The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 14 JAN 2021

NATIONAL

INTERNATIONAL

 

Government’s RoDTEP scheme could face legal challenges, warn tax experts

The Remission of Duties or Taxes on Export Products (RoDTEP) scheme, which is being put in place following a dispute with the US at the WTO, is set to face issues as several companies have reached out to the government for clarity around the tax rates and exemptions.

RoDTEP was introduced in India after other schemes— such as advance authorisation—were challenged by the US at the World Trade Organisation (WTO).

Interestingly, even the advance authorisation scheme is under litigation after goods and services tax (GST) was introduced and the tax department refused to extend benefits to exporters.

Many companies and exporters had sought that the government extend some of the existing schemes till there is more clarity around RoDTEP.

The government has now extended schemes such as Merchandise Export from India Scheme (MEIS) by about three months this year.

Tax experts said many exporters are already facing a lot of trouble and with some of  the existing schemes already under litigation, even RoDTEP could present legal challenges for the government.

“Benefits under advance authorisation have been subject to judicial review on various occasions after the introduction of GST and any restriction under the new RoDTEP scheme will have to cross the barrier of constitutional validity as well,” said Abhishek A Rastogi, partner at Khaitan.

Under the advance authorisation scheme, which was prevalent under the erstwhile tax regime, exporters could get an authorisation to import raw materials used for manufacturing exported goods without payment of taxes on imports based on past exports.

Under the GST framework, however, the government’s stand was that exemptions in any part of the value chain would distort the system and, hence, shouldn’t be allowed.

The government had amended the foreign trade policy to that effect.

Tax experts pointed out that in many cases, exporters continued to do business as they were doing prior to GST and the amendment, resulting in the notices.

Many exporters want the government to continue allowing them the benefits they have been getting all along. “Benefits under advance authorisation scheme are in line with the global framework and, hence, appropriate provisions should be incorporated to allow this benefit, which will substantially help the importers to address working capital issues,” said Rastogi.

ET had earlier reported that the indirect tax department has also started questioning several importers on certain transactions and is looking to slap an additional duty on that.

Importers say the tax department has started levying this even on raw materials imported by them which are eventually used to manufacture goods that are exported. India tends to levy additional duty on certain imports. This is mainly done to protect domestic manufacturers, say industry experts.

Source: The Economic Times

Back to top

169%! That’s In The Style’s sales growth last quarter!

British online fashion retailer, In The Style, has just been through a great quarter! At least that’s what the numbers indicate!

The fashion retailer saw its year-over-year (Y-o-Y) sales for the 13 weeks ended 31 December 2020 jump by a whopping 169 per cent to touch £13.5 million.

What’s noteworthy is that online fashion retailer has also seen 45 per cent Y-o-Y growth in new customers.

These extraordinary numbers have now put the online retailer in a very good position at the start of the year.

Another notable factor was the huge sales made by the digital retailer through its app, which was an astounding 500 per cent. In-app sales, notably, accounted for over half of total sales.

The record numbers achieved through this channel were also major factors to a 50 per cent rise in the online conversion rate.

The terrific sales numbers also owe a lot to a robust performance during the Black Friday and Christmas seasons.

Besides, the retailer believes that good growth in new customers as well as growing awareness about the brand were also instrumental in resulting in good numbers.

The Manchester-based In The Style is known for its womenswear and is owned by Adam Frisby. It ships to as many as 100 countries including the UK.

Source: Apparel Online

Back to top

CBIC bars officers from attending non-govt webinars, conferences

The Central Board of Indirect Taxes and Customs (CBIC) has barred its officers from attending seminars, webinars or conferences organised by non-government agencies, unless permitted by the revenue secretary.

The instructions were issued to all field units on January 12, and strict compliance without exception has been mandated. The Board has allowed the officers from attending as 'resource person' only if webinars or conferences are organised by government agencies.

Source: The Economic Times

Back to top

UBS sees economy turning positive in H2; closing FY21 with only 7.5% contraction

Swiss brokerage major UBS Investment Bank sees the economy carrying forward the unexpected recovery seen in the second quarter into the third and GDP most likely turning green or contracting by only 40 basis points (bps) and closing the March quarter with a 80 bps growth.

This will help the economy end the current year ending March with a 7.5 per cent contraction, which is 1 full 100 bps more optimistic than the consensus forecast and and even lower than the latest government forecast of 7.7 per cent.

In the midst of the pandemic, the economy tanked in the quarter to June ravaged by the lockdown, printing in the worst growth numbers in history at a massive -23.9 per cent, but dramatically improved in the second quarter with a contraction of just 7.5 per cent.

This massive improvement has many analysts revising upwards the full year numbers in a 7-8.5 per cent range. The government too last week forecast a contraction of only 7.7 per cent.

“We see the economy turning around and likely to print positive GDP numbers both in the December and well as march quarters. By the March quarter, the economy should be in the green printing in 0.80 per cent growth or more, helping the full fiscal close with only 7.5 per cent contraction only,” Tanvi Gupta-Jain, the India chief economist at UBS Investment Bank told PTI.

She said the 7.5 per cent contraction for the year to March 2021 is a full 100 bps better the consensus average and 20 bps better than even that of the latest government forecast of 7.7 per cent contraction of the economy.  The economist expects the economy normalising from the first quarter of FY22 on the back of the continuing growth in the least-contact segments of the economy, while high-contact sectors picking up from Q2.

But she is quick to underline that all these are contingent on the vaccines hitting the market at an affordable rate from early 2021. She expects the economy to clip at 11.5 per cent in FY22, reflecting the deeper 7.5 per cent contraction in the current fiscal, on the back of the massive recovery in consumption that resumed in the second quarter.

Expecting a V-shaped recovery from the fourth quarter of FY21 onwards, she expects FY23 growth to stabilise at 6 per cent given the high base in Fy22. She expects the combined fiscal deficits of the Centre and the states to come in at 11.5 per cent of which the Central deficit will be 7 per cent of GDP and the states’ at 4.5 per cent.

Ruling out a second wave of the pandemic, the economist says the pandemic has peaked in September last in the country, except in some large cities which may also witness a second wave. On the vaccine procurement, supply and storage, she says the government will have to set aside at least Rs 50,000 crore just for procuring the 600 million-odd doses needed for the 300 million needy in the first phase but storage will be the biggest hurdle as the pandemic vaccine has to be kept in deep-freeze.

She also feels it will take time for the entire nation to develop heard immunity beyond 2021 — something the medical fraternity feels a must in pandemic situations. It’s not about the availability of the vaccine that is a challenge but deployment, logistics and storage are the real challenges, she says.

According to her, 300 million — 30 million health workers and 270 million elderly and the vulnerable — will get vaccinated by end-August and the larger burden of which could be shared by the government.

Source: The Financial Express

Back to top

Efforts will continue to make India a truly self-reliant nation: Piyush Goyal

Efforts will continue to make India a truly self-reliant nation and improve the quality of life as well as the ease of living for its citizens, Union minister Piyush Goyal said on Wednesday.

"We have an opportunity to provide sustainable development as the mantra of this country...we have an opportunity to change the image of this country from the past where it was full of contradiction, full of irregularities to a country which works honestly, transparently and works for the wider benefit of its... citizens," he said.

Goyal holds multiple portfolios including Railways, and Commerce and Industry. He is also in charge of the consumer affairs and food & public distribution ministry.

He noted that the ecosystem of government, private sector, the institute of company secretaries, industrial bodies and institutions, among others, are all equal stakeholders in the future of the country.

"We are going to make this country great; we are going to make this country truly a self-reliant nation which serves our people, which...improves the quality of life and the ease of living of every citizen of India. No power on earth can stop us from succeeding," Goyal said.

He was speaking at an event organised by the Institute of Company Secretaries of India (ICSI) for giving away national awards for excellence in corporate governance.

Source: The Hindustan Times

Back to top

 

Budget 2021: Dear FM, forget the deficit. Spending is the only way out of this crisis

After hesitating for nearly six months, the Centre now appears to have decided to speed up spending. Government spending, which had remained flat till September, surged 50% y-o-y in November and is expected to grow strongly in December too. On the back of this change in stance, Q4 2020 GDP is expected to grow significantly stronger at 2% (on a year-ago basis) and for the full year, contract 6.5%.

It is unfortunate that GoI waited until tax revenue began to recover before easing its purse strings. To be fair, this is what most emerging markets do: run fiscal policy pro-cyclically rather than countercyclically as it is supposed to be done. In 2020, we did see some notable exceptions, such as in Brazil. But funding constraints and inadequate automatic stabilisers have forced fiscal policy in most emerging markets to add to economic volatility rather than dampen it.

India is no exception. It should have increased spending in the first half of this fiscal year when the economy acutely needed the support and not wait for the infection rate to subside, mobility and activity to start normalising, and tax revenue to recover before doing so. While the adage ‘live within one’s means’ is good advice for individuals and governments alike, it is mostly intended to hold over the medium term. As an instrument of macroeconomic policy, governments are expected to alter spending countercyclically to dampen volatility on a year-to-year or even quarter-to-quarter basis.

Be that as it may, one hopes that GoI continues with this change in the fiscal stance into the next year. The economy will recover in 2021and we expect GDP growth to rise by 13.6%. Admittedly, this is much higher than the current consensus forecast, and it depends quite critically on higher global growth, driven by the expectations of higher US fiscal stimulus, continued strong growth in  China, and the worldwide roll-out of the Covid-19 vaccines by H2 2021.

More importantly, it also depends on GoI extending support to the economy. The nearly 20 percentage points turnaround in GDP growth should lead to a strong recovery in government revenue. One hopes — and expects —that GoI does not use all the higher revenue to reduce the deficit. Instead, it should use a substantial part of the increase to raise public spending.

Your Loss is My Profit

But increase spending on what? There are just two areas where GoI should focus: income support and public health. At the risk of sounding like a broken record, despite the expected double-digit growth next year, the level of GDP will still be 4-5% below its pre-pandemic path at end-March 2022. This is akin to losing $200 billion for two straight years. With listed companies managing improving savings by cutting employment and investments (profits of listed companies rose 30% in Q3 2020, according to RBI), the income loss is likely to have fallen disproportionately on households and SMEs. For example, some private surveys point to 18 million job losses so far.

While debt moratorium and other regulatory forbearance have concealed the extent of the damage to household and SME balance sheets, these measures simply postpone the eventual reckoning. The scarring caused by the impairment to balance sheets can seriously reduce medium-term growth, as it has done in previous crises. And if this were to happen, then not only would GoI be forced to spend more to recapitalise banks — and every fiscal indicator that matters to rating agencies and the market, such as medium-term debt sustainability, would ironically worsen — but also banks could turn risk-averse and their reluctance to extend credit could severely hamstring the recovery.

Further, this extended loss of incomes can wreak havoc to income inequality, to poverty, and to the gender gap, as women’s employment is likely to have been disproportionately affected since much of the loss in employment has been borne by services, where female employment is much higher than in manufacturing.

While one understands the clamour for more infrastructure spending, it is surprising that the demand for better public health services hasn’t elicited as much attention even though this crisis was worsened by India’s fragile public health system.

Both Health and Wealth

While cheap skilled labour, India’s large market, the ease of doing business, and policy consistency will remain the key drivers of FDI, it is likely that, after the pandemic, the state of a country’s public health system has become as important a factor.

Investors will look not just for cheap and skilled labour but also a healthy workforce. In the past, the inadequacy of public health was sidestepped, as private services in India were seen as comparable to international standards and much cheaper than in developed countries. Covid-19 showed that private healthcare cannot replace a weak public health system.

Investing in income support and public health are not medium-term issues. They can easily become 2021 problems if not addressed now.

Source: The Economic Times

Back to top

See how Indian RMG exports fared in its top markets in Jan.-Nov. ’20

India’s apparel export values have plunged 25.41 per cent in Jan.-Nov. ’20 period to clock US $ 11.07 billion revenues, as against US $ 14.84 billion in the same period of 2019.

The top 5 destinations for ‘Made in India’ garments in a pandemic-affected year are USA, UAE, UK, Germany and Spain as these countries collectively contributed 59.44 per cent of total Indian RMG export values.

India shipped US $ 2.97 billion worth of garments to USA which is the largest apparel export destination for the country, declining 24.80 per cent on Y-o-Y basis.

Apparel shipment to UAE valued US $ 1.38 billion, which is less than half to what India shipped to its top market, in Jan.-Nov. ’20 period and declined 17.25 per cent.

UK imported US $ 1.02 billion worth of apparels from India in the said period, decreasing by 30.64 per cent on Y-o-Y basis, while the shipment to 4th largest market Germany made India earn US $ 714.80 million with a yearly decline of 22.72 per cent.

As far as Spain is concerned, the exports dropped by 31.33 per cent to US $ 485.60 million in the review period.

AR will also let its readers know the countries where India has seen growth in its apparel exports during the Jan.-Nov. ’20 period. Stay connected.

Source: Apparel Online

Back to top

GDP may clip at just 6 pc in FY22 if COVID-19 vaccine distribution is delayed, says BofA Securities

A delay in COVID-19 vaccine distribution could impact GDP growth prospects in the next fiscal year and the Reserve Bank may cut policy rates by 50 basis points by June as inflation cools down, a foreign brokerage said on Wednesday.

BofA Securities said it expects GDP growth at 9 per cent in 2021-22 if the vaccine distribution is done in the first half of the new fiscal year but may be just at 6 per cent if the distribution is deferred to the second half (October-March).

For the current financial year, it expects GDP to contract by 6.7 per cent as against the government’s estimate of 7.7 per cent contraction. It can be noted that a slew of policy measures have been taken in the recent past including deep rate cuts, which had to be halted because of a surge in inflation to beyond the upper end of the range set for RBI.

Speaking to reporters a day after official data suggested a sharp cool-down in the consumer price inflation to 4.6 per cent in December after being consistently above 6 per cent, its India economist Indranil Sen Gupta said BofA expects the RBI to cut rates by 50 basis points by June before it starts hiking them again.

He said the pressure on the inflation has been driven more because of supply-side issues and expected the same to ease going forward, explaining that over 1.60 per cent impact on the price rise number is only because of such constraints.

The gap between the headline inflation and wholesale price inflation or the core consumer inflation points to the supply side constraints affecting the overall situation at present, he said.

From a growth perspective, the brokerage said India will be the third biggest economy in the world in the next decade. Growth will be driven by a demographic dividend which will be driving investment, rising financial maturity and emergence of mass markets, it said.

Gupta pitched for a fiscal stimulus in the budget to address the demand side concerns, and keeping the fiscal deficit at 5 per cent of the GDP for FY22. Specific measures can include a cut in excise duty on oil products, he said, adding that even though there has been a rally in oil prices lately, the commodity will stabilize eventually.

Other measures which the budget can look at will be a recapitalization of the state-owned banks who can in turn use the capital for lending to productive purposes in the economy and also issuance of Rs 1 lakh crore of PSU infrastructure bonds, he said.

Gupta said from an external perspective, India is at its most comfortable level for over a decade because of the accretion of forex reserves which can now last for over ten months of imports.

The rupee will not depreciate as much as it did during three episodes in the last decade, forcing policymakers to throw everything they can to arrest the fall, he said, adding that the currency manipulator tag will also go off once the volatilities in rupee are taken care of.

Source: The Financial Express

Back to top

Birla Cellulose and Nanollose file for patent for high tenacity lyocell fibres made from bacterial cellulose

India’s Birla Cellulose has filed a joint patent application with Australia’s Nanollose for high tenacity lyocell fibres made from bacterial cellulose.

The lyocell market is predicted to be worth US $ 1.5 billion by 2024.

Both the companies, leaders in textile industry, will now focus on taking this success to the pilot production phase so as to produce initial commercial quantities of fibre to enable commercial agreements with fashion brands.

Dr. Aspi Patel, Chief Technology Officer of the Aditya Birla Group and Birla Cellulose, said, “This innovative development is another important step in our continuing journey to make our fibres more sustainable. This is an exciting development in the area of next generation alternative feedstock, and we are looking forward to scaling up this technology in collaboration with Nanollose.”

The patent application, entitled High Tenacity Lyocell Fibres from Bacterial Cellulose and method of preparation thereof, is said to represent a major advancement over Nanollose’s previous viscose versions of nullarbor and nufolium.

Using the lyocell process, a team of fibre experts at Birla Cellulose, Pulp and Fibre Innovation Centre has produced nullarbor fibre that is finer than silk and significantly stronger than conventional lyocell that is traditionally produced from wood pulp.

Lyocell is a form of rayon, which is made using a closed loop process with low demand on chemical and water usage and low waste generation. This makes it environment-friendly and brings with it an elevated demand from clothing brands.

Source: Apparel Online

Back to top

India saw faster-than-expected pace of recovery in October-December quarter: Nomura

The Indian economy saw a faster pace of normalisation during the third quarter of the ongoing fiscal as the pandemic situation did not substantially deteriorate during the festive season, according to global brokerage firm Nomura.

The Nomura India Monthly Activity Indicator (NIMAI) rose sharply to -2.3% year-on-year in December against -7.7% in November following a substantial gain from -13.3% in September, the firm said in a report titled, ‘As virus recedes, growth proceeds’, on Wednesday.

“Based on the faster pace of economic normalization, we recently raised our Q4 2020 (Q3FY21) and Q1 2021 (Q4FY21) GDP growth forecasts to 1.5% y-o-y and 2.1%, respectively, from -0.8% and -1.2% previously,” the Japanese I-bank said.

The NIMAI, which includes 19 high frequency indicators covering consumption, investment, industry and services, suggested that the gap between aggregate demand and supply had narrowed further during the October-December quarter, leading to a stronger-than-expected recovery.

The improved starting point for 2021 led to an increase in Nomura’s growth projections for the coming year. “In financial year terms, we expect GDP growth of -6.7% y-o-y in FY21 (y/e March 2021), before rising to 13.5% in FY22, above consensus (10%),” the report said.

Further, the Indian economy was set to enter a “Goldilocks” period in 2021 with the moderation in inflation in the short term due to lower food prices, it added.

The firm had earlier forecast an 8.2% contraction for the ongoing fiscal. While the government has projected FY21 to see a 7.7% contraction in the first advance estimates of GDP, Nomura said it anticipates a further moderation in the expected contraction.

The Nomura India Normalization Index (NINI) reported consumption improving to 88.3% in December from 85% in October while the figure for investment stood at 93% by the end of 2020, or just three percentage points below pre-pandemic levels, according to the report.

On the supply side, the NINI pointed to a multi speed recovery with the industrial sector at 90% in December while the services sector lagged at 46%, indicating a gradual improvement from 37% in September.

In terms of headline inflation, Nomura expects calendar year 2021 to see a softer 4.5% compared to 6.7% in CY20. “Consequently, we believe that the shelf-life of ultra-accommodative monetary policy is expiring, and the debate has now effectively shifted to how the RBI (Reserve Bank of India) should taper without disrupting growth prospects,” it said.

Source: The Economic Times

Back to top

Govt may step in if WhatsApp violates data privacy of users

After scrutinising the changes in WhatsApp’s privacy policy, the government will decide whether intermediary guidelines need to be strengthened to safeguard the privacy of social media users.

Government officials told BusinessLine that they would communicate if the encrypted messaging platform compromises on security and privacy of its users. “We are examining the situation... we can’t say anything right now, as we are yet to get the details,” an official said.

Intermediary guidelines

The official said the government can change the intermediary guidelines if deemed necessary, as framing the guidelines is in the final stages.

According to senior officials in the Ministry of Electronics and Information Technology (MeitY), the concern arose because the earlier social media platform Facebook, which owns WhatsApp, too, had maintained that it cannot encrypt any of the WhatsApp messages. But its updated policy said, “WhatsApp must receive or collect some information to operate, provide, improve, understand, customise, support, and market our services, including when you install, access, or use our services.” This has spawned debates.

The new terms of service and privacy policy will come into effect on February 8 and, according to reports, users have to either accept the changes in WhatsApp’s ToS and privacy policy or their accounts will be deleted.

Industry veterans are also questioning the timing of these changes, especially as they come after the launch of the WhatsApp Pay, in which users have to share the banking details that are linked to PAN and Aadhaar. However, over the last few days, the company has been coming out with clarifications that users’ privacy will be protected and not compromised.

“We don’t keep logs of who is messaging or calling. While traditionally mobile carriers and operators store this information, we believe that keeping these records for two billion users would be both a privacy and security risk,” the company said.

Sharing info with FB

On sharing contacts with Facebook, it said, “When you give us permission, we access only the phone numbers from your address book to make messaging fast and reliable; we don’t share your contacts lists with the other apps Facebook offers.” It has also clarified that some changes would be made in the ‘business accounts’ of the users, but not to individual or family groups.

Source: The Hindu Business LIne

Back to top

Bacterial cellulose dilapidation system can lift biofuels production

Researchers have revealed facts of how a certain type of bacteria breaks down cellulose – a discovery that could benefit cut the cost and environmental impact of the use of biomass, including biofuel production. The bacteria’s cellulose degradation system is in some way different from how a fungus is already widely used in industry, including to soften up denim to make stone-washed jeans.

Efforts to find ways to break down cellulose, the tough stuff that makes up plant cell walls, faster and more productively has long been a goal of industrial researchers.

When plants are processed into biofuels or other biomass applications, cellulose has to be degraded into simpler sugar molecules first, and this step can represent up to a quarter of the operating and capital costs of biofuel production. If this process can be made faster and more productive, it won’t just save industry money, but such efficiencies could also reduce the environmental impact of production.

Cellulose molecules bind very strongly to each other, making cellulose very hard to break down. Some fungi can break it down, however, and their cellulose degradation systems are well known.

Fungi produce many types of cellulases — enzymes that speed up the chemical reaction that degrades cellulose. And such fungi have been widely used in industry for this reason.

For example, the fungus Trichoderma reesei — discovered during World War Two in the Pacific as a result of its eating away at tents and clothing — is used in the production of stone-washed jeans. Cellobiohydrolase, a type of cellulase that the fungus produces, breaks down cellulose into cellobiose, a simple sugar more easily useable by organisms. This slightly degrades the denim material in places, which in turn softens it — making it appear as if washed with stones — and makes it more comfortable to wear.

But there is another type of cellulose degradation system used by some bacteria, and which is similar in many ways to that used by this fungus. But this system has not been very well understood until now. In a paper in the Journal of Biological Chemistry on August 18th, researchers from Japan’s Institute for Molecular Science, National Institutes of Natural Sciences (IMS, NINS) have finally described this system in detail at the single-molecule level.

The type of cellobiohydrolase produced by the bacterium Cellulomonas fimi has a similar catalytic domain to the cellobiohydrolase produced by T. reesei.

The catalytic domain of an enzyme is its region that interacts with a molecule that it wants to change or break down (to cause the enzymatic reaction). Both the fungus and the bacteria’s cellulose degradation system also exhibit similar hydrolytic activity (the way that they use water to break down the cellulose’s chemical bonds).

But the two systems have different carbohydrate-binding modules (the series of proteins in the enzyme that binds to the carbohydrates in the cellulose) and what are termed “linkers,” in essence the part of the enzyme that links the catalytic domain to the carbohydrate-binding modules.

In earlier research, the NINS scientists had already established that the structure of the linker region of the fungal cellobiohydrolase played a crucial role in how fast the enzyme binds to cellulose (and thus how fast the system degrades cellulose).

“So the obvious next questions were: Even though these other parts of the bacterium’s cellobiohydrolase are different to those of the fungus, do they nevertheless do something similar?” said Akihiko Nakamura and Ryota Iino, the researchers on the team.

Nakamura added, “Do they also speed up cellulose degradation?”

They found that they do. The scientists used single-molecule fluorescence imaging — an advanced method of microscopy that delivers images of living cells with a resolution of just tens of nanometers — to observe the bacterium’s cellobiohydrolase binding to and dissociating from cellulose molecules.

This allowed them to clarify the functions of the different parts of the cellulose degradation system. They found that the carbohydrate-binding modules were indeed important for the initial binding, but the role played by the linker region was fairly minor.

However, they found that the catalytic domain was not so similar after all. Its structure showed longer loops at the entrance and exit of a “tunnel” in the heart of the system compared to that of the fungus. And this difference in the tunnel structure results in higher processivity — the ability of an enzyme to set off multiple consecutive reactions.

The next steps will be to engineer these bacterial cellulose-degrading enzymes to break down cellulose faster.

Source: Textile Today

Back to top

FSDC sub-committee reviews developments in economy

RBI Governor Shaktikanta Das headed Sub-Committee of the FSDC on Wednesday reviewed the major developments in the global and domestic economy as well as financial markets that impact financial stability, the central bank said in a statement. The virtual meeting of the Sub-Committee of the Financial Stability and Development Council (FSDC) was attended by various regulators, including Sebi and Irdai.

The Sub-Committee also discussed scope for improvements in insolvency resolution under IBC, utilisation of data with the Central KYC Records Registry and changes in the regulatory framework relating to Alternative Investment Funds (AIFs) set up in the International Financial Services Centre (IFSC), among others.

It also reviewed the activities of various technical groups under its purview and the functioning of State Level Coordination Committees (SLCCs) in various states and Union Territories.

"The regulators reaffirmed their resolve to be alert and watchful of emerging challenges to financial stability," the Reserve Bank of India (RBI) said.

The members of the panel who attended the meeting included Ajay Tyagi (chairman, Sebi); Subhash Chandra Khuntia (chairman, Irdai); Supratim Bandyopadhyay (chairman, PFRDA); M S Sahoo (chairperson, IBBI); Injeti Srinivas (chairperson, IFSCA); and Debasish Panda (secretary, Department of Financial Services).

Rajesh Verma (secretary, Ministry of Corporate Affairs); Ajay Prakash Sawhney (secretary, Ministry of Electronics and Information Technology); Krishnamurthy Subramanian (Chief Economic Adviser) and Shashank Saksena (secretary, FSDC) also attended the meeting, besides deputy governors and executive director of RBI.

Source: The Economic Times

Back to top

Revival of fashion industry demands digitisation

What it takes to revive an industry like fashion, which is consumer-driven, after surviving a pandemic like COVID-19 that caused businesses to go on standstill mode? Can the industry go back to traditional methods to overcome the losses? Is it feasible for the business owners to rely on same old processes to achieve new goals in a new normal world? The answer to all these questions is well-known to the industry stakeholders but all it takes to accelerate growth is their sense of realisation that they need to increase speed of their products to the market, at a pace which was already required and the only change COVID-19 has brought is the acceptance of the use of technology.

How can less reaction time and digitisation help increase the speed to market?

In easy words, reaction time is the time taken by a fashion retailer to think about a garment to the time the garment is in the store shelves. One of the most critical issues the fashion industry is facing is high reaction time as more than 30 per cent of the time of a retailer gets wasted in waiting for the next step or process to take place.

“Retailers wait for vendors to create the samples and the vendors wait for the buyers or designers to approve the samples! Every stakeholder in the supply chain remains stuck in waiting period in some way or the other which hampers the overall lead time planning. Brands and manufacturers have to figure out how they can reduce waiting time…,” shared Gunish Jain, CEO, BlueKaktus – a leading software technology provider of fashion retail and manufacturing industry.

Quantifying waiting time and what it costs in terms of lead time is absolutely critical to figuring out how to integrate the supply chain. Since long the focus of the fashion retailers is on building global sourcing capabilities where they can get the garments made in different countries and therefore they keep chasing the lower costs. But till what extent? There has been saturation and the retailers can’t go for much lower prices than they are already getting in different sourcing places and the only solution remains is to build efficiencies and productivity. Here comes the crucial role of digitisation or technology.

According to Gunish, the front-end of the fashion industry is digitised (through e-commerce) but the backend still remains analogue. When it comes to garment manufacturers, more often than not, they largely get stuck while thinking that they have to make garments but how can digitisation help? The reality of low margins, where fashion companies are fighting for every cent which can be saved, can result in a reluctance to invest in new technology, but manufacturers really need to explore what additional value the latest technologies can deliver.

The era of digitisation is demanding new ways of thinking, in order to assume digital leadership because of – fragmented process chains; different times and production cycles; missing standards of communication interfaces; small profit margins and extended lead times. Having supply chain on a single platform is important and, first of all, the companies need to have Single Source of Truth (SSoT) so that they can know where and at what stage their orders are.

Being an SSoT-driven supply chain, the biggest advantage is the companies can track and monitor entire process that takes place on the digital platform. Transactions which have been happening offline start happening online, where data is not collated separately rather every stakeholder is working on the same data. This transition avoids confusion and time reduces consumption.

Giving an example, Gunish said that orders are usually given to vendors through email which is still a non-digitised manner. “Instead of receiving orders through email, use a platform or software where the orders are available from the buyer’s side. Vendors can download it and, if there is any change in the placed order, it automatically gets updated. The companies have a single repository where entire information is available,” informed Gunish.

Another advantage of using SSoT concept is that the vendor can ask for extension due to any sort of delay caused in the operations at factory level. If this transaction is reported in the system in a digitised manner where vendors request for an extension of certain number of days, the system  keeps the record for future purpose and the same can be tracked later on if request was granted or not. Right now, this has been happening on phones or emails which can’t be tracked and creates chaos as well as delays in the planned lead time.

Once all the transactions are digitised, the next step for the companies is to start analysing the data. For example, the brands can analyse the data and know the average lead time the vendor needs to provide a sample! The data also tells the number of times a vendor was able to achieve right first time in sample making. Because of this analysis, the brands can always choose to skip a few steps while deciding for lead time such as asking for multiple prototypes and giving size sets again and again!

At the third stage, automation comes into the scenario and the companies start automatising the process and routine tasks. One of the most important outcomes of automation in this stage is reduced human follow-up as it becomes automated… “Why do you need a merchant calling up a vendor and saying where the shipment is? Rather than people spending expensive time on follow up, the system needs to be given the responsibility,” averred Gunish.

Once all these stages are achieved, manufacturing companies in collaborative efforts with brands can be termed as future-ready companies.

Why manufacturers need to understand the significance of digitisation road-map?

The garment manufacturers always need to understand what retailers are going through as they are the ones who are directly interacting with the market and the end-consumers. The manufacturers need to figure out how they can restructure their business processes to make operations more nimble and agile. A ‘quick delivery’ strategy can always help them overcome the current challenges they are facing; price battles can be solved; and they can become a preferred supplier to the brands. It’s also imperative for them to know that the apparel and fashion brands want to work with the vendors who understand their challenges and are willing to adapt in order to solve those challenges.

Source: Apparel Online

Back to top

FinMin allows Kerala to borrow additional Rs 2,373 cr post ‘ease of doing biz’ reforms

he Centre on Wednesday said it has permitted Kerala to borrow an additional Rs 2,373 crore after the state successfully undertook ‘ease of doing business’ reforms.

Kerala has now joined seven other states — Andhra Pradesh, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu and Telangana — which have completed the reforms facilitating ease of doing business to be eligible for the additional borrowing.

These eight states have been granted an additional borrowing permission of Rs 23,149 crore.

“Thus, the state (Kerala) has become eligible to mobilise additional financial resources of Rs 2,373 crore through open market borrowings. Permission for the same was issued by the Department of Expenditure on January 12,” the Finance Ministry said in a statement.

The ease of doing business is an important indicator of the investment-friendly business climate in the country.

The government had in May, as part of the ‘Aatmanirbhar Bharat’ package, announced to link grant of additional borrowing permissions to states who undertake the reforms to facilitate ease of doing business.

The reforms stipulated in this category include completion of first assessment of ‘District Level Business Reform Action Plan’, elimination of requirements of renewal of registration certificates/approvals/licences obtained by businesses under various Acts.

In view of the resource requirement to meet the challenges posed by the COVID-19 pandemic, the government had in May enhanced the borrowing limit of the states by 2 per cent of their GSDP.

Half of this special dispensation was linked to the states undertaking citizen centric reforms — implementation of ‘One Nation One Ration Card System’, ease of doing business reforms, urban local body/utility reforms and power sector reforms.

So far, 10 states have implemented the One Nation One Ration Card System, eight states have done ease of doing business reforms, and four states have done local body reforms.

Total additional borrowing permission issued so far to the states, which have done the reforms, is Rs 56,526 crore, the statement said.

Source: The Financial Express

Back to top

Indian Banks to be resilient even if there is a 15% run on deposits: RBI report

Even as the RBI has warned that easy financial conditions created to tackle the economic impact of the pandemic could pose a threat to financial stability, Indian banks are well equipped with liquid assets to meet a small run on their deposits even in a worse case situation.

A sensitivity analysis of the liquidity risks by the central bank shows that Indian banks could be resilient even if there is sudden and unexpected withdrawal of around 15 per cent of deposits and at the same time 75 per cent of credit commitments utilised.

Assuming severe stress in the system fearing safety of their money, the depositors would rush to withdraw un-insured deposits in stress scenario. Simultaneously borrowers would do their best in increasing the usage of unutilised portions of sanctioned working capital limits as well as utilisation of credit commitments and guarantees extended by banks to their customers. Though the COVID- induced lockdown which prompted the central bank to adopt an aggressive accommodative stance has so far has not resulted in any perceptible adverse conditions in the market, risks continue to remain.

"Banks, in general, may be in a position to withstand liquidity shocks with their high-quality liquid assets-" the Reserve Bank said in its financial stability report. Banks have a comfortable buffer of HQLAs to meet their day to day liquidity needs, RBI's analysis showed. HQLAs are pegged at 24.6 per cent of their total assets in a baseline scenario and 15.4 per cent of the total assets in a severe stress situation are available to banks to meet their liquidity needs.

HQLAs are normally excess invested in monetary instruments over what is mandatorily needed to be made by the central bank. In the Indian context it would be cash reserves in excess of required CRR, excess SLR (statutory liquidity ratio) investments besides the additional SLR maintained under RBI's marginal standing facility and also additional SLR investments at 15 per cent of NDTL as stipulated by the central bank in April 2020, in order to boost liquidity in the system.

The assessment of liquidity risk is significant as the central bank has flagged of risks of its accommodative stance. "While easy financial conditions are intended to support growth prospects they can have unintended consequences in terms of encouraging leverage, inflating asset prices and fuelling threats to financial stability" the RBI has said.

Source: The Economic Times

Back to top

Uniqlo to source fabric from Varanasi

World’s leading retailer Uniqlo will now source fabric from Varanasi!

The Japanese fashion retailer will bulk purchase the raw materials for its various products.  Soon the company officials will visit the textile hub to meet the weavers.

With the help of foreign ministry, Deepak Agarwal, Commissioner Varanasi Division, gave a presentation to the company through video conference, wherein he discussed about the quality, price and design aspects.

Shankar Jha, Joint Director of National Institute of Fashion Technology and Director, officials of Weavers Service Centre and few weavers were also present in this discussion.

Uniqlo is interested to purchase raw materials from Varanasi and will process it in a factory in Gujarat. The deal will definitely help the weaving industry of Varanasi where weaving has been done in houses since ancient times.

Varanasi-based fabric and garment manufacturers are of the opinion that sourcing by Uniqlo will also motivate other brands and retailers to work with them.

Few of the Varanasi-based companies are into export of fabric and fashion accessories.

Having around 2,200 stores across 23 countries, Uniqlo entered India last year and opened its store in Delhi.

Source: Apparel Online

Back to top

The budget must tackle India’s prevailing economic uncertainty

The numerous prompt and decisive relief and reform measures announced by the government in the recent past to manage the impact of the covid pandemic on Indian industry and the overall economy have led to a distinct turnaround in India’s growth trajectory.

Improved trends in agricultural production, the manufacturing sector and consumption have boosted industry confidence and strengthened consumer sentiment. The latest poll of chief executive officers conducted by the Confederation of Indian Industry (CII) indicates positive business expectations, further affirmed by an all-time high goods and services tax (GST) revenue collection of ₹1.15 trillion in December 2020. It is likely that the economy will recover this year itself, and India will have to ensure that such a recovery remains sustainable. The Union Budget of 2021-22 is less than a month away and offers a great opportunity for comprehensive and objective steps towards achieving this objective.

The sharp fall in India’s economic growth rate resulted in a revenue shortfall for the government, leading to a stressed fiscal situation. Thus, we need judicious fiscal management while simultaneously maintaining a growth impetus.

Like every year, CII has submitted a comprehensive set of suggestions for generating demand and employment, along with the required revenue, as well as on direct taxes and import tariffs to encourage Atmanirbhar Bharat.

The two most critical areas that require attention for India’s economy to get back on a high-growth trajectory are private investment and job creation. For creating employment and livelihoods, a stable tax regime is strongly desired. Keeping in view the fiscal constraints, CII has not suggested any significant deductions or exemptions in direct taxation, and therefore, its tax recommendations are focused mainly on clarity in law, simplification of procedures and reduction of litigation to facilitate business transitions which would make doing business easier for industry. There is a need to maintain contractual sanctity by ensuring that any tax-law amendments are done in such a manner that the amended laws honour existing contracts under execution.

To encourage employment in higher skilled jobs, the present cap of ₹25,000 needs to be raised to ₹50,000 per month under Section 80JJAA of the Income Tax Act, which provides for deduction of 30% on emoluments paid to new employees, to be claimed for three years.

There exist large volumes of litigation and pending tax cases. Mediation can provide final and binding settlements to ensure certainty and provide relief from long-drawn litigation. Hence, a time-bound mediation mechanism for tax disputes should be introduced in the upcoming budget.

The Finance Act of 2018 provides for the grandfathering of long-term capital gains accrued up to 31 January 2018 on listed equity shares. A clarification should be issued that it would apply to shares of amalgamated or demerged companies as well.

To enhance the financial strength and soundness of banks, and thus the stability of India’s financial sector, the prescribed limits on provisioning for bad and doubtful debts by Indian banks should be enhanced from the existing 8.5% to 15%. Further, the interest on non-performing assets that has been overdue for more than 90 days should be excluded from total income and taxed only on a receipt basis.

The global covid-induced economic downturn has had an unprecedented impact on exports. Orders have been cancelled and global trade has been transformed.

India’s government has proactively taken steps to help industry manage the impact of covid through various measures, including a lowering of tax rates and the deferment of tax payments and compliances. Also, a major thrust has been given to the Make in India, Atmanirbhar Bharat and Vocal for Local initiatives. Following the vision of Prime Minister Narendra Modi, CII has proposed a set of general principles to guide the country’s import tariff structure, along with a roadmap to encourage and calibrate domestic manufacturing in alignment with global trade trends that would strengthen its manufacturing capacities and boost its export competitiveness over three years.

CII has suggested the lowest or ‘nil’ slab for inputs or raw materials, a top slab of 5-7.5% for final products, and 2.5-5% for intermediate goods. This will help Indian industry integrate itself with global value chains and turn its goods and services competitive in world markets. Exceptions could be considered for a few products presently in higher slabs, accompanied by policy actions to boost domestic manufacturing through phased manufacturing programmes and production-linked incentive schemes. Any imposition or increase of import duty may impact the global competitiveness of Indian manufacturers and make it difficult for them to further slot their operations into global value chains.

At her interaction with CII in December, finance minister Nirmala Sitharaman had stated that the current unprecedented times call for a budget like never before. CII looks forward to an ambitious and balanced budget this year that will proactively tackle the prevailing economic uncertainty.

Source: The Mint

Back to top

Pace of economic recovery will depend on the degree of vaccine rollout: BofA Securities

India’s economic growth is expected to grow at 9% for FY22, if the vaccine is rolled out in the first half of CY21 and 5.5% for FY23, BofA Securities said in its report.

The pace of economic recovery and strength of the recovery will depend on the degree of the Covid-19 vaccine rollout. The brokerage stated that if the vaccine is rolled out in the second half of CY21, the GDP for FY22 will grow at 6%.

The foreign brokerage expects the Reserve Bank of India to cut interest rates by another 50 basis points (bps) in calendar year (CY) 2021. This, according to the brokerage, would be followed by a 100 basis points hike in interest rates in fiscal year 2023.

“We are looking at a 50 basis point cut in the repo rate for 2021 and we are looking at a 100 basis point hike in interest rate in FY23,” said Indranil Sen Gupta, India economist, BofA Securities.

The brokerage also stated that it expects inflation to come down, which would allow the RBI to maintain an accommodative stance going forward. However, given that liquidity is rising, BofA Securities believes that the RBI would have to resort to held to maturity (HTM) limit hikes in order to fund the fiscal deficit which would remain at 5% of the GDP.

It also expects demand side measures to be taken by the government. “One innovation we expect from the government is to issue infrastructure bonds to fund infrastructure investment,” said Indranil Sen Gupta.

He also added that the RBI will continue to build foreign exchange reserves by buying $45 billion in FY 22. The economic recovery would be driven by consumption, according to the brokerage.

BofA Securities is of the view that the biggest uncertainties for CY21 are the vaccine roll out which is expected to drive growth, changing policies in the United States of America and whether the liquidity in the capital markets would drive the fuel oil prices up.

Source: The Financial Express

Back to top

GDP may clip at just 6 pc in FY22 if vaccine distribution is delayed: BofA Securities

India is going to emerge as one of the fastest growing economies clocking a growth rate of 9 per cent in FY'22 on the back of revival consumption, according to a report by Bank of America Securities and hence expects the budget to focus on demand enhancing measures. The forecast is based on the assumption that vaccine roll happens in the first half of CY'21.

The pandemic-induced lockdown which almost brought the economy to a virtual standstill which impacted the economy from the supply side is now seeing demand side pressures. "Income and job losses due to the Covid 19-driven shutdown, have generated a demand problem in an economy traditionally limited by supply constraints" said a report by BofA Securities.

The report said among the three certain developments post COVID besides soft lending rates and forex reserves build-up will be that the recovery will be driven by consumption. " There is a recovery. The recovery will be largely driven by consumption" said Indranil Sengupta, chief India economist at BofA Securities. "But the pace of the recovery would depend on what is the degree of vaccine roll-out" .

On the policy front, especially in the forth-coming budget, the focus is expected on demand-side measures. " We expect the government to create demand by giving more money in the hands of the people by cutting taxes at the lower end, or by recapitalizing banks or by raising infrastructure bonds so that things starts moving and jobs start coming back" said Sengupta.

Oil excise duty could be cuts to reduce retail prices and support consumer demand. These demand boosting measures could be funded by likely COVID-19 cess on higher income groups and has pegged the centree's fiscal deficit for FY'22 at 5 per cent of GDP, down from an estimated 7.9 per cent in Fy'21.

The report also highlights, besides facilitating softer lending rates that RBI will consolidate adequate forex reserves by adopting an asymmetric policy of buying forex when the US dollar weakens and allowing the rupee to depreciate when it strengthens.

Source: The Economic Times

Back to top

RBI forms working group on digital lending as frauds come into sharp focus

With frauds in digital lending space coming into sharp focus, the Reserve Bank of India has set up a working group to study digital lending activities of the regulated and unregulated players. The group will suggest steps to regulate digital lending including online lending platform and mobile lending.

The recent spurt and popularity of online lending platforms/mobile lending apps have raised certain serious concerns which have wider systemic implications, RBI said in statement.

The six-member panel comprised of four RBI internal and two external members is expected to submit its report within three months. Jayant Kumar Dash, Executive Director, RBI will be chairman of the group. Other three internal members are Ajay Kumar Choudhary, Chief General Manager-in-Charge, Department of Supervision, P Vasudevan, Chief General Manager, Department of Payment and Settlement Systems, RBI and Manoranjan Mishra, Chief General Manager, Department of Regulation. Mishra will be act as Member Secretary of the group.

The two external members are Vikram Mehta, Co-founder, Monexo Fintech and Rahul Sasi, Cyber Security Expert & Founder of CloudSEK.

The group will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities.

It would identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers. Working group in mandated to suggest regulatory changes to promote orderly growth of digital lending.

It would recommend measures for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies, RBI added.

It would prepare a robust Fair Practices Code for digital lending players, insourced or outsourced, suggest measures for enhanced Consumer Protection. Finally, the working group would recommend measures for robust data governance, data privacy and data security standards for digital lending services, RBI added.

The digital lending has the potential to make access to financial products and services more fair, efficient and inclusive. From a peripheral supporting role a few years ago, FinTech led innovation is now at the core of the design, pricing and delivery of financial products and services.

While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection, regulator added.

Source: The Business Standard

Back to top

A special panel of FSDC considers changes in AIF regulations

A special panel of the Financial Stability and Development Council (FSDC), an umbrella organisation is considering changes in the regulatory framework relating to Alternative Investment Funds that would be set up in the GIFT City, Gujarat.

It held a meeting on Wednesday as members discussed a wide range of matters that could pose threat to financial stability. RBI governor Shaktikanta Das chaired the meeting.

“The regulators reaffirmed their resolve to be alert and watchful of emerging challenges to financial stability,” RBI said in a release.

“The Sub-Committee, inter-alia, discussed scope for improvements in insolvency resolution under IBC, utilisation of data with the Central KYC Records Registry,” it said adding that those AIFs would be set in the International Financial Services Centre, a dedicated global arena under GIFT City.

The members of the panel or sub-committee included bosses of different regulators and other government bodies including the Securities Exchange Board of India, Insurance Regulatory and Development Authority of India, Insolvency and Bankruptcy Board of India, Department for Financial Services.

The panel also reviewed the activities of various technical groups under its purview and the functioning of State Level Coordination Committees (SLCCs) in various states / UTs.

It reviewed the major developments in the global and domestic economy as well as financial markets that impact financial stability.

Source: The Economic Times

Back to top

Govt introduces faceless penalty scheme

The government has introduced the Faceless Penalty Scheme 2021 which will digitise issuing of penalties on assessees under the faceless taxation regime.

The scheme, notified on Wednesday, specifies setting up of national faceless penalty centres, regional penalty centres, penalty units and review units for execution of penalty proceedings, such that a penalty order is issued correctly and undergoes review before being issued to an assessee.

For appeals, an assessee can approach the commissioner looking after appeals or the national faceless appeal centre.

The Central Board of Direct Taxes said in the notification that till the time the faceless penalty centres, both at national and regional levels, are set up, the penalty actions will be undertaken by the faceless assessment system.

All communication between units and assessees will be done either via email.or through mobile app, while while physical hearing will be allowed only with approval from CBDT.

The government has been trying to make faceless taxation a reality, having introduced faceless assessment and faceless appeals last year.

More than 58,000 cases identified for faceless assessment in the first phase, final orders have been passed in more than 24,700 cases, revenue secretary Ajay Bhushan Pandey had said in an interview earlier this month.

The government has been relying heavily on technology, artificial intelligence and machine learning to plug as evasion and in turn making assessment of taxes for assessees as seamless as possible.

Finance minister Nirmala Sitharaman has said last month that the government was inclined to introducing faceless assessment for indirect taxes as well.

Source: The Economic Times

Back to top

FinMin to set up national, regional centres for faceless penalty proceedings

The finance ministry has notified the Faceless Penalty Scheme under which national and regional centres will be set up to facilitate the conduct of faceless penalty proceedings in income tax cases.

“The penalty under this Scheme shall be imposed in respect of such territorial area, or persons or class of persons, or income or class of income or cases or class of cases, or penalties or class of penalties as may be specified by the CBDT,” the notification said.

As per the scheme, the National Faceless Penalty Centre will facilitate the conduct of faceless penalty proceedings in a centralised manner and has been vested with the jurisdiction to impose penalty. The scheme also provides for setting up of various Regional Faceless Penalty Centres.

The appeal against a penalty order made by the National Faceless Penalty Centre shall lie before the Commissioner (Appeals) having jurisdiction over the jurisdictional income tax authority or before the National Faceless Appeal Centre.

A person shall not be required to appear either personally or through authorised representative in connection with any proceedings before the income tax authority at the national or regional faceless penalty centres or penalty/penalty review unit set up under this scheme, it said.

As part of tax reforms, the government last year launched faceless tax assessment scheme.

The faceless assessment and appeals process was introduced to make tax administration free of any bias and to remove any subjectivity that personal interface between the taxpayer and officials could introduce in the process.

In case of an appeal against such assessment, the taxpayer can seek personal hearing by way of video-conference to present his case. As per the scheme, this request “may” be cleared by a chief commissioner or director general handling a regional faceless appeal centre.

The finance ministry has also launched taxpayers’ charter which seeks to provides fair, courteous and reasonable treatment while treating taxpayers as honest. It also expects taxpayers to be honest and pay taxes on time.

Source: The Financial Express

Back to top

Facilitating market access for Cottage, Micro, Small and Medium Enterprises (CMSMEs) of Bangladesh

Cottage, Micro, Small, and Medium Enterprises (CMSMEs) are considered to be catalyzers of any economy. In the development context, CMSMEs play a crucial role in both developed and developing countries impacting positive changes in the community level economy and in boosting the national economic scenario.

Terming the contribution of CMSMEs to be the lifeline of Bangladesh’s economy, the Honorable Commerce Minister Tipu Munshi recently stated on 11 January 2021 that the sector is contributing about 26 percent to the country’s Gross Domestic Product (GDP) annually on average for since long.

As Bangladesh had been able to maintain a 5.24 percent economic growth rate in FY 2019-20, where, the apparel sector earned US$ 38.2 billion contributing 11.58 percent to GDP amid the COVID-19 havoc, in that economic perilous state, the CMSME sector was still able to have more than twice impact than to the dominating apparel sector on country’s GDP believed to be driven by the ever-expanding local consumption market till to the date.

Furthermore, the share of industrial accomplishments in the economy increased gradually with the developments of manufacturing elements and capacity following the first three industrial revolutions that are poised to change in the coming days as the fourth industrial revolution is already upon us now. Flexibility over the large enterprises leads CMSMEs to take the challenges of reaching competitive supplying of demanded products within the shortest time frame.

Thus, their presence strengthens the national income, employment, productivity and entrepreneurial advancement. The market access of the CMSMEs refers to national and global presence through trade, international investment, strategic alliances, partnerships and networking arrangements creating an environment of business functions ranging from research, innovation, and product development to customer outreach.

Although CMSMEs are the main contributors to the economy, they mostly lag behind to reach the destined market. Many factors contribute to the lower rate of participation of CMSMEs in expanding their businesses vertically and horizontally throughout the country as well as the international market.

The constraints are mainly– lack of symmetric information, inadequate access to intermediary business services, unavailability of national guidelines to explore new markets, mere presence and utilization of digital techniques to exploit new market opportunities.

Furthermore, CMSMEs are affected by trade barriers like standards and technical regulations, frequently changing and unstable policy-law formulations, logistics processes and services, and customs and other administrative procedures due to proper knowledge.

Lack of proper information

The government policies regarding income tax, corporate tax, value-added tax, import duties, export provisions, business & product licensing and certification, services provided by the commercial and scheduled banks, interest rates and financing procedures announced by the central bank change from time to time.

This information is not regularly and easily communicated with the CMSMEs, and that is why, CMSMEs fall into vulnerabilities that massively hinder their business continuity, even in the worst case, CMSMEs are forced to close down their businesses as to be unable to cope with the new Tax-VAT-Duty-Interest Rate regime.

Besides, proper information is not available regarding training programs offered by government organizations. For this reason, most of the CMSME entrepreneurs take training from privately owned subpar training providers as National Skills Development Authority (NSDA) does not disseminate information to the CMSMEs about upper-standard privately owned internationally affiliated and recognized training institutes like DCCI Business Institute (DBI).

Again, they are not much aware of the new product line or trend of the world and don’t know what standard need to follow to access the market or communicate with the potential buyers.

Inadequate access to business intermediary and development services

Business intermediary and development services, such as advisory and consultancy firms on full-service business brokerage and mergers & acquisitions, trade license application and renewal, name clearance and registration process in the Registrar of Joint Stock Companies and Firms, factory-labor and environmental compliances, application and renewal process in Office of the Chief Controller of Imports and Exports, etc. are mainly in Dhaka City.

Because of this, CMSMEs located in other parts of the country are going through time-consuming and cost-increasing problems in time of expanding their businesses or trying to go the upper level of the ladder. As a result, it creates a great hindrance in the development of CMSMEs and their market accession.

Unavailability of a national program to guide CMSMEs for accessing and exploring the export market

There are some privately arranged courses which are mainly offered in Dhaka city that gives some learning’s to the CMSMEs about export market access, but, there are no nationally arranged training programs by the government to educate new entrepreneurs and locally operated CMSMEs going global by exploring export market opportunities, and knowing tariff rates, non-tariff measures such as required certificates and standards to be fulfilled for entering any particular with any specific product.

The Small & Cottage Industries Training Institute (SCITI) also conducts a training program on ‘Export Marketing’ often only in Dhaka, but not nationally.

Access to Finance

In Bangladesh, most of the CMSMEs experience great hurdles in raising their funds for working capital or to expand their businesses. The main problem they face in accessing finances from the financial and Non-Financial Banking Institutions (NBFI’s) due to lack of proper documentation, complex loan disbursement procedure, no banking account, bankable project submission, poor relations with banks, collateral problem, etc.

As a result, many of the cottage and micro-enterprises in our country do not have a bank account but doing business through cash payment or in good faith. In a study of World Bank with Policy Research Institute (PRI), in South Asian countries, Bangladesh has an estimated financing gap of about Taka 237 billion (US$ 2.8 billion).

Again, in this pandemic, the situation goes more aggravate for the CMSMEs. Although govt. has announced a 20,000 crore Taka stimulus package to support the CMSMEs while they are still struggling to get loans from the banks due to complex procedures and the reluctant nature of the banks found from a DCCI survey. Thus, it is very important to find out an alternative financing mechanism, other than a banking channel, to support the vulnerable CMSMEs.

Recommendations:

1.            An alternative financing platform like Trade Discounting Platform can be created to circulate cash flow for the CMSMEs. The Platform will be an online platform, transaction will be transparent, adequate funding will be available for the CMSME entrepreneurs. The entrepreneurs who do not have any formal bank account yet, need to be brought under the shade of banking financial services. For this, it is needed to introduce a specific policy for unbanked and underprivileged Cottage and Micro-enterprises to make them bankable through the 10 Taka account opening scheme.

2.            Despite contributing as a raw material sourcing point for the intermediary and tertiary domestic market and export-oriented manufacturers, traders are not getting the due attention of the financier and unable to obtain adequate funds. Thus, the credit limit for the Trading Businesses under the current stimulus package for CMSMEs, regulated by Bangladesh Bank, needs to be increased up to 30%.

3.            It is required to create a cluster-based scheme to support new and existing entrepreneurs for expanding their businesses. At least Taka 8,000 Crore circular fund is needed to support the scheme. The scheme shall disburse credits to the CMSMEs at zero-interest for the first 2 years and from the 3rd year, they can be charged with an interest rate at 5%. And the time-period needs to be at least 10 Years for the full repayment of credit plus interest. It will help to develop clusters and entrepreneurs in different sectors.

4.            A decentralized govt. office system needs to be initiated to provide the business intermediary and development services to the CMSMEs at the district level too.

5.            Nationally, more cluster-based training programs are needed throughout the country to create an industry-based strong workforce and explore the untapped national and international market.

6.            The platform of the “Bangladesh Trade Portal” needs to be popularized to the CMSMEs as well as to the businesses for better access to information for trade expansion around the globe.

7.            An easier version of TAX, VAT guideline needs to be developed and proper training programs need to be conducted throughout the country since most of the CMSME entrepreneurs are not much educated in our country.

8.            The growth of the CMSMEs can be extrapolated by a more internationalized infrastructure development for the business ecosystem. This applies to the infrastructure for financial markets, advisory services, information access, access to finance, intellectual property rights markets and regulation, etc. are need to be in line with international standards. To make this happen, it is required to create an active collaboration between governments, international agencies, and the private sector to reap the significant potential benefits from it.

Source: Textile Today

Back to top

INTERNATIONAL

Economy may attain 7.40pc growth if second wave doesn’t cause downturn: BB policy review

Bangladesh economy may reach the annual growth target of 7.40 per cent in the current fiscal year (FY21) as long as the second wave of Covid-19 does not restrain the economic activities and the development of vaccines casts a positive impact.

The latest monetary policy review of Bangladesh Bank made the observation.

“The economy is likely to maintain the targeted growth path with an expectation that a second wave of the pandemic would not harm the economy seriously,” said the annual monetary policy review of the central bank.

“Besides, an advanced stage of vaccine development would have a positive impact on the global as well as domestic economy,” it added.

The central bank has released the monetary policy review after six years and posted it on its website on Wednesday afternoon.

“The government has set a 7.4 per cent real Gross Domestic Product (GDP) growth target for FY21 weighing on the rebound in the economic situation aided by continued policy initiatives such as stimulus packages, low cost refinance schemes, and policy relaxations, among others,” it mentioned.

The flagship publication of the central bank also pointed out that the country’s economy has recovered faster from the pandemic-driven slowdown, and it was reflected in the sector-wise performance for the first quarter of the current fiscal year ‘amid a dreadful situation as the pandemic continues.’

“The growth targets indicate that growth will recover at a faster pace in FY21 and will increase gradually,” it added.

The review noted that Bangladesh economy faced Covid-19 pandemic-induced challenges in every economic sector, but managed a 5.24 per cent real GDP growth in FY20 which was significantly lower than a record high of 8.15 per cent growth in FY19.

“The contraction in GDP for FY20 stemmed mostly from the supply-side shocks, suffered mainly by pandemic-induced disturbances in the industry sector, particularly by substantial production loss in large and medium scale manufacturing output,” it explained.

The review report also pointed out that to support the economy during the pandemic, the government and the central bank initiated stimulus packages of more than TK 1.21 trillion and also relaxed policy and provided low cost refinance schemes.

“Aided by those prompt policy initiatives, the economic recovery of Bangladesh remained at the forefront among the neighbouring South Asian economies and attained a 5.2 per cent growth rate in FY20 while growth rates of India, Pakistan, and Sri-Lanka are expected to be negative in 2020,” it added.

Source: The Financial Express Bangladesh

Back to top

Joe Biden to appoint 'Indo-Pacific coordinator' to address concerns from China

US president-elect Joe Biden is set to create a new position within the National Security Council (NSC) and appoint veteran foreign policy expert Kurt Campbell to focus on challenges emerging from China in the Indo-Pacific, according to media reports on Wednesday.

Campbell, a former top Pentagon official who also served as assistant secretary of state for East Asian and Pacific Affairs in the Obama administration and helped frame the “pivot to Asia”, is expected to join as the “Indo-Pacific coordinator”.

The job will give him “broad management over the NSC directorates that cover various parts of Asia and China-related issues", The Washington Post reported, citing unnamed Biden transition officials.

Campbell will report to incoming national security adviser Jake Sullivan, and the NSC will have several “coordinators”, who will have more authority than the “senior directors” below them, The Post said.

Biden was considering creating the new position inside the White House “because of the rising importance attached to tackling a range of challenges from China”, the Financial Times reported.

A person familiar with the decision told the Financial Times that it was “partly taken because of the need to better integrate China policy across different government agencies with a veteran Asia expert at the helm”. The person added Biden “recognised that China was an issue that every government agency — not just the traditional foreign policy, defence and economic-related departments — would have to grapple with more than in the past”.

Campbell is considered to be close to both incoming secretary of state Antony Blinken and incoming national security adviser Jake Sullivan. He is also seen as one of the more hawkish Democrats on China.

Earlier this month, Campbell and Rush Doshi, expected to be named China director in the NSC, wrote an article for Foreign Affairs magazine that said the US will have to build a coalition of allies and partners to address challenges from China in the Indo-Pacific.

“A strategy for the Indo-Pacific today would benefit from...the need for a balance of power; the need for an order that the region’s states recognize as legitimate; and the need for an allied and partner coalition to address China’s challenge to both. Such an approach can ensure that the Indo-Pacific’s future is characterized by balance and twenty-first-century openness rather than hegemony and nineteenth-century spheres of influence,” the article said.

In another article for Foreign Affairs in 2018, Campbell argued the US strategy of engaging China in the hope that it would liberalise and reform hadn’t worked.

“Neither carrots nor sticks have swayed China as predicted. Diplomatic and commercial engagements have not brought political and economic openness. Neither US military power nor regional balancing has stopped Beijing from seeking to displace core components of the US-led system. And the liberal international order has failed to lure or bind China as powerfully as expected. China has instead pursued its own course, belying a range of American expectations in the process,” that article said.

Source: The Hindustan Times

Back to top

Bangladesh seeks five years to prepare for graduation to developing nation

Bangladesh has sought the facilities reserved for the least developed countries for five years for preparations after graduating to the developing nation bracket.

It floated the proposal at a virtual expert group meeting with the United Nations Committee for Development Policy in Dhaka on Tuesday.

Zuena Aziz, the principal coordinator of Sustainable Development Goal (SDG) affairs at the Prime Minister’s Office, headed the Bangladesh delegation in the meeting, reports bdnews24.com.

The meeting was part of preparations for the tri-annual review session of the CDP in February, when the UN committee is set to recommend Bangladesh for graduation from LDC for the second time.

A finance ministry statement said Bangladesh sought the five years from 2021 to 2026 for preparations to make the graduation process sustainable and smooth.

The government urged the international community to continue the facilities further after the graduation, it said.

Bangladesh fulfilled all the criteria necessary for the graduation to a developing country in 2018. In line with the UN rules, a country will get recommended for graduation if it can fulfill the criteria in two tri-annual reviews in a row.

According to CDP provision, a country can enjoy three to five years for preparations after the recommendation for graduation.

If Bangladesh’s proposal for the preparations is approved, it will formally enter the developing nation bracket in 2026.

After the formal graduation, Bangladesh will lose the benefits for LDCs, such as soft loans and export facilities.

Under the current rules, Bangladesh will enjoy the duty-free access to the European Union for three more years after 2026.

Fatima Yasmin, the economic relations secretary, made a presentation on Bangladesh’s journey towards the developing nation status during the meeting.

She noted that the achievement has come at a time when Bangladesh is celebrating the birth centenary of Bangabandhu Sheikh Mujibur Rahman and golden jubilee of independence.

Fatima also called for the international community’s support to tackle climate change and achieve the SDGs.

The Bangladesh delegation also included Shamsul Alam, a member of the Planning Commission, Finance Secretary Abdur Rouf Talukder, Foreign Secretary Masud Bin Momen, Commerce Secretary Md Jafar Uddin, Permanent Representative of Bangladesh in UN Rabab Fatima, and Md Mustafizur Rahman, representative of Bangladesh at its Permanent Mission to the UN Offices and other international organisations in Geneva.

Chairperson José Antonio Ocampo Gaviria and others in the CDP delegation praised Bangladesh for its recent achievements in development, according to the ministry statement.

According to the UN, a country is eligible to graduate from the LDC category if it has a gross national income (GNI) per capita of $1,230 or above for three years, a Human Assets Index (HAI) of 66 or above and an Economic Vulnerability Index (EVI) of 32 or below.

Bangladesh has continued to fulfill the three conditions on a very large margin.

Bangladesh's current GNI per capita is $ 1,274. The HAI is 73.2, while the EVI is 25.2.

The GNI per capita measures the dollar value of a country’s total income in a year divided by its population. The HAI is a composite index that accounts for education and health. The EVI accounts for population size, remoteness, merchandise export concentration, share of agriculture, forestry and fisheries in gross domestic product, homelessness owing to natural disasters, instability of agricultural production, and instability of exports of goods and services, the share of population living in low elevated coastal zone.

Source: The Financial Express Bangladesh

Back to top

Bangladesh and other jeans exporting countries witness a dip in export to US

Top jeans supplier country in the USA, Bangladesh saw its shipments dip 3.73% for the 11 months through November to $522.78 million, on par with the previous month’s data from the Commerce Department’s Office of Textiles & Apparel (OTEXA).

The denim purchase was hit severely during the pandemic. But steadied in November amid a holiday push. In the year to date through November, denim apparel imports declined 26.01% to a value of $2.57 billion compared to the same 11-month period in 2019, according to new data from OTEXA. The decline was a slight development from the 27.42 percent year-to-date decrease in October.

While imports of denim apparel from No. 2 producer Mexico fell 43.6 percent to $424.74 million.

3rd-place Vietnam lost some of its gains from the prior two months, with a year-to-date increase of 0.68 percent to $342.09 million in November. This trailed by 1.08 percent and 1.77 percent year-to-date increase in October and September, correspondingly.

China continued to lose ground as a jeans production center in the month. For the year to date through November, imports from China nosedived 53.75 percent to $304.82 million.

Chinese manufacturers have been dealing with fallout from the pandemic much like the rest of the world, while also suffering from the strategic sourcing shifts by importers looking to reduce risk and costs from tariffs derived from the trade war with the U.S.

Morris Goldfarb, Chairman and CEO of G-III Apparel Group, said on a conference call with analysts last month that “Our development of product and production in China come down significantly.”

“We’ve done a masterful job of bringing down our China production from possibly 85 percent of this company’s production several years ago down to… around 30 percent today,” Goldfarb said.

Among second-tier countries with a smaller market share, imports from Cambodia continued to show strength, with a year-to-date gain of 13.62 percent to $130.77 million. Pakistan flattened its decline to 3.25 percent to $227.81 million in the period.

Among 3rd-tier suppliers with notable gains were Madagascar, up 5.45 percent to $30.60 million, and Ethiopia, gaining 21.59 percent to $21.29 million.

Source: Textile Today

Back to top

China top investor in Bangladesh's economic zones

China is top foreign investor in the country's economic zones (EZ) as the number of its formal proposals outstrips 13 other nations.

Between fiscal year 2018 and December of 2020, China grabbed more than one-third of the proposals made in the zones, according to the data of the Bangladesh Economic Zones Authority (BEZA).

Economists said the US-China trade conflicts are forcing Chinese manufacturers to relocate their production facilitates to alternative locations and Bangladeshi zones will be able to attract those investors.

In FY 2019, China was the largest source of FDI in Bangladesh.

Talking to the FE, executive chairman of the BEZA Paban Chowdhury said investment from China will increase further while investors from Japan will also come in a big way by the next year.

He said the signing Free Trade Agreements (FTAs) with other countries is necessary to ensure market access to the investors.

Though the BEZA is encouraging environment-friendly investment, most of the Chinese investors are showing interest to invest in the chemical sector and coal-fired power generation.

He said the government has developed all utility services, including a 400 KV electricity plant at the Bangabandhu Sheikh Mujib Shilpanagar (BSMS).

The mega zone on 30,000 acres of land, equivalent to 79 such industrial parks, would be able to attract FDI in the coming years, he said.

Al Mamun Mridha, joint secretary general of the Bangladesh China Chamber of Commerce and Industry (BCCCI), said some factors, including the dissemination of information, repatriation of profits and currency issues need to be addressed to woo more Chinese investors.

"We are going to hold a road-show in China this year for promoting our investment opportunities," he said, adding that a meeting on it was held on Tuesday at the Bangladesh Investment Development Authority (BIDA).

Bangladesh has geographical advantages to attract FDI compared to Hong Kong and Singapore, he said.

He, however, suggested reducing hassle of investors while commuting to the destinations from airports, cut the requirement of documentation, improving One-Stop Services (OSS), resolving land disputes, etc.

He said only two companies relocated to Bangladesh from China, which can be increased further by addressing those issues.

Mr Mamun expressed his optimism over the zone development activities and pledged to support the Chinese investors through the BCCCI.

Dr Mohammad Abdur Razzaque, research director of the Policy Research Institute (PRI), said China is investing massively under its Belt and Road Initiative and it has pledged to invest more than $27 billion.

"Many Chinese investors want to relocate their less technology-intensive manufacturing units outside China as its government is now pushing for more capital and technology-intensive industrial transformation for China," he texted on WhatsApp.

However, Chinese investors in traditional sectors are looking for a country with proven supply side capacity and low wages, he said.

Bangladesh has duty-free access to the Chinese market to attract its investors, he added.

"There are other investors from different countries who don't want to invest in China due to geopolitical pressure, but want to get market access to China. They are also looking for a third country to relocate their investment," he said.

Although geopolitical rivalry between India and China is making it difficult to materialise more Chinese investment into that country, Myanmar is reaping benefit of it, he said.

With new investment prospects arising from China, Bangladesh needs to delicately manage bilateral relations both with China and India, he said.

According to an FE analysis based on BEZA's data, 10 Chinese companies have placed FDI proposals worth US$ 3,215 million out of $ 9,126.661 million proposals submitted to the BEZA from 13 countries.

The BEZA has so far completed the allotment of lands to some 38 foreign companies of different countries at BSMS, Moheshkhali Economic Zone-3, Sreehatta EZ, Sabrang Tourism Park and some private EZs.

Except for China, the country's zones have received investment proposals from India, the UK, the USA, the Netherlands, Thailand, Japan, Singapore, Australia, South Korea, Malaysia, Norway, and Germany from fiscal year 2017-18 to December of the current fiscal.

BSMS at Mirsarai, Feni and Sitakundo attracted the highest FDI proposals worth US$ 6.38 billion among the EZs under operation including private ones.

Of the FDI proposals, the BEZA has got highest investment proposals worth US$ 2,529.47 million from the Chinese Hangzhou Jinjiang Group Co. Ltd.

Already, the allotment of around 500 acres of land has been made to the company that proposed to invest in 1,320 MW coal-fired power plant.

Among other Chinese companies, Beijing Zhenyuan Henghui Engineering consulting Co. Ltd placed investment proposals worth $ 304 million, followed by Jiangsu Yabang Dyestuff Co. Ltd $ 300 million and Zhuzhou Jinyuan Chemical Industry Co. Ltd $ 28 million.

Source: The Financial Express Bangladesh

Back to top

2021: Challenges before the RMG industry

The RMG industry of Bangladesh has been unprecedentedly disrupted by the Covid-19, and the recovery process is quite challenging for the industry since the crisis persists. The first wave of the pandemic swamped the industry through the cancellation of orders, deferred payments/discounts by buyers, cash crunch hitting the backbone of the industry to maintain regular operations of the industry.

Thanks to our Honorable Prime Minister for her gracious and visionary steps which helped the industry to stay afloat during the peak hour of Covid-19. Extension of wage assistance loan and other vital stimulus packages for this industry, especially the easing off and enhancement of the export development fund, retention of foreign currency in a single pool for Back-to-Back import payments, extending the tenure of realization of export proceeds, and most importantly suspension of loan classification enabled us to withstand the effect of the first wave.

While we were trying to recover from the shock caused by the first wave of the pandemic during July-September of 2020, the second wave marked its beginning during the final quarter of 2020 and has worsened the situation. On this backdrop, it is difficult to project 2021 since there is a number of uncertainties around us.

Recovery from the virus, as well as the recovery of the global economy, trade and business is still ambiguous to a great extent. Based on the current trend and scenario it appears that the global apparel market may continue to experience a slowdown till May/June 2021.

Major challenges for the industry

  • Slowdown in export:

The second wave of Covid-19 has already forced us to experience its severity as it crippled the western world. Cities in Europe and the USA, which are the major markets of our clothing, are either under lockdown or state of emergency. Export has been on a falling trend once again during October – December 2020, after a slight recovery in August and September 2020.

RMG export in October 2020 has declined by 7.78% on a year-over-year (y-o-y) basis, while October 2019 had seen 19.79%, meaning that the growth in October 2018 and 2020 is -26.03%. Similarly, the y-o-y growth of export in November 2020 was -2.66%, but growth between November 2018 and 2020 is -14.32%.

The recently published data for December makes it more appalling as export plunged by 9.69%. This wrapped the annual export performance with an unprecedented fall of 16.94%.

  • Changing buying behavior and underutilization of capacity:

With the detection of the new strain of the virus and retail sales growth in both the USA and EU been on a declining trend (i.e., -16% in November and -13% in October 2020 respectively), the situation has further aggravated at the buying end.

Though we don’t have an inclusive picture over the real-time ‘cancellation’ scenario in the industry and non-payments, but a survey on 50 factories shows that instead of cancellation buyers are following a ‘go slow’ approach in placing new orders and factories reported 30% less order, which is the picture industry-wide and getting worse day by day.

Though the first wave was more severe and cancellation during the second wave is not that rampant, but buyers are following a different approach to managing their supply chain. Instead of cancellation, we are experiencing a slowdown in order placements. This is as severely adverse as the first wave since factories are not being able to have a forecast and plan their capacity. Such an uncertainty puts the industry in an unpredictable situation and impacts in the area of –

  1. Uncertainty over confirmed business, shipment, payment and WIPs
  2. Allocation of capacity (utilized and unutilized)
  3. Optimum management of supply chain and use of resources
  4. Economic impact and business viability
  • Unprecedented decline in price:

While the price decline has already been a trend in the global market for decades, the COVID-19-led disruption has further escalated the situation. We have lost 2.87%-unit value in 2020, and during September-December the decline was recorded at 4.82%. Given the scenario of underutilization of capacity which already spurred cost and increased cost of compliance especially to maintain health and safety at factories, such a scenario is unsustainable.

  • Financial vulnerability and support needed to reconstruct the industry:

This is important to note the differences between the impact of the first wave and the second wave of COVID-19. With a slight pause, the recurrence of COVID has appeared as ‘decapitating the already dead’. Injured by the first wave the industry was already bleeding and left to such a disrupted and weakest position that severity of a fraction of the magnitude of the first wave may be more intense.

Important to note that – 

  1. The industry has lost 6 billion dollars in export in FY2019-20, meaning that the capacity was seriously under-utilized.
  2. Acceptation of high discounts and delayed payments to clear the canceled goods which have its impact on the financial stability of this industry (we lost 4.85% of unit value since September on a year-over-year basis)
  3. The forced loan has been created against factories mostly working for bankrupted buyers
  4. The industry had to pay wages and all the regular payments (essential overhead).  The repayment of the wage support loan is scheduled to start from January 2021 which has a significant financial bearing on factories. An example might be helpful to understand the scenario. If a factories’ wage bill is 1 crore taka per month, then it has drawn (1X4 =) 4 crore takas as wage loan incentive for April-July, and an equal installment over 18 months would cost 22 lacs Taka per month, which is one-fifth of the usual wages of a regular month. During this crisis moment, when factories are still in a troubling situation and difficult to stay in business with regular expenses when the price is slashed up to 5% which is around 30% of the monthly wage, so the payment of 20% additional wages while operating in less capacity-efficiency thus assuming increased overhead costs per unit of product, and getting less paid of an amount equivalent to 30% of monthly wages, it is logically and mathematically not supporting the business model.
  5. Moreover, since the export markets are deeply shocked by the second wave and the impact on export is apparent, to allow the factories to survive and to protect the livelihoods of millions a second stimulus package, particularly wage assistance loan would be critical for the industry for at least 4 months.

Reconstruction of the industry from the damages done by COVID-19 and protecting the livelihoods of our workers is of topmost priority for us in 2021. While we need legal protection to save our factories from forced loans caused by buyers’ bankruptcies, special measures are needed to allow factories turnaround from the damages, particularly relieving them from bad loans and outstanding liabilities for a considerable tenure so that the factories don’t suffer from suffocating borrowing limits from banks.

We are ever grateful for the supports from the government which saved the industry and the livelihood of our 4.1 million workers from a possible catastrophic consequence of the first wave. We hope that through the continued support from the government we will be able to stay in the course throughout the second wave, though it’s very difficult to foresee the severity of the impact on the global economy and the recovery process.

  • Vulnerability in the trading system, e.g., contractual arrangement:

COVID has exposed the vulnerability in global trade which needs to be addressed pragmatically and systematically to make trade more predictable, safer and sustainable for mankind. The weaknesses in the contractual arrangements between parties in global trade is something which has been exposed by COVID and needs to be addressed. The situations like bankruptcies of the global brands and resulting non-payments to suppliers across borders must be taken with adequate importance. Appropriate safeguard measure is also needed globally by forums like WTO or WCO or UNCTAD or ICC in collaboration with developed and developing nations to ensure due diligence in trade.

Besides, we need policy reforms to resolve insolvency so that it protects business and investment, also makes the path of new entrepreneurs’ smoother. The need for a safe exit policy has been an urge by the industry for quite some time, and the post-pandemic reconstruction of the industry may falter without an appropriate arrangement to deal with insolvencies.

  • Maintaining health and hygiene at workplace:

While saving the industry from further disruption by COVID and maintaining safer operation, particularly the health and hygiene practices across the industry, would be the priority in the coming days. BGMEA has taken several steps in this area in collaboration with ILO and Maya to raise awareness among the workers at factories.

  • 4th IR led disruptions:

Technology has been one of the few great forces which is going to reshape the industry and the supply chain in near future, be it digital payment of wages or pursuing the path toward innovation.

The readymade garment industry has already made a significant move in the area of digital wage payments recently, and as per the visionary leadership and directives by our Honorable Prime Minister Sheikh Hasina almost all the garment workers were paid with their wages digitally (either through digital bank transfer or mobile financial outlets) during the months of the first wave of COVID. BGMEA has been actively involved with the government and promoting digital wage payment since last year, and currently, we are collaborating with an agency which is working on an interoperable digital transaction model.

Besides innovation and efficiency has been one of the priority agenda for us to ensure business sustainability, and we are working on that front to enable our members easily access technologies, in terms of building capacity through skills development as well as creating access to finance.

The increasing share of online sales vis-à-vis brick and mortars has gained further momentum due to COVID-led germophobia which may significantly change the buying behavior of the consumers. So, it is high time Bangladesh revisited its strategy regarding online marketing and sales.

  • Market access in post LDC era and sustainable graduation:

LDC graduation is a matter of pride for us and it is important for us to also understand the challenges that Bangladesh has. 73% of Bangladesh’s RMG exports enjoy duty-free access as an LDC ($25 billion out of $34 billion), which will be completely waived and the margin of preference will diminish for Bangladeshi products compared to our competitor countries, especially for Vietnam since Vietnam has signed FTA with EU which will come in to force next month or in August this year.

Furthermore, in the EU, we enjoy single transformation rules of origin under EBA at this moment, and with the graduation, Bangladesh will have 2 options – GSP Plus or Standard GSP, and both of them require double transformation rules of origin which is difficult for us and will make it difficult to fully utilize the EU GSP as we are currently enjoying. Besides, there are few criteria that a country should meet to qualify for GSP Plus, especially the ratification and compliance to 27 international conventions and the condition to comply with the 7.4% threshold will come on our way to retain preferential access to the EU market. With everything set and done, with Vietnams EUFTA coming into play, the extension of EBA (through bilateral or multilateral initiatives), and exploring FTA possibilities with preference-giving countries are important. Therefore, charting our path to sustainable graduation, effectively pursuing the matter of insolvency resolution would be on our cards.

  • Diversification:

Diversification of products within RMG as well as diversifying the export sectors will be key to Bangladesh’s sustained industrial development.

Concluding Remarks

It’s difficult to draw a prediction on 2021 since we have many uncertainties to be cleared like containing the virus and the success of the vaccines/vaccination, and how quickly the global economy responds in the post-pandemic era.

Probably we are at the end of the tunnel, but the ray is not visible yet to project the future confidently. But we certainly hope that 2021 will be a year of coming back and we expect the industry to make a turnaround sometime in mid-2021. Now we need to be more watchful and monitor the situation cautiously.

Given the fact that Bangladesh occupies only 6.8% of the global market, we have enormous potentials and strengths to contribute more to our economy in the coming days.

Source: Textile Today

Back to top

EIU report: Vietnam rises as an alternative to China, beating India

Vietnam has emerged as a low-cost manufacturing base in Asian supply chains, beating India and even China in indicators, including foreign direct investment (FDI) policy and foreign trade and exchange controls, according to the Economist Intelligence Unit (EIU).

In fact, Vietnam’s rise as an alternative manufacturing hub to China predates a trade war between Washington and Beijing in recent years, it says in a report. Vietnam’s incentives for international firms for setting up units to manufacture hi-tech products, pool of low-cost workers and proliferation of free trade agreements (the latest one is with the EU) place it at an enviable position among Asian peers, the report suggests.

 

According to the EIU, while Vietnam scored 6 on a scale of 10 in the FDI policy, both India and China have scored 5.5 each. Similarly, India scored just 5.5 in foreign trade and exchange controls, while Vietnam scored 7.3 and China 6.4. As for the labour market, Vietnam’s score was 5.6, against India’s 5.4. However, China here scores over both India and Vietnam with 5.7. While both Vietnam and India see a huge infrastructure deficit, New Delhi scored less than Hanoi (3 vs 3.5 out of 10).

Of the 14 countries in Asia that the EIU has focussed on, as many as 12 (except for Indonesia and Bangladesh) have outscored India in the FDI policy and labour. In foreign trade and exchange controls, only Pakistan performed worse than India, and in infrastructure, only Bangladesh scored less than it.

The EIU report highlights that Vietnam will continue to offer generous arrangements for international firms with incentives for investment, “with the downside that local supply linkages in more advanced manufacturing will remain limited for the next decade”.

The country’s low-skilled manufacturing wages will remain competitive for years to come, although scarcity of specialised labour will persist as a disadvantage of the business environment.

“Vietnam’s proliferating membership of free trade agreements represents a strong point of its trade relations, reducing export costs. There are only modest risks to this advantage, mainly in the form of trade tensions with the US,” the report said.

For instance, the EU-Vietnam FTA offers footwear manufacturers in Hanoi the biggest gain. Around 40% of exports to the EU in this category faced 30% tariffs, which were reduced to 0% from August 2020. The apparel sector of Vietnam, a competitor of India in this segment, will also get greater benefits. Vietnam is also a part of the China-dominated RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership involving 11 nations, including Japan.

 

Source: The Financial Express

Back to top

Bank depositors in distress as real rate of returns recedes

The real rate of return on deposits in the money market had turned negative between the months of April and December last year.

The average rate of interest on bank deposits went below or remained close to the rate of inflation prevailing during the period, according to a latest central bank publication.

In November last year, the weighted average interest rate on deposits stood at 4.64 per cent, lower than 5.5 per cent rate of inflation in the same month, according to the Monetary Policy Review-December 2020 of the Bangladesh Bank.

The rate of inflation, however, dropped to 5.29 per cent in December 2020 but was remained above the weighted average deposit rates.

The headline inflation went up on the back of rising prices of the staples.

Such a situation in an economy means that the real returns for the depositors drop as a result of the higher inflation rates, and it erodes purchasing power significantly.

"The objective of increasing the efficiency in the banking sector through reducing the lending and deposit rates will be difficult to achieve if the rate of inflation is close to or higher than the deposit rate," the publication noted.

During the period under review, the weighted average lending rate also fell to 7.62 per cent in November from 9.58 per cent in March 2020.

However, there are many monetary programmes exceeding the targets in November though set for December 2020.

The Bangladesh Bank (BB) in its report said that it has adopted many strategies, including monetary easing, to keep the money market stable amid the ongoing Covid-19 pandemic.

It cut cash reserve ratio (CRR) by 150 basis points from 5.5 per cent to 4.0 per cent in two phases while reducing the bank rate to 4.0 per cent from 5.0 per cent in July to rationalise the rate with the prevailing interest rate regime.

The central bank, however, issues monetary policy for a full fiscal year with half-yearly programmes for key monetary aggregates.

Net Foreign Asset (NFA) and reserve money grew significantly until November last against the targets set for December 2020.

The growth of NFA more than doubled to 27.75 per cent in November 2020 from the target of 12.48 per cent for December 2020.

This is mainly due to higher purchases of foreign currencies by the central bank from the market.

The growth of reserve money was 20.68 per cent in November 2020, significantly higher than the target set at 15.5 per cent for December 2020.

The BB report observed that it was higher mainly due to the robust growth of net foreign asset of the central bank, resulted from the huge purchase of foreign exchange and net claims of the BB on deposit growth relating to the implementation of the stimulus package.

The net domestic assets remained significantly lower than the target as it stood at 10.29 per cent in November against the December 2020 target of 14.41 per cent. It means that the credit growth to the private sector was much lower than expected.

The private sector credit growth was 8.21 per cent in November last which was projected to grow at 11.5 per cent at the end of December 2020.

The report said the central bank has launched easing of the monetary policy through reduction of the CRR and repo rate to combat the pandemic effect that ultimately helped create huge liquidity in the money market.

It said the total amount of excess liquidity stood at Tk 1,951.7 billion at the end of November 2020. The deposit growth rate also surged to over 13.0 per cent in November last which started showing a falling trend until April-June, 2020 quarter.

Source: The Financial Express Bangladesh

Back to top

Bengaluru world’s fastest growing tech hub, London second: Report

Bengaluru has emerged as the world’s fastest-growing mature tech ecosystem in the world since 2016, followed by the European cities of London, Munich, Berlin and Paris, with India’s financial centre of Mumbai in sixth place, according to new research released in London on Thursday.

Dealroom.co data analysed by London & Partners – the Mayor of London’s international trade and investment agency – reveals that investment in the Karnataka capital of Bengaluru grew 5.4 times from $1.3 billion in 2016 to $7.2 billion in 2020, with the Maharashtra capital of Mumbai growing 1.7 times from $0.7 billion to $1.2 billion in the same period.

The UK capital of London registered an impressive three times growth between 2016 and 2020, rising from $3.5 billion to $10.5 billion.

“It’s fantastic to see that Bengaluru and London ranked as the top two fastest growing global tech hubs for VC investment. Our two great cities share mutual strengths in entrepreneurship and innovation – creating lots of opportunities for tech investors and companies to do business across both regions,” said Hemin Bharucha, Chief Representative of India at London & Partners.

“London has a strong trade and investment relationship with cities across India and today’s figures show the opportunities for future partnerships between UK and India on technology. Despite the pandemic, tech companies in London and India are continuing to lead the way in creating game changing technologies – especially in high growth sectors such as EdTech and Fintech,” he said.

“The UK government’s recent Brexit deal with the European Union brings certainty for Indian companies and investors looking to London and we look forward to welcoming more Indian businesses to the UK capital in the years ahead,” he added.

Bengaluru is also ranked sixth for the world’s tech venture capitalist (VC) investments, on a global list topped by Beijing and San Francisco, New York, Shanghai and London making up the top five. Mumbai comes in at No. 21 in the worldwide ranking, with Boston and Singapore among the other high-ranking cities.

Skillmine, a Bengaluru-headquartered tech company offering new generation IT consulting and managed services which expanded to London last year, highlighted access to “like-minded tech entrepreneurs alongside a deep tech talent pool” as the highlight of what has been referred to as India’s Silicon Valley in the past.

“It has been exciting to be part of Bengaluru’s emergence as a world-class tech hub. From here we expanded our business operations into London in May last year, as well as into the Middle East and America markets. London is a global tech hub with access to a thriving tech talent pool alongside growth capital and a wide customer base. We are excited to grow our business in the city,” said Anant Agarwal, Managing Director, Skillmine.

Behind Bengaluru and London, the other fast growing tech hubs include the two German cities of Munich and Berlin and the French capital of Paris, all three more than doubling their investments in the 2016-2020 period. The UK capital, however, cemented its status as Europe’s leading tech hub – with London companies receiving over three times the amount of investment than any other European tech city.

“London is the global tech capital of Europe. Despite the challenges brought about by Brexit and the coronavirus pandemic, London’s tech sector continued to thrive in 2020 and has an important role to play in the city’s economic recovery. London is already home to some of the world’s best technology companies and will remain open to international investment and tech talent from all over the world,” said London Mayor Sadiq Khan.

Despite the global pandemic and the UK’s exit from the EU, London tech firms raised $10.5 billion in 2020 – significantly more than the total amount raised in 2017 ($7 billion) and 2018 ($ 5.9 billion) and close to the record in 2019 ($ 10.7 billion).

“It’s brilliant to see how resilient London’s tech sector has been, despite all the challenges of 2020. International investors have shown real confidence in London, with new venture capital funds setting up here to invest in high-growth companies in sectors like fintech, cybersecurity and health tech. This is because London continues to be the gateway to the European market and a fantastic place to set up and scale a tech company,” said Laura Citron, CEO of London & Partners.

The new research from Dealroom.co and L&P also reveals that mega funding rounds for London-based tech companies increased VC investment levels for UK tech in 2020, with British tech firms raising a record $15 billion in 2020. Additional findings show that London is now home to 1,252 VC firms – more than any other European city.

Following the outbreak of the global pandemic and an increase in remote working in 2020, enterprise software technologies emerged as a top sector for VC investors. London saw an 82 per cent increase in enterprise software investments last year, with the UK capital’s firms raising a total of $1.9 billion.

Source: The Hindu Business Line

Back to top

 

South Korea, Pakistan, India dominant in dropping USA cotton yarn import value!

Cotton yarns import value of USA has dropped 8.64 per cent to US $ 71.61 million in Jan.-Nov. ’20 period, as per OTEXA data.

There was nil shipment from China to USA in cotton yarn category and the top 3 shippers were South Korea, Pakistan and India which collectively shipped US $ 48.30 million worth of cotton yarns to USA.

South Korea shipped US $ 18.14 million worth of cotton yarns to USA in the 11-month period of 2020, declining 11.34 per cent on yearly basis.

Pakistan, a strong country in producing cotton products, saw a drop of 13.90 per cent in its exports of cotton yarns to the USA in the said period and it valued US $ 15.57 million.

On the other hand, the drop recorded by India in its cotton yarn exports to USA was comparatively much lower than South Korea and Pakistan.

India shipped US $ 14.70 million worth of cotton yarns in Jan.-Nov. ’20 period, falling just 2.50 per cent on Y-o-Y basis.

No other country could reach double-digits in its respective cotton export values to USA.

Mexico, being top among remaining shippers, clocked US $ 3.96 million from its cotton yarn exports to USA, decreasing by huge 61.57 per cent on Y-o-Y basis.

Source: Apparel Online

Back to top