directly connected with the stepping motor which ensures fast and versatile productivity along with higher quality.
Textile Today: What are the prospects do you see for the Bangladesh textile and apparel industry?
Manik Lal Chowdhury: Adoption of new technology firmly depend on a textile entrepreneur’s mindset. Commonly the Bangladesh textile and apparel industry is worker-based. Switching for automation is a bit sluggish in the industry. Though Bangladesh apparel offers one of the topmost sustainable industries globally with most LEED Certified factories –the factories need to do more investment on full fledge automation to increase environmental sustainability and more profitability.
I see great prospects for our textile & apparel industry right now. A lot of the fashion buyers are moving out of China, meaning we have a lot of opportunities to grab. We have that capacity to accommodate any sort of RMG product.
At the same time, apparel orders are coming back slowly. So, I will say it is high time to equip yourself with the latest technologies and move forward.
Eastman Technocrafts Ltd. offering a total solution from cutting to packaging which in synchronizing with all technologies. Also ECO certification in technology where ‘O’ zero tolerance in any sector.
Source: Textile Today
The Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR) of December 2020 has stated that banks’ gross non-performing assets (GNPAs) may rise sharply to 13.5 per cent by September 2021, and escalate to 14.8 per cent, nearly double the 7.5 per cent in the same period of 2019-20, under the severe stress scenario.
And banks will have to brace for a rollback of regulatory forbearance that was announced in the wake of the pandemic, and enhance their capital positions.
The FSR, released on Monday, gave a caveat: “Considering the uncertainty regarding the unfolding economic outlook, and the extent to which regulatory dispensation under restructuring is utilised, the projected ratios are susceptible to change in a nonlinear fashion”.
This suggests that the RBI’s forbearance measures may not be giving an accurate picture on the stress currently.
In his foreword, RBI Governor Shaktikanta Das noted: “Stretched valuations of financial assets pose risks to financial stability. Banks and financial intermediaries need to be cognisant of these risks and spillovers in an interconnected financial system.”
The growing disconnect between certain segments of financial markets and real sector activity, pointed out in the last FSR (June 2020), has got further accentuated, with abundant liquidity spurring a quest for returns. Within the financial market spectrum too, the divergence in expectations in the equity market and the debt market has grown.
State-run banks are seen being the worst-affected among bank groups with their GNPA ratio expected to increase to 16.2 per cent by September 2021 under the baseline scenario from 9.7 per cent in September 2020. And to a high of 17.6 per cent in a severe stress scenario.
The implications for capital adequacy (cap-ad) are as follows. Systemic cap-ad is projected to drop to 14 per cent in September 2021 from 15.6 per cent in September 2020 under the baseline scenario and to 12.5 per cent under the severe stress scenario.
The FSR mentioned that “stress test results indicate that four banks may fail to meet the minimum capital level by September 2021 under the baseline scenario, without factoring in any capital infusion by stakeholders. In the severe stress scenario, the number of banks failing to meet the minimum capital level may rise to nine”.
The FSR has also made a tweak.
In the last FSR, a one-time additional scenario of “very severe stress” was introduced in view of the uncertainty around the pandemic, its economic costs, and delay in the data-gathering process. With a better appraisal of the pandemic’s impact on economic conditions, it is assessed that the worst is behind us, though the recovery path remains uncertain. Accordingly, stress tests have reverted to the regular 3-scenario analysis in this issue.
The FSR does not explicitly refer to recapitalisation, but noted the pandemic threatened to result in balance sheet impairment and capital shortfalls, especially as regulatory reliefs are rolled back.
“In addition, banks will be called to meet the funding requirements of the economy as it traces a revival from the pandemic,” Das added in his foreword.
This basically is a reiteration of the RBI’s position in its Report on Trend and Progress of Banking in India (2019-20), which said “the modest GNPA ratio of 7.5 per cent at end-September 2020 veils the strong undercurrent of slippage”.
The accretion to NPAs in accordance with the RBI’s income recognition and asset classification norms would have been higher in the absence of the asset quality standstill provided as a pandemic relief measure. And that given the uncertainty induced by the pandemic and its real economic impact, the asset quality of the banking system may deteriorate sharply.
The FSR hinted the Centre might have to fast-track the recapitalisation concerns of state-run banks without referring to the subject directly.
“Banks have sufficient capital at the aggregate level even in the severe stress scenario but, at the individual bank level, several banks may fall below the regulatory minimum if stress aggravates to the severe scenario.”
With the stress tests pointing to deterioration in the asset quality of banks, an early identification of impairment and aggressive capitalisation are imperative for supporting credit growth across various sectors, alongside pre-emptive strategies for dealing with potential NPAs. Dividend earning from state-run banks is uncertain because the RBI has said that banks are not to make any dividend payment on equity shares from the profits pertaining to the financial year ended March 31, 2020, so that they can support lending.
Banks need to prepare for these adversities by augmenting their capital base.
While easy financial conditions are intended to support growth prospects they can have unintended consequences like encouraging leverage, inflating asset prices and fuelling threats to financial stability, the report said.
As for non-banking financial companies (NBFCs), credit given by NBFCs grew by a mere 4.4 per cent as compared with 22 per cent in 2018-19. Gross NPAs of NBFCs increased to 6.3 per cent on March 2020 from 5.3 per on March 2019. Asset quality is expected to deteriorate due to disruption in business operations caused by the pandemic, especially in the industrial sector, one of the major recipients of NBFC credit.
Source: The Business Standard
Covid-19 pandemic has an unprecedented impact on US$35 billion Bangladesh apparel industry. The impacts of the pandemic on the apparel industry can be felt at multiple facets from order cancellation to payment delays. In March and April, more than US$3.18 billion in orders were cancelled putting around 1,150 factories in limbo, leaving around 2.8 million workers, mostly women, facing poverty and hunger. Furthermore, some of the retailers have refused to pay for clothing that they had ordered before the start of the Covid-19 pandemic resulting in raw materials through to finished products sitting in the warehouses costing billions to the manufacturers. Meanwhile, those who are willing to accept the pre-Covid orders are seeking discounts or payment extensions. For example, Australian fashion retail groupMosaic Brandsis delaying payment, holding or cancelling orders placed with Bangladesh manufacturers with a total value of $15 million.According to the BGMEA, Bangladesh apparel industry has lost $4.9 billion between March and June. The opening up of theUS and European economies in Julylast created optimism in the Bangladesh apparel industry. However, optimism proved to be short-lived as the European countries went into lockdown in November to manage the second wave. As the uncertainty continues, the outlook of Bangladesh apparel industry and its workers is gloomy.
During the pandemic, existing challenges related toretailer pressure for price reductionsand short turnaround timeshaveworsened. Pressure for price reduction is the root cause for the numerous issues that workers are facingsuch assafety issues related tofire hazards in the factory and forced overtime with no proper compensation. Long term issue of non-payment of living wages has deepened during the crisis. For many of the workers, the pandemic has exacerbated their poverty and forced them deeper into debt. Eventually, the pandemic will end, but it is uncertain if the Bangladesh apparel industry will ever return to pre-Covid glory. To recover from the crisis and rebuild the industry, gaining a reputationas an industry that treats its workers with compassion and dignitybecame crucial than ever before. Transparency in Bangladesh apparel industry would not only enhance reputationbut also enables consumers across the world to choose products that are produced sustainably. Ahead of the festive season, OXFAM report on retailer purchasing practices has highlighted the demand fromAustralian consumers for transparency inworkplace practices at Bangladesh apparel manufacturers. Now, the question is- how Bangladesh apparel industry can promote transparency in apparel supply chains right down to how garmentsare produced, the working conditions in which they produce, andthe environmental sustainability practices are conducted in the production contexts.
BLOCKCHAIN IN BANGLADESH APPAREL:Technology plays a vital role in providing transparency in apparel supply chains.Blockchainproperties of immutability, decentralisation, and cryptography provide transparency and traceability in supply chains.Particularly, the cryptographic hash function used to validate the transactions on block prevents anyone from altering the recorded data creating immutable transactions record that promotes trustworthiness in supply chains. All parties on a blockchain networkcan easily verify transactions recorded on the ledger without the need for a central authority. These properties would ensure security, proof of identity and privacy, and eliminate malicious transactions.Implementation of blockchain technology would enable to trace the details of the product originsand the conditions in which they are produced in a complex apparel supply chain. In this context, blockchain becomes not only a traceability tool but also a driver toward sustainability in terms of the triple bottom line, i.e. economic, social, and environmental.Promoting sustainability in apparel supply chains through blockchain technology addresses the executives' concern of lack of progress towards sustainable apparel supply chains. According to a McKinsey survey, 56 percent of 64 sourcing executivesresponsible for a total sourcing value of over USD 100 billion agreed that responsible and sustainable sourcing is critical but they are lagging in implementation.
Some of the sustainability benefits, offered by the implementation of blockchain technology, are discussed below.
ECONOMIC BENEFITS:The apparel industry is known to have payment terms that benefit buyers while exposing suppliers to financial risks. In the apparel industry, a letter of credit (LC) with the payment term where the manufacturer receives payment only after the order is shipped is commonly used. In some cases, payments are delayed for a pre-determined period from anywhere between 30 and 150 daysafter goods are shipped. The use of LC requires the management of financial bureaucracy whichtakes time and contributes to additional costs. In addition to the financial issues, apparel manufacturers in Bangladesh are experiencing issues related to documentation. It is estimated that around 66.0 percent of exports could not be delivered on time because of the late submission of documents. Moreover, documentation delayshave resulted in money laundering riskabout53.0 percent of the time.
In this context, blockchain eliminates inefficiencies in global apparel supply chains by allowing all members of the supply chain (carriers, banks, traders, suppliers, etc.) to exchange information, documents, and data, directly via a secured decentralized network. As the information is exchanged instantaneously, blockchain reduces payment risks and prevents fraud while facilitating fast, secure, low-cost international payment processing services. Blockchain also changes the conventional process of email order confirmation to automated smart contract validation which will reduce human errors and misunderstandings in payment terms, returns, purchases, etc.To be specific,the use of blockchain technology will reduce the turnaround time of the LC and increase trading efficiency.
ENVIRONMENTAL BENEFITS:The apparel industry is known to be the heaviest polluter from air to water. It accounts for 10% of global carbon emissions, more carbon than international flights and maritime shipping combined.Moreover, this industry produces over 92 million tonnes of solid waste globally, most of which goes to inhuman landfills. It is estimated that 85.0 per cent of the textile produced goes into landfills. This industry also impacts the ecosystems of waterwayswith35% of all micro-plastics in the ocean came from the laundering of synthetic textiles like polyester. In Bangladesh, more than 200 rivers are directly and indirectly affected by untreated effluent from factories and industries. Untreated textile effluent can contaminate groundwater and water bodies, reduce dissolved oxygen in the water and affect aquatic ecosystems. Furthermore, this industry is the second-largest consumer of the world's water supply and is expected to cause extreme water scarcity in countries throughout Asia including Bangladesh by 2030.In Bangladesh, the apparel industry is known to consume high volumes of water per unit fabric for processing, which contributes to the depletion of groundwater levels at up to 2-3 metres.
To address the environmental impact of the apparel industry, manufacturers are under pressure to adopt cleaner production practices. Cleaner production programs such as Partnership for Cleaner Textile (PACT) and Leadership in Energy and Environmental Design (LEED) are considered by the firms who are actively seeking to implement environmental practices. With these practices implemented in their facilities, someBangladesh apparel manufacturers are leading thegreen revolution in apparel supply chains. Now, these firms need to report and communicate the implementation of environmental practices. In this context, blockchain will assist in documenting how environmental practices are implemented. Moreover, blockchain also assists in promoting a circular economy. For example MonoChain, a blockchain-powered platform is targeting minimisingapparel waste by promoting reuse. MonoChain's Wallet enables consumers to record the clothing they buy. Consumers can count the value of their items, inspiring them to sell or donate instead of throwing away unwanted apparel.
SOCIAL BENEFITS:The working environment in which the apparel is producedhas always been questioned by foreign buyers. Bangladesh apparel industry, as alleged by various circles, does deprive most workers of their rights. Some of the issues such as minimum basic salary, working hours, overtime calculation, yearly increment, and discrimination are persistent to appear in Bangladesh apparel industry.Incidents in Bangladesh apparel industry such as factory fires and building collapse has highlighted the health and safety concerns at the workplace. Despite theincrease in minimum wage paid to workers in 2019, it is well below the living wages leaving millions of workers in poverty. Moreover, the government intervention and laws to overcome the health and safety issues at workplaces has resulted in fraudulent activities and mock compliance to safety practices by many organisations. In order to expose potential human rights abuses in apparel supply chains, there is a demand on organisations to disclose thesupply chain practices.
Against this background, blockchain technology can be used to monitor factory safety in its global supply chains. The regulator can inspect the facilities and updated the results on blockchain to flag any instances of health and safety violations, child labour, or unauthorized subcontracting. Moreover,it can provide an interface between overseas buyers and factory workers through a self-reporting infrastructure. It means that the system provides an opportunity to the workers to record and post their experiences, thus giving them a real voice. As this system records the auditor reports and the worker experiences on a blockchain which are timestamped, the results could never be manipulated.Overall, blockchain technology helps to ensure that the code of conduct is followed and social compliance objectives are achieved.
As discussed, the implementation of blockchain technology will provide opportunities to build sustainabilityfrom the triple bottomline perspective in the apparel industry. Blockchain's benefits will only be realised when different industry participants come together to create a shared platform. Hence, industry bodies, including the BGMEA do need to drive the blockchain implementation in the apparel industry through forming consortia with IT companies.
Source: The Financial Express Bangladesh
India and the US are negotiating on a wide range of trade concerns, including greater access to the Indian market for American agricultural products, potentially in exchange for America restoring New Delhi's status under the Generalised System of Preferences (GSP), according to a Congressional report.
President Donald Trump in 2019 terminated India's designation as a beneficiary developing nation under the key GSP trade programme after determining that it has not assured the US that it will provide equitable and reasonable access to its markets.
"The United States and India are negotiating on a wide range of trade concerns, including greater access to the Indian market for US agricultural products, potentially in exchange for US restoration of India's eligibility under GSP. The current status of the negotiations has not been disclosed," the latest report by independent Congressional Research Service (CRS) said.
Reports of the CRS are not an official report of the US Congress. Its subject matter experts prepare reports on various issues for the American lawmakers to make informed decisions. The comment on India is mentioned in the "Major Agricultural Trade Issues in the 117th Congress" dated January 8.
In September last year, the Indian government enacted three laws intended, in part, to help integrate Indian agriculture into the global market.
Commerce and Industry Minister Piyush Goyal in September said most issues preventing a limited trade deal between India and the United States have been resolved and an agreement could be signed anytime the political situation in the US allows it.
India is seeking exemption from high duties imposed by the US on some steel and aluminium products, resumption of export benefits to certain domestic products under the GSP, and greater market access for its products from sectors such as agriculture, automobile components and engineering.
On the other hand, the US wants greater market access for its farm and manufacturing products, dairy items and medical devices, apart from cut in import duties on some information and communication technology products.
Noting that the United States and India view one another as important strategic partners to advance common interests regionally and globally, the CRS report said given the rapid growth in population and income among a large segment of the population, demand for higher-value food products such as fruits, nuts, dairy products, and other livestock products is growing among Indian consumers.
While India is among the world's largest producers and consumers of a range of crop and livestock commodities, United States Department of Agriculture (USDA) projects that India will continue to be an important importer of dairy products, vegetable oils, pulses, tree nuts, and fruit and that it will continue to be a major exporter of rice, cotton, and buffalo meat.
Observing that US-India trade negotiations follow a period of trade tensions, the CRS said in March 2018, the United States levied additional tariffs on steel and aluminum imports from India.
India responded by identifying certain US food products for retaliatory tariffs but did not levy them until June 16, 2019, after the United States terminated preferential treatment for India under the GSP.
India's retaliatory tariffs range from 10 per cent to 25 per cent on imports of US chickpeas, shelled almonds, walnuts, apples, and lentils. Both countries' tariffs and India's GSP status are likely issues in the ongoing negotiations, it said.
Agricultural exports from the US to India have increased since 2015, reaching USD 1.6 billion in 2019. The US in the same year imported agricultural products valued at USD 2.6 billion from India.
The CRS said that India maintains high tariffs on many products- for example, 60 per cent on flowers, 100 per cent on raisins, and 150 per cent on alcoholic beverages. Some Members of Congress have requested that the United States Trade Representative (USTR) seek to reduce the current 36 per cent tariffs faced by US pecans. Since 2017, a system of annual import quotas on pulses has restricted US exports of pulses to India.
Export of wheat and barley to India are currently restricted due to its zero-tolerance standard for certain pests and weeds, and restrictions also exist on imports of livestock genetic material, it said.
In its report, the CSR informed lawmakers that USTR may continue challenging India's domestic support for agriculture at upcoming WTO Committee on Agriculture (COA) meetings and, if necessary, could pursue these concerns through WTO's dispute settlement mechanism. India's domestic support for agriculture could be an issue during US-India trade negotiations or during the discussions related to WTO reform on agriculture.
Source: The Economic Times
Awami League General Secretary Obaidul Quader on Friday extended greetings of New Year 2021 and hoped that Bangladesh would march towards prosperity in the new year.
The road transport and bridges minister came up with the statement at a press conference at his official residence on parliament premises in Dhaka, reports BSS.
Obaidul Quader also hoped that positive trend will return in the country’s politics overcoming the negativity in the new year.
He said that the world people would return to normal life getting freed from the coronavirus pandemic in the new year.
“Under the leadership of Prime Minister Sheikh Hasina, the country will enter into new horizons overcoming all negative aspects of coronavirus in the new year,” he wished.
Source: The Financial Express Bangladesh
The denim apparel imports of the USA continued falling in November ’20 as well followed by an overall apparel shipment contraction of the country.
USA imported US $ 264 million worth of denim apparels in November month, declining 10.90 per cent on Y-o-Y basis and 19.53 per cent on M-o-M basis.
After witnessing a yearly growth for 3 consecutive months (August, September and October) in its denim apparel shipment to USA, Bangladesh plunged by 2.66 per cent in November clocking US $ 54.80 million revenues.
What should worry Bangladesh is a monthly decline of 24 per cent in Nov. ’20 over Oct. ’20 at a time when Mexico – which stands at the second spot – just dropped by 2.35 per cent on monthly note.
However, Bangladesh is still the top denim shipper to USA as, cumulatively, it hit US $ 522.77 million in Jan.-Nov. ’20 period and the value is around US $ 100 million more than Mexico.
Mexico’s denim shipment decreased by 10.46 per cent in Nov. ’20 over Nov. ’19 and was worth US $ 50.77 million.
As far as Vietnam (3rd top denim apparel shipper to USA) is concerned, it was down by 2.97 per cent on Y-o-Y basis and its denim apparel shipment to USA totalled US $ 33 million in Nov. ’20, while it saw a plunge of 20.78 per cent on M-o-M basis.
China fell big time both on Y-o-Y basis (down 36.46 per cent) and M-o-M basis (down 25.75 per cent) to clock US $ 28.15 million in November ’20.
Source: Apparel Online
Commerce Minister Tipu Munshi said the global economic dimension has changed a lot and in order to sustain in the international market with access to diversified export, it needs to conduct more institutional research.
He also said that SMEs are the lifeline for the country’s economy that are contributing about 26 per cent to our GDP. Moreover, to be more competitive in the export market, the government will support all potential sectors.
He later assured the chamber president of all-out support from the ministry for the greater interest of the country’s economy. The minister further requested the DCCI president to put forward necessary recommendations from the business community to the ministry for the government’s consideration, according to a statement.
During the discussion, DCCI President Rizwan Rahman drew the attention of the minister regarding allowing the same fiscal and non-fiscal facilities to all export-oriented sectors like RMG sector. In the post Brexit era, Bangladesh government can take initiative to sign FTA with the UK, he added. The Companies Act sets the capital limit of Tk 2.5 million and sales transaction valued Tk 10 million to register a One Person Company (OPC) business. To this point, the DCCI president requested the minister to reconsider the clause and reduce the threshold. He also emphasised formulating a comprehensive trade policy to boost export diversification. He also said that businesses require an extension on both moratorium and repayment period for loans under the stimulus package to a minimum one year as most of the businesses are still struggling with pandemic challenges.
DCCI Secretary-General Afsarul Arifeen and Secretary Md Joynal Abdin were also present during this meeting.
Source: The Financial Express Bangladesh
2020’s apparel industry at a glance
Primarily, the supply of raw materials to local garment factories was disrupted when China—Bangladesh’s main source for raw materials —paused all shipments between March and April due to the coronavirus outbreak.
Though, garment factories were allowed to continue operations if they had enough work orders from global buyers or if they wanted to produce Personal Protective Equipment (PPE).
But the sector met great trouble when several international buyers offered lower prices and deferred their payments at a time when restrictions on movement caused delays in shipment. These factors led to job losses for many workers as the millers were forced to close their factories following a drastic fall in production.
According to BGMEA, exporters received 30 percent fewer work orders for the next season (December to March) compared to the pre-pandemic levels.
On the other hand, backward linkages—to whom the apparel sector is highly dependent— supply myriad items to the apparel sector, to name just a few noteworthy ones, textiles, dyeing, packaging, trim and accessories, apparel labels, and services such as washing, printing and embroidery. As some of the Readymade garments (RMG) factories could not pay the outstanding invoices to the backward linkage factories, which put drastic impact or even damage some of the businesses of the backward linkage.
Mynul Hasan–Field Coordinator, Mapped in Bangladesh (MiB), Centre for Entrepreneurship Development (CED), Brac University; and Shamim E. Haque– Assistant Professor, Brac Business School & Senior Research Fellow, CED, Brac University—claimed in their recent article that there seems to be no provision in the government’s incentive and/or other alternatives for the backward linkage players to survive during the crisis.
Most factories were underutilized or about to be shut down, especially as there are limited or no orders during this crisis period. Unemployment and non-paid workers are crucial for the sector now. No mechanism or government incentives have been declared targeting these small factory workers of the backward linkages.
Though backward linkage should get more and more attention from the government and apparel millers to make the RMG industry more independent and strong.
What to look forward to in 2021
Amidst so many unknowns and uncertainty, the RMG industry eyes to a new year. Leaving the sufferings behind, industry people would like to think of 2021 as a new beginning, to do things in a better way ahead with the arrival of a Covid-19 vaccine that would save both lives and businesses.
Besides, 2021 is going to be a significant year for Bangladesh as it will celebrate its 50th year of independence and graduate from a least developed country (LDC). 2021 should be a year where promoting the country’s export competitiveness will be a top priority.
Industry people are hoping that business will be more stable by mid or end of 2021 if no major side effects of the vaccine and new COVID wave are exposed. Demand for more sustainable products, value-added products will be accelerated as well as functional products will lead to future business. More than ever, consumers will favor products/brands with a purpose/ function and sustainability.
According to BGMEA data, more than 33 companies are making and preparing PPE for export, where the largest shipment was by the Beximco Group which exported 6.5 million medical gowns to US brand Hanes. More millers should come forward to catch the protective clothing market.
On the other hand, Bangladesh is still stuck with cotton-based textile production, whereas the entire world has gone the other way. The rest of the world is now focused on manmade fiber-based textiles. And this is important for Bangladesh to realize, said some industry experts.
Finally, the industry needs to remember that several risk factors may hit the industry as risk is a part of business. So it’s crucially important to be continually alert in how the crisis is affecting, and how brands are behaving and maintaining legitimacy in these uncertain times.
An organization where leadership, management and workforce are not prepare for the extraordinary risk will eventually suffer the consequences. RMG units should have effective practices for risk management.
Source: Textile Today
India being one of the key targets of the UK's post-Brexit Global Britain strategy should be viewed not just as an important commercial interest but also a rival, reflects a new influential report released on Monday on the UK's future as a non-member of the European Union (EU).
'Global Britain, global broker: A blueprint for the UK's future international role', compiled by the think-tank Chatham House - the Royal Institute of International Affairs, calls on Britain to focus its energies on investing in becoming a global broker to link together liberal democracies of the world and a continued alignment with the EU and its member-states as well as the US.
Other economically significant Asia-Pacific democracies already part of British and US alliance structures - such as Australia, Japan and South Korea - are also flagged as a priority, given the increasing pressure they face from a "stronger and more assertive China".
"In contrast, some of the original targets of 'Global Britain' - China, India, Saudi Arabia and Turkey - may be important to the UK's commercial interests, but they will be rivals or, at best, awkward counterparts on many of its global goals," it warns.
It accepts India's importance to the UK as being "inescapable", given that it is set to be the largest country in the world by population very soon and have the third-largest economy and defence budget at some point in this decade, as also an English-speaking country with a large diaspora in the UK forming the basis of the two countries' deep historical linkages. However, the think-tank strikes a note of caution over the two countries' shared colonial history proving a stumbling block to the promise of a deeper relationship.
"Developing the relationship with India, a pivotal regional democracy, as part of this shift in British strategic focus will prove a complex task," it points out.
"As a result, India is always on the list of countries with which a new UK government commits to engage. But it should be obvious by now that the idea of a deeper relationship with India always promises more than it can deliver. The legacy of British colonial rule consistently curdles the relationship," it notes.
The report also points to India's "complex, fragmented domestic politics", which make it one of the countries resistant to open trade and foreign investment. It highlights concerns raised by domestic groups as well as the United Nations and other democracy-watchers over a "crackdown on human rights activists and civil society groups" not being actively challenged by the judiciary.
"While giving India the attention it deserves, the UK government needs to accept that gaining direct national benefit from the relationship, whether economically or diplomatically, will be difficult," the analysis notes.
Against this backdrop, the report reflects on the prospect of including India within any new Democratic 10 or D10 coalition of 10 leading democracies at this time as it could make building meaningful consensus on policy or joint actions that much harder.
"India has a long and consistent record of resisting being corralled into a 'Western' camp. It led the Non-Aligned Movement during the Cold War and, in 2017, India formally joined the China- and Russia-led Shanghai Cooperation Organisation," the report points out.
"Trying to corral groups of states into new, fixed caucuses is rife with difficulties," it adds.
Instead, the advice is for the UK to use its G7 presidency this year as a prelude to the proposed Summit for Democracy, which incoming US President Joe Biden has committed to hosting in his first year in office.
"The UK should invest in becoming a global broker, leveraging its unique assets to link together liberal democracies at a time of strategic insecurity and engage alongside them with other countries that are willing to address shared international challenges constructively," it notes.
"At a minimum, the UK needs to be a leading member of the group of countries protecting and supporting liberal democracies and standing up for rules-based international collaboration. It can also be a broker helping to connect democratic and non-democratic governments in initiatives to tackle shared global challenges, from climate change to health resilience and equitable growth... The world needs less talk and more action. In this sense, an appreciation of Britain as a valued and creative global broker must be earned, not declared," it concludes.
Source: The Economic Times
London: Britain is set to announce plans outlawing the import of goods suspected of using forced labour in China's Xinjiang province, media reported Monday, in a move which would further strain ties between London and Beijing.
Foreign Secretary Dominic Raab is expected to reveal his plans, which are also set to include tougher laws on exporting goods or technology that could be used for repression, to MPs this week, according to The Sun and Guardian newspapers.
Britain and China's relationship has grown increasingly frosty over the last two years, particularly over London's criticism of the crackdown on democracy campaigners in Hong Kong and its offer of citizenship for its residents.
Britain has also criticised the treatment of Uighur Muslims in Xinjiang Province, with the government calling evidence that they are being forced to produce cotton "deeply troubling". Beijing has denied allegations of forced labour.
The British government is concerned that the textile industry is not checking carefully enough whether goods from Xinjiang, which supplies nearly a quarter of the world's cotton, are made using forced labour.
Proposals could include fines if companies fail to show due diligence in checking their supply chains, according to The Guardian.
But Raab's plans are expected to stop short of sanctioning Chinese officials linked to "re-education" camps and forced sterilisation programmes, according to The Sun.
"Our approach to China is rooted in our values and interests," an official at the Foreign Office was quoted as saying.
"However, where we have concerns, we raise them and hold China to account."
Former Conservative party leader Iain Duncan Smith -- an outspoken China critic -- told The Sun he welcomed the plans but said they were insufficient to "deal with the growing problem we face with China".
China's outgoing ambassador in London, Liu Xiaoming, last week said relations between the two countries "depend on whether the UK sees China as a partner or a rival", adding that the "ball is in the court of the UK side".
China denies forced labour is used in its cotton industry, saying that the camps from where the pickers are drawn are "vocational training schools" and that factories are part of a poverty alleviation scheme.
British retailer Marks and Spencer vowed last week not to use cotton from Xinjiang as concern grows in the fashion industry about their supply chains.
Two years ago, US firm Badger Sportswear announced it would stop sourcing clothing from the Chinese apparel company Hetian Taida, over concerns it was using forced labour from internment camps in Xinjiang.
Meanwhile last month, French footballer Antoine Griezmann announced that he would "immediately terminate (his) partnership" with telecom giant Huawei, citing "strong suspicions" that it was involved in the Chinese authorities' surveillance of the Uighur minority.
Uighurs are the principal ethnic group in Xinjiang, a huge region of China that borders Afghanistan and Pakistan.
According to experts and human rights groups, at least one million Uighurs have been detained in recent years in political re-education camps.
British MPs are increasingly turning their focus on China, and a group of Conservative backbenchers, including Duncan-Smith, are supporting calls for Britain not to strike bilateral trade deals should a British court rule Beijing is guilty of genocide.
The government has resisted the calls, arguing that international courts are the proper institutions for determining genocide.
Source: Economic Times