Modi government has expanded its loan guarantee programme to help businesses ward off the ravages of the second wave. According to the proposal, the Central government will be permitting small businesses to borrow an extra 30 per cent of their credit limit. This is a sizeable bump-up from the 20 per cent announced last year. The expansion of the Emergency Credit Line Guarantee Scheme is part of a series of planned steps aimed at boosting assistance to the economy to help it recover from the impact of the second Covid wave... Under the plan, last year's Rs 3 lakh crore ($41 billion) of loans to small businesses will now be expanded further. "Validity of ECLGS extended to 30.09.2021 or till guarantees for an amount of Rs.3 lakh crore are issued. Disbursement under the scheme permitted up to31.12.2021," an official notification said. Other measures include: — ECLGS 4.0:100% guarantee cover to loans up to Rs.2 crore to hospitals/nursing homes/clinics/medical colleges for setting up on-site oxygen generation plants, interest rate capped at 7.5%; — Borrowers who are eligible for restructuring as per RBI guidelines of May 05, 2021 and had availed loans under ECLGS Last year's $41-billion scheme for small businesses has been expanded further in scope. second Covid shock - The Economic Times of overall tenure of four years comprising of repayment of interest only during the first 12 months with repayment of principal and interest in 36 months thereafter will now be able to avail a tenure of five years for their ECLGS loan i.e. repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter; — Additional ECLGS assistance of up to 10% of the outstanding as on February 29, 2020 to borrowers covered under ECLGS 1.0, in tandem with restructuring as per RBI guidelines of May 05, 2021; — Current ceiling of Rs. 500 Cr. of loan outstanding for eligibility under ECLGS 3.0 to be removed, subject to maximum additional ECLGS assistance to each borrower being limited to 40% or Rs.200 crore, whichever is lower; — Civil Aviation sector to be eligible under ECLGS 3.0
Source: Economic Times
On doubling India-UK trade
Despite the huge amount we do with India, there has been a bit of unfulfilled promise. We’ve got 850 Indian companies in the UK and these employ over 116,000 employees, so there’s a huge amount of activity that goes on between India and the UK. Having said that, there are barriers in our trade, but I’m sure that with goodwill on both sides, if we move down the path of a free trade agreement, the mere act of removing some of those barriers will no doubt impact trade. A modern comprehensive free trade agreement involves much more than movement of goods — they cover services, they cover digital business, they cover SMEs. So there’s a huge amount of content in a free trade agreement. EU has tried unsuccessfully to negotiate a free trade agreement with India over the last 10-15 years. I’m very hopeful now that we’re an independent trading nation, we could do things ourselves, we’ll be able to move on with this when the time is right. The possibility of a UK-India Free Trade Agreement is higher now than it ever has been.
On sectors with scope for trade
We know India is interested in expanding its access to the UK market in a number of sectors, including agri food, pharmaceuticals; we can see great opportunities for services in India, for some of our professional qualifications to be valid in India, a number of other matters. I think it will progress when the time is right. Liberalising trade will benefit both our economies and how we go about these things, as you know, we do a deep consultation with UK business before we look to negotiations; once we get insights from UK businesses, that’s when we’ll put together our negotiating strategy.
On impediments to trade
India is a complicated country. It’s a country where you need to understand it to make an impression on it. I think the growth of e-commerce in India has played to certain methods; SMEs in England, branded goods, brands that might have found it much easier to access the Indian market. I’ve always felt with India, the British companies who know it and operate there do well out of it. Companies who don’t know it, don’t do business there. Part of the advantage of moving down the track we are, it’s opening people’s eyes to what the possibilities are in India. I always say that free trade agreements in themselves are fine but what you really have to do is to operationalise them, to bring home to British businesses, large, medium and small, how can they use these agreements to export more to India.
On inviting India for the G7 summit
We thought it would give rise to some very interesting discussions, having India present. I see it as something in a way that is no more no less than a manifestation of a very strong partnership that we have with India, they are a natural country for us to invite. I think the Indo-Pacific region is becoming increasingly important. India is exerting itself more on the international stage. We welcome that. For the first time at the G7 we are going to have a trade pact associated with the G7. Trade Secretary Elizabeth Truss will be holding meetings with the G7 trade ministers. Trade policy and attracting investors have become two very important things in the UK, it is part of what we see as the economic bounce back after Covid. I want us to be much more muscular and entrepreneurial.
Source: Financial Express
The Indian economy has been slowing, now at 5-6 percent range, and will need quite a bit of policy-change reforms, in a difficult world environment, to be successful in the decade ahead,” said Martin Wolf, Chief Economics Commentator, Financial Times. He was in conversation with Anil Sasi, National Business Editor, The Indian Express.Observing the country since his early days as a World Bank economist in the ’70s, he called India’s economic reform policy “inconsistent, not sufficiently positive”, and its three engines — trade, credit and government-spending — “pretty weak”. He said, “We’re going back to what my friend (economist) Raj Krishna called the Hindu rate of growth, which is 3-4 per cent. That will be a catastrophe because that’s a per-capita growth of 2 per cent and then India’s catch-up story would end.”He cautioned, “India is de-globalising, not back to what it was before but more than the world is; owing to policy choices: increased protection and decreased attention to export competitiveness.” Calling attention to three indicators for future planning: “Long-term performance, the Covid-19 impact, and the challenges ahead”, he said, in the long run “credit, trade, fiscal policy, will all be constrained”. Credit-to-GDP ratio has been slowing (after 2010) despite no financial crisis, there are “bad loans” in the banking sector, demonetisation (in 2016) was a “crazy” step instead of “radical financial restructuring”, trade ratios have been “falling rapidly” since 2013-14. Wolf added that India’s GDP growth at purchasing power parity from 5 per cent (in 1990) to about 15 per cent (by 2025, IMF forecast) has been “pretty well” but incomparable to “China’s spectacular 5 per cent (1990) to 35 per cent (2025) growth story”. India’s “steady growth” (6 per cent a year) peaked at “close to 9 per cent in the early 2000s” but saw “a real collapse” last year. “Among the developing countries, India had a really, really bad negative hit (Bangladesh did astonishingly well),” he stated. With the US-China relationship deteriorating, India should “seize opportunity” and “reopen the economy”, become a trade-growth hub, raise international competitiveness, start green revolution, reform education, labour markets and financial sector to be the “fastest-growing economy, at 8-plus per cent, in 20 years”.
Source: Financial Express
Shrugging off pandemic-induced economic woes, the Indian rupee has witnessed significant appreciation in the first two months of the current fiscal as dovish stance by the US Federal Reserve and other raft of factors steered the currency's overall positive trajectory, according to experts. Apart from relatively easy money approach of the US Federal Reserve, less aggressive intervention by the Reserve Bank of India (RBI) in forex market helped the rupee also emerge as the top-performing Asian currency in May, they opined.Going ahead, analysts said, the USD-INR spot is likely to remain volatile amid a slew of events like next month's major central banks' monetary policy decisions, hopes of plateauing COVID curve, rollout of vaccination programmes and expectations of a possible stimulus package by the Indian government to boost domestic economic activities. Dovish stance from RBI when they meet for monetary policy decision on June 4, and a fiscal package from the government are expected to support growth and support the currency," Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities, said.Noting that the bias for rupee remains on the bullish side, he said, "we expect rupee to head towards 72 odd levels in the near term". Forex traders cautioned that the coronavirus risk still persists and a lot will depend on aggressive rollouts of the vaccination programme. Moreover, the impact of the second COVID wave on the first quarter of FY21 will also weigh on investor sentiments."Investors will also watch out for the vaccination programmes and aggressive rollouts will help the domestic economy. If not, then the economic recovery could be slow. In turn, this could weigh on the local currency which could again depreciate towards 74.00 levels," Sriram Iyer, Senior Research Analyst at Reliance Securities, said. In April, the Indian rupee witnessed a small depreciation due to FPI outflows from the equity markets. Additionally, a resurgence of a COVID second wave intensified worries that an economic recovery may be delayed.However, in May, the rupee became Asia's top-performing currency. For the current fiscal year, the rupee has appreciated around a percentage point (0.92 per cent). Registering gains for the third straight day, the rupee rose 15 paise to close at 72.45 against the US dollar on May 28 (Friday). This month has only one more trading day on May 31 (Monday). According to Iyer, the currency could appreciate initially supported by FPI flows and lack of intervention from RBI."So, initially, we could see the rupee test 72.00 levels. This will definitely help importers especially oil imports which could help reduce the twin deficits. At the same time, exporters could feel the heat, so RBI could enter at a certain point to cap appreciation," Iyer said.Markets will also be looking for cues from RBI's monetary policy next week and the Federal Reserve' policy in mid-June. Rahul Gupta, Head Of Research-Currency at Emkay Global Financial Services, believes that although COVID cases are plateauing, regional lockdowns have created a sense of worry that it may again take a toll on the economic growth. He also pointed out that due to the second COVID wave in India and regional lockdowns, the IPOs of nearly nine companies have been postponed for the later months. "So, to keep the ball rolling, Modi government may come up with a stimulus package, which will be rupee positive. Technically, a broad trading range would be 71.50-73.50," Gupta said. India's foreign exchange reserves touched a record high of USD 592.894 billion for the week ended May 21, boosted by gold and currency assets. The previous all-time high for the forex kitty was USD 590.185 billion for the week ended January 29, 2021.
Source: Business Standard
India’s economic growth is likely to have continued expanding in the fiscal fourth quarter of the last year 2020-21, with economists predicting a 1.3-3.5% on-year GDP growth in January-March. The Central Statistics Office (CSO) will later today reveal how the Indian economy performed during the January-March quarter and the pandemic-struck full financial year.
India Q4 FY21 GDP data today: India’s economic growth is likely to have continued expanding in the fiscal fourth quarter of the last year 2020-21, with economists predicting a 1.3-3.5% on-year GDP growth in January-March. However, economists continue to expect a contraction for the full financial year 2020-21, owing to the severe lockdown seen in the initial quarters. The Central Statistics Office (CSO) will later today reveal how the Indian economy performed during the January-March quarter and the pandemic-struck full financial year. India’s GDP grew 0.4% in the October-December quarter of FY 2020-21.
January-March quarter GDP growth expectations
Barclay’s Chief India Economist Rahul Bajoria: 3.5%
Rahul Bajoria believes that the resurgent COVID-19 wave took the wind out of an economic recovery that was gathering momentum. “We expect the economy to have expanded by 3.5% on-year in Q4 FY21, as a low base and strong sequential gains helped propel GDP growth to a five-quarter high,” he said. Rahul Bajoria added that the agriculture sector is likely to have remained resilient, as large wholesale market arrivals and high purchases of harvested crops by the government point to a strong rabi harvesting season. ICRA’s Chief Economist Aditi Nayar: 2% “With a widespread recovery in volumes benefitting from the low base of the onset of the nationwide lockdown in March 2020, we project the growth of the GVA at basic prices to have improved to 3.0% in Q4 FY2021,” said Aditi Nayar. ICRA expects the improvement in the on-year growth of GVA at basic prices in Q4 to have been led by the industry and services, with a deterioration foreseen in the performance of agriculture, forestry and fishing.
Morgan Stanley economist Upasana Chachra: 2.5%
“We expect GDP growth to recover to 2.5% on-year in QE March, amid broad-based improvement across components. High-frequency indicators such as PMI, rail freight, power demand, GST collections and E-Way Bills all improved amid a better COVID-19 situation in the quarter,” Morgan Stanley said in a note last week. Morgan Stanley estimates a broad-based improvement in the services sector, while industry growth is expected to reflect a slight sequential slowdown.
State Bank of India’s Chief Economic Advisor Soumya Kanti Ghosh: 1.3%
Soumya Kanti Ghosh said that corporate results have reinforced the fact that Q4 growth would be much better than Q3 growth. “The corporate GVA of 625 companies has expanded by 62.04% in Q4 as compared to 12.98% growth in Q3 (of 4164 companies ),” he highlighted.
Full-year contraction to be in single digits
Based on the fourth-quarter growth estimates, SBI has pegged the full-year GDP contraction to be 7.3%, down from the earlier predicted 7.4%. In the Financial Year 2019-2020, GDP growth came in at 4.2%. SBI’s estimates are modest than those pegged by the NSO and the Reserve Bank of India. While NSO believes full-year contraction to be 8%, the RBI estimated it to be 7.5%.
Grim picture ahead in FY22?
The ferocious second wave is likely to have an impact on India’s GDP growth going forward in Financial Year 2021-2022. “Though the impact of the second wave on the real economy seems to be limited so far on paper,” SBI said. “Real GDP loss would be in the range of Rs 4-4.5 lakh crore and hence real GDP growth would be in the range of 10% -15% (as against RBI forecast of 26.2%),” they added. Barclay’s has also trimmed its forecast for this fiscal year. “We reduce our baseline FY2021-22 GDP growth forecast again, lowering it to 9.2% on-year from 10% earlier, and 11% before the outbreak of the second wave,” they said.
Source: Financial Express
Led by engineering goods, gems and jewellery, and pharmaceuticals, exports grew more than 60% year-on-year to a record $34.5 billion in March and earned a robust $32 billion in April, the first month of fiscal year 2021-22. As global demand rebounds faster than the domestic market, it’s a now-or-never moment for India’s export dreams. The post-covid world may offer India an opportunity to junk its mix-and-match approach and craft a clear export policy which can help create well-paying jobs.
Source: Mint
The compensation amount promised by the Centre is estimated to be higher than the Rs 1.58 lakh crore projected by the Centre, and a special session of the GST Council will be convened to discuss it, three opposition-ruled states said on Sunday. Finance ministers of Kerala, Punjab and Chhattisgarh said there was no consensus regarding the compensation requirement in 2021-22 in the May 28 GST Council meeting and a special session would be called only to discuss 'Revenue Augmentation and Post June 2022 compensation'. Punjab Finance Minister Manpreet Singh Badal said all states are facing shortfall in the range of 20-50 per cent and "we have said that the Council should be meeting every quarter to discuss the revenue situation of states". "The shortfall in compensation up to April is Rs 5,000 crore for Punjab. All opposition-ruled states spoke in one voice that the compensation amount from Centre should be higher," Badal told PTI. Punjab, he said, has been pitching for a discussion on the compensation mechanism that would be adopted after June 2022, as states continue to face revenue gap following the GST implementation than what was collected in the pre-GST times. Kerala Finance Minister K N Balagopal said Rs 4,077 crore is due on account of compensation from the Centre and the Centre should ensure that the states get the 14 per cent promised growth in revenue. "The 7 per cent revenue growth assumption is no assumption. Some states are facing negative growth, hence this assumption does not stand. We will discuss the issue," Balagopal added. Chhattisgarh Finance Minister T S Singh Deo said projections regarding compensation and borrowing were made by the Centre and a detailed discussion would happen at the special session of the GST Council, date for which has not been decided yet. The Centre has estimated the compensation requirement of states at Rs 2.69 lakh crore for the current financial year. Of this, over Rs 1.11 lakh crore would come from cess on luxury, demerit and sin goods which will be given to the states to compensate them for the shortfall in revenue arising out of GST implementation, according to the agenda note circulated before the Council meeting. The remaining Rs 1.58 lakh crore would have to be borrowed to meet the promised compensation, based on the assumption that a revenue growth of states would be 7 per cent this fiscal, the note added. In the last fiscal 2020-21, the Centre had borrowed on behalf of the states and released Rs 1.10 lakh crore to compensate for the GST revenue shortfall. Another Rs 68,700 crore was collected by way of levy of cess.
Source: Economic Times
USA: The U.S. Department of Commerce (“Commerce Department”) announced that imports of polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam are being unfairly sold below their fair value in the United States at the following margins. U.S. Customs and Border Protection will now begin collecting antidumping duties (AD) in the amount equal to the dumping cash deposits rates for imports from each country. Importers will be required to post duty deposits at these AD rates on the date the preliminary determinations are published in the Federal Register (in approximately one week). These deposits will be collected until the Commerce Department and U.S. International Trade Commission (“USITC”) conclude their investigations later this year. At that time, the duties could change. Imports of polyester textured yarn from China and India are currently subject to significant double- and triple-digit AD and countervailing duties as a result of prior investigations that concluded in January 2020.
Source: Global Textiles
ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government has decided to extend the regionally competitive energy tariff (RCET) regime for the export industry in the budget for financial year 2021-2022, and provide Rs50 billion annual subsidy to the sector. “Yes, the authorities concerned have agreed to provide the RCET to the export industry in the next financial year,” top officials at the commerce ministry confirmed to The News. During the next financial year, the government will provide the export industry electricity at 7.5 cents per unit, and RLNG at $6.5 per MMBTU with an impact of Rs50 billion in a year. The government will provide a subsidy of Rs10 billion to state-owned gas companies for providing gas at $6.5 per MMBTU to export industry and Rs40 billion subsidy to power division for provision of electricity at 7.5 cents per unit, it was learnt. With the decision to extend the RCET, the surge in textile export up to $16.5 billion is expected till June 2021, which will help the country take total exports up to $27 billion in June 2021 and $30 billion in June 2022. In the next financial year, textile export will go up to $20 billion because of continuation of the RCET regime.Special Assistant to Prime Minister on Power and Petroleum Tabish Gauhar said that the government would have to extend the subsidy of Rs50 billion (Rs10 billion against provision of gas at Rs6.5 per unit and Rs40 billion against electricity at 7.5 cents per unit) in the next financial year and power division wants the commerce ministry to arrange for the required subsidy from the finance division on time to avoid a build-up in the circular debt in this head. Sources in the commerce and textile ministry said that apprehensions of power division about release of budgeted subsidies have been addressed by the financial managers at the finance ministry. Not only to maintain, the sources said, the existing pace in surge of export, but also to provide more stimulus to the exports, Finance Minister Shaukat Tarin and Adviser to Prime Minister on Commerce, Textile and Investment played crucial role to prepare the mind of the government that strongly believes in growth-oriented budget to accord approval to the RCET in the next budget.They said that Pakistan Institute of Development Economics (PIDE) also carried out a study which recommended continuation of the RCET to the export industry, saying it played an important role in the surge of current year’s exports. The textile industry has capitalised, they said, on the given incentives to help the government achieve the ultimate aim of export maximisation, job creation and realisation of economic prosperity. Pakistan’s export industries (including textiles) witnessed an exceptional growth of 9pc in 9 months of FY21.
Source: The News
China: Direct-spun PSF stepped into narrow range-bound gradually after experiencing the prosperity before and after May Day holiday. In the week before May Day, bolstered by the rise of polyester feedstock and PSF futures, direct-spun PSF price rallied gradually from low where the downstream spinners procured PSF intensively. After May Day holiday, with the sales improving, the price of direct-spun PSF moved up further. However, downstream buyers became reluctant then and the sales ratio started to decline. In early to mid-May, PSF futures slumped, and the transactions by the way of basis showed obvious advantages, pressuring the sales of direct-spun PSF plants. Later on, direct-spun PSF price moved into volatile downtrend within narrow range alongside the ups and downs of polyester feedstock and PSF futures during the period, but the downstream spinners showed modest buying interest with previous stocks at hand. As a result, the inventory of directspun PSF plants started to accumulate. It kept negative in most of the time before May Day holiday, but then rushed up from minus 0.8 day to current 4.3 days. In fact, the actual product inventory in the warehouses of direct-spun PSF plants has risen to high level at 21.3 days. To deal with that, many plants started to cut production. For example, Yizheng Chemical fiber, Jinlun and Huvis (Sichuan) all arranged maintenance or production cut during May. By the end of May, the operating rate of direct-spun PSF plants has moved down to about 93% from the high of about 97%. On the other hand, downstream blended polyester yarn has been sold smoothly since April with great profit, promoting some spinners to shift production from pure polyester yarn and TC-type one to CVC-type one which contains less PSF than the former, leading to a decrease in demand for PSF. However, compared with the decrease in rigid demand, the speculative demand decreased more obviously. Therefore, even if the production cut has been adopted to cope with the surplus pressure and the stocks are also in downward momentum with expectation to weaker demand in May, the supply is still in length compared with the demand.
Source: Global Textiles
Turkey: Turkey’s textile industry hopes to launch a new era of cooperation with international companies and brands to exceed a production capacity of $100 billion. Turkey, the world’s fifth largest supplier of textiles, expects to export roughly $12 billion worth of textiles ($30 billion including apparel) in 2021. According to the Istanbul Textile and Raw Materials Exporters Association, the production capacity of $90 billion of Turkey’s textiles and apparel industry can be increased with facilities bedecked with modern production infrastructure and qualified production power. The Turkish textiles sector currently employs more than one million skilled labour. The Istanbul Textile and Raw Materials Exporters Association said that the imminent recovery of international trade offers enormous opportunities for cooperation between Turkish textiles firms and foreign partners.
Source: Global Textiles
