• CCI AD FROM 5th April 2021




Cotton sector divided over prospects of higher acreage

The cotton sector is split over its view on the prospects for the fibre crop next crop year (July 2021-June 2022) with a section saying that the area under the crop might increase, while the other expressing pessimism over the prospects of a higher acreage.

This is despite growers getting higher than minimum support price (MSP) for most part of the current season and States such as Telangana declaring their intention to bring more acreage under the fibre crop.

“The area under cotton will increase next season since the kapas (raw cotton) rate is ruling at ₹6,500-6,600 a quintal. That is almost 15 per cent higher than the MSP,” said Cotton Association of India President Atul Ganatra. For this season, the Centre has fixed the MSP for medium staple cotton at ₹5,515 a quintal.

“Chances of a higher acreage in cotton are bright as it is the most attractive cash crop,” said K Selvaraju, Secretary-General, Southern India Mills Association – a representative body of the textile industry in the southern region.

Alternative crops

The United States Department of Agriculture (USDA), in its annual outlook, said that the area under cotton could remain stagnant or drop two per cent from about 13 million hectares (mh) this season.

During the current season, area under cotton dropped to 12.96 mh from 13.37 mh last season, according to the Committee on Cotton Production and Consumption (CCPC). “Farmers are expected to shift to alternative crops such as soyabean and paddy due to better prices,” it said.

Rajkot-based raw cotton, yarn and cotton waster trader Anand Poppat said that there were chances of farmers switching over to crops such as groundnut since returns from these crops were higher compared to cotton. “If farmers grow groundnut, they can cultivate another crop too like wheat,” he said.

“Also, Telangana Chief Minister (K Chandrasekhara Rao) has said that this year cotton would be grown on eight mh. So, Telangana is expected to overtake Maharashtra in cotton acreage and become number two in cotton production after Gujarat,” CAI’s Ganatra said.

The CAI President said that as per information the trade has received, sowing of cotton would increased in Gujarat and Rajasthan, besides Telangana. Overall, the area could increase by eight to 10 per cent.

Poppat said the area under cotton in the Saurashtra region could increase next season but the acreage could drop in other parts of Gujarat, Maharashtra and Madhya Pradesh. “If there is an increase in the area under cotton, it could be not more than five per cent,” he said.

The USDA said that the area in North India, comprising Punjab, Haryana and Ganganagar tracts of Rajasthan would increase by two per cent in view of prevailing market prices.

In Maharashtra, the area would drop two per cent as farmers could shift to pulses in view of kapas prices ruling around MSP levels only, while in Madhya Pradesh demand for edible oils could see growers switching over to soyabean.

The USDA expects the cotton area in Telangana to drop 11 per cent and in Karnataka, it could slip five per cent.

Higher yield

However, the US agency said that production could be higher next season at 380 lakh bales (of 170 kg each) as the yield could increase by five per cent to 496 kg/ha in view of the projection of a normal monsoon.

The projection of a higher production next season is against estimates of 370 lakh bales output this season. According to the CCPC, output this season is expected to be 371 lakh bales compared with 365 lakh bales.

The CAI has projected production to be unchanged this season at 360 lakh bales this season from the last one.

“If we are getting a big cotton crop next season, it is good for Indian farmers, ginning factories and spinning mills. A big crop is a win-win situation for the entire textile chain,” Ganatra said.

Record carryover stocks

Besides higher production, the cotton industry has also carried over record stocks from last season. According to CCPC, a record 120.95 lakh bales of cotton had been carried over to this season, while for the next season, the carryover stock could be 97.95 lakh bales.

The USDA does not visualise any problem with regard to demand for Indian cotton, both abroad and in the domestic market.

“The global recovery in consumption will fuel strong exports of cotton fibre and yarn. In addition, domestic consumption is likely to rise as COVID-19 measures are relaxed and consumers increase their in-person shopping,” the USDA said.

For the current season, India has exported 55 lakh bales of cotton compared with 50 lakh bales last season.

According to Cotton Corporation of India Chairman-cum-Managing Director PK Agrawal, cotton exports could top 75 lakh bales this season on account of good shipments to Bangladesh, Vietnam and China. Poppat said Indian cotton was also finding its way to Turkey.

Competitive price

A major reason for cotton exports topping last year’s total shipments is that it has been priced competitively compared to other destinations such as the US, Brazil, West Africa and Australia.

Currently, Indian cotton is offered for exports at ₹45,300-45,700 per candy (of 356 kg). In contrast, cotton in New York is ruling at 79.90 cents a pound (₹47,050 a candy). Usually, cotton from Australia, US and West Africa is sold at a premium to New York prices.

Domestic consumption could increase over five per cent next season to 324 lakh bales from this season, the USDA said. The demand outlook was positive in view of mass vaccinations across the country, it added.

Source: The Hindu Business Line

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Increase in yarn rates leaves garment inc in knotty situation

The rapid rise in the rates of yarn is hitting the garment and textile industry hard, as it has led to an increase in their production cost. According to businessmen, the rate has increased by 30% to 40% and if both the Centre and the state government did not intervene at the earliest, they would be in dire straits.

Hemant Abbi, executive member of the Moti Nagar United Factory Association, said, “The rate of yarn used in shawl manufacturing has increased by more than Rs 150 per kg in the past few months. Acrylic yarn, which is mostly used by our industry, earlier cost Rs 240-Rs 250 per kg, but now its price has shot up to Rs 370 per kg. Despite such huge increase in our cost of production, we have not increased the rates of our products and are absorbing the losses rather than passing them on to our customers. Our repeated attempts to convince the yarn manufacturers to drop the rates have failed. They blame the rise on the increase in the rate of the raw material used by them, but there is no evidence to prove it. Now it is up to the Central and the state governments to help us, else our industry will be destroyed.”

Sanju Dhir, chairman of Ludhiana Woollen Manufacturers’ Association, said, “The average increase in the rates of yarns has been 30-40%, while there are some yarns that have witnessed a price increase of 100%. This is an unprecedented situation for our industry, as earlier too the rates increased, but after a while they came down. But this time, the rates have only been increasing for several months. We have written a letter to the ministry of textiles, seeking intervention.”

Source: The Times of India

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Government doesn’t expect rush of MSME insolvency cases after 'fast track window' ordinance

The government does not expect a rush of insolvency cases from micro, small and medium enterprises (MSMEs) after it promulgated an ordinance to open a special fast track window for them.

The ministry of corporate affairs — which will set the floor for initiating cases under “pre-packaged” insolvency — and the Insolvency & Bankruptcy Board of India (IBBI) are expected the notify the regulations for initiating insolvency resolution under the new scheme, sources told TOI.

While the default floor for corporate insolvency resolution was increased from Rs 1 lakh to Rs 1 crore last year under the Insolvency and Bankruptcy Code, in case of MSMEs the threshold will be set lower with the maximum amount of default capped at Rs 1 crore.

“Only serious entrepreneurs facing genuine problems due to the special situation will have the opportunity to use the scheme meant for MSMEs, especially because banks will also need to have comfort,” corporate affairs secretary Rajesh Verma told TOI.

He said in a large and diverse country such as India, ‘a one size fits all approach’ may not serve the requirements. “That is why there is a framework within a framework. There are enough safeguards to ensure that only the genuine needs are met,” Verma said.

He also said apart from aiding resolution, a key thrust was job preservation in MSMEs. The scheme will be available to around seven lakh MSME businesses that are registered under the Companies Act, either as corporate entities or as limited liability partnership firms.

The law comes with stiff penalties too in case of violations and frauds, including a possible jail term.

Source: The Economic Times

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Hope Floats For India-Pakistan Trade Developments

After almost two years, there was excitement among the advocates of India-Pakistan trade. Developments such as ceasefire along the Line of Control, exchange of peace overtures, and trade ban lift created an impression that relations between India and Pakistan are moving towards normalisation.

The mood changed in less than 24 hours when the decision to allow imports of limited commodities was rejected, in a meeting chaired by Prime Minister Imran Khan on April 1, 2021.

The trade relations between India and Pakistan had changed drastically after the militant attack in the Pulwama district in February 2019, post which India withdrew the status of Most Favoured Nation (MFN) for trade granted to Pakistan in 1996, imposed a 200 per cent duty hike, suspended trade across the Line of Control (LoC) in Jammu and Kashmir region and Pakistan suspended all economic ties with India after the J&K Reorganization Bill in August that year.

Pakistan’s proposal to resume trade arose out of increasing prices and decreasing yield of cotton and sugar in the country. While Pakistan grows cotton domestically, majority of its cotton imports came from India, for example, in 2018, India accounted for 40 per cent of Pakistan’s cotton imports. After the trade ban between India and Pakistan in 2019, Pakistan began sourcing cotton and cotton yarn from the US, Vietnam, and Brazil, thereby witnessing a rise in cotton prices, amid low production and higher import tariffs. One of Pakistan’s major imports from India was cotton yarn (HS Code 520524), the import tariff on this product category is 11 per cent from the US and Vietnam, compared to 5 per cent from India.

The textile industry is one of the major industrial sectors of Pakistan, accounting for 60 per cent of the country’s total exports. Pakistan’s government targets raising the country’s textile and clothing exports from USD 13.5 billion in 2018 to USD 25 billion by 2025. Expensive cotton can impact Pakistan’s competitiveness in cotton-based readymade garments. This matters even more with the China Pakistan Free Trade Agreement (CPFTA2) in the background.

Under CPFTA2, China has eliminated tariffs on 313 priority tariff lines of Pakistan’s export interest. Of the 313 high-priority products that Pakistan can now export duty free to China, 130 are from the textiles and clothing sector. For Pakistan to fully reap the benefits of the CPFTA2, access to low-priced cotton is essential to maintain export competitiveness for cotton-based readymade garments globally.

After textiles, the sugar industry in Pakistan is the largest agro-based industry, with an annual production of 5.5 million metric tonnes.

In 2019-20, the global sugar production stood at 167 million metric tonnes, 18 per cent of which is constituted by Brazil, 16 per cent by India, and 3 per cent by Pakistan making it the eighth largest producer and consumer of sugar. After Pakistan banned trade with India, it started importing sugar from Brazil, China, and Thailand, among others, leading to a surge in prices and restricted supply.

Before February 2019, cotton and sugar were the top items exported by India to Pakistan, and the imports of fruits, vegetables, and nuts from Pakistan constituted a significant share of India’s total imports from Pakistan.

Upsetting the cross-border trade dynamics can often have more repercussions than foreseen. Trade disruptions often cause fluctuations in the price of goods that would have otherwise been kept under check by the balancing out mechanisms of international trade. For example, gypsum, imported from Pakistan, was being used in India as well as in Nepal as raw material for their cement plants.

To avoid empty backhauling, trucks carrying these consignments brought back other products such as yarn from mills in Uttar Pradesh to Punjab. In the absence of gypsum trade, the per-kilogram freight rate of trucks transiting from Uttar Pradesh to Punjab had increased almost two-fold. Moreover, the numerous spinning mills in Indian Punjab lost access to markets in Pakistani Punjab that provided a valuable consumption base less than 300km away. With Pakistan deciding to completely suspend bilateral trade, exports of cotton from India to Pakistan were affected the most, eventually hurting Pakistan’s textile industry.

Additionally, there is a hidden human cost of suspending any economic activity. According to our research, Unilateral Decisions and Bilateral Losses by Afaq Hussain and Nikita Singla, more than 50,000 people in Amritsar were directly affected because of their breadwinners’ dependence on bilateral trade. A decision to lift the trade ban will not only help stabilize prices of trade-able commodities, but also restore employment for people in the border areas of Wagah and Attari.

The Covid-19 pandemic has plunged into recession economies across the globe, including those of India and Pakistan. While some of the pandemic-induced drop in growth and trade is outside the control of any nation, an overall trade policy framework between India and Pakistan is crucial for addressing their trust deficit and misapprehensions on an economic front. This backed with political inclination on both sides, reflected in small beginnings (like India withdrawing 200 per cent duty hike and Pakistan restarting trade even if for limited commodities), could be called a beginning to good times.

Source: The Outlook Newsletter

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Cotton USA offering 5 solutions to spinners for achieving higher efficiency, reducing costs and assuring optimum quality

Cotton USA, leading U.S. cotton fiber promoter and manufacturer of cotton products, arranged a technical seminar on ‘Driving Long Term Profitability for Mills and Manufacturers with Cotton USA Solutions’ on 31st March 2020 at Radisson Blu Water Garden Hotel in the Capital.

This program was aimed to widely introduce ‘Cotton USA Solution’ a cotton consultancy service to uphold the next level of business transformation for greater profitability, improved productivity and the latest techniques by Cotton Council International (CCI).

Around 200 stakeholders from different factories, brands, technology providers and cotton specialists were present at the event.

The event was organized in 2 sessions. In the first session, Ali Arsalan, Managing Director of Atiya Consulting and CCI Consultants and Representative in Bangladesh delivered the welcome speech and hosted the whole event; Bruce Atherley, Executive Director of CCI gave the latest updates on Cotton Council International; US Cotton Trust Protocol (USCTP) News by Stephanie Thiers-Ratcliffe, Director (Brand and Retails) of CCI; COTTON USA Solutions + Mill Mastery Course Introduction by Chris Faerber, Member of CCI Technical Team and Dr. Rubana Huq, President of BGMEA also joined in the program virtually and shared her remarks in the seminar.

Cotton USA is proudly offering the following solutions to the spinning millers for achieving higher efficiency, reducing costs and assuring optimum quality-

  • 1:1 Mill Consults
  • Mill Studies
  • Mill Exchange Program
  • Technical Seminars
  • Mill Mastery™ Courses

An expert pool of CCI technical team combining from different countries is assuring all these solutions to the factories by connecting virtually or physically. Currently, Bruce Atherley, Executive Director of CCI (from the USA) is leading this 10 members, technical team.

Bangladeshi spinning millers who use 50% cotton of the total capacity from Cotton USA, will get US cotton licensees and can enjoy these services as complimentary. The rest of the mills also can be benefited from this service with a license which will cost 500$ per year.

In the second session, leading technology providers and technical experts joined in the session and shared their views on different technological development and technical issues that could help Bangladeshi Cotton Spinners for spinning mills efficiency and further business growth.

In the session following presentation has been elaborately shared- ‘Spinning Mill Automation Increases Spinning Mill Efficiency’ by Gerd Moch, Key Account Manager of Saurer; ‘Think Quality™ from Fiber to Yarn’ by Oswald Baldischwieler, Executive Vice President (Textile Technology) of Uster Technologies; a data-driven Case Study on ‘Yueda Textile Mills’ by Roger Gilmartin, Managing Director of Triblends Consultants Ltd. and ‘The Barriers to Profitability- The CCI Experience including Profitability Model’ Joerg Bauersachs, Head of CCI Technical Team.

The closing remarks of such a knowledge-sharing session were delivered by CCI Bangladesh representative Ali Arsalan and then his teammates Jamil Ansari invited all the valued attendees to join in the networking session.

Cotton Council International (CCI) has 60 years of experience promoting U.S. cotton fiber and products to trade and consumers.

Source: Textile Today

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Expectation of export growth

Strong recovery

According to the Ministry of Industry and Trade, the first quarter saw a strong recovery in import and export activities. Specifically, total import and export turnover in the first quarter was estimated at US$152.65 billion, up 24.1% over the same period last year.

Of which, export turnover of goods reached US$77.34 billion, up 22%, while import turnover reached US$75.31 billion, up 26.3%, resulting in a trade surplus of US$2.03 billion. The major contributor to the export growth in the first months of the year was the foreign invested sector, with a turnover ratio of 76.2%. On the other hand, the domestic economic sector also grew well at 4.9%, reaching US$18.3 billion.

The export turnover of almost all products in the processing industries has also grown well. Of which, telephones and accessories reached the highest turnover of US$14.08 billion, up 9.3%, followed by exports of computers, electronic products and components with US$11.96 billion, up 31.3% over the same period last year. In particular, the group consisting of machinery, equipment, tools and spare parts surpassed textiles and garments to rank third in export turnover, reaching US$9.1 billion and up 77.2% compared to the first quarter in 2020.

In addition, the export turnover of many other items also increased sharply, such as wood and wood products increasing by 41.5%, means of transport and spare parts by 20%, and iron and steel of all kinds increasing by 65.2% over the same period last year. In particular, textile and garment exports only achieved a modest growth of 1.1% (US$7.18 billion), but also showed signs of recovery.

Export data also shows that enterprises are making effective use of the now-signed free trade agreements (FTAs). Since the EU - Vietnam FTA (EVFTA) took effect in August 2020, the growth rate of exports to the EU has gradually improved and increased to 18% in the first three months of 2021. Similarly, Vietnam's exports to partners in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also recorded high growth in the first quarter, with Canada increasing 13.7%, Australia up 17%, Chile 25.6%, Mexico 12.7%, and New Zealand 35.1%, respectively. With the impact of the United Kingdom - Vietnam FTA (UKVFTA) which is temporarily taking effect, export turnover to the European nation in the first months of the year also increased by 22.1%.

In the opposite direction, imported goods also showed a quite positive sign as import turnover of materials for production was estimated at US$70.58 billion, up 26.8% over the same period and accounting for 93.7% of the total, while import turnover of consumer goods is estimated at US$4.73 billion, accounting for only 6.3%. Director General of the General Statistics Office of Vietnam (GSO) Nguyen Thi Huong said that a sharp increase in the import of materials for production means that domestic production is showing signs of strong recovery.

Opportunities for growth

The Ministry of Industry and Trade believes exports in the near future are expected to continue to flourish thanks to the recovery of the world economy as well as the more fully and comprehensively implemented FTAs. Global demand will also improve as the world economy enters a recovery period thanks to the strong rollout of COVID-19 vaccinations, while countries' fiscal and monetary easing policies should increase opportunities for Vietnam's exports.

Moreover, new generation FTAs such as the CPTPP, EVFTA and UKVFTA are expected to create favourable conditions for Vietnamese goods to enter partner markets with more preferential tariffs as well as reducing to the lowest level of barriers. Therefore, continuing to make good use of the advantages from the FTAs will be one of the important factors in promoting Vietnam’s exports in the coming time.

On the other hand, the average export prices of many items also increased over the same period. Specifically, the price of pepper increased the most by 31.5%, reaching an average of US$2,879 per tonne, rice prices increased 18.6%, reaching US$547/tonne, coffee increased by 6.8%, reaching an average of US$1,801 per tonne, tea increased 10.2%, averaging US$1,604/tonne, rubber up by 14.1%, reaching an average of US$1,660 per tonne.

However, there are still difficulties and challenges for exports as the global COVID-19 epidemic is still complicated, although many countries are now promoting their vaccination campaigns. In Europe, many major economies such as Germany, France or Italy continue to have to extend their lockdown orders in many areas against the spread of the epidemic. The resurgence of the COVID-19 epidemic makes it difficult for the transportation of goods, and as supply chains are interrupted, Vietnam’s exports are affected.

Meanwhile, input costs such as logistics or high import material prices have also negatively affected the production and export activities of Vietnamese enterprises. In fact, many businesses have been forced to delay their export plans for old orders and cannot receive new orders because they cannot currently deliver on time, hindering the production recovery of enterprises. Besides this, recently, many export markets for the agricultural and aquatic products of Vietnam have made changes in their food safety certification regulations, such as China, the Republic of Korea or Australia.

GSO Director General Nguyen Thi Huong suggests Vietnam should continue to make use of FTAs, especially CPTPP, EVFTA and the Regional Comprehensive Economic Partnership (RCEP) to promote its export activities in the coming time, while improving competition opportunities and the value of exported goods, especially those with which Vietnam has advantages. It is also important to continue to focus on solving difficulties for enterprises and promoting the recovery in domestic production in order to create momentum for exports.

The Ministry of Industry and Trade also announced it will focus on exploiting and taking advantage of opportunities from FTAs to find solutions to develop markets and remove barriers to entry into new markets.

It is crucial to continue to closely monitor developments of the COVID-19 epidemic in the world and to take timely response measures, closely follow the situation of each market to identify the types of domestic goods that can increase export opportunities, and give priority to export promotion activities to markets that have recovered after the pandemic, while consolidating, expanding and diversifying these, especially small and niche markets, in addition to diversifying product structure, improving export product competitiveness and developing brands.

Source: Nhan Dan News

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Ensuring a stronger and fairer global recovery

An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. Would you be happy about the demise of your enemy or sad about the destruction of your car?

For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.

Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. Parts of the emerging world are in an even tougher position.

Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.

The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. This reflects a broad range of health, economic, financial, and socio-political factors.

In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.

Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.

Then there is the financial angle. Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.

European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone.

Rising interest rates could also undermine the dominant paradigm in financial markets—namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. In the short term, high liquidity has pushed cheap funding to many countries and companies.

But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.

Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalisation, and the more likely political polarisation will impede good and timely policymaking.

But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond—one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. This requires both national and international policy adaptations.

National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. This is not just about improving human productivity (through labour reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.

Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.

With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socioeconomic objectives. But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.

Source: The Financial Express

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