Economy likely to contract up to 7.5% this fiscal, may see 9-11% growth in FY22: Former CEA Arvind Virmani

The Indian economy is likely to contract in the range of 5-7.5 per cent this fiscal but will see a growth of 9 to 11 per cent in FY 2021-22, former chief economic adviser Arvind Virmani said on Friday.

Addressing a virtual event organised by industry body PHDCCI, Virmani said in the upcoming Budget, the government should come up with policies to accelerate India’s economic growth.

“In the post-pandemic Budget, policy reforms (are) needed for accelerating India’s economic growth…,” he said adding that the economy is likely to contract to 5 per cent to 7.5 per cent in FY2020-21 and grow 9-11 per cent in the next fiscal,” he said.

The Union Budget for FY2021-22, the eighth of the Narendra Modi-led government, is scheduled to be presented in Parliament on February 1, 2021.

Finance Minister Nirmala Sitharaman will be presenting her third Budget.

The Reserve Bank of India (RBI) has projected the Indian economy to contract 7.5 per cent in the current fiscal while the National Statistical Office (NSO) estimates the contraction at 7.7 per cent.

Virmani further said that India can’t become ‘Aatmanirbhar’ with the 20th-century Direct Tax Code (DTC).

“There is a need to simplify direct taxes and indirect taxes for MSMEs. We can’t have 21st century Aatmanirbhar with 20th century DTC… We need 21st century Direct Tax Code,” he said.

The eminent economist also emphasised that there is a need of 15 per cent uniform GST rate for 75 per cent of goods and services.

Noting that production-linked incentive (PLI) was actually a very good scheme, Virmani said the government should promote employment generating exports.

Virmani also pointed out that free trade agreements (FTAs) with the US, European Union (EU) and the UK are much important than with the Regional Comprehensive Economic Partnership (RCEP) because most MNCs are located in the US, EU and the UK.

He also suggested that the government should spend more on infrastructure projects, modernise sewage system to deal with the future pandemic and invest on R&D on contagious diseases.

Source: The Financial Express

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Why technology is the only path to sustained growth for MSMEs

The Covid-19 pandemic catapulted the majority of Indian businesses to shift online to scale up and succeed, with small business owners waking up to the need of technology as the only path for sustained growth.

However, the majority of India’s Micro, Small and Medium Enterprises (MSMEs), that employ over 120 million people and contribute significantly to the GDP, unfortunately, are far away from reaping benefits of digitalisation.

Already reeling under the lack of access to credit and inability to leverage newer technologies like cloud computing, IoT, consumer analytics, the MSME sector was further hammered by challenges of business continuity and reduced cash flows due to the pandemic.

Small businesses don't necessarily have the resources to make large investments in technology but the disruption has made them realise how adopting to digital can help them take advantage of opportunities in today's changing environment. Even as MSMEs are struggling for survival, it is crucial to evaluate what the Government and technology companies can do to help small businesses carve out a growth path for themselves.

For the economy to recover from the adverse effects of this pandemic, the MSME sector needs to form the bulwark of the revival plan. The Economic Times Digital Payments Forum presented by Mastercard aims to start a dialogue on how digital technology and small businesses can profitably marry.

The imminent panel will have Akhilesh Tuteja, Partner & Head, Digital Consulting, KPMG India, Shashank Kumar, Co-Founder and CTO, Razorpay and R Narayan, President, FICCI-CMSME, Founder & CEO, Power2SME as speakers to raise concerns faced by Indian MSMEs.

Sandeep Malhotra, Executive VP, Products & Innovation, Mastercard, Prakash Mallya, VP and MD, Sales, Marketing & Communications Group, Intel India and Dr KP Krishnan, NCAER will also join the panel as speakers.

The Dialogue “Technology in Small Business – The Path to Sustained Growth” will deliberate on the digitisation of SMBs/SMEs and how the adoption of digital payments will shape the future path to sustained growth. Other key areas of discussion include:

Affordable innovations which tech companies can deliver to small businesses

  • Beyond ease of transactions, how can digital payments help SMBs ride the wave of economic recovery?
  • Policy interventions to help reduce the digital gap between large and small companies.
  • How digital tools can help SMBs derive greater insight into customer preferences and drive effective engagement.

Source: The Economic Times

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Exports up marginally to USD 27.15 billion in December

India’s exports rose marginally to USD 27.15 billion in December 2020, while imports surged 7.56 per cent to USD 42.59 billion, official data showed on Friday.

The merchandise exports were valued at USD 27.11 billion in December 2019 while imports had totalled USD 39.59 billion.

“The trade deficit for December 2020 was estimated at USD 15.44 billion as against the deficit of USD 12.49 billion in December 2019, which is an increase of 23.66 per cent,” according to the government data.

India’s overall exports (merchandise and services) in April-December 2020-21 were estimated at USD 348.49 billion, exhibiting a negative growth of 12.65 per cent over the same period last year, the data showed. Overall imports during April-December declined 25.86 per cent on an annual basis to USD 343.27 billion.

Source: The Financial Express

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India’s exports up 10.9% in first two weeks of January

India’s exports grew 10.92% year-on-year to $11.81 billion in the fortnight ended January 14, driven by a growth in pharmaceuticals, electronics and engineering sectors, indicating a revival in activity.

Imports in the January 1-14 period were up 6.58% at $18.02 billion led by gold, and pearls, precious and semi-precious stones.

Gold imports witnessed a $452.1 million rise in the period.

In the week ended January 14, exports were $5.61 billion, up 5.59% over the same period of previous year and imports rose 12.28% to $9.32 billion.

After a gap of three months, India’s exports witnessed growth in December when outbound shipments grew 0.14% to $27.15 billion buoyed by food products, electronics and pharmaceuticals.

In the first two weeks of January, export excluding petroleum, oil and lubricants increased 16.07% on-year while imports excluding petroleum rose 18.78%.

“Thus, India is a net importer in trade during the second week of January 2021,” said an official.

Among geographies, the US was the top destination for India’s exports with an increase of $254.74 million followed by the UK and Indonesia. The steepest decline in exports were witnessed in petroleum products, readymade garments of all textiles and leather.

On the other hand, the UK, China and Singapore were the top sources of India’ imports in the first two weeks.

Non- oil, non-gems and Jewellery imports, an indicator of the strength of domestic demand, rose 13.13% during the period.

Source: The Economic Times

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Filatex India’s net profit surges by 255.63%

Filatex India, leading manufacturing company of synthetic filament yarns, has seen its net profit surge by 255.63 per cent to Rs. 66.04 crore in Q3 FY21, compared with Rs. 18.57 crore in Q3 FY20.

Net sales of the company fell by 2.19 per cent year-on-year (YoY) to Rs. 721.59 crore during this quarter, while total expense declined by 11.32 per cent to Rs. 632.21 crore in Q3 December 2020 as against Rs. 712.94 crore in Q3 December 2019.

It is pertinent to mention here that due to national lockdown and COVID-19 restrictions, the company’s plants were shut for 2 months and, upon resumption, were permitted to operate at an initial capacity of 30 per cent.

With a gradual increase in production, the company has finally achieved yarn capacity utilisation exceeding 90 per cent in September 2020.

Madhu Sudhan Bhageria, CMD, said, “After facing a pandemic setback in H1FY21, we are now making a comeback in H2FY21. This has been possible on account of a quick and steady recovery of the downstream textile sector and sharp recovery of demand. The commencement of additional Drawn Texturizing Yarn (DTY) capacity has also contributed to higher margins.”

Source: Apparel Online

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Start-up to start-up collaboration amongst BIMSTEC countries holds potential: Goyal

Commerce Minister asks investors to make investments, increase engagements with start-ups

Start-up to start-up collaboration amongst India and other BIMSTEC countries holds immense potential as it can bring together young minds in the region and take innovations, inventions and research & development to the next level, Commerce & Industry Minister Piyush Goyal said.

Speaking at the inaugural session of Prarambh’, a two-day virtual global summit on start-ups, Goyal called upon Indian investors to look at BIMSTEC (The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) region for making investments and increasing engagement with start-ups through mentoring and support.

“India has now become one of the fastest growing start-up ecosystems in the world…. ‘Prarambh’ will further strengthen this ecosystem by enabling exchange of ideas and inspiring our entrepreneurs to innovate and realise their dreams,” Goyal said.

Leaders from all BIMSTEC countries, which include Bangladesh, Bhutan, India, Nepal, Sri Lanka, Myanmar and Thailand, participated in the inaugural session on Friday.

New journey

Goyal said the partnership among BIMSTEC countries will take start-ups to the forefront of a new India, new world, and new neighbourhood in the new normal. He expressed hopes that the summit will mark the beginning of a new journey growing beyond government to government and business to business collaborations.

The two-day long virtual summit will bring together over 200 speakers from around the world and India, facilitate discussions on technologies, innovation, robust policies, and initiatives, enable government and international organisations to share their views and encourage youth to innovate. Prime Minister Narendra Modi will address the summit on Saturday.

India has over 41,000 start-ups registered with the government but there are many more that are working at the grassroots level and doing good work. “True talent lies in our villages and towns,” he said.

Tenzin Lekphell, Secretary-General, BIMSTEC, said the economy, jobs, livelihood, business, trade and commerce have been badly affected due to the Covid pandemic, and start-ups provide a ray of hope with a capacity to innovate and respond quickly to any problem. He called upon member-countries to provide policy support and come together to help start-ups.

Lekphell suggested that such conclaves must be held annually and a start-up hub be set up in the BIMSTEC Secretariat.

Source: The Hindu Business Line

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Forex reserves up by USD 758 mn to lifetime high of USD 586.082 bn

The country’s foreign exchange reserves rose by USD 758 million to reach a record high of USD 586.082 billion in the week ended January 8, RBI data showed on Friday.

In the previous week ended January 1, the reserves had increased by USD 4.483 billion to USD 585.324 billion.

In the reporting week, foreign currency assets (FCAs), a major component of the overall reserves, rose by USD 150 million to USD 541.791 billion.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

The gold reserves climbed by USD 568 million to USD 37.594 billion, weekly data by the Reserve Bank of India (RBI) showed.

After remaining unchanged during the last week, the special drawing rights (SDRs) with the International Monetary Fund (IMF) increased by USD 5 million to USD 1.515 billion.

The country’s reserve position with the IMF rose by USD 35 million to USD 5.181 billion in the week, as per the data.

Source: The Financial Express

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Global investors keen on opportunities in India, say industry executives

Global investors are keen on investing in startups in India, with over USD 2 trillion worth of liquidity being available for entrepreneurs as they tap into opportunities across sectors like health-tech, ed-tech and social commerce, according to industry executives.

Speaking at the 25th Wharton India Economic Forum, Sandeep Naik - Managing Director and Head of General Atlantic's business in India and Southeast Asia - said there hasn't been a better time to be an entrepreneur in India than now.

"There is so much global liquidity...we have over USD 2 trillion of dry powder on the investing side that's waiting to back great entrepreneurs...there are tons of investors that will line up outside your door to make it happen," he said.

Naik added that he is bullish in segments like health tech, social commerce, and video streaming that have seen much activity in the recent past.

"I am very bullish about health tech, it is going to be a huge opportunity going forward because just like education, there's going to be an explosion on the health tech side, somebody is going to come, address it, and create massive companies. Social commerce is a big theme," he said.

He added that live streaming is really taking off and a bunch of short video apps are coming up as well, and so VOD (video on demand) has become a big segment to go after because through that, one can engage in commerce as well.

"There are things happening around finTech, around life sciences, biotech that we get excited about, there are so many things," he said.

Facebook India Head Ajit Mohan said entrepreneurs would be successful when building a business for the long term.

"I don't think there is a market for trading ideas. I think there are a lot of people with ideas who kind of want to build something very quickly, but the reality is, it is hard work and a lot of focus on execution, and entrepreneurs who say I'm here for the next 10-15-20 years to build something deep (are the ones who are successful)," he added.

He noted that organisations also need to work on opportunities with depth and scale, especially in countries like India.

"I would pick education and healthcare (as big opportunities) because it seems like these are two sectors where India can really offer solutions for the world, even as it builds answers for itself. We have a large population, and it'll be explosive if we can line them up through learning and education," Mohan said.

Source: The Economic Times

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India took ‘very decisive’ steps to deal with coronavirus pandemic: IMF chief Kristalina Georgieva

IMF Managing Director Kristalina Georgieva has praised India for taking “very decisive” steps to deal with the coronavirus pandemic and its economic consequences and asked the country to do more this year to support an accelerated transformation of the economy.

Participating in a global media roundtable on Thursday, the chief of the International Monetary Fund predicted a less bad outlook for India in the upcoming World Economic Update due to the steps taken by it.

When I called on everybody to stay tuned for January 26, that applies very much to India. You would see a picture in our update that is less bad. Why Because the country actually has taken very decisive action, very decisive steps to deal with the pandemic and to deal with the economic consequences of it, Georgieva said.

The IMF is scheduled to release its World Economic Update on January 26.

Talking about India, she said it was a very dramatic lockdown for a country of this size of the population with people clustered so closely together.

“Then India moved to more targeted restrictions and lockdowns. What we see is that that transition, combined with policy support, seems to have worked well. Why Because if you look at mobility indicators, we are almost where we were before COVID in India, meaning that economic activities have been revitalised quite significantly, she said.

What the government has done on the monetary policy and the fiscal policy side is commendable. It is actually slightly above the average for emerging markets. Emerging markets on average have provided six per cent of the GDP. In India, this is slightly above that. Good for India is that there is still space to do more. If you can do more, please do, Georgieva said.

According to the IMF Managing Director, 2021 is the year to use that space.

But use it wisely in a more targeted manner and to support an accelerated transformation of the economy. Because what we see is amazing how much faster structural change takes place. And policymakers ought to be leaning forward in this environment to support this structural transformation and to cushion the impact it has on those that are on the losing side of it, she said.

Georgieva said that she is impressed by the appetite for structural reforms that India is retaining.

We welcome that. No question those reforms, and actually that applies very much to South Africa… will determine competitiveness in the future. We need higher productivity. We need more vibrant and inclusive economies. And they are not going to fall from the sky. There have to be reforms that support them, she said.

Welcoming the fact that India does not give up on structural reforms, she said: And I’m saying, yes, do it! Because the world change is accelerating and economies have to be agile and adaptable to change… We have to be constantly leaning forward.

At the same time, she said that one of the aspects of India’s reforms that are still lagging is on gender equality.

I want to just stress it is scary to see how we are losing ground on gender equality over these months so fast. Women are front line workers, but they are also, by and large, in the contact intensive industries hit. They are often in the informal economy, help cannot easily reach them, so they are hit.”

….once people start losing jobs, who is to lose jobs first [Again] women are on the front line. Labour market participation in India for women has been low. It is shrinking…I know the government is paying attention, it is moving in that [direction], but there is so much space to tap into the productive potential of women and the entrepreneurial potential of women, Georgieva said.

The IMF in its October outlook projected India to contract by a massive 10.3 per cent in 2020.

However, India is likely to bounce back with an impressive 8.8 per cent growth rate in 2021, it had said.

Source: The Financial Express

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If vaccines successful, economy may see record growth by Q3 in ’21, says Harsh Goenka

Harsh Goenka, Chairman, RPG Enterprises, on Friday said the Indian economy could witness record growth in Q3 2021 if the Covid-19 vaccines are successful.

Goenka, who is quite active on Twitter, wrote in a post that the economy could witness record growth this year citing robust demand.

“Substantial inquiries in our civil construction business for expansion in auto, chemical and cement industries.

 “We in RPG given go-ahead for capital expansion, possible acquisitions. Demand is looking robust. If vaccines successful, economy may do record growth by Q3 in ’21,” Goenka tweeted.

Goenka had expressed previously his optimism about India’s economic recovery citing increased manufacturing and recovery in auto and agriculture sectors, among other factors.

“I am optimistic about our economy: – Manufacturing in Oct highest in decade, – Auto sector-Double digit growth in Oct – Agri sector up 3.4% (Q2) – Tractor sales up 40% – Migrant workers back – FII inflow high – Sensex all-time high – India Inc PAT up >40% (Q2) – Nominal GDP gap down to 4%,” tweeted Goenka in November 2020.

“My own experience: – All our plants are running at 100% capacity – Demand is very strong – Rural markets have never been better – Slight shortage of raw materials – Back to hiring more people. INDIA IS BACK!!!,” he added.

Source: The Hindu Business Line

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Indian economy ‘weak’, credit growth bottoming out, says BofA Securities report

American brokerage BofA Securities on Friday said the Indian economy continues to be weak, pointing to activity indicators tracked by it. On the positive side, the brokerage said credit demand is bottoming out and the real lending rates adjusted for wholesale price inflation are falling.

It can be noted that there has been a slew of reports lately about a stronger recovery being underway after the jolt caused by the pandemic. The government expects the GDP to contract 7.7 per cent in financial year 2021 because of the reverses. The bad news is that the continued drop in our BofA India Activity Indicator reinforces our view that the economy still remains weak, the brokerage said in a note.

The indicator fell by (-) 0.6 per cent in November on top of the (-) 0.8 per cent in October, and 4.6 per cent drop in the September quarter, it said, adding, this supports our call of GVA (gross value added) contractions of (-)1 per cent in the December quarter and (-) 6.7 per cent in FY21. On the credit growth front, it said the rise in banking system advances seems to have bottomed out and the system will close with a growth of 6.2 per cent in the financial year 2021.

The credit growth for financial year 2022 will come at 12 per cent, it said. It can be noted that credit growth had been declining for the last few years, in sync with a dip in the overall economic growth which has been on the downward spiral since demonetization in late 2016 as borrowers went slow on expansion. The real lending rates adjusted for WPI will be one of the prime reasons for the faster credit growth estimate in financial year 2022, the brokerage said.

Nominal MCLR (marginal cost of funding based lending rate) is down 1.45 per cent since March 2019 and the real MCLR (adjusted for WPI) is down 1.50 per cent on RBI easing and the core WPI inflation inching up further to 3.1 per cent from 2.3 per cent in November 2020. The RBI has cut interest rates in two moves after the emergence of the pandemic but has kept rates on hold for the last three consecutive policy reviews because of high consumer price inflation.

Source: The Financial Express

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View: Are we looking forward to the UK and the US trade agreements to compensate RCEP?

Pandemic has created lots of threats and opportunities simultaneously to the Indian economy. Since the fourth quarter of 2020, Indian trade shows signs of mild recovery, given some significant politico-economic changes in the international arena. Still, we have several uncertainties in the international negotiations front.

The new variation of the COVID-19 has started influencing the world once again. It has triggered a few vulnerabilities once more. Is it accurate to say that we are going to lockdown once more? How will it affect our global exchange? We have just revoked RCEP. Will trade arrangements with our significant trading partners like the US, UK, and EU allow us to play better on the global stage? Are these exchanges going to open new occasions to move upward in the stepping stool of global value chains (GVC)? Or on the other hand, these will be another arrangement of strategic negotiations with the least economic benefits like the current free trade agreement (FTAs).

The existing plethora of scholarly writing has called attention to the political economy inspirations driving the proliferation of trade agreements, which generated less economic benefits. In one of my examinations, I found that our existing FTAs don't significantly affect our trade after controlling the political economy factors.

Typically, nations do tend to sign trade agreements with whom they have a critical trading history. India did likewise under south-south collaborations, yet none of the current FTAs have produced any significant welfare gain. A conceivable explanation could be the shallow kinds of agreements, which don't completely cover numerous elements of exchange, for instance, non-tariff measures. Data or information lop-sidedness to the exporters is another explanation, for which all exporters can't explore the FTA routes adequately.

Current export shares (see figure) reveal that the US (16%), UK (3%), and EU (15%) are our major trading partners. We held a trade surplus with the US and UK by US$ 12.7 billion, and US$ 1.2 billion individually in 2018. Germany, Netherlands, Belgium, Italy, France, and Spain are our top exchanging nations EU locale. With EU, we are having a trade deficit of US$ - 5.6 billion.

The Biden-Administration and Brexit have provided India some changing international politico-economic platform for effective trade negotiations with these trading partners. But whether these deals will help combat the trade diversion effect of RCEP for India is an inquiry. Consequently, unlike the existing FTAs, India should be more cautious in signing deals with the UK and the US. We should not rush to arrange these agreements so that the incumbent and new exporters can effectively use the FTA courses.

International outsourcing of high-tech processed intermediate manufacturing like chemicals, pharmaceuticals, computers, electronics, optical, machinery equipment, motor vehicles,etc., has increased in developed nations like the US, UK, and EU nations. Developing countries like India have revealed higher linkages in the value chain of low-tech primary products used as intermediaries and processed intermediate goods like food, coke, refined petroleum, basic metal, rubber, plastic, etc. Given the growing regional-GVCs, the mega-regional negotiations would likely be more effective in enhancing the interconnectedness among nations regarding their participation in GVCs in “Factory Asia” or in “Factory EU.” Thus, for India, bilateral treaties may not compensate the benefits of mega-treaties to move up to the GVC-ladder.

Given our existing infrastructure, and other roadblocks of growth trajectory, the pandemic tells us that the V-shape recovery of the economy is theoretically possible. Under the circumstances, we should focus more on rebuilding our trade policy to gain a comparative advantage in high-tech processed intermediate products to create an “enabling environment” to trade in manufacturing and services.

Source: The Economic Times

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Road to Recovery: Imports rise for the first time in 10 months

Merchandise exports inched up in December, for a second time since February 2020, while imports advanced for the first time in 10 months, suggesting a gradual return towards normalcy.

The quick estimate released by the commerce ministry on Friday shows exports rose 0.1% on year to $27.15 billion in December, better than a 0.8% contraction announced earlier. Imports rose at a much faster pace of 7.6% in December to $42.59 billion, inflating trade deficit to a 25-month high of 15.44 billion.

The rise in imports reflects a nascent revival of domestic demand following the Covd-induced compression since March last year, as businesses go through a “reset” phase, taking advantage of the lifting of lockdown curbs.

However, as pointed out by analysts, some amount of pent-up demand for raw materials may also have contributed to the increase in imports, although it’s still an encouraging sign. If inbound shipments continue to rise, import-sensitive exports, too, will get a boost but it will also mark a return to the usual high trade deficit trend.

The outbound shipment of core products (goods excluding petroleum and gems & jewellery), which reflects the economy’s competitiveness, grew 5.5% in December, against a 0.4% fall in the previous month. Similarly, core imports rose 8% last month, compared with a 1.7% fall in November.

Already, hit by the pandemic, exports have witnessed a roller-coaster ride this fiscal. Having risen by 6% in September, the first expansion since February, outbound shipments faltered by 5.1% in October and 8.7% in November before the marginal rise in December. Overall, merchandise exports still down by 15.7% up to December this fiscal, while imports contracted by 29%.

Interestingly, core exports have accelerated at a quicker rate than that of overall merchandise exports month after month since May 2019, according to an FE analysis, based on the data from the Directorate General of Commercial Intelligence and Statistics.

Aditi Nayar, principal economist with Icra, recently said: “The recovery in imports reinforces our expectation that the current account surplus will deflate to sub-$5 billion in the second half of this fiscal.”

The expansion in non-oil exports is enthusing in light of the curbs imposed by major trading partners following the resurgence of Covid-19 cases, Nayar said. Higher imports “signals a strengthening of the domestic growth impulses, pent-up demand for imported items as well as a rise in commodity prices”, she added.

Sharad Kumar Saraf, president of the exporters’ body FIEO, stressed that traditional and labour-intensive sectors have passed the most challenging times and the order books have started looking up with more contractions being firmed up. “The arrival of vaccines have also helped in boosting the business sentiments,” he added.

Some of the high-value products that witnessed substantial rise in exports in December included iron ore (69.3%), drugs and pharmaceuticals (17.4%), electronics (16.5%) and gems and jewellery (6.8%).

Already, presenting a less gloomy picture, the World Trade Organization in October expected global merchandise trade to fall by 9.2% in 2020 from the year before, compared with the 12.9% drop projected in April last year. This will augur well for India’s trade as well

Source: The Financial Express

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Budget: SIMA urges allocation of Rs. 9,000 crore for ATUFS

With the Union Budget to be presented on 1 February, the Southern India Mills’ Association (SIMA) has sought allocation of Rs. 9,000 crore for the Amended Technology Upgradation Fund Scheme (ATUFS).

Of this, nearly Rs. 6,000 crore is needed to meet the committed liabilities under earlier versions of the scheme.

It is also pertinent to mention here that in last few years, textile sector has not got allocation of more than Rs. 7,000 crore.

The Association also sought working capital for the mills to buy cotton and creation of a National Textiles Fund. This will help meet the financial needs of textile units for infrastructure creation and technology adoption.

The Association highlighted that the bamboo fibres can be compared with viscose fibres as the source of raw material is nearly the same.

The bamboo fibre is made of bamboo pulp and viscose is made of wood or eucalyptus pulp. So, based on this factual criterion, the imported bamboo fibre has been classified by the Customs Department under Tariff Headings 5504 9090 or 5504 1000.

Due to the absence of a specific entry for the Bamboo Fibre in the Customs Tariff Act, 1975, the importers were directed to clear the product as artificial staple fibre. Hence, a specific code is needed for bamboo fibre, it said.

Source: Apparel Online

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Budget 2021: UKIBC seeks corporate tax rate parity between foreign, domestic companies

Union Budget 2021 Expectations: The UK-India Business Council on Friday said it has suggested making the tax structure identical for domestic and overseas companies in India as part of its pre-Budget recommendations submitted to Finance Minister Nirmala Sitharaman. “Globally, the general practice is to have a tax rate parity across all kinds of companies within the same industry. Examples are all BRIC countries except India and a majority of OECD countries (UK, Japan, etc.) as well as important financial centres like Hong Kong & Singapore,” Jayant Krishna, Group CEO, UK-India Business Council (UKIBC) said in a statement.

The reduction in corporate tax rate for domestic companies coupled with abolition of Dividend Distribution Tax (DDT) creates a significant disparity between the effective tax rates applicable to foreign companies and domestic companies, UKIBC said. At present, the corporate tax rate for foreign companies is 43.68 per cent, while domestic companies have to pay 25.17 per cent as corporate tax, the Council said.

“A reduction in the corporate tax rate for foreign banks’ branches will provide a level playing field for them as compared to branches of domestic banks and encourage investment by foreign entities that are keen to invest in India through a branch route,” Krishna said.

UKIBC’s group chair Richard Heald, OBE urged the government to further accelerate the pace of economic reforms through Budget announcements which would eventually lead to enhanced investment and trade footprint of UK’s businesses in India. Apart from this, UKIBC also suggested the government to increase allocations for defence sector to over 2.5 per cent of GDP and raise foreign direct investment (FDI) limit through automatic route in the sector to 100 per cent from 74 per cent.

It also sought increase in insurance sector FDI limit to 100 per cent from 49 per cent and hike in government spending on education and skill development. UKIBC also asked for mutual recognition of degrees between India and major countries, including UK, removal of retrospective taxation, fast-tracking disinvestment of public sector undertakings (PSUs), customs duty reduction for import of alcoholic spirits, and a regulatory regime for online gaming and sports betting.

The Union Budget will be presented in Parliament on February 1.

Source: The Financial Express

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China's battle against fresh COVID outbreak clouds economic recovery

New cases in China are at 10-month highs, prompting the lockdown of 28 million people in two provinces, disrupting logistics and industrial activity, with millions expected to scrap holiday travel plans in a blow to China’s efforts to get consumption back on track.

China’s economy plunged an unprecedented 6.8 per cent in the first quarter last year.

Thanks partly to surging global demand for Chinese-made electronics and gear to protect from coronavirus, China looks set to be the only major economy to expand in 2020, with growth expected at 2.1 per cent.

Given the limited geographic spread of the outbreaks and improved testing and containment, economists do not expect anything approaching a repeat of what happened in the first quarter of last year, when the emergence of the coronavirus resulting in the world’s second largest economy contracting by 6.8 per cent.

Manufacturing and export demand remain robust. But economists say consumption, which typically accounts for more than half of the economy and has lagged the wider recovery, may take a hit.

Authorities have urged people not to travel for the week-long Lunar New Year holiday, which starts Feb. 11 and is typically a time to spend on travel, food and gifts.

“The worsening coronavirus situation will impact economic activity, and markets may need to temper their expectations for strong pent-up consumption demand in the coming LNY holidays,” Nomura analysts wrote in a note this week.

The outbreak and social distancing measures “add conviction” to Nomura’s forecast that policymakers will moderate moves to ease stimulus and slow credit growth, and delay rate hikes into 2022, it said.

But Julian Evans-Pritchard, senior China economist at Capital Economics, said there may be an economic upside.

“One reason many manufacturers have been quick to participate in official efforts to discourage travel is that it would allow them to keep factories running over the holiday,” he wrote in a Friday note.


In the steelmaking powerhouse Hebei province, which surrounds Beijing and has seen cities locked down to contain the outbreak, steel inventories have jumped 11 per cent this year, according to data from consultancy Mysteel, with industry sources blaming transport restrictions.

In the Hebei city of Tangshan more than one-third of steel mills have coke supplies of fewer than seven days, which suggests supply shortages, and weekly blast furnace capacity utilization rates fell this week by 1.7 per cent from last week and by 7 per cent from a year earlier, Mysteel data shows.

“The COVID situation may not improve quickly, but the impact will not be as big as in last year’s Lunar New Year,” said Zhang Yiping, economist at China Merchants Securities in Shenzhen.


Consumption in China was slower to recover than factory output or investment, although retail sales recorded the fourth straight month of year-on-year growth in November.

Gubei Watertown, a tourist site at the foot of China’s Great Wall, has suffered cancellations of 8,900 room bookings as well as numerous year-end conferences, Chen Xianghong, president of Wuzhen Tourism Co Ltd, one of its owners, said on the Twitter-like Weibo site on Thursday.

“We can’t close, but keeping open is loss-making,” he said.

Many companies which would ordinarily be holding parties are cancelling events, while cities have advised couples to delay wedding banquets.

Liquor giant Kweichow Moutai, based in Renhuai in Guizhou province, told employees to stay put.

“All employees are not allowed to leave Renhuai, participate in gatherings, or visit public areas such as karaoke outlets, bars or internet cafes,” according to a notice to staff reported by state media this week.

Source: The Financial Express Bangladesh

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Joe Biden’s plan can build a bridge to a better economy

BETTER TIMES may be coming for the U.S. economy, because of the arrival of a coronavirus vaccine and a $908 billion federal support package enacted in December. Economists surveyed by the Wall Street Journal predict 4.3 percent growth in 2021, a 6.8-point improvement over 2020’s dismal 2.5 percent contraction.

Right now, however, that brighter future seems remote indeed: Conditions for workers and businesses are worsening because of a surge in coronavirus cases since the fall. New claims for unemployment rose by nearly 1 million in the week ending Jan. 9, with the prospect of more layoffs to come.

What the country needs, soon, is a plan to alleviate hardship and support economic activity in the period between the dismal short term and the promising medium term. The proposal President-elect Joe Biden unveiled on Thursday could build that kind of a bridge. At $1.9 trillion, its total price, when combined with the $908 billion already enacted, is high but not excessive. Roughly speaking, $2.8 trillion would close the “output gap” between the level of goods and services the United States would likely produce over the next three years without that much aid and what it would produce with it, based on a framework for evaluating fiscal policy developed by the nonprofit Committee for a Responsible Federal Budget. Equally important, Mr. Biden’s plan emphasizes critical needs: extending unemployment benefits and upping the emergency supplement from $300 per week to $400; money for state and local governments; rental and small-landlord relief; and child care.

At a projected cost of $465 billion, the largest item in Mr. Biden’s plan is an additional $1,400 direct payment to most U.S. households, which would bring the total to $2,000 in combination with the $600 provided in December and, mostly, already distributed. This sets up a potential political struggle between Democratic progressives, who have already asserted that people need even more, a fresh $2,000, and those who argue — correctly, in our view — that many, many households would benefit that do not need the money, and that the funds could be more efficiently spent on other needs. A similar debate over targeting Mr. Biden’s proposed $350 billion in state and local aid seems likely, given that some states, such as California, are flush with funds, while others, such as New York and Louisiana, face pandemic-related red ink.

These issues must be resolved promptly, however, since funding must hit the economy while it can still do the most good. The need for speed is especially true regarding extended unemployment benefits, set to expire in March. Mr. Biden has generously — especially given recent events — extended an olive branch to Republicans and invited them to work on his plan in a bipartisan spirit. And he has leverage, given that some of what he proposes could be accomplished through the simple-majority reconciliation process if it comes to that. The horror of a pro-Trump insurrection on Jan. 6 compounded the nightmare of coronavirus. If the GOP is looking for ways to regain public trust, dealing constructively with Mr. Biden to salve America’s economic wounds would be a place to start.

Source: USA Today

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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

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Nepal for early solution to boundary dispute, India talks development

Nepal said it discussed the boundary dispute with India at the Foreign Ministers' meeting on Friday under the rubric of the sixth India-Nepal joint commission. The issue found no mention in the Indian read-out of the meeting chaired by Foreign Ministers S Jaishankar and Pradeep Gyawali, respectively.

The Nepalese Foreign office’s assertion did not find a mention in the Indian statement about the joint commission’s proceedings. Rather, it suggested that both sides had kept aside their political differences to focus on bilateral cooperation, including a railway line to Kathmandu, a second oil pipeline, another integrated check-post and funding of two more cultural heritage projects in Nepal.

But the Nepalese Foreign office said not just the boundary issue, but another political matter of revising the Peace and Friendship Treaty of 1950 was also discussed.

On Thursday, on being asked if the boundary issue would be discussed, MEA spokesperson Anurag Srivastava had said, “Let me say that the Joint Commission meeting and boundary talks are separate mechanisms.”

Later, Nepal Foreign Minister Pradeep Gyawali publicly underlined both the political issues. “We should sincerely attend to the issues that we have inherited from the past, address them appropriately and creatively work out the agendas for future,” he said, hinting at the unresolved boundary issue. On a review of the treaty, he said the Eminent Persons’ Group had done its work to review the entire spectrum of Nepal-India relations and “it is our job is to receive their report and implement it”.

Both sides discussed connectivity, economy and trade, power, oil and gas, water resources, and political and security issues.

Revising peace and Friendship treaty

The Nepalese Foreign office said not just the boundary issue, but another political matter of revising the Peace and Friendship Treaty of 1950 was also discussed at the Foreign Ministers’ meeting.

Source: The Tribune

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Spain rejects virus confinement as most of Europe stays home

While most of Europe kicked off 2021 with earlier curfews or stay-at-home orders, authorities in Spain insist the new coronavirus variant causing havoc elsewhere is not to blame for a sharp resurgence of cases and that the country can avoid a full lockdown even as its hospitals fill up.

The government has been tirelessly fending off drastic home confinement like the one that paralyzed the economy for nearly three months in the spring of 2020, the last time Spain could claim victory over the stubborn rising curve of cases.

Infection rates ebbed in October but never completely flattened the surge from summer. Cases started climbing again before the end of the year. In the past month, 14-day rates more than doubled, from 188 cases per 100,000 residents on Dec. 10 to 522 per 100,000 on Thursday.

Nearly 39,000 new cases were reported Wednesday and over 35,000 on Thursday, some of the highest daily increases to date.

The surge is again threatening intensive care unit capacity and burdening exhausted medical workers. Some facilities have already suspended elective surgery, and the eastern city of Valencia has reopened a makeshift hospital used last year.

Unlike Portugal, which is going on a month-long lockdown Friday and doubling fines for those who don’t wear masks, officials in Spain insist it will be enough to take short, highly localized measures that restrict social gatherings without affecting the whole economy.

“We know what we have to do and we are doing it,” Health Minster Salvador Illa told a news conference Wednesday, ruling out a national home confinement order and advocating for “measures that were a success during the second wave.”

Fernando Simón, the government’s top virus expert, has blamed the recent increase in cases on Christmas and New Year’s celebrations. “The new variant, even if it has an impact, it will be a marginal one, at least in our country,” he said this week.

But many independent experts disagree and say Spain has no capacity to conduct the widespread sequencing of samples to detect how the new variants have spread, and that 88 confirmed and nearly 200 suspected cases that officials say have largely been imported from the U.K. are underestimating the real impact.

Dr. Rafael Bengoa, former director of Healthcare Systems at the World Health Organization, told The Associated Press the government should immediately enact “a strict but short” four-week confinement.

“Trying to do as little as possible so as not to affect the economy or for political reasons doesn’t get us where we need to be,” said Bengoa, who also oversaw a deep reform in the Basque regional health system.

The situation in Spain contrasts starkly with other European countries that have also shown similar sharp leaps in cases, increasingly more of them blamed on the more contagious variant first detected in the U.K.

The Netherlands, which has been locked down for a month, has seen the pace of infections starting to drop. But with 2% to 5% of new COVID-19 cases from the new variant, the country is from Friday requiring air passengers from the U.K., Ireland and South Africa to provide not only a negative PCR test taken a maximum of 72 hours before departure but also a rapid antigen test result from immediately before takeoff.

France, where a recent study of 100,000 positive tests yielded about 1% of infections with the variant, is imposing curfews as early as 6 p.m., and Health Minister Oliver Veran has not ruled out a stay-at-home order if the situation worsens.

Existing lockdowns or the prospect of mandatory confinement have not been questioned or turned into a political issue in other European countries.

Ireland instituted a complete lockdown after widespread infections were found to be tied to the new variant. Italy has a color-coded system that activates a strict lockdown at its highest — or red — level, although no areas are currently at that stage.

In the U.K., scientific evidence of the new variant has silenced some critics of restrictions and spurred Prime Minister Boris Johnson to impose measures that are strict but slightly milder than the nation’s first lockdown. People have been ordered to stay home except for limited essential trips and exercise, and schools have been closed except for some exceptions.

In Germany, where the 7-day rolling average of daily new cases has recently shot up to 26 per 100,000 people, many high-ranking officials are arguing that the existing strict confinement order needs to be toughened and extended beyond its current end-of-January expiration.

Nordic countries have rejected full-on mandatory lockdowns, instead instituting tight limitations on gatherings and certain activities. Residents have been asked to follow specific recommendations to limit the spread of the virus.

In Sweden, the issue is both legal and political, as no law exists that would allow the government to restrict the population’s mobility. While urging residents to refrain from going to the gym or the library, Swedish Prime Stefan Lofven said last month, “we don’t believe in a total lockdown,” before adding, “We are following our strategy.”

Policymakers in Spain seem to be on a similar approach, although it remains to be seen if the results will prove them wrong. On Thursday, they insisted that vaccinations will soon reach “cruising speed.”

But Bengoa, the former WHO expert, said vaccinations won’t fix the problem immediately.

“Trying to live with the virus and with these data for months is to live with very high mortality and with the possibility that new variants are created,” he said, adding that the new variant of the virus widely identified in the U.K. could make the original version start to seem like “a good one.”

Dr. Salvador Macip, a researcher with the University of Leicester and the Open University of Catalonia, says the combination of spiraling infections and the uncertainty over the new variants should be enough for a more restrictive approach, but that pandemic fatigue is making such decisions more difficult for countries like Spain, with polarized politics.

“People are fed up with making sacrifices that take us nowhere because they see that they will have to repeat them,” Macip said.

Source: New Delhi Times

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