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MARKET WATCH 05TH APRIL 2021

NATIONAL

INTERNATIONAL

Indian man-made fibre garment exports expected to grow in 2021: TexPro

The exports of garments, made using man-made fibre (MMF), from India are expected to move up in 2021 with government support and efforts of industry experts. It is expected to surge to $430.66 million in June 2021 with a CAGR of 8.00 per cent from the $271.39 million in December 2020, according to Fibre2Fashion's market analysis tool TexPro.

Likewise, the average monthly exports of MMF garments from India are expected to grow to $358.36 million in the first half of 2021 with a rise of 39.88 per cent from the monthly average of 2020.

The MMF garments exports of India has been recovering with considerable growth rates after the ease in impact of COVID-19. The Government of India (GoI) has been working on the strategies to boost the exports of the country which can sustain the country’s economy in this difficult time of pandemic. The GoI and industry stakeholders have targeted to achieve approximately 10.00 per cent market share in the global market of MMF garments.

The MMF garments exports of the country significantly dropped in 2020 with the impacts of the COVID-19 pandemic and slower pace of global economy. The monthly average MMF garments export of India has declined to $256.18 million in 2020. The sudden plunge has been observed in April 2020 to $32.22 million from the $277.16 million in March 2020 with a significant fall of 88.38 per cent.

With the combined effort of GoI and the industry personnel, an export level has been achieved in July 2020 with value of $258.40 million, a seven-folded growth in just three months. It has shown the consistent rise till December 2020 except for the fluctuation between September 2020 and November 2020.

In February 2021, GoI has planned to extend the benefit of the Scheme for RoDTEP (Remission of Duties and Taxes on Exported Products) to all export goods. It has taken effect retrospectively from January 1, 2021.

The GoI has also given approval to Production-Linked Incentive (PLI) scheme which is applicable to the segments such as MMF and technical textiles and has allotted ₹10,683.00 crore over the period of five years. Under PLI scheme, seven mega textiles parks would be created in the country which can increase the MMF garment production and export. The Indian textiles ministry has focused on 40 HS lines of MMF garments under the PLI.

According to the garment exporters, the major constraints in the exports of the MMF garments are long lead times and availability of quality MMF fabrics. After the prolonged meetings and discussions, the fabric producers have assured the supply of quality fabrics as they claimed that they are ready with adequate and quality machinery and technology of international standards.

The PLI scheme would help raw material producers to compete with the producers from neighbouring countries with lesser tariff barriers. GoI has focused on infrastructure highways, railways and ports, which will improve logistics and will cut the cost of doing business.

The reduction of custom duty on nylon also can revamp the MMF garments exports. According to industry experts, the anti-dumping duty on MMF raw materials must be removed. The prominent budget provision has been made for MSME (Micro, Small and Medium Enterprises) sector with ₹15,700.00 crore in the coming fiscal. GoI has allocated a budget of ₹1,624.00 crore to the shipping lines to boost the trade. The subsidy support will be given to Indian shipping companies in global tenders floated by various ministries and CPSEs (Central Public Sector Enterprises) which will bring down the shipping costs.

Source: Fibre2Fashion News

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RoDTEP Scheme: Revenue Dept vetting Pillai panel’s report on refund rates

The Department of Revenue is vetting the duty refund rates for exporters proposed by the GK Pillai Committee in its full report on the new Remission of Duties and Taxes on Exported Products (RoDTEP) scheme and will take a call on whether to go with the suggested rates or lower them to keep expenditure in check, sources tracking the development have said.

“As long as the Department of Revenue sticks to the refund rates that have been proposed by the GK Pillai Committee, the Commerce Department should not have a problem in supporting and notifying them, as these have been scientifically calculated. In that case, the exporters’ wait for the rates would soon be over,” an official source told BusinessLine.

The RoDTEP rates have been calculated by the Pillai Committee based on all input taxes paid by exporters, including embedded taxes, that have not been refunded under any other scheme.

However, if the Department of Revenue decides to lower the rates, there is a possibility that the Commerce Department may have issues with it, the official added.

RoDTEP Vs MEIS

Exporters are aware that under the RoDTEP scheme, most sectors would not be eligible for a refund as high as the one they were enjoying under the Merchandise Exports from India Scheme (MEIS) that was discontinued from January 1, 2021 (simultaneously with the implementation of RoDTEP). However, they don’t want cuts beyond the rates suggested by the Pillai Committee.

“Exporters understand that RoDTEP is not the same as MEIS which was basically an incentive scheme and, therefore, an export subsidy disallowed by the WTO. But they want all their input levies to be refunded fully under the scheme, as recommended by the Pillai committee,” the official said.

Under the MEIS, exporters from a number of sectors would get refunds ranging from 2-4 per cent of the value of the exported goods. However, this calculation was not based strictly on input taxes paid.

The Pillai Committee’s suggested refund rates may be lower than the MEIS rates, but it may still be difficult for the Revenue Department to implement them within the budgeted ₹13,000 crore. The Finance Ministry had initially projected that the revenue foregone towards the scheme would be ₹50,000 crore annually.

“The funds could be increased if the Finance Ministry wishes,” the official said.

More funds needed

Exporters body FIEO wants the government to provide enough funds for RoDTEP and announce the rates soon. “RoDTEP is a scheme that is here to stay for some time. It is one of the few instruments available to support exports. Under all pragmatism, one should look into that aspect,” said Ajay Sahai, Secretary General, FIEO.

With exports of goods estimated to fall by 7.4 per cent (year-on-year) to $289.92 billion in fiscal year 2021, and outlook for the new fiscal still being uncertain due to the rising wave of the Covid-19 pandemic, exporters have been asking the government for more support.

Source: The Hindu Business Line

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Surat-based company conducts free COVID-19 vaccination drive for employees

A Surat-based company has launched a free one-week-long COVID-19 vaccination drive for its employees on Saturday.

Major textile industrialist of Surat city, Sanjay Saravagi has started a vaccination drive that gives free vaccinations to all of his employees, a total of 6,000 employees. If they prefer not to be vaccinated they will be required to take RTPCR tests every 3 days to prove that they are not COVID-19 infected.

Sanjay Saraogi, Director of the company said, "COVID-19  is a very dangerous disease, the whole country is facing the brunt of it. I appreciate the Indian government that has taken the vaccination drive to all parts of the country. We have started a vaccination camp to give free vaccines to all of my 6,000 employees and the drive is going well."

"They either have to take the vaccine or get tested after every 3 days or else they will not be allowed to work. Hopefully, it would encourage all to get vaccinated," said the company director.

Alok Rai a worker said, "I have been working in this company for 10 years. From today the vaccination drive starts in our company. All the workers in our company can get the vaccine and we have been maintaining all the COVID-19 protocols. In the days ahead may my company flourish and may everyone here be happy."

Source: The Economic Times

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Insolvency scheme: Govt, regulator finalising pre-pack framework, MSME scheme

The government and the regulator are in the process of finalising a so-called pre-pack insolvency scheme, while a special framework for micro, small and medium enterprises (MSMEs) is almost ready, sources told FE.

As authorities brace for a potential rise in bad loan cases with the lifting of a suspension of insolvency proceedings against Covid-related defaults on March 25, the schemes are being tailored to incentivise early identification of stress, facilitate fast resolution and reduce costs and litigation.

“Work is on. Stakeholders’ comments on pre-pack insolvency scheme have been obtained. Both the schemes could be notified soon,” a source said. The Insolvency and Bankruptcy Code (IBC) needs to be amended for the pre-pack scheme.

Under the special framework for MSMEs, only the debtors could be allowed to trigger their own bankruptcy process, albeit with the approval of unrelated financial creditors who account for at least 25% of outstanding claims. Creditors can still trigger insolvency proceedings against MSMEs, but only through the usual corporate insolvency resolution process (CIRP) under extant rules.

The pre-pack insolvency scheme offers greater leeway to the honest promoter, who will retain the control of their firm during the insolvency process. In fact, he will get to submit resolution plans first. This will then face a Swiss challenge, a move that is expected to lead to more resolutions and less litigation.

As part of its measures to soften the Covid-19 blow, the government had last year proposed to bring in a special framework for these small businesses. At the same time, it wanted to firm up a pre-pack scheme that will yield resolution fast before the stressed firm sees substantial value erosion.

The pre-pack scheme will be based on the report submitted by a panel headed by Insolvency and Bankruptcy Board of India chairman MS Sahoo. The panel has suggested that this scheme be available for any stress — pre-default and post-default. The implementation of the scheme can be phased, starting with resolution of defaults from Rs 1 lakh to Rs 1 crore and Covid-related defaults; this is to be followed by defaults above Rs 1 crore, and then defaults from Rs 1 to Rs 1 lakh.

Under both the pre-pack scheme and the framework for MSMEs, the time limit for the resolution will also be drastically reduced. Market participants will get 90 days to submit resolution plans and the National Company Law Tribunal will have another 30 days to approve them. The IBC currently stipulates a maximum of 270 days for the completion of the entire CIRP.

Already, the central bank has warned that, under a severe stress scenario, banks’ gross non-performing assets (NPAs) may almost spike to as much as 14.8% by September 2021 from 7.5% a year before. In the Financial Stability Report released in January, the Reserve Bank of India said even under the baseline scenario, the NPA ratio may surge to 13.5% by September. This means chances of a rise in insolvency cases are for real.

Data available with the IBBI show, of the 1,942 ongoing cases as of September 2020, the resolution of as many as 1,442 has been dragging on beyond the mandatory 270 days. In many cases, analysts have attributed this delay to the legal hurdles posed primarily by defaulting promoters’ dogged pursuit to hold on to their companies. In fact, most of the large cases, including Bhushan Steel, Essar Steel and Bhushan Steel and Power, had witnessed inordinate delays due to litigations. The pre-pack scheme is expected to significantly minimise litigation.

Also, since MSMEs typically account for the largest chunk of these cases, a special framework will help them resolve stress better and faster, analysts reckon.

Similarly, under the MSME framework, several procedural requirements on issues, such as claims of creditors, may be simplified to make the entire process less rigorous. This is aimed at reducing the cost as well as time required for stress resolution. Firms with annual turnover of less than Rs 250 crore or investments less than Rs 50 crore will be covered under the new mechanism.

Source: The Financial Express

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INTERNATIONAL

No trade with India under current circumstances: Pakistan PM Khan Imran Khan

Prime Minister Imran Khan decided that Pakistan cannot go ahead with any trade with India under the current circumstances after holding consultations with key members of his Cabinet on importing cotton and sugar from the neighbouring country, a media report said on Saturday.

The prime minister after consultations on Friday instructed the Ministry of Commerce and his economic team to immediately take steps to facilitate the relevant sectors, value added, apparel and sugar, by finding alternative cheap sources of import of the needed commodities, the Dawn newspaper quoted sources as saying.

Various proposals have been presented to the Economic Coordination Committee (ECC) which considers these suggestions from an economic and commercial point of view. After consideration by the ECC, its decisions are presented to the Cabinet for ratification and final approval, the report said.

In the present case, a proposal was presented to the ECC to allow the import of cotton, cotton yarn and sugar from India keeping in view domestic requirements, it said.

With regards to the ECC decision to allow import of sugar, cotton and cotton yarn from India, Khan held consultations with key members of his Cabinet on Friday and decided that Pakistan could not go ahead with any trade with India under the current circumstances, it said.

The ECC had decided on commercial grounds to recommend these imports for the Cabinet’s consideration. While the decision was not on the formal agenda of the Cabinet meeting, the issue was brought up by Cabinet members and the prime minister instructed that the ECC’s decision be deferred and immediately reviewed, the report said.

The Cabinet headed by Prime Minister Khan on Thursday rejected the proposal of the high-powered committee to import cotton from India, with Foreign Minister Shah Mahmood Qureshi asserting that there can be no normalisation of ties until New Delhi reverses its decision in 2019 to revoke the special status of Jammu and Kashmir.

Pakistan’s U-turn on Thursday came a day after the ECC, under newly-appointed Finance Minister Hammad Azhar, recommended importing cotton and sugar from India, lifting a nearly two-year-long ban on its import from the neighbouring country amidst tensions over the Kashmir issue.

India has said that it desires normal neighbourly relations with Pakistan in an environment free of terror, hostility, and violence. India has said the onus is on Pakistan to create an environment free of terror and hostility.

India has also told Pakistan that talks and terror cannot go together and has asked Islamabad to take demonstrable steps against terror groups responsible for launching various attacks on India.

The ECC’s decision had raised hopes of a partial revival of Pakistan-India bilateral trade relations, which were suspended after the August 5, 2019 decision of New Delhi to revoke the special status of Jammu and Kashmir.

In May 2020, Pakistan lifted the ban on the import of medicines and raw material of essential drugs from India amidst the COVID-19 pandemic.

India’s move to revoke the special status of Jammu and Kashmir in 2019 angered Pakistan, which downgraded diplomatic ties and expelled the Indian High Commissioner in Islamabad. Pakistan also snapped all air and land links with India and suspended trade and railway services.

Source: The Financial Express

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World economy risks 'dangerously diverging' even as growth booms

The world economy is on course for its fastest growth in more than a half century this year, yet differences and deficiencies could hold it back from attaining its pre-pandemic heights any time soon.

The US is leading the charge into this week’s semi-annual virtual meeting of the International Monetary Fund, pumping out trillions of dollars of budgetary stimulus and resuming its role as guardian of the global economy following President Joe Biden’s defeat of “America First” President Donald Trump. Friday brought news of the biggest month for hiring since August.

China is doing its part too, building on its success in countering the coronavirus last year even as it starts to pull back on some of its economic aid.

Yet unlike in the aftermath of the 2008 financial crisis, the recovery looks lopsided, in part because the rollout of vaccines and fiscal support differ across borders. Among the laggards are most emerging markets and the euro area, where France and Italy have extended restrictions on activity to contain the virus.

“While the outlook has improved overall, prospects are diverging dangerously,” IMF Managing Director Kristalina Georgieva said last week. “Vaccines are not yet available to everyone and everywhere. Too many people continue to face job losses and rising poverty. Too many countries are falling behind.”

The result: It could take years for swathes of the world to join the US and China in fully recovering from the pandemic. By 2024 world output will still be 3% lower than was projected before the pandemic, with countries reliant on tourism and services suffering the most, according to the IMF.

The disparity is captured by Bloomberg Economics’ new set of nowcasts which shows global growth of around 1.3% quarter on quarter in the first three months of 2021. But while the US is bouncing, France, Germany, Italy, the U.K. and Japan are contracting. In the emerging markets, Brazil, Russia and India are all being clearly outpaced by China.

For the year as whole, Bloomberg Economics forecasts growth of 6.9%, the quickest in records dating back to the 1960s. Behind the buoyant outlook: a shrinking virus threat, expanding US stimulus, and trillions of dollars in pent-up savings.

Much will depend on how fast countries can inoculate their populations with the risk that the longer it takes the greater the chance the virus remains an international threat especially if new variants develop. Bloomberg’s Vaccine Tracker shows while the US has administered doses equivalent to almost a quarter of its people, the European Union has yet to hit 10% and rates in Mexico, Russia and Brazil are less than 6%.

“The lesson here is there is no trade-off between growth and containment,” said Mansoor Mohi-uddin, chief economist at the Bank of Singapore Ltd.

Former Federal Reserve official Nathan Sheets said he expects the US to use this week’s virtual meetings of the IMF and World Bank to argue that now is not the time for countries to pull back on assisting their economies.

It’s an argument that will be mostly directed at Europe, particularly Germany, with its long history of fiscal stringency. The EU’s 750 billion-euro ($885 billion) joint recovery fund won’t start until the second half of the year.

The US will have two things going for it in making its case, Sheets said: A strengthening domestic economy and an internationally respected leader of its delegation in Treasury Secretary Janet Yellen, no stranger to IMF meetings from her time as Fed Chair.

But the world’s largest economy could find itself on the defensive when it comes to vaccine distribution after accumulating massive supplies for itself. “We will hear a hue and cry emerge during these meetings for more equal access to vaccinations,” said Sheets, who is now the head of global economic research at PGIM Fixed Income.

And while America’s booming economy will undoubtedly act as a driver for the rest of the world by sucking in imports, there could also be some grumbling about the higher market borrowing costs that the rapid growth brings, especially from economies which aren’t as healthy.

“The Biden stimulus is a two edged sword,” said former IMF chief economist Maury Obstfeld, who is a now senior fellow at the Peterson Institute for International Economics in Washington. Rising US long-term interest rates “tighten global financial conditions. That has implications for debt sustainability for countries that went deeper into debt to fight the pandemic.”

JPMorgan Chase & Co. chief economist Bruce Kasman said he hasn’t seen such a wide gap in 20 to 25 years in the expected out-performance of the US and other developed countries when compared with the emerging markets. That’s in part due to differences in distribution of the vaccine. But it’s also down to the economic policy choices various countries are making.

Having mostly slashed interest rates and started asset-purchase programs last year, central banks are splitting with some in emerging markets beginning to hike interest rates either because of accelerating inflation or to prevent capital from flowing out. Turkey, Russia and Brazil all raised borrowing costs last month, while the Fed and European Central Bank say they won’t be doing so for a long time yet.

Rob Subbaraman, head of global markets research at Nomura Holdings Inc. in Singapore, reckons Brazil, Colombia, Hungary, India, Mexico, Poland, the Philippines and South Africa all risk running overly-loose policies.

“With major developed market central banks experimenting on how hot they can run economies before inflation becomes a problem, emerging market central banks will need to be extra careful to not fall behind the curve, and will likely need to lead, rather than follow, their developed market counterparts in the next rate hiking cycle,” said Subbaraman.

In an April 1 video for clients, Kasman summed up the global economic outlook this way: “Boomy type conditions with quite wide divergences.”

Source: the Business Standard

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UK's Next joins list of clothing retailers pausing Myanmar orders; Cambodia among those to profit from move

Next CEO says move is "big step" * Orders switched to Bangladesh, Cambodia and China * Primark, H&M, and Benetton have also paused orders

LONDON, April 4 (Reuters): Britain's Next has joined a growing list of European clothing retailers suspending new production orders with factories in Myanmar in the wake of February's military coup.

Myanmar has been rocked by protests since the army overthrew the elected government of Nobel laureate Aung San Suu Kyi on Feb. 1 citing unsubstantiated claims of fraud in a November election.

At least 536 civilians have been killed in protests, 141 of them on Saturday, the bloodiest day of the unrest, according to the Assistance Association for Political Prisoners (AAPP).

Myanmar is known globally for its yarn, fabric and textile products, and its garment industry is a key source of jobs.

"We're not placing any more orders at the moment, that is a big step," CEO Simon Wolfson told Reuters after Next reported annual results.

"We don't source a lot of our product from Myanmar but most of the stock that we were sourcing from Myanmar...we have alternatives in place already for that stock in other countries."

Next's orders previously going to Myanmar have now been split between Bangladesh, Cambodia and China.

Wolfson said Myanmar provided less than 5% of Next's total stock.

On Wednesday, Associated British Foods said its Primark fashion business had paused orders in Myanmar, following similar moves from Sweden's H&M, the world's second-biggest fashion retailer, and Italy's Benetton Group.

On Monday Italian clothing retailer OVS said it would keep its "limited presence" in Myanmar but would stop its business with suppliers acting in a discriminatory way towards workers involved in rallies against the country's junta.

Britain's Marks & Spencer said it is continuing with its booked orders but keeping future orders under review.

Separately on Thursday, Britain sanctioned a Myanmar conglomerate for its close links to the military leadership which Foreign Secretary Dominic Raab said was wantonly killing innocent people including children.

Source: The Star

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Experts call for ease of doing business

The private sector has a critical role in the growth of the economy.  The Punjab government is looking forward to receiving proposals from the business community prior to finalising the provincial budget for the next financial year.

Chief Executive Officer  of the  Punjab Board of Investment and Trade (PBIT),  Dr Erfa Iqbal   said this during a pre-budget meeting on better business regulations,  jointly held by Sustainable Development Policy Institute (SDPI) and National Textile University Faisalabad.

Dr Erfa added further that all sectors of the economy need to come up with specific suggestions about taxes, business facilitation, access to infrastructure, investments, and other related aspects of doing business.

National Textile University Rector, Dr Tanveer Hussain emphasised that the prosperity of a country is dependent on industrialisation. In Pakistan, textile industry plays a pivotal role despite the turn out of the exports has been low during last ten years.

He said that we need to focus on value addition and reliance on renewable energy in addition to improving research and  development.

Small and Medium Enterprise Development Authority Regional Coordinator, Shaban Khalid was of view that ease of doing business in Pakistan is required and thus, SMEDA is playing a crucial role in this arena. All Chambers of Commerce and Industries are requested to highlight their capacity building needs, he added.

Joint Executive Director SDPI, Dr Vaqar Ahmed  highlighted the fact that the upcoming federal budget will be formulated under difficult circumstances as government’s resources are overly stretched due to pandemic-related spending. Therefore, the private sector needs to play a role in building back better.

“Textile sector will play an important role in supporting Pakistan’s balance of payments and its exports will be much needed to help post-pandemic economic recovery,” Dr Ahmed said and added further that a timely regulatory impact assessment could then help rationalise various obsolete regulations, which are leading to high costs for the businesses.

Faisalabad Chamber of Small Traders Chief Executive Officer, Mian Zafar Iqbal was of opinion that the fear of harassment in the business circle by tax authorities can only be redressed by more comprehensive public private dialogue.

Head of Association of Chartered Certified Accountants Pakistan, Sajjeed Aslam  was of view that we need to look at the entire value chain of textile, which starts from agriculture. Moreover, the focus should be on developing a framework while moving from short term to a medium, and longer-term reform plan.

Institute of Chartered Accountants of Pakistan Council member,  Muhammad Awais,  on the occasion opined that the taxation structure in Pakistan is very complex for industries, particularly for SMEs. He said that reduction of tax is required as in some cases, 40-50 per cent  of incomes are being paid in taxes.

Head of Policy Solutions Lab at SDPI, Dr Sajid Amin  was of view that the economic recovery is largely dependent on fiscal stimulus and support to SMEs.

Source: The Nation

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Pak PM Khan warns against 'extremely' dangerous third wave of coronavirus

Prime Minister Imran Khan said on Sunday that the third wave of the coronavirus was extremely dangerous in comparison to the previous two waves, warning that his government will be forced to impose major restrictions if people will not follow the standard operating procedures (SOPs).

Khan, who tested positive last month for the disease which is now raging in the country, was addressing the nation before sitting for a live question-answer session, the second such interaction with masses in recent months.

We have so far been protecting our people, we are not imposing a lockdown (or) closing our factories. We are only imposing minor restrictions so that this wave doesn't spread rapidly. But if this spreads, it will have a very negative impact and we will be forced to take steps," he said.

He said that people were not taking precautions while going out in public which could have dangerous implications and speed up the spread of the virus.

He defended his government for not imposing strict lockdown and instead pursuing the policy of smart lockdowns, saying shutting down the economy would increase financial hardships.

He said no one was sure how long the third wave would last but its impact can be mitigated by wearing masks.

Prime Minister Khan, 68, tested positive for the virus on March 20. His wife Bushra Bibi also tested coronavirus positive the same day. A week later, President Arif Alvi and Defence Minister Pervez Khattak also tested positive.

Meanwhile, the National Command and Operation Centre (NCOC) after reviewing the countrywide situation, banned the inter-provincial transport for two days a week (Saturday and Sunday) from April 10 to 25. But goods, freight, medical and other emergency services will be exempted from the ban.

Pakistan registered 5,020 new cases in the last 24 hours, taking the national tally to 687,908. Another 81 people died and with it the number of COVID-19 deaths reached 14,778.

Education Minister Shafqat Mahmood said that the NCOC would meet on April 6 to decide about the opening of schools.

The NCOC had issued guidelines for Ramadan, banning the entry of people older than 50 years and adolescents in mosques for prayers.

Source: the Business Standard

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