Economic Survey 2021 India: India is reaping the “lockdown dividend” from the preventive measures it adopted at the onset of the COVID-19 pandemic indicating its willingness to take short-term pain for long-term gain, said the Economic Survey tabled in Parliament on Friday.
The document also said despite the hard-hitting economic shock created by the global pandemic, India is witnessing a V-shaped recovery with a stable macroeconomic situation aided by a stable currency, comfortable current account, burgeoning forex reserves, and encouraging signs in the manufacturing sector output.
“India is reaping the ‘lockdown dividend’ from the brave, preventive measures adopted at the onset of the pandemic…,” it said in the opening chapter titled ‘Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis’.
Unlike Oscar Wilde’s cynic, ‘who knows the price of everything and the value of nothing,’ India’s policy response to the pandemic stemmed fundamentally from the humane principle advocated eloquently in the Mahabharata that ‘Saving a life that is in jeopardy is the origin of dharma.’
“Therefore, the ‘price’ paid for temporary economic restrictions in the form of temporary GDP decline is dwarfed by the ‘value’ placed on human life,” said the survey.
The document further said India recognised that while GDP growth will recover from the temporary shock caused by the pandemic, human lives that are lost cannot be brought back.
The response drew on epidemiological and economic research, especially those pertaining to the Spanish Flu, which highlighted that an early, intense lockdown provided a win-win strategy to save lives, and preserve livelihoods via economic recovery in the medium to long-term.
“To implement its strategy, India imposed the most stringent lockdown at the very onset of the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the necessary time to ramp up the health and testing infrastructure,” it said.
Faced with enormous uncertainty, India adopted a strategy of Bayesian updating to continually calibrate its response while gradually unlocking and easing economic activity.
As per the survey, India has transformed the short-term trade-off between lives and livelihoods into a win-win in the medium to long-term that saves both lives and livelihoods.
By estimating the natural number of cases and deaths expected across countries based on their population, population density, demographics, tests conducted, and the health infrastructure, the survey compare these estimates with actual numbers to show that India restricted the COVID-19 spread by 37 lakh cases and saved more than 1 lakh lives.
According to the document, Uttar Pradesh, Gujarat and Bihar have restricted the case spread the best; Kerala, Telangana and Andhra Pradesh have saved the most lives; Maharashtra has under-performed the most in restricting the spread of cases and in saving lives. India was amongst the first of the countries that imposed a national lockdown when there were only 500 confirmed cases.
The stringent lockdown in India from March 25 to May 31 was necessitated by the need to break the chain of the spread of the pandemic.
Source: The Financial Express
The Economic Survey 2020-21 tabled today acknowledged the role of infrastructure as the foundation of growth of the country in no uncertain terms.
The importance of basic infrastructure facilities can never be overstated, the survey noted. "In the absence of adequate infrastructure, the economy operates at a suboptimal level," it said.
Just putting in money hardly serves any purpose when adequate infrastructure is missing. Without this piece of the puzzle falling in place, the economy remains distant from its potential and frontier growth trajectory, the survey said.
According to the document, rapid and inclusive economic growth will be difficult to achieve without investing significantly in the infra sector.
Infrastructure and economic growth share a lot of backward as well as forward linkages, which makes investment in infra an imperative for an economy like India's, the Economic Survey 2020-21 observed.
The survey highlighted the National Infrastructure Pipeline (NIP) scheme which is targeted at facilitating the implementation of world-class infrastructure projects in the country.
According to the statement, this first-of-its-kind initiative will boost the economy and generate better employment opportunities. Besides, it will drive the competitiveness of the Indian economy, the survey said.
Funded jointly by the Central Government, State Governments and the private sector, the NIP was launched with the projected infrastructure investment of Rs 111 lakh crore spanning the period between 2020 and 2025. The sectors that will have a major share in the scheme include energy, roads, urban infrastructure and railways.
Source: The Economic Times
The country’s foreign exchange reserves rose by USD 1.091 billion to USD 585.334 billion in the week ended January 22, RBI data showed.
In the previous week ended January 15, the reserves had declined by USD 1.839 billion to USD 584.242 billion.
It had touched a life-time high of USD 586.082 billion in the week ended January 8.
In the reporting week ended January 22, the reserves rose on account of an increase in foreign current assets, a major component of the overall reserves.
FCA increased by USD 685 million to USD 542.192 billion, the Reserve Bank of India’s (RBI) weekly data showed.
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 rose by USD 398 million to USD 36.459 billion in the week ended January 22, the data showed.
The special drawing rights (SDRs) with the International Monetary Fund (IMF) rose by USD 1 million to USD 1.513 billion in the reporting week.
The country’s reserve position with the IMF also increased by USD 7 million to USD 5.171 billion in the week, the data showed.
Source: The Financial Express
The Economic Survey on Friday called for simplification of regulatory processes in the light of uncertainties in the real world scenarios.
The Survey noted that administrative processes in India are often loaded with significant amount of procedural delays and other regulatory complexities in decision-making process, making them inefficient and cumbersome for all stakeholders.
It has highlighted this problem and recommended ways and means to resolve this administrative challenge.
The Economic Survey 2020-21 presented in Parliament on Friday said that in order to solve the problems, authorities often make attempts to reduce discretion by having evermore complex regulations, which is counterproductive and results in even more non-transparent discretion.
International comparisons show that the problems of India's administrative processes derive less from lack of compliance with process or regulatory standards, but more from over-regulation, it said.
It is not possible to have regulations that can account for all the uncertainties in the world and all possible outcomes, it said, adding, the evidence shows that India over-regulates the economy. This results in regulations being ineffective even with relatively good compliance with process.
Using the framework of 'incomplete contracts', the Survey argued that the problem of overregulation and opacity in Indian administrative processes flows from the emphasis on having complete regulations that account for every possible outcome.
This is due to the inadequate appreciation of the difference between ‘Regulation' and ‘Supervision', on the one hand, and the inevitability of incomplete regulations, on the other hand, it said.
"While real-world regulation is inherently incomplete, increasing the complexity of regulatory provisions reduces verifiability and fosters opaque discretion in the hands of the supervisor. Thus, over-regulation, not simpler regulation, leads to excessive discretion ex post," it said.
The solution, the Economic Survey said, is to avoid substituting supervision with more complex regulation.
The optimal solution is to have simple regulations combined with transparent decision-making process. Having provided the government decision maker with discretion, it is important then to balance it with three things --improved transparency, stronger systems of ex-ante accountability (such as bank boards) and ex-post resolution mechanisms.
Source: The Economic Times
Finance Minister Nirmala Sitharaman tabled the Economic Survey for 2020-21 in Parliament on Friday in the backdrop of coronavirus pandemic that brought all economic activity to a standstill for a few months in 2020, and saw the Indian economy sink into recession.
The key numbers were mostly in line with what most analysts / economists had forecast. Here’s a quick comparison of what they had expected versus the Economic Survey’s projections.
GDP growth
India’s economy, as per the Economic Survey, could contract 7.7 per cent in fiscal 2020-21, pulled down mainly by the coronavirus pandemic and the ensuing nationwide lockdown to contain the spread of the disease.
Real GDP growth, as per Economic Survey, could come in at 11 per cent in the next financial year 2021-22 (FY22). This is a tad lower than what experts had hoped for. Those at Nomura, for instance, pegged the real GDP growth higher than what the Economic Survey has projected.
“A combination of factors – the lagged impact of easy financial conditions, the ‘vaccine pivot’, and improving global growth prospects should lead to a strong growth outturn in FY22 (real GDP growth of 13.5 per cent, on our estimates). We expect the government to assume nominal GDP growth of 15 per cent y-o-y in FY22 (more conservative relative to our estimate of around 17 per cent) from -4.2 per cent y-o-y in FY21 (advance estimates),” wrote Sonal Varma, managing director and chief India economist at Nomura in a January 19 report co-authored with Aurodeep Nandi.
That said, the estimate is broadly in line with Reserve Bank of India's (RBI's) estimates, which had pegged the GDP contraction at 7.5 per cent in FY21 - up from its earlier forecast of a 9.5 per cent contraction.
Fiscal deficit
On the fiscal deficit front, the likelihood of exceeding the budget estimate (BE) in FY21 was also expected in a pandemic-impacted year.
“Keeping in view the concurrent demand of expenditure pertaining to the stimulus packages announced by the Government during the year to mitigate the impact of the pandemic and the anticipated revenue shortfall, it is expected that the fiscal deficit of the Central Government may overshoot its Budget Estimate for the current fiscal year,” the survey said.
Analysts at Barclays expect India’s consolidated fiscal deficit to reach 14 per cent of GDP (central: 7.7 per cent; state governments: 5 per cent; off-balance sheet items: 1.3 per cent) during FY 20-21, and decline only gradually over the next five years, with the government likely to prioritize reviving growth in the near-term.
“Relaxation in fiscal deficit targets may be necessary, and the government may have to revise the deficit target upwards for the current year in view of the dire need to augment capital expenditures. The Government should take a fresh look at the policy of fiscal deficit targets and allow for gentle increases in government borrowings to finance larger public investment and social expenditures,” said Dr. M Govinda Rao, chief economic advisor at Brickwork Ratings.
Divestment / Public sector undertakings (PSUs)
The survey has highlighted the need for revamping the Boards of Central Public Sector Enterprises (CPSEs), reorganize their structure, and enhance their operational autonomy coupled with strong corporate governance norms including listing on stock exchanges for greater transparency.
Going ahead, experts feel that the increase in public spending will have to be financed to a large extent by garnering disinvestment proceeds and monetizing assets.
“Calibrating a counter-cyclical fiscal policy requires fiscal expansion. The government’s measures are largely on the supply side to revive the investment climate by making the cost of borrowing low and saving more after tax profits for further investment. Now is the time for interventions on the demand side to increase consumption and investment demand. This would require an increase in public spending and new investments from public enterprises,” Govinda Rao adds.
Source: The Business Standard
Hours after the government tabled the Economic Survey 2020-2021, senior Congress leader P Chidambaram slammed the report saying the terms defined in it as reforms have all been rejected by the people of the country. In a series of tweets, Chidambaram said while the Economic Survey is “witnessing a V-shaped recovery”, the International Monetary Fund (IMF) has that the Indian economy "will reach the pre-Covid level only in 2025!"
“According to the Survey, the top three ‘structural reforms’ were the (1) anti farmer laws (2) the new MSME definition and (3) the four Labour Codes. The farmers have rejected the three Farm laws. The MSMEs have said that they had got no relief at all. The Trade Unions have rejected the four Labour Codes. What is reform is what the people have rejected. It is the new definition of ‘reform’ and ‘democracy’,” the former Union finance minister said in one of his tweets.
Chidambaram also pointed out the "best decision" of the Centre. "The best decision taken by the government is the decision not to print the Economic Survey. Once upon a time, the Survey was the vehicle to communicate to the people in simple language the state of the economy and the prospects in the coming year," he said. "The most frequently used word in the Economic Survey is “regression”. The current government has taught us the meaning of “recession”. When you learn the meaning of “recession” and “regression”, you will qualify to be included in the team to write the next Economic Survey," he added.
Union finance minister Nirmala Sitharaman presented the Economic Survey 2020-21 in Parliament on Friday, ushering the Budget session. The Budget will be presented on February 1. The government's pre-Budget state of economy document hailed the three contentious farm laws, stating that they will give freedom to the markets as well as help in raising incomes of small and marginal farmers. "The newly introduced farm laws herald a new era of market freedom which can go a long way in the improvement of farmer welfare in India," the survey said.
The document also added that the reforms in agriculture markets will enable the creation of 'one India one market' for agri-products, yield innumerable opportunities for farmers to move up the value chain, create jobs and increase incomes.
"The reforms in the agricultural sector were more overdue than even the labour reforms as the existing laws kept the Indian farmer enslaved to the local mandi and their rent-seeking intermediaries. While every other category of producer in India had the freedom to decide where to sell his/ her produce, the Indian farmer did not," the document observed.
Thousands of farmers, mainly from Punjab, Haryana and western Uttar Pradesh, are protesting at various borders of the national capital seeking repeal of the three bills. They have expressed concerns that the laws are pro-corporate and could weaken government-regulated mandis, also called Agriculture Produce Marketing Committees (APMCs).
Source: The Hindustan Times
The first part of the Budget Session of Parliament is likely to end on February 13 instead of February 15, sources said on Friday, underling that the total number of working days would however remain the same.
The matter was discussed in the Business Advisory Committee of Lok Sabha where leaders of various parties were unanimous to end part one of the session on February 13.
As per earlier schedule, the session was to go on a recess after meeting on February 15, a Monday. Now, at least Lok Sabha would meet on February 13, a Saturday, before being adjourned to meet again on March 8.
This would mean that the number of working days would remain. In the Monsoon Session of Parliament, the two Houses had met on Saturdays and Sundays. But this time, the usual weekend breaks have returned.
The Budget Session is scheduled to end on April 8. The Business Advisory Committee of Lok Sabha also decided to allocate 10 hours for the debate on the Motion of Thanks to the President's Address to the joint sitting of Parliament delivered on Friday, the first day of the session.
The debate would take place on February 2, 3 and 4 and Prime Minister Narendra Modi would reply to it on February 5, the sources said.
At the all-party meeting convened by Lok Sabha Speaker Om Birla later, opposition members demanded a debate on the issues raised by farmers protesting on various Delhi border points.
The government suggested that the issues can be raised during the debate on the Motion of Thanks to the President's Address.
Speaker Birla urged party leaders to cooperate in the smooth functioning of the House, saying he would try to give every member a chance to speak.
Source: The Economic Times
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Source: Apparel Online
Countries around the world urgently need supportive monetary and fiscal policies until the deadly coronavirus pandemic is in check, a senior IMF official has said, as he advocated building buffers against fluctuations in external capital flows that could impact financial stability in nations like India.
Observing that the economies have been very negatively impacted by the coronavirus pandemic, Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department of the International Monetary Fund, said that in 2020 a vast majority of countries had sharp contractions in economic activities.
“Until the pandemic is in check, supportive monetary and fiscal policies remain urgently needed. That’s what we see in our membership around the world,” he told PTI in an interview.
“The good thing on the economic policy front is that there has been a synchronised support that was deployed around the world that has helped to mitigate the fallout from this pandemic and so the hope is that this is a bridge to recovery,” Adrian said. He said the pandemic triggered a great deal of stress in financial markets early last year.
Central banks, he said, stepped in very quickly to ease monetary policy, to provide liquidity backstops, and to really contain the fallout from the pandemic on financial markets. That has been extremely effective, he said. The second element that is very important is the stability of the banking system globally, he noted.
The IMF, he said, conducted a global bank stress test that covered 30 countries. It found that even in adverse scenarios banks in the aggregate globally seem to be well-capitalised. And that’s really the payoff from 10 years of regulatory reforms at the international level, he observed.
The third element of the response to the crisis has been the fiscal response and countries around the world have undertaken large fiscal measures to provide support for the corporate sector and households.
India, Adrian said, went into this terrible pandemic with a number of issues in the financial sector. In the core banking system, there had been some weaknesses, related to a non-performing loan.
There is the non-bank sector as well in India that is very important, he said.
“The finance companies grew very rapidly and there was a sharp contraction of credit of these finance companies and that could have amplified some of the negative feedback loops that we observed,” he said.
“And so, already going into the pandemic, there was some of the deleveraging in the non-bank sector in the finance company sector in particular in India, that was going on. That was going hand in hand with some economic contraction and then of course the pandemic led to further lockdowns,” he said.
“But having said that, looking forward we have upgraded our outlook for India to some extent. We do hope that the stronger economic outlook will also help on the banking side to get to better outcomes. But certainly, the regulators in India are in the process of addressing those weaknesses,” he said.
The IMF on Tuesday projected an impressive 11.5 per cent growth rate for India in 2021, making the country the only major economy of the world to register the double-digit growth this year amidst the pandemic.
Responding to a question, Adrian said one of the very positive spillovers across economies in this episode is that monetary easing has been done around the world in a synchronised manner. “So, monetary policy was eased at the same time as everybody was hit with this terrible temper dynamic at the same time.
The easing of financial conditions — the lowering of interest rates, the narrowing of credit spreads and the recovery of equity markets, really has helped corporates, and sovereigns around the world to continue to access capital markets,” he said, describing it as a very positive spillover. As a result, capital flows have returned to emerging markets.
“But of course, there’s some risk to that. So there could be further bad news, bad stocks in emerging markets, including in India, related to vaccines, ….for example, the effectiveness of vaccines, or there could be further adverse shocks coming to other sectors of India,” Adrian said.
“That could trigger a reversal of capital flows. Or there could be some, some global risk appetite shock where market sentiment outside …India turns. And so, the financial conditions that are external to India are certainly very important for financial stability, and for macroeconomic outcomes in India,” he said.
According to the IMF official, in terms of financial stability, building buffers is the first order prescription.
“When you’re hit with adverse shocks, and you have enough capital in the banking system enough liquidity in the banking system, when the nonbank financial sector is well regulated, to have buffers; and when your central bank has a foreign exchange reserves to buffer against fluctuations in external capital flows that is tremendously helpful,” he said.
As such, in good times and times of easy funding conditions, building buffers back up is certainly a first-order policy prescription, Adrian said.
The second element is to use monetary policy in a way to cushion shocks. “That is only possible when you don’t have imbalances that are very large. Good policy in normal times in terms of growth, helps you build buffers that protects you in times of adverse shocks,”
Source: The Financial Express
India's federal fiscal deficit in the nine months to end-December stood at 11.58 trillion rupees ($158.74 billion), or 145.5% of the budgeted target for the whole fiscal year, government data showed on Friday.
Net tax receipts were 9.62 trillion rupees, while total expenditure was 22.8 trillion rupees, the data showed.
In an economic survey report presented to parliament earlier on Friday, the government said the fiscal deficit for the financial year ending in March, would overshoot the initial estimate of 3.5% of GDP.
Source: The Economic Times
As the impacts of the COVID-19 pandemic continue to persist, Bangladesh’s central bank – the Bangladesh Bank (BB) –has extended the enhanced credit limit under its Export Development Fund (EDF) scheme for the textiles and clothing exporters by six more months till June.
The members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Textile Mills Association (BTMA) are eligible to enjoy the enhanced loan ceiling until June 30 of this year instead of December 31 of last year, said a notification, issued by the Bangladesh Bank (BB), on 27 January.
“Given the ongoing situation due to COVID-19, it has been decided to continue the enhanced limit of $30.00 million, for disbursements until June 30, 2021, to member mills of BGMEA and BTMA,” quoting the central bank the notification said.
Source: Textile Today
India's administrative processes suffers from over-regulation, which results in regulations being ineffective even with relatively good compliance, the Economic Survey said on Friday.
It said there is a case for enacting Transparency of Rules Act to end any asymmetry of information regarding rules and regulations faced by a citizen.
"It is not possible to have complete regulations in a world which has uncertainty as it is not possible to account for all possible outcomes. The evidence, however, shows that India over-regulates the economy. This results in regulations being ineffective even with relatively good compliance with process," the 2020-21 Economic Survey said.
The Survey said the problem is that policy makers, by default, tend to favour prescriptive regulation over supervision.
"Unlike supervision , regulation can be easily measured. After all, regulations provide criteria or checklists, making it easier for regulators to follow and reduce their accountability later on. In contrast, it is difficult to quantify the amount and quality of supervision," it added.
The Survey said that international comparisons show that India ranks better than its peers on having regulatory standards in place and compliance to process.
"The real issue seems to be effectiveness of regulations caused by undue delays, rent seeking, complex regulations and quality of regulation," it added.
Giving example, the Survey said a study by Quality Council of India shows that the time taken from point of decision of closure to actually the company getting struck off from the Registrar of Companies is 1,570 days (i.e. 4.3 years), even if all paperwork is in place and the company is not involved in any litigation or dispute.
Interestingly, out of the total time taken, about 1,035 days are taken for clearances by Income Tax, Provident Fund, GST departments and in taking back security refunds from various departments.
"In contrast, voluntary liquidation takes about 12 months in Singapore, 12-24 months in Germany and 15 months in UK. In Germany, for very large and active companies, it takes 2-4 years. Given the likelihood of disputes and litigation, for the comparable large cases it may take up to a decade in India," the Survey noted.
The solution is to simplify regulations and invest in greater supervision which, by definition, implies willingness to allow some discretion, it added.
Source: The Economic Times
Indian Union Budget 2021-22: With India enduring the COVID-19 pandemic disruption, the Finance Minister has assured that the 2021 Union Budget will be like no other in the past and will help India emerge as the engine for global growth. Harmonization of the tax laws with the other domestic laws helps bring consistency, reduce litigation and boost investor/stakeholder’s confidence in the economy while fostering the ever-green government agenda of ‘ease of doing businesses. Against this backdrop, we have listed below some of the key tax expectations from the forthcoming Union Budget:
Capital Gains Regime for Indian shares directly listed abroad: The Government has mooted for a new regime to allow Indian Companies directly list their shares/securities overseas. At present, this is being done through Depository Receipts (ADR/GDR) mechanism, for which there is a specific capital gains exemption under S. 47(viia) of Income-tax Act 1961 (“ITA”) on transactions between non-residents. Technically, shares of Indian Companies directly listed outside India would qualify as ‘Assets situated in India’ and could give rise to Indian capital gain taxation, even if traded only between non-residents. Hence, introducing a specific exemption on similar lines like the ADR/GDR Regime for non-residents trading in Indian Company shares on the overseas bourses would make this new Regime attractive to foreign shareholders.
Exemption under Gifting Provision to transactions under Insolvency and Bankruptcy Code, 2016 (‘IBC’): Section 56(2)(x) and Section 50CA of ITA often poses difficulties in IBC transactions where neither the person transferring the shares (i.e., sellers/promoters) nor the person receiving the shares has control over the determination of consideration for the transfer of shares and where the consideration for such transfer gets approved by competent authorities like NCLT.
CBDT has presently relaxed the applicability of Section 56(2)(x)/Section 50CA on NCLT-approved Resolution Plans to entail the transfer of unlisted shares of a Company (including its subsidiaries) where the NCLT has suspended the Board of Directors of such Company on charges of oppression/mismanagement, and whose control has been transferred to a Government-appointed Board. (CBDT Notifications dated 29 June 2020 and 30 June 2020).
A similar exemption to share transfers under IBC-related Resolution Plans has been the need of the hour since its inception.
Taxation of Outbound Mergers: The Companies Act 2013 allowed Outbound Mergers for the first time in the Indian history effective 2017. However, unlike the tax exemptions specifically available under S. 47(vi) (for the Companies) and 47(vii) (for the shareholders) of the ITA for Inbound mergers, the law remains silent on the taxation of outbound mergers. Bringing the much-needed tax clarity on outbound mergers has been imperative since its introduction to make it a viable/useful tool for the global restructuring of operations.
Tax Regime for Shareholders of a Company delisted through the NCLT Regime: Market Regulator SEBI made amendments to its Delisting Regulations, 2009 by simplifying the delisting procedure for a listed subsidiary to become a wholly-owned subsidiary of its Listed Parent by resorting through to an NCLT Scheme and averting the lengthy reverse book building procedures. Such NCLT Scheme entails swapping of shares by the public Shareholders of the delisted Indian subsidiary to the Listed Parent against correspondingly receiving such Listed Parent’s equity. While SEBI’s amendment would facilitate easing compliance, amendments in the tax law to introduce specific tax exemption on the NCLT-approved ‘swap’ transaction, as well as to allow the roll-over of the original holding period and the tax basis in the hands of the shareholders, would greatly help in the success of such initiative.
Extending the Manufacturing-related concessionalised Tax Regime (S.115BAB of the ITA) to Contract Manufacturers: An Indian company setting-up and commencing manufacturing operations between 1 October 2019 and 31 March 2023 is eligible to concessionalised corporate tax rate of 15% (plus Surcharge/Cess), subject to prescribed conditions (S.115BAB of the ITA). This Regime is presently not available to contract to manufacture. The Government has allowed 100% FDI under automatic route in contract manufacturing and to ensure that intent behind FDI in contract manufacturing achieves its full potential; it is noteworthy to extend the S. 115BAB coverage even to domestic companies who sub-contract the manufacturing activities to third parties.
Source: The Financial Express
India is reaping the "lockdown dividend" from the preventive measures it adopted at the onset of the COVID-19 pandemic indicating its willingness to take short-term pain for long-term gain, said the Economic Survey tabled in Parliament on Friday. The document also said despite the hard-hitting economic shock created by the global pandemic, India is witnessing a V-shaped recovery with a stable macroeconomic situation aided by a stable currency, comfortable current account, burgeoning forex reserves, and encouraging signs in the manufacturing sector output.
"India is reaping the 'lockdown dividend' from the brave, preventive measures adopted at the onset of the pandemic...," it said in the opening chapter titled 'Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis'.
Unlike Oscar Wilde's cynic, 'who knows the price of everything and the value of nothing,' India's policy response to the pandemic stemmed fundamentally from the humane principle advocated eloquently in the Mahabharata that 'Saving a life that is in jeopardy is the origin of dharma.'
"Therefore, the 'price' paid for temporary economic restrictions in the form of temporary GDP decline is dwarfed by the 'value' placed on human life," said the survey.
The document further said India recognised that while GDP growth will recover from the temporary shock caused by the pandemic, human lives that are lost cannot be brought back.
The response drew on epidemiological and economic research, especially those pertaining to the Spanish Flu, which highlighted that an early, intense lockdown provided a win-win strategy to save lives, and preserve livelihoods via economic recovery in the medium to long-term.
"To implement its strategy, India imposed the most stringent lockdown at the very onset of the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the necessary time to ramp up the health and testing infrastructure," it said.
Faced with enormous uncertainty, India adopted a strategy of Bayesian updating to continually calibrate its response while gradually unlocking and easing economic activity.
As per the survey, India has transformed the short- term trade-off between lives and livelihoods into a win-win in the medium to long-term that saves both lives and livelihoods.
By estimating the natural number of cases and deaths expected across countries based on their population, population density, demographics, tests conducted, and the health infrastructure, the survey compare these estimates with actual numbers to show that India restricted the COVID-19 spread by 37 lakh cases and saved more than 1 lakh lives.
According to the document, Uttar Pradesh, Gujarat and Bihar have restricted the case spread the best; Kerala, Telangana and Andhra Pradesh have saved the most lives; Maharashtra has under-performed the most in restricting the spread of cases and in saving lives.
India was amongst the first of the countries that imposed a national lockdown when there were only 500 confirmed cases.
The stringent lockdown in India from March 25 to May 31 was necessitated by the need to break the chain of the spread of the pandemic.
Source: The Economic Times
India in September 2020 introduced a new Customs (Administration of Rules of Origin under Trade Agreement) Rules-2020 including a number of provisions importers should follow to get duty benefits.
Bangladesh customs and trade officials are claiming that the new Indian customs rules are against the principles of South Asian Free Trade Agreement and similar trade deals.
They said that the Rules of Origin of SAFTA might prevail over the newly adopted customs rules of India if any conflict arises.
The National Board of Revenue in a recent letter to the commerce ministry also said that Indian authorities had forced their importers to follow a complex and demanding procedures for availing duty benefits under the trade agreement.
The Indian customs rules issued by the Central Board of Indirect Tax and Customs, however, said that the SAFTA RoO provisions would prevail over other rules if there is any conflict.
‘In the event of a conflict between a provision of these rules and a provision of the Rules of Origin, the provision of the Rules of Origin shall prevail to the extent of the conflict,’ it said.
In this context, Bangladeshi exporters should follow the SAFTA rules instead of new Indian rules, Bangladesh officials said.
The government should also start consultation with the neighboring country to resolve the issue.
Earlier in December while the commerce ministry requested Indian authorities to address the inconsistencies and make the rules aligned with the SAFTA rules, In a reply Indian customs authorities said that they found no inconsistencies in the rules.
According to the customs wing of the NBR said that Indian move was a violation of the principles of the international trade agreements, including SAFTA.
In its opinion, Customs international trade and agreement wing of the NBR said a number of provisions, including mandatory inclusion of some information in the bill of entry, might discourage the importers to avail the duty benefits under the trade agreements.
Providing the information in the bill of entry is not required as the information is given in the rules of origin certificates of the exporting country, it said.
Indian customs rules also prohibited acceptance of date expired RoO certificates though the SAFTA RoO allows such certificates in case of any exceptional situations, including natural calamities.
The rules have also made preservation of RoO certificates and other information for five years mandatory and submission to the customs authorities as per requirement.
But the SAFTA RoO has a provision of preserving the certificates for two years.
The documents, which are considered as confidential, can be supplied to the government agencies of importing countries as per requirement, it said.
The Indian customs rules have also empowered its customs commissioners to reject the preferential claim of the importers while SAFTA RoO said the certificate of origin could not be rejected in case of small mistakes in the information given in CoO or other documents including import certificates, invoice and packing list.
The rules have also made mandatory providing some information and declarations by importers that they are not supposed to know and only exporters may know the information related to origin of the product, the NBR said in the letter.
Such provisions show their negative mindset over trade agreements, it said.
Source: Textile Today
Making a case for an optimal fiscal stance, the Economic Survey on Friday said growth leads to debt sustainability and not necessarily vice-versa.
"This is because debt sustainability depends on the 'Interest Rate Growth Rate Differential' (IRGD) i.e. the difference between the interest rate and the growth rate in an economy.
"With the Indian context of potential high growth, the interest rate on debt paid by the Indian government has been less than India's growth rate by norm, not by exception," it said.
It suggested that sustainable debt-to-GDP ratio should be maintained over the next decade irrespective of growth and interest rate indicators.
The N K Singh committee to review Fiscal Responsibility and Budget Management (FRBM) has recommended bringing down the debt-to-GDP ratio of Centre and states to 60 per cent by 2023.
The Survey said the phenomenon of a negative IRGD in India, unlike advanced economies, is not due to lower interest rates but much higher growth rates, prompting a debate on saliency of fiscal policy, especially during growth slowdowns and economic crises.
With evidence from across several countries, the Survey said growth causes debt to become sustainable in countries with higher growth rates, and that such clarity about the causal direction is not witnessed in countries with lower growth rates.
The Survey, tabled by Finance Minister Nirmala Sitharaman in Parliament, also said India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie given the country's stage of development.
"The relationship between inequality and socio-economic outcomes on one hand, and economic growth and socio-economic outcomes, on the other hand is different in India from that observed in advanced economies. Unlike in advanced economies, economic growth and inequality converge in terms of their effects on socio-economic indicators in India," it said.
The third Economic Survey of the Modi 2.0 government examined the correlation of inequality and per-capita income with a range of socio-economic indicators, including health, education, life expectancy, infant mortality, birth and death rates, fertility rates, crime, drug usage and mental health across Indian states.
The analysis showed that both economic growth and inequality have similar relationships with socio-economic indicators.
On the basis of the analysis, it said "economic growth has a far greater impact on poverty alleviation than inequality. Economic growth has been represented by income per capita at the state level."
However, the Survey said the policy objective of focusing on inequality may not apply in the Indian context given the differences in the stage of development, India's higher potential rate of economic growth and the higher absolute levels of poverty.
"Also, the examples of India and China have posed a striking challenge to this conflict. The growth stories of India and China have shown a significant reduction in poverty due to high economic growth," it said.
It said focus on policy of growth does not imply that the redistributed objectives are unimportant, but that redistribution is only feasible in a developing economy if the size of the economic pie grows.
For a developing country such as India, where the growth potential is high and scope for poverty reduction is also significant, the focus must continue on growing the size of the economic pie rapidly at least for the foreseeable future, it added.
The Survey also indicates that a well-designed expansionary fiscal policy stance can contribute to better economic outcomes in two ways.
"First, it can boost potential growth with multi-year public investment packages that raise productivity. Second, it can mitigate the risk of Indian economy falling into a low wage-growth trap, like Japan," it said.
Further, at a time of excessive risk aversion in the private sector, as seen during an economic crisis, risk-taking via public investment can catalyse private investment, leading to a crowding in, than a crowding out.
With the National Infrastructure Pipeline already laying out the agenda for ambitious public spending, fiscal policy catering to its funding can boost growth, productivity, generate higher-paying jobs and thereby be self-financing.
The National Infrastructure Pipeline (NIP) unveiled in April 2020 has projected total investment of Rs 111 lakh crore in infra projects over five years.
While emphasising that a more active, counter-cyclical fiscal policy is not a call for fiscal irresponsibility, the Economic Survey sought to break any asymmetric bias created against fiscal policy.
Source: The Business Standard
The Economic Survey takes a dig at businesses resorting to jugaad instead of spending big on research and development activities.
"Mere reliance on 'Jugaad innovation' risks missing the crucial opportunity to innovate our way into the future," the Survey notes.
It further adds that of the ten major economies, India's businesses have the lowest contribution to R&D while it is the government that has to do the heavy lifting.
"India’s gross expenditure on R&D at 0.65 per cent of GDP is much lower than that of the top 10 economies (1.5-3 per cent of GDP) primarily because of the disproportionately lower contribution from the business sector," the Survey highlights.
The Survey calls resident firms to increase their share of patents that matches India's status as the fifth largest economy. It calls for more R&D spending if India wants to realise its economic aspirations.
The Survey says that despite liberal tax incentives in India for promoting R&D activities, Indian businesses have performed poorly.
As the pandemic reshapes how global supply chains work, India can take advantage of this reordering and come up with schemes like PLI to encourage businesses to manufacture and innovate in India.
That would help India in beating its rivals in southeast Asia that are vying for a large share of the manufacturing pie as global MNCs look to shift base to a more favourable destination in the post pandemic world.
The Survey shows that despite India's improvements on the innovation index, it still lags behind Vietnam in the lower middle income group of countries.
That scenario will need to change as India rolls out the red carpet for global giants to come and manufacture in India.
Source: The Economic Times
The Economic Survey reaffirms that the worst is behind us and the economy would bounce back with a V-shaped recovery after being hit hard by the COVID-19 pandemic, India Inc said on Friday.
Sharing their views on the Survey 2020-21 tabled in Parliament, the industry also made a case for continuation of support from the government this year for a broad base recovery and revitalise the ameliorating economic growth.
CII Director General Chandrajit Banerjee said the survey makes a candid and convincing assessment of the Indian economy based on objective analysis, enriching content and credible policy direction to take the economy forward.
"While striking an optimistic note, the Survey reaffirms that the worst is behind us and the economy would bounce back, to experience a resilient V shaped recovery after being hard hit by the COVID-19 pandemic. The availability of the vaccine and robust service sector recovery would further buttress the growth momentum," Banerjee said.
Ficci President Uday Shankar said several key points made in the survey are in tune with the current requirements of the economy and it hopes to see a reflection of these in the upcoming Union Budget.
"To bring the improving growth trajectory on a firm footing and extend it to many more sectors, continuous support from the government is needed through the year 2021," Shankar said, and emphasised that this is not the time to be hemmed in by potential impact of an expansionary fiscal policy on sovereign ratings but walk the extra mile to meet the national requirements.
Assocham Secretary General Deepak Sood said the survey has hit the nail right on its head by stating that the Indian economy's "homecoming" to normalcy is leading to hopes of a robust recovery in services and consumption, emphasizing forcefully that the reforms must continue to realise the full growth potential.
''The Survey, authored by Dr Krishnamurthy Subramanian, presents an optimistic outlook for the next financial year projecting 11 per cent real GDP growth. That sounds rather conservative and if we continue to do well on containing and finally eliminating the COVID-19 virus, the growth for 2021-22 can even surprise for better," Sood said.
PHD Chamber of Commerce and Industry President Sanjay Aggarwal said: "The Survey indicates that India's mature policy response to this once-in-a-century crisis provides important lessons for democracies to avoid myopic policy-making and demonstrates the significant benefits of focusing on long-term gains".
Experts too shared their views on various aspects of the Economic Survey.
Arun M Kumar, Chairman and CEO, KPMG in India said the Survey aims to chart a way out of the pandemic crisis, towards a future of robust growth, as also suggested by the IMF's World Economic Outlook of January 2021.
Rumki Majumdar, Economist, Deloitte India noted that the emphasis of the Survey has rightly been on healthcare and one that they too have repeatedly highlighted.
Ashwin Sapra, Partner, Cyril Amarchand Mangaldas said, "COVID-19 has exposed the fault lines in our healthcare system. The Economic Survey sheds light on this glaring issue. Steps need to be taken to bridge the gaps so that we are not caught off guard ever again."
India's economy is likely to rebound with a 11 per cent growth in the next financial year as it makes a 'V-shaped' recovery after witnessing a pandemic-led carnage, the pre-Budget Economic Survey said on Friday.
The Gross Domestic Product (GDP) is projected to contract by a record 7.7 per cent in the current fiscal ending March 31, 2021. India witnessed its last annual contraction of 5.2 per cent in fiscal year 1979-80.
The Economic Survey 2020-21 said the agriculture sector is the only silver lining while services, manufacturing and construction were most hit by the lockdown that was imposed to curb the outbreak of the COVID-19 pandemic.
Source: The Business Standard
Rules relaxed
The Centre has amended the rules of CSR (Corporate Social Responsibility) regime. Corporates can now undertake multi-year projects under new CSR rules. Companies have been permitted to set off the excess amount spent under CSR up to three succeeding financial years. Earlier, companies are required to shell out at least two per cent of their three-year annual net profit towards CSR activities in a financial year.
Not a criminal offence anymore
Non-compliance with CSR provisions has also been decriminalised by shifting such offences to penalty regime. Also, companies having CSR obligation below Rs 50 lakhs have been exempted from constituting a CSR Committee.
To boost transparency
To boost transparency, govt has also mandated agencies implementing CSR projects for companies to get registered with the ministry's MCA 21 portal and the system will automatically generate a unique CSR registration number. International organisations have been permitted to carry out designing, monitoring and evaluation of the CSR projects or programmes. However, they cannot act as implementing agencies. According to the official, such a move will help in bringing in the best international practices in the field of CSR and capacity building. Besides, disclosure requirements have been enhanced with respect to CSR projects.
To allow better use of resources
The new rules allow companies to create or acquire capital assets through CSR in the name of beneficiaries or a public authority or registered trust. As per the amended rules, there will be impact assessment of CSR projects that will help companies to plan and allocate resources in a better manner. The assessment will be applicable subject to various conditions.
To improve ease of doing business
The amendments are aimed at further improving the ease of doing business, decriminalising non-compliance with CSR provisions as well as to make the CSR framework more transparent, an official told PTI. Further, the idea is to move from just looking at expenditure to focusing on impact of CSR projects implemented under the companies law, the official added.
Source: The Economic Times
India was the only country among emerging markets to receive equity inflows from FPIs in 2020, as the country attracted USD 30 billion in the first nine months of the year, according to the Economic Survey.
Also, net inflows from foreign portfolio investors (FPIs) recorded an all-time monthly high of USD 9.8 billion in November 2020, as investors' risk appetite returned.
"During April-December 2020, equities witnessed an inflow of at USD 30 billion, five times its previous year value - India was the only country among emerging markets to receive equity FII inflows in 2020," according to the Survey tabled in Parliament on Friday.
As a result of strong inflows, buoyant Sensex and Nifty resulted in India's market-capitalisation to Gross Domestic Product (GDP) ratio crossing 100 per cent for the first time since October 2010.
"While stock markets value the potential future growth, these elevated levels still raise concerns on the disconnect between the financial markets and real sector," the Survey noted.
However, other emerging markets like Indonesia, Malaysia, South Korea, Taiwan, Philippines, Brazil, Thailand and South Africa witnessed outflows from FPIs last year.
"The total cumulative investment by FPIs (at the acquisition cost) increased 5.4 per cent to USD 273.6 billion as on December 31, 2020 from USD 259.5 billion as on December 31, 2019," the Survey pointed out.
In addition, markets regulator Sebi has granted certain temporary relaxation to FPIs in view of the COVID-19 pandemic.
This included providing temporary relaxation in processing of documents pertaining to FPIs by allowing designated depository participants and custodians to process the request for registration/ continuance / KYC review and any other material change on the basis of scanned version of signed documents(instead of originals) and copies of documents which are not certified, received from specified email.
Apart from this, investors put in Rs 2.76 lakh crore into the mutual funds industry during April-December 2020-21, as compared to a net inflow of Rs 1.82 lakh crore in the corresponding period of the last year.
The inflow led to 45-player mutual funds asset base rising 17 per cent to reach an all time high of Rs 31.02 lakh crore at the end of December 31, 2020 from Rs 26.54 lakh crore at the end of December 31, 2019.
Source: The Business Standard
In most of the Indian apparel export houses, HR department is also responsible for compliance, but here’s a shocking case of an export house where the HR Head made huge money through unethical practices – significantly impacting company’s financial health.
Ludhiana-based KG Exports has around 500 workers and Jagveer Singh, HR Head of the company, was found to be involved in misappropriation of around Rs. 35.79 lakh by debiting the salary of workers who had left the company long back.
The company’s owner has reported the matter to the police. The police have registered case against the HR head and are investigating the matter.
As per information, Jagveer Singh was deluding the company by showing five ex-workers on duty for last three years, and was also keeping their salaries. The accused used to then withdraw their salaries by using the ATM cards of the employees, which he was in possession of.
The matter came into light when the owner of the company, Manish Dua, found discrepancies in accounts, and explored the issue in detail with the help of bank.
The police have footage of CCTVs at ATMs from where Jagveer withdrew the cash. “He will be arrested soon,” said a police officer.
It is pertinent to mention here that KG Exports is exporting its knitted garment to many countries across the globe.
Source: Apparel Online
In the Economic Survey for 2020-21, tabled in Parliament on Friday, Chief Economic Advisor Krishnamurthy Subramanian strongly defended the government’s actions in response to the Covid-19 pandemic, and also laid out a case for ignoring the build-up of debt and turning on the fiscal taps in the forthcoming Union Budget.
The Survey saw a “V-shaped recovery” from the lockdown-induced crash in the first quarter of 2020-21, with only a “modest decline in GDP growth in the second half of the year”, and a “faster-than-anticipated economic recovery”. The Survey further argued that a “supply-side push from reforms” and infrastructure investment, the roll-out of the vaccine, and targeted moves like the production-linked incentive scheme for manufacturers would lead to real growth of 11 per cent in 2021-22.
The scars from the pandemic, however, will remain. The Survey admitted that, even if India returned to its five-year historical average of GDP growth, 6.7 per cent, as fast as 2022-23, real GDP would still only be 90-91 per cent of what it would have been without the pandemic.
In order to deal with the pandemic, the government raised its target for gross market borrowings for 2020-21 from the Budget Estimate of Rs 7.8 trillion to Rs 12 trillion. State governments also saw a borrowing increase of over 40 per cent. The Survey views this increase as “demonstrating the government’s commitment to provide sustained fiscal stimulus”. Although admitting that, globally, “debt levels have reached historic highs, making the global economy particularly vulnerable to financial market stress”, Subramanian nevertheless makes a case for India to take on yet more debt, claiming that “given India’s growth potential, debt sustainability is unlikely to be a problem”.
No assurance, however, is provided by the Survey that this trend will continue into the future, given the shrinking of India’s potential growth; in data released on Friday, growth in 2019-20, prior to the pandemic taking hold, was revised downward to 4 per cent, the exact midpoint of the Reserve Bank of India’s inflation target.
Taking aim at the government’s fiscal conservatism, the Survey claims “printing more money does not necessarily lead to inflation and a debasement of the currency”, but could – if invested in projects with positive “societal value” — actually “be beneficial to citizens”.
The Survey claimed that India’s trajectory during the pandemic was unique, and argued that “the upturn in the economy while avoiding a second wave of infections makes India a sui generis case in strategic policymaking amidst a once-in-a-century pandemic.”
Taking aim at alternative theories for the limited number of deaths in India – such as, for example, greater population resistance – the Survey assigns complete responsibility for the relatively low population mortality in India during the pandemic to the draconian nature of the initial lockdown. Indeed, it also argues that not only did the “stringent lockdown saved lives”, but it also “supported a V-shaped recovery across all the economic indicators.
The Survey further claims that “costs and opportunities” were weighed “strategically” before the first lockdown, and it presented some basic calculations to conclude that government management led to India having 3.7 million less cases than expected.
The Survey conducted a similar back-of-the-envelope exercise – using population density, global numbers, and demographic profiles – for the various states of the Union, concluding in this case that Kerala and Telangana had saved the most lives, while Maharashtra “has performed the worst in number of cases and deaths”. The Survey also made the politically effective, though economically questionable, decision to compare the effectiveness of pandemic control in globalised Maharashtra on the one hand and in Uttar Pradesh and Bihar on the other, concluding the latter states’ policies therefore “held India in good stead”.
Arguing that the regulators’ forbearance on bank loans was necessitated by the pandemic, the Survey nevertheless makes a strong call, based on the experience following the financial crisis of 2008, for withdrawing that forbearance quickly. It says that “when an emergency medicine becomes a staple diet, it can be counter-productive”, and says that an Asset Quality Review should be “conducted immediately after the forbearance is withdrawn”.
It also praises the relief packages, indicating that they were calibrated and used “Bayesian updating”. It noted that there was no point in stimulating demand when supply was constrained during the lockdown, comparing it to “pushing the accelerator while the foot was firmly on the brake”. The time for stimulus, however, according to the Survey, has clearly arrived. In fact, it demands “a sustained, productive programme of permanent stimulus directed towards public investment, in both human and physical capital”.
Concerns about debt sustainability and credit ratings downgrade in the face of “permanent stimulus” are dismissed. Arguing that India’s willingness and ability to pay its debt is evident through history and through the size of its foreign exchange reserves when compared to the tiny proportion of sovereign, foreign-currency-denominated debt.
The Survey attacked global credit ratings of India’s sovereign debt, currently one step above junk status, as not reflecting India’s fundamentals, and being “noisy, opaque and biased”. Government spending should therefore ignore not just the debt to GDP ratio, but also the threat of downgrades, argued the survey: “India’s fiscal policy, therefore, must not remain beholden to a noisy/biased measure of India’s fundamentals and should instead reflect Gurudev Rabindranath Thakur’s sentiment of a mind without fear.”
Source: The Business Standard
India's economy will take two years to reach its pre-pandemic growth level, the government said in a report presented to parliament on Friday.
"Overall, India is well on its path to a V-shaped recovery to pre-pandemic levels and beyond," the government said, adding a mass vaccination drive was well underway.
Source: The Economic Times
The Economic Survey endorsed continuation of the expansionary fiscal policy to sustain recovery in demand as the economy comes out of the pandemic shock.
Coming down heavily on global rating agencies, it suggested that India’s fiscal policy should not be restrained by ‘biased and subjective’ ratings and should focus on growth and development. To drive home the point, the Survey quoted Rabindranath Tagore’s famous lines “where the mind is without fear”.
In the April-December period, the fiscal deficit widened to 145 per cent of the Budget Estimate for FY21. Economists estimate the fiscal deficit to widen to somewhere between 7 per cent and 9 per cent of GDP, against the government’s target of 3.5 per cent.
“…There is likely to be fiscal slippage during the year… In order to sustain the recovery in aggregate demand, it is expected that the government may have to continue with an expansionary fiscal stance,” according to the Survey.
It added that the expenditure support along with the various key reforms introduced during the year are likely to ensure medium-term growth. “The growth recovery would facilitate buoyant revenue collections in the medium term, thereby enabling a sustainable fiscal path,” the report said.
The long-term fiscal policy road map for the Centre and states will be laid down by the 15th Finance Commission. The longer-term fiscal sustainability depends on reviving growth relative to the interest cost of government debt, according to the Survey. Aditi Nayar, principal economist at ICRA Ratings, has estimated the deficit to widen to 5 per cent of GDP in FY22.
Outlining the need for a counter-cyclical fiscal policy, the Survey suggested a well-designed expansionary fiscal policy stance can contribute to better economic outcome, and is necessary to smoothen out economic cycles, which is critical during economic downturns.
Government spending becomes imperative at the time of excessive risk aversion in the private sector. “With the National Infrastructure Pipeline already laying out the agenda for ambitious public spending, a fiscal policy catering to its funding can boost growth, productivity, generate higher-paying jobs and thereby be self-financing.”
The Survey called for the methodology of granting sovereign credit ratings to be made more transparent, less subjective and better attuned to reflect an economy’s fundamentals.
Pointing out that “noisy, opaque and biased” ratings damage foreign portfolio investments, it suggested countries engage with ratings agencies to ensure correction of the methodology that would reflect economies’ ability to pay obligations. “Moreover, the pro-cyclical nature of credit ratings and its potential adverse impact on economies, especially low-rated developing economies, must be expeditiously addressed.”
It said India’s ability to pay can be gauged not only by the extremely low foreign currency-denominated debt but also by the comfortable size of its foreign exchange reserves that can pay for the short-term debt of the private sector as well as the entire stock of sovereign and non-sovereign external debt.
M Govinda Rao, chief economic advisor at Brickwork Ratings, said the government should take a fresh look at the policy of fiscal deficit targets and allow for gentle increases in government borrowings to finance larger public investment and social expenditures.
However, he added the government should be transparent and include off-Budget liabilities in providing the estimates for the deficit.
If off-Budget borrowings were included, the target for FY21 would have stood at 4.36 per cent of GDP instead of the target of 3.5 per cent.
Industry lauded the Survey’s counter-cyclical fiscal policy argument.
Chandrajit Banerjee, director general, Confederation of Indian Industry, said an expansionary fiscal policy will result in faster growth and smaller deficits in the future.
Source: The Business Standard
India’s fiscal deficit in the nine months to end-December stood at 11.58 trillion rupees ($158.74 billion), or 145.5% of the budgeted target for the whole fiscal year, government data showed on Friday.
Net tax receipts were 9.62 trillion rupees, while total expenditure was 22.8 trillion rupees, the data showed.
India’s fiscal deficit is projected to overshoot the initial estimates, 3.5% of GDP, in the current financial year ending in March, the government said in an economic survey report presented to parliament earlier on Friday.
Source: Reuters India
Prime Minister Narendra Modi on Friday expressed confidence that the Budget for 2021-22 would be seen as part of the packages announced by Finance Minister Nirmala Sitharaman over the past 10 months to offset the impact of Covid-induced lockdowns.
“Perhaps for the first time in the history of India a finance minister had to present four-five mini budgets in the form of separate packages in 2020,” Modi told the media before Parliament’s Budget Session started.
Sitharaman is scheduled to present the Budget in the Lok Sabha on Monday.
As businesses were almost shut in April last year due to the countrywide lockdown, announced to tackle the pandemic, the finance minister announced the first package in March. She followed these up with three more.
The packages focused on vulnerable sections of the people, giving them free food, work under the Mahatma Gandhi Rural Employment Guarantee Act and direct benefit transfers, besides agriculture and micro, small and medium enterprises. They initiated reforms and linked some of them to the fiscal leeway given to the states.
The government claimed it, along with the Reserve Bank of India (RBI), announced packages worth Rs 29.87 trillion, which is about 15 per cent of India’s GDP. Of this, the RBI’s measures constituted 6 per cent of GDP and the government’s 9 per cent. However, independent experts estimated the fiscal cost of the government measures at slightly more than Rs 3 trillion.
Of the reforms announced by the finance minister in packages, three related to the controversial farm laws.
The 19 Opposition parties boycotted the president’s address to the joint sitting of Parliament on Friday, in solidarity with the farmers’ protests against the Acts.
Modi asked MPs to debate and discuss all the issues that concerned the people of the country, and hoped they would not shy away from contributing to fulfilling the people’s aspirations, by making full use of Parliament and following all the propriety of democracy.
“A golden opportunity has come before the nation to fulfil the dreams of the freedom fighters. There should be proper utilisation of this decade and, therefore, there should be discussion and presentation of different views this session for meaningful results, keeping in mind this entire decade,” he said. “I have full faith that all the members of Parliament will make this session more productive.”
Source: The Business Standard
Vietnam’s textile and garment industry is eyeing US$39 billion export revenue in 2021. Vietnam National Textile and Garment Group (Vinatex) recently said the country’s textile and garment exports was worth $35 billion in 2020 due to the severe disruption of the COVID-19 pandemic, US-China trade war, Brexit and trade protectionism.
Vinatex added that despite the pandemic and given global demand drop, the 22% export growth was extraordinary.
The country is one of the world’s top five textile and apparel exporting nations that has not paused production during the pandemic.
Vinatex logged a total of 15.5 trillion VND ($670.7 million) in revenue and combined profits of 628.9 billion VND, equivalent to 106% and 164.8% of the set targets respectively, reported a local news agency.
Le Tien Truong, Chairman, Vinatex urged Vietnam’s government to cut long-term interest rates, adding the textile and garment manufacturers would find it tough to access loans after a year of low business efficiency.
Under government management, the sector has abridged non-production costs, especially those for logistics services through the national logistics network, and other non-tariff costs.
Source: Textile Today
India's economy is likely to rebound with a 11 per cent growth in the next financial year as it makes a 'V-shaped' recovery after witnessing a pandemic-led carnage, the Pre-Budget Economic Survey said on Friday.
The Gross Domestic Product (GDP) is projected to contract by a record 7.7 per cent in the current fiscal ending March 31, 2021.
India witnessed its last annual contraction of 5.2 per cent in fiscal year 1979-80.
The Economic Survey 2020-21 said the agriculture sector is the only silver lining while services, manufacturing and construction were most hit by the lockdown that was imposed to curb the outbreak of the COVID-19 pandemic.
"After an estimated 7.7 per cent pandemic-driven contraction in 2020-21, India's real GDP is projected to record a growth of 11.0 per cent in 2021-22 and nominal GDP by 15.4 per cent. These conservative estimates reflect upside potential that can manifest due to the continued normalisation in economic activities as the rollout of COVID-19 vaccines gathers traction," the survey said.
The growth will further be supported by supply-side push from reforms and easing of regulations, push for infrastructural investments, boost to manufacturing sector through the Productivity Linked Incentive Schemes, recovery of pent-up demand for services sector, increase in discretionary consumption subsequent to roll-out of the vaccine and pick up in credit given adequate liquidity and low interest rates, it said.
The survey tabled in Parliament by Finance Minister Nirmala Sitharaman said there is likely to be a fiscal slippage during the year based on the available trends for April to November 2020.
India is expected to witness current account surplus during the current financial year after a gap of 17 years, it said.
India has recorded a current account surplus of 3.1 per cent of GDP in the first half of the year largely supported by strong services exports.
"Given the trend in imports of both goods and services, it is expected that India will end with an annual current account surplus of at least 2 per cent of GDP – after a period of 17 years," it said.
The contraction of 7.7 per cent in the current fiscal is on account of disruption in normal activities due to the pandemic.
However, India is expected to be the fastest growing economy in the next two years, the survey said.
Earlier in the week, the International Monetary Fund projected an impressive 11.5 per cent growth rate for India in 2021, making the country the only major economy of the world to register a double-digit growth this year amid the pandemic.
As per the advanced estimates of national income released by the National Statistical Office (NSO), India's GDP is estimated to contract by a record 7.7 per cent during 2020-21 as the COVID-19 pandemic severely hit the key manufacturing and services segments.
Other global agencies too have projected contraction in the country's economic growth for the fiscal 2020-21.
Source: The Economic Times
Terming India’s strategy on lockdowns as one for short-term pains for long-term gains, the Economic Survey said the country adopted a strategy of continually calibrating its response while gradually unlocking and easing economic activity.
To implement its strategy, India imposed the most stringent lockdown at the very onset of the pandemic. This enabled flattening of the pandemic curve and, provided the necessary time to ramp up health and testing infrastructure, the Survey said.
Using a plethora of evidence, the Survey demonstrated the benefits of this strategy. By constructing a stringency index at the state level the survey showed that cases and deaths (compared to the expected) correlates with the stringency of the lockdown.
Source: The Business Standard
Medical textile exports in the subgroups saw a 22-fold increase on Y-o-Y basis in 2020. At the same time, the exports from the Aegean region saw around 46-fold increase, reaching US $ 92 million.
Jak Eskinazi, Head Coordinator, EIB explained the reason behind the increase. He said that there was a strong demand for the medical textile (buoyed by surgical dresses and masks) and activewear products during the pandemic, while the export of textile products is somehow sluggish but recovering.
Despite the pandemic, Turkey’s textile exports saw a loss of just 8 per cent in 2020 as compared with 2019. But, as far as the Aegean region is concerned, textile goods worth US $ 240 million were exported with a yearly increase of 6 percent.
On the other hand, technical textile exports of Turkey grew significantly by 76 percent in 2020, hitting US $ 3 billion. “In technical textile products, exports from the Aegean region rose to US $ 194 million, an increase of 98 percent,” said Eskinazi.
Turkey ranks 6th worldwide in terms of the apparel exports in general while the pandemic pushed Turkish medical textile good exports to over the $1 billion threshold from January through October of last year.
Medical textile goods worth $95 million were exported in October alone. They exported to 167 countries, with Germany topping the list by receiving $165 million worth of Turkish goods in the January-October period.
The U.S. came in second with $160 million, followed by the U.K. and the Netherlands with $104 million each, the data showed.
Exports to the world’s largest medical textile goods exporter, China, reached $24 million in the 10-month period.
Among others, Spain received around $49.5 million worth of Turkish medical textile goods. Exports to Italy, France, Canada, Romania and Qatar amounted to some $44.5 million, $39 million, $38.8 million, $36.9 million and $28.3 million, respectively.
Surgical gowns alone contributed a $700 million share in exports, and the share of exports of medical masks was $173 million.
Source: Textile Today
Turkish investors are keen to establish their own economic zone in Bangladesh with huge investments in several sectors, including textiles.
Turkey’s Foreign Economic Relations Board (DEIK) President Nail Olpak made the remark at a recent webinar tiled ‘Turkey and Bangladesh: A New Era in Investment and Trade’, co-hosted by Bangladesh Investment Development Authority (BIDA) and DEIK on Thursday.
Nail said “We are proud to see many prominent Turkish companies have already been investing to Bangladesh and we hope to see more in near-future”.
Prime Minister’s Private Industry and Investment Adviser Salman Fazlur Rahman, who was the Chief Guest, reportedly, underlined that Bangladesh offers highly suitable opportunities for Turkish businesses in Readymade Garments, textiles, ICT, Health, Construction and Infrastructure sectors while adding that Dhaka is delighted to be a key partner under Turkey’s ‘Asia Anew’ initiative.
The Bangladeshi Ambassador to Turkey, Mosud Mannan and the Turkish Ambassador to Bangladesh, Mustafa Osman Turan also spoke at the webinar, where over 170 private sector entities joined.
Sheikh Fazle Fahim, President of Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), and Hülya Gedik, Chairperson of DEİK Bangladesh-Turkey Business Council addressed the event where Can Dincer, Chief Commercial Officer of Arcelik Global and Gökhan Tezel, Chief Executive Officer, Aygaz, shared their experience as existing investors.
Bangladesh Economic Zones Authority (BEZA) Executive Chairman Paban Chowdhury, Bangladesh Hi-Tech Park Authority Managing Director (Secretary) Hosne Ara, Public-Private Partnership Authority (PPPA) Chief Executive Officer (Secretary) Sultana Afroz and BIDA Director (Registration and Incentives – Foreign Industry) Shah Mahboob offered featured presentations at the function.
Source: Textile Today
A US lobby group which represents firms including Amazon.com and Walmart has urged India not to tighten foreign investment rules for e-commerce companies again, according to a letter seen by Reuters.
India is considering revising the rules after traders in the country accused Amazon’s Indian division and Walmart’s Flipkart of creating complex structures to bypass investment regulations, Reuters reported this month.
The US companies deny any wrongdoing.
India only allows foreign e-commerce players to operate as a marketplace to connect buyers and sellers but local traders say the US giants promote select sellers and offer deep discounts, which hurts business for smaller local retailers.
In 2018, India changed its foreign direct investment (FDI) rules to deter foreign firms offering products from sellers in which they have an equity stake.
The government is now considering tightening those rules again to include sellers in which a foreign e-commerce firm holds an indirect stake through its parent, Reuters reported.
Such a change could hurt Amazon as it holds indirect stakes in two of its biggest online sellers in India, Cloudtail and Appario.
Citing the Reuters story in a Jan 28 letter, the US-India Business Council (USIBC), part of the U.S. Chamber of Commerce, urged the Indian government not to make any more material restrictive changes to e-commerce investment rules.
“Any further changes in FDI rules would limit e-commerce firms from leveraging their scale,” USIBC said in the letter seen by Reuters.
USIBC also asked India’s Department for Promotion of Industry and Internal Trade (DPIIT) to engage in substantive consultation with companies on e-commerce regulation.
USIBC and DPIIT did not respond to a request for comment.
The government is also considering prohibiting online sales by a seller who, for example, purchases goods from an e-commerce entity’s wholesale unit, or any of its group firms, and then sells them on the entity’s websites, Reuters has reported.
The 2018 rule changes soured relations between India and the United States, as Washington said the policy changes favoured local e-commerce retailers over US companies.
Industry sources told Reuters on Friday that the prospects of such frequent policy changes in India have alarmed Amazon, which has committed $6.5 billion in investments in India, and Walmart, which invested $16 billion in Flipkart in 2018.
The USIBC letter said “investments require reasonable policy predictability and fair treatment”.
“USIBC is concerned that material changes to the FDI policy creates uncertainty and impacts investor confidence, as well as business continuity of existing investments,” it said.
Amazon declined to comment on the USIBC letter. Walmart and Flipkart did not respond to requests for comment.
After the Reuters story was published last week, a group representing millions of brick-and-mortar retailers in India said it has received government assurances that policy changes were in the offing.
Source: The Financial Express Bangladesh
China’s Jack recently organised its first online overseas end-user conference dedicated to the Indian market in 2021.
The conference was conducted for the members of Noida Apparel Export Cluster (NAEC).
The conference kicked off with the speech of Jimmy, General Manager, Jack who addressed all the members associated with NAEC, the President of NAEC Lalit Thukral and Jack’s agent.
After Jimmy’s speech, Lucian, Sales Manager of North India, gave a comprehensive overview of Jack’s latest technologies such as IoT, new automated machines and multiple function machines.
After getting the general idea of these products, the association members got a virtual machine demonstration through a moving camera lens and got to know about the latest technologies of Jack better.
It’s worth mentioning here that COVID-19 has caused heavy blows on the apparel businesses but, as Jack claims, the Group didn’t stop exploring new opportunities in year 2020 when Jack’s overseas team organised hundreds of online broadcasts and conferences.
“Even though the overseas sales teams were not able to travel in the market, they still made their efforts virtually to promote new technologies and shared garment manufacturing knowledge to help customers improve their efficiency,” said Jack’s team.
Source: Apparel Online
