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MARKET WATCH 16 OCT, 2021

NATIONAL

INTERNATIONAL

India to start talks for three more free trade agreements: Piyush Goyal

While Goyal didn’t name these economies, he said talks with them will be over and above India’s current negotiations with Australia, the UK, the UAE and the EU for free trade agreements (FTAs). The idea is to lend more power and speed to projects by connecting all relevant departments on one platform. High logistics cost in India at 13% of GDP was eroding competitiveness in exports, he had said. Commerce and industry minister Piyush Goyal on Thursday said two more countries and a bloc of nations have evinced interest in forging trade pacts with India, which reflects growing interests among key economies in bolstering their trade engagement with New Delhi in a post-Covid world. While Goyal didn’t name these economies, he said talks with them will be over and above India’s current negotiations with Australia, the UK, the UAE and the EU for free trade agreements (FTAs). The interest was shown in bilateral meetings at the recentlyconcluded G20 ministerial in Sorrento, Italy. Goyal held about 15 meetings with the trade ministers of various countries, including South Korea, South Africa, the US, Brazil, China and the EU. The negotiations are a part of New Delhi’s broader strategy to forge “fair and balanced” FTAs with key economies and revamp existing pacts to boost trade. The move gained traction after India pulled out of the China-dominated RCEP talks in November 2019. Addressing reporters, Goyal also asserted that the National Master Plan for ‘multi-modal connectivity’, or PM GatiShakti, will fast-track infrastructure projects and cut delays as well as cost over-runs through a holistic and well-coordinated approach. This will help boost economic growth, spur employment and draw large-scale investments into the country. The programme was launched by Prime Minister Narendra Modi on Wednesday. The new initiative is a GIS-based platform with as many as 600 layers, capturing all utilities and network linkages in various economic clusters. Ambitious targets have been set under the plan for capacity addition in various infrastructure sectors for 2024-25. The new plan will complement the Rs 111-lakh-crore National Infrastructure Pipeline and multiple efforts to generate resources for it, including the National Monetisation Pipeline and the development finance institution (DFI) that are being operationalised. Goyal indicated that the programme is aimed at breaking inter-ministerial silos. Instead of separate planning and designing by relevant departments, projects will be designed and executed with a common vision. Minimising disruptions and ensuring quick completion of work with cost efficiency are the guiding principles for development of infrastructure as per the National Master Plan. GatiShakti will enhance India’s competitiveness through next generation infrastructure and seamless multi-modal connectivity. It will ensure the smooth movement of goods and people and enhance the ease of living as well as doing business. The idea is to lend more power and speed to projects by connecting all relevant departments on one platform. High logistics cost in India at 13% of GDP was eroding competitiveness in exports, he had said. As for trade agreements, India and Australia are eyeing are planning to hammer out an early-harvest deal by the Christmas this year and a broader FTA by the end of 2022. Similarly, New Delhi and Abu Dhabi aim to wrap up negotiations by as early as December 2021 and sign the deal by March 2022 after the completion of necessary ratification processes. If all goes as planned, it would be the first FTA to be signed by India in just over a decade. Balanced FTAs are expected to also enable the country to achieve sustained growth rates in exports in the coming years. Already, India has set an ambitious merchandise export target of $400 billion for FY22, against $291 billion in FY21.

Source: Financial Express

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Indo-US ties: Sitharaman, Yellen say focus on firm recovery policy

Joint statement comes amid mounting anxiety over potential taper tantrum India and the US have underscored the need for maintaining “supportive policies” until a strong and inclusive economic recovery is “firmly entrenched”. Finance minister Nirmala Sitharaman and US treasury secretary Janet Yellen acknowledged the devastation caused by the Covid-19 pandemic and sought to bolster bilateral co-operation, at the eighth India-USA Economic and Financial Partnership meeting, held in Washington on Thursday. It was also attended by Federal Reserve chairman Jerome Powell and Reserve Bank of India governor Shaktikanta Das, among others. The joint statement comes amid mounting anxiety globally over potential taper tantrum once the US Federal Reserve begins to scale back its $120-billion-a-month quantitative easing, with many analysts expecting it to be as early as in November. In India, however, both the government and the Reserve Bank of India have hinted at an extended period of growth-supporting interventions. Sitharaman and Yellen also pledged to boost cooperation in stemming illicit finance, money laundering and terror-funding, and highlighted the need for effective implementation of the standards stipulated by the Financial Action Task Force (FATF). Importantly, the FATF – the Paris-based global body against money laundering and terror-funding – has retained Pakistan on its ‘grey list’ for its persistent failure to crack down hard on terror-financing. “We continue to strengthen our cooperation in tackling money laundering and combating the financing of terrorism through increased information sharing and coordination,” according to the joint statement after the meeting. “Both sides agree on the importance of fighting financial crimes and on the effective implementation of the Financial Action Task Force (FATF) standards to protect our financial systems from abuse,” it added. Both Sitharaman and Yellen hailed the OECD/G20 Inclusive Framework political agreement on October 8 as representing a significant accomplishment for updating the international tax architecture to reflect the modern economy and establish an international tax system that is more stable, fairer, and fit for the 21st Century requirements. “We take note of the progress made in sharing financial account information between the two countries under the Inter-Governmental Agreement under the Foreign Account Tax Compliance Act (FATCA),” according to the joint statement. During the meeting, both India and the US also agreed on further engagements on financial-sector issues, including cross-border payments, payment systems and the development of the International Financial Services Centre. They reiterated commitment to greater engagement, both bilaterally and multilaterally, to address global economic issues. According to the joint statement, the meeting featured a session on climate finance, reflecting their respective commitments to driving urgent progress in combating climate change and the critical role of climate finance in achieving this shared global goal. Separately, at the plenary meeting of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund (IMF), Sitharaman expressed concern over the stark differences in vaccination coverage of lowincome and advanced countries and called for addressing vaccine inequity swiftly. To win the war against Covid-19, “it is imperative that we freely share medical research and develop adaptive, responsive, affordable, and accessible health care systems”, the finance minister said. Despite the pandemic, Sitharaman stressed, India continued its structural reforms. “Wide-ranging reforms, including in agriculture, labour and financial sector are expected to contribute towards acceleration of the economy,” she said.

Source: Financial Express

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India set to achieve the $400 billion annual exports milestone

India has clocked record exports in the first half of FY22 at $197.89 billion and is closer than ever to achieve the $400 billion annual exports milestone by the end of the year. However, the soaring global commodity prices, including of key inputs such as oil, chemicals, metals, plastic and cotton, are largely responsible for this rise. The volume growth is not commensurate with this value growth, traders and industry watchers say. Kirtika Suneja takes a look:

• $197.89 billion merchandise goods exports in Apr-Sep

• Improved global demand supports outbound shipments

Apr-Aug

• Fresh fruit & veg exports down 17.4% in volume terms, up 3.8% in $

• Value-added steel product exports fall 15-35%

EXPORTERS SAY

• Carpet, handicraft export volume only 5% higher on year

• Liquidity crunch, high manufacturing cost squeeze profits

• Energy crisis, high coal imports may worsen commodity inflation, hit exports

• 20-30% rise in ocean freight, container prices since May

Source: Economic Times

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Import surge drives September trade deficit to record $22.6 bn

However, imports surged at a much faster pace of 84.8% from a year before (albeit on a low base), driving up trade deficit to a record $22.6 billion in September, according to the provisional estimates released by the commerce ministry on Thursday. Merchandise exports rose 22.6% in September from a year before and 29.9% from the pre-pandemic (same month in FY20) level, as orders from critical western markets and China continued to flow in. However, imports surged at a much faster pace of 84.8% from a year before (albeit on a low base), driving up trade deficit to a record $22.6 billion in September, according to the provisional estimates released by the commerce ministry on Thursday. Of course, imports were driven partly by a spill-over of pent-up domestic demand that remained mostly muted in the wake of the pandemic. But import bill was greatly inflated by elevated global crude oil prices, which are hovering around 3-year highs, and massive purchases of gold in the build-up to the festival season. While exports stood at $33.79 billion in September, imports surged to $56.39 billion. The growth in exports in September was marginally better than the preliminary estimate released earlier this month. Imports of petroleum products jumped over 199% year-on-year to $17.4 billion, supported by elevated crude oil prices. Gold purchases from overseas climbed 751% to $5.1 billion in the build-up to the festival season. Even edible oil imports shot up by 132% and coal purchases surged 83%. Of course, base effect, too, remained unfavourable. However, policy-makers may seek comfort in the fact that merchandise exports have now exceeded the pre-pandemic level for seven months in a row. Exports between April and September hit a record $197.9 billion, up 57.5% from a year before and 24.3% from the same period in FY20. Core export (excluding petroleum, and gems and jewellery) rose 18.8% in September from a year before, lower than the 22.6% growth in overall merchandise exports. Also, it was 33.4% higher than the level witnessed in August 2019. Similarly, core import (excluding petroleum and gold) rose 40.5% year-on-year and 22.8% from the pre-pandemic level. With the sharp rise in September, merchandise imports in the first half of this fiscal stood at $276 billion, up 81.7% from a year ago and 11.3% from the pre-Covid level. Exports of petroleum products shot up by 48% in September, while those of cotton yarn, fabrics, made-ups and handloom products surged by 41%, engineering goods by 37% and organic and inorganic chemicals by 30%. Commenting on the export data, A Sakthivel, president of exporters’ body FIEO, said recovery in key economies across the globe, coupled with the expectation of buoyant order booking position for the coming months, especially during the festive season, has led to such continuous growth in exports. Aditi Nayar, chief economist at ICRA, said the sharp rise in goods trade deficit in September “reflects an element of inventory stocking ahead of the festive season as well as advancement of crude oil purchases in light of the looming hardening of prices”. While the deficit is expected to moderate in the coming months, it will likely range between $13 billion and $16 billion per month in the second half of this fiscal (higher than the first half), she added.

Source: Financial Express

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PLI Scheme - How do production-linked incentive schemes work

How do performance-linked incentive schemes work? How do they spur production of goods? And how are the benefits passed on to manufacturers and consumers? Here's an explainer on PLI schemes. Say you are the government, and you want to spur production of a certain category of goods. The demand for such goods isn’t all that great. But you think once they are manufactured in large quantities, or sold at the right price points, it should work out fine. This is where you will employ PLI or a production-linked incentive scheme. The PLI is an old and popular tool with governments to spur production of goods that the country sees as necessary for social good, taxes, or employment-generation reasons. PLIs are essentially the incentives to companies to boost product. They could be in the form of tax rebates, import and export duty concessions, or maybe easier land-acquisition terms. Generally, the benefits of a PLI scheme are passed on to the final consumers of the goods in terms of lower prices. Take the example of electric vehicles. They don’t have ready demand but a shift to greener automobile is essential for the country. In this regard, the government has what is called the FAME scheme. It stands for Faster Adoption and Manufacturing of Hybrid and Electric Vehicles. Under this scheme are a whole lot of concessions for EV makers. Recently, the Indian government identified 13 priority sectors where PLI schemes will be launched with a total outlay of Rs 2 trillion. Sectors for which incentives have already been approved are electronic or technology products, pharmaceuticals drugs, telecom & networking products, food Products, high-efficiency solar modules, automobile and auto components, specialty steel, textile manufacturing, advanced chemistry cell battery, textiles, and specialty steel.

Source: Business Standard

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Exports high on growth, order booking position: FIEO

Reacting to the monthly trade data for September, 2021, which has continued on the path of higher growth trajectory, FIEO President A Sakthivel said that the monthly exports figure of USD 33.79 with an impressive double-digit growth of more than 22.63 percent along with half yearly performance of USD 197.89 with a remarkable growth of about 57.53 percent goes to show that we are on course to achieving USD 400 billion export target for the fiscal. Crossing USD 197 billion in merchandise exports during the first half of the financial year in itself is a spectacular performance during these challenging times, which further reiterates the dedication, commitment and hard work of the exporters coupled with supportive Government policies said, Sakthivel. The FIEO Chief added that recovery in the global economies across the world added with the expectation of buoyant order booking position for the coming months specially during the festive season has also led to such continuous growth in exports. Sakthivel again praised the government under the able and dynamic leadership of Prime Minister, Shri Narendra Modi and also the Union Finance Minister and the Union Commerce & Industry and Textiles Minister for showing confidence and trust on the exporters. The decision to disburse all pending export incentives, announcement of PLI Scheme for MMF and Technical Textiles, PM MITRA much needed relief to services exporters with SEIS release, capital infusion in ECGC coupled with the decision of listing ECGC through the IPO, increase in corpus of NEIA and extension of ECLGS Scheme till March 31, 2022 will further help in addressing liquidity concerns of exporters and ease of doing business, added the FIEO President. The FIEO President said that the top sectors, which performed impressively during the month were Engineering Goods, Petroleum Products, Gem & Jewellery, Organic & Inorganic Chemicals, Cotton Yarn/Fabrics/Made-ups, Handloom Products etc., RMG of All Textiles, Electronic Goods, Rice, Coffee, Marine Products and Plastic & Linoleum. Sakthivel emphasised that many labour-intensive sectors were major contributors, which itself is a good sign, further helping job creation in the country. However, imports clocking USD 56.39 billion with a growth of about 84.77 percent during the month should be analysed, said Dr A Sakthivel. The FIEO Chief is of the view that though the government has announced a slew of measures to support exports, the need of the hour is to soon resolve risky exporters issues, augmenting the flow of empty containers and establishing a regulatory authority to seek justification of freight hike and imposition of various charges by the shipping lines need urgent intervention of the government. Sakthivel said that the Federation has also urged the Government to provide freight support to all exports till 31st March 2022 as freight rates have skyrocketed and are likely to sombre by March 2022.

Source: SME Times

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India to remain accommodative in its monetary policy: RBI governor

India is witnessing a very robust economic recovery, but there is still unevenness across sectors, RBI Governor Shaktikanta Das said India, which is experiencing robust economic recovery which remains uneven across sectors, has decided to remain accommodative in its monetary policy, the Reserve Bank of India Governor told the international community on Thursday. India is witnessing a very robust economic recovery, but there is still unevenness across sectors, RBI Governor Shaktikanta Das said in his address to the annual meeting of the International Monetary Fund and the World Bank. Video of the excerpts of his speech were posted and released by the IMF. We have therefore decided to remain accommodative in our monetary policy, while being closely watchful of the evolving inflation scenario, Das said in the short video.

Source: Business Standard

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Forex reserves increase by $2.039 billion to $639.516 billion

Gold reserves were up by USD 464 million to USD 38.022 billion in the reporting week. The country's foreign exchange reserves rose by USD 2.039 billion to USD 639.516 billion in the week ended October 8, according to RBI data. In the previous week ended October 1, the reserves had dipped by USD 1.169 billion to USD 637.477 billion. The reserves had surged by USD 8.895 billion to a life time high of USD 642.453 billion in the week ended September 3. During the reporting week ended October 8, the rise in the reserves was on account of an increase in the Foreign Currency Assets (FCAs), Reserve Bank of India's (RBI) weekly data released on Friday showed. FCA rose by USD 1.55 billion to USD 577.001 billion in the reporting week, as per the data. Expressed in dollar terms, FCA include the effect of appreciation or depreciation of nonUS units like the euro, pound and yen held in the foreign exchange reserves. Gold reserves were up by USD 464 million to USD 38.022 billion in the reporting week. The Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) rose by USD 28 million to USD 19.268 billion. The country's reserve position with the IMF declined by USD 3 million to USD 5.225 billion in the reporting week, the data showed.

Source: Business Standard

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Textile Retail Segment: What consumers are looking for – Expert decodes

Textile wholesale segment is a much-diversified sector because it involves several stages for final productions. The mix involves farming, cutting, dying, weaving, stitching, embroidery etc. These are initiated at wholesale segment and carried forward to the Textile Retail Segment. Textile retail segment is one of the fastest running segments as you will find door to door outlets all over India, as India is the most popular textile hub globally. Shivam Soni, Founder & CEO- Beyoung Folks Private Limited, shares his knowledge on the shift in Textile Retail Segment and what consumers are looking for. Talking about Expectations of Customers from Textile Industry, Shivam Soni, says, “Nowadays, consumers are becoming more knowledgeable in terms of textiles and clothing. E-commerce market and the TV world has given people clothing goals. Considering this, you will find two types of people in the market. Firstly, there are people who shop directly from the readymade clothing stores. Secondly, you will find people who love to create their own designs. Hence, they end up at textile stores where they can do the match and mismatch of clothing. Consumers thus expect a lot of things from the textile industry for several reasons. One of the core expectation is how organic and natural the fabric is, in terms of comfort. The textile world is quite diverse, especially in India. Now people can compromise on the price when they are more inclined towards quality. This has increased pressure on the textile industry as the quality highly matters. For instance, cotton, lycra, rayon etc. are being more popular today because of its level of comfort. “ Shivam Soni adds, “Another aspect is the colors and patterns obtained for a beautifully designed fabric. Plain colors, block print, screen print, embroidery and a lot more, the textiles offer all, considering consumer choices. Cities like Jaipur, Bikaner, Surat etc. are accordingly secluded varying with the textile obtained here. Popular fashion designer Sabyasachi too stated “his Crore worthy apparels are designed over textiles especially bought from a small retailer in Jaipur”. Climatic conditions and habitat make India diverse in terms of textile varieties. This has also led to increased consumer demand because premium quality lies right in the country.” On the Most Popular Textile Retail Segment In India, Shivam Soni opines, “Cotton is the most commonly bought textile for both wholesale and retail segments. It is prominently known for its versatility for being shirts, t shirts, kurtas, shorts and what not. The cotton and cotton blend textile retail segment also allows most innovations and designer ideas. Famous brands such as Beyoung prominently deals in apparels made in cotton because of the unbeatable comfort. “ Further, on the Rise In Textile Retail Segment In India, Shivam Soni, says, “The textile retail segment in India is growing immensely. The scenario is estimated as $103.4 billion in 2020-21. It is further expected to take a rise to $ 190 billion by 2025-26. Cotton consumption across India is estimated to be $75 billion which is further segmented according to customer usage. $55 billion is used by people for making apparels at both wholesale and retail segments. $15 billion is used for technical textile consumption and an amount of $5 billion is dedicated to home furnishings. This cotton production is also used more for exports all across the world.” “Consumers today are expecting better fabrics which can cope up with the weather and provide utmost comfort. The textile retail segment is sticking to it to the fullest and has thus experienced immense growth. According to reports, textile industry has valued exports worth $1297.82 billion by August 2021 and is expected to rise by 55.62% over years. Growth rate of textile retail segment expected a growth of 8.7 percent from fiscal year 2015 to 2020, which is expected to increase rapidly,” Soni concluded.

Source: Zeebiz

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Reliance Brands to pick up 40% stake in Manish Malhotra's MM Styles

The designer firm will use the investment to expand to global markets, said a statement from the company Reliance Brands Ltd (RBL) will pick a 40 per cent minority stake in renowned fashion designer Manish Malhotra's MM Styles Pvt Ltd, for an undisclosed sum, the two companies said on Friday. This is the first external investment for the brand, which had so far been privately held by the designer. The strategic partnership is aimed at accelerating the 16-year-old couture house's growth plans in India and across the globe, they said in a joint statement. "RBL has signed a definitive agreement to invest in founder and creative director Manish Malhotra's eponymous brand for a 40 per cent minority stake," it added. Commenting on the investment, Reliance Retail Ventures Ltd Director Isha Ambani said, "Our strategic partnership with Manish Malhotra is anchored on our immense respect for his craft and our deep commitment to Indian art and culture. Being an entrepreneur, Manish, the man behind the brand, has always been nimble and ahead of his times." She further said, "Recognition and appreciation for Indian couture is at an inflexion point globally and we are excited to partner in this journey with Manish." Reliance Retail Ventures Ltd is the holding company of all retail companies in Reliance Industries Ltd group. Launched in 2005, Manish Malhotra luxury-retail has four flagship stores in Mumbai, New Delhi, and Hyderabad, two shop-in-shop besides a virtual store. The brand's design language is brought to life by a team of 700 artisans and professionals, led by Malhotra himself, the statement said. "The collaboration with Reliance Brands Ltd was a natural decision for me, as it represents both Reliance's astute vision and the family's deep affinity for crafts and culture. As the brand aims for international expansion, business diversification, and renewed creative growth, there could have been no better strategic partner to accompany us on this journey," Malhotra said. The coming together of the partners aims to develop a corporate framework that sustains Manish Malhotra's legacy for generations to come. Besides physical retail expansion, the partnership will work on creating a strong technology backbone for the business, developing phygital and experiential ecommerce opportunities, the statement said. The brand will continue to be led by Manish Malhotra, Managing and Creative Director, it added.

Source: Business Standard

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EU envoy suggests product diversification

Says it will help Pakistan to enhance exports to the bloc Pakistan needs to introduce new products to enhance its exports to the European Union, said Ambassador of European Union to Pakistan Androulla Kaminara. Speaking to businessmen at the Lahore Chamber of Commerce and Industry (LCCI) on Thursday, she said that Pakistani products were best in terms of quality and they could easily make their way to EU markets. She was of the view that introduction of new products and joint ventures could play a vital role in this regard. Talking about the GSP Plus status for Pakistan, the envoy said that a two-year performance report on the country would be reviewed soon and decision would then be taken for extension of the scheme. “The European Commission has tabled the next generation of GSP Plus and five new conventions have been added,” she revealed. “It is a good omen that Pakistan is also a signatory.” Kaminara announced that Pakistan was the most successful country in using the GSP Plus status. She extended support for expansion of Pakistan’s exports to the EU and expressed the desire to be a partner in this regard. The ambassador stated that the EU would continue to engage with its partners, including Pakistan, to address the common challenge of climate change. She revealed that the EU was particularly focusing on the small and medium enterprise (SME) sector of Pakistan. Speaking on the occasion, LCCI President Mian Nauman Kabir appreciated the European parliament for extending the GSP Plus status for Pakistan till December 31, 2023. He pointed out that the EU was the second most important trading partner of Pakistan. Citing figures of the ITC World Trade Map, he stated that Pakistan’s exports to the EU stood at $7.96 billion in 2020 while imports from the bloc amounted to $4.1 billion. “These trade figures reflect that the EU accounts for about 14% of Pakistan’s total trade volume and around 31% of Pakistan’s total exports,” he mentioned. “In this context, the extension of GSP Plus status till December 31, 2023 holds great significance for Pakistan’s economy.” The LCCI president said that Pakistan’s exports to the EU were heavily dominated by textile products, which accounted for more than 75% of shipments from Islamabad to the trade bloc. On the other hand, major imports of Pakistan from the EU comprised machinery, transport equipment and chemicals, he noted. He stressed the need for product diversification in exports to the EU and was of the view that Pakistan could enhance exports of leather products, furniture, carpets, plastics, sports goods and rice. “Almost 71% of our total exports to the EU go to just five countries, namely the United Kingdom, Germany, the Netherlands, Spain and Italy,” the LCCI president said. “We are looking forward to exploring more opportunities in markets of other countries such as Greece, Slovenia, Bulgaria, Finland and Ireland where exports from Pakistan are relatively lower.” Kabir called for exploiting the trade potential by exporting agriculture-based processed food to the EU in collaboration with European companies through joint ventures and transfer of technology. He said that to enhance exports to the EU, it was imperative for Pakistan to apprise the SMEs of latest trends in textile, fashion and other potential sectors like leather, furniture and carpets. He requested the envoy to invite famous brands, specialising in these sectors, to Pakistan for the training of local SMEs.

Source: Tribune

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Sri Lanka Manufacturing and Services activities expand in September 2021

Both manufacturing and service sectors of Sri Lanka expanded in September 2021, the Central Bank’s Purchasing Managers’ Index (PMI) Survey released Friday showed. Manufacturing PMI bounced back to 54.3 in September 2021, increasing by 9.2 index points compared to August 2021. This increase was mainly attributable to the significant improvements observed in New Orders and Employment sub-indices. The increase in New Orders, particularly in the manufacture of textile & wearing apparel and food & beverages sectors, have contributed considerably to the overall improvement in the PMI. Some respondents in the textile & wearing apparel sector mentioned that they received a large number of export orders in September with the normalization of the economies in the major export destinations. Employment has also increased, especially in the manufacture of textile & wearing apparel sector, where new recruitments resumed with the tapering off of the pandemic situation. However, Production and Stock of Purchases have remained closer to the neutral level with a marginal contraction during September 2021. Some respondents in the manufacture of food & beverages sector highlighted that they had to slow down the factory operations due to the lower availability of raw materials. Further, the continuous increase in the cost of imported raw materials, particularly due to rising global commodity prices, has also been highlighted as a major concern. Meanwhile, Suppliers' Delivery Time lengthened in September 2021. In the next three months, expectations for manufacturing activities remain at elevated levels anticipating further improvements in economic condition locally and globally. Services PMI entered the growth territory reporting an index value of 52.2 in September 2021 following the dip observed in August 2021. This was underpinned by the increases in New Businesses, Backlogs of Work and Expectations for Activity subindices. New Businesses increased in September compared to the previous month mainly with the improvements observed in transportation, solely related to freight forwarding, financial services, education and telecommunication sub-sectors. Business activities in transportation, solely driven by freight forwarding, education and insurance sub-sectors showed improvements during September. However, business activities in other personal activities, wholesale and retail trade, human health activities and accommodation, food and beverage sub-sectors were largely affected due to the quarantine curfew imposed throughout the month. As such, Business Activity sub-index edged up in September, yet continued to remain below the threshold level. Employment sub-index continued to remain in the negative territory with retirements and voluntary resignations amid comparatively low level of new recruitments. Meanwhile, Backlogs of Work continued to increase in September since a limited staff reported to work amid prolonged travel restrictions and COVID19 infections among staff members. Expectations for Business Activities for the next three months increased in September following the lift in travel restrictions and fall in domestic COVID-19 cases. Nevertheless, some respondents continued to express their concerns with regard to adverse effects on business operations from import restrictions and increase in input costs.

Source: Colombo Page

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Pakistani ambassador invites Chinese textile investors

At the China (Ordos) International Cashmere and Wool Exposition held in China’s northern province Inner Mongolia, Pakistani Ambassador to China Moin ul Haque invited Chinese investors, entrepreneurs and fashion designers to explore the Pakistani market for joint ventures in the areas of textile, garments, and woolen products. “As a major source of wool, yarn, and fabric to world markets, Pakistan stands ready to share these bounties of nature with China as well”, he said Gwadar Pro reported on Thursday. The growth and cultivation of cotton, wool, and cashmere has always been the backbone of Pakistan’s agriculture and livestock sectors. According to a research report by China-Pakistan Agricultural and Industrial Information Cooperation Platform (CPAIC), about 14pc of arable land in Pakistan is used to grow cotton, and about 1.5 million farmers are engaged in cotton cultivation. From 2014 to 2019, its cotton area harvested took up nearly 10pc of the global total. In the latest forecast by the Cotton Crop Assessment Committee, the total cotton production in the country for the year 2021-22 is anticipated at 9.74 million bales, a leap from last year’s 4.5 million bales. But meanwhile, resurgent overseas demand for finished textile products as exemplified by a 26pc increase in textile export in September may lead to a record amount of cotton import this year expected at 5.6 million bales as forecast by USDA. The huge gap between supply and demand has driven the cotton price to a ten-year high at Rs15,000 per mound last Friday. The lucrative opportunities call for vigorous efforts and enhanced production. According to the analysis of the CPAIC report, climate uncertainties, pests, shrinking planting areas, backward research technologies, and limited processing capacity are constraining the “white gold” to fully unleash its value. Cotton production in Pakistan is directly impacted by climate; particularly, abnormal rainfall and temperature will result in a drop in cotton production. As per the statistics of USDA on Pakistan’s cotton production from 2000 to 2019, cotton output reached a record high in 2005 due to sufficient irrigation water and good pest and disease control. In the subsequent few years, the production dropped sharply and remained low; one reason was that the ratio of cotton seedling emergence decreased because of frequent heavy rains during the sowing season, while cotton buds fell off due to insufficient rainfall in the later stage of the planting season and the high temperature. From a long-term perspective, the area dedicated to cotton by growers has been declining in the last few years. Punjab and Sindh provincial governments estimate planted cotton area 2021/22 to be 1.9 million hectares, 14 percent less than last year. Due to counterfeit pesticides and economic stimulus, the price of cotton could hardly cover its production cost. A comparative analysis by the Central Cotton Research Institute Multan on cotton production costs in Pakistan, China, and India shows that Pakistan has the highest production cost. As a result, some farmers have switched to other crops such as corn, rice, and sugarcane. According to the CPAIC report, independent research and international cooperation are in dire need to improve the quality of cotton seeds and their resilience against abnormal weather, diseases, and pests. From 2019 to 2020, the seedling emergence rate of new cotton buds was only 40pc to 60pc under the influence of severe pests, complicated climate, and insufficient supply of cotton seeds, far below the normal level of over 80pc. Under the mode of free cultivation, farmers pick cotton by hand and sell it to nearby ginning factories without grading. Lack of proper picking and variety separation results in impurities in cotton. Medium to low-quality products dominate the market, i.e., Color Grade M and SLM, strength 28 GPT or lower, and length below 26mm. Cotton germplasm resources are the foundation for cotton basic research and applied research. According to Professor Du Xiongming, Dean of the Cotton Germplasm Division in the Institute of Cotton Research, Chinese Academy of Agricultural Sciences, Chinese cotton is renowned for its high yield, high quality, and early maturity, while Pakistani cotton excels in its resistance to heat, drought, salt and alkali, and cotton leaf curl virus (CLCV). The cooperation of the two sides in the collection and identification of cotton germplasm resources is of great significance, and the timing is right. More than 300 cotton germplasm resources have been exchanged, told Professor Du. MoUs of joint research programs have been signed with several Chinese institutions, including Huazhong Agricultural University (HZAU), Xinjiang Agricultural University (XAU), School of Agriculture Sciences, Zhengzhou University (ZZU), and Institute of Cotton Research (ICR) of Chinese Academy of Agricultural Sciences (CAAS), Anyang. “Many Chinese textile companies have established their production units in Pakistan. And recently, the Challenge Apparel Group of China factory in Pakistan was inaugurated by the president of Pakistan”, Ambassador Haque informed the participants of the China (Ordos) International Cashmere and Wool Exposition.

Source: Daily Times

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How China punishes MNCs for speaking against Beijing's controversial policies

Brands suffered when they spoke out over labor concerns. Now China is launching a rival cotton certification program. When a fashion industry sustainability group called out China over its treatment of Uyghur Muslims, the idea was to nudge Beijing toward human-rights reforms while cleaning up a troubled corner of the $60 billion global cotton business. Western brands have learned the hard way that things don’t work that way in China. In the 12 months since the Better Cotton Initiative, whose members range from Uniqlo owner Fast Retailing Co. to Nike Inc. to Walmart Inc., published a statement on allegations of forced labor in the cotton-growing Xinjiang region, several brands have suffered major setbacks in China, one of the world’s biggest producers and consumers of the fabric. The organization missed production targets last year and companies including Levi Strauss & Co. and Chinese sneaker maker Anta Sports Products Ltd. have scaled back their involvement. Others have gone quiet, pulling statements of concern about the situation in Xinjiang from their websites. Hennes & Mauritz AB’s revenue in China, once its fourth-largest market, fell 40% in the most recent quarter. Although the BCI statement has long vanished from the group’s website, there’s little sign of a truce. Instead, China, which says claims of human-rights violations are unfounded, is escalating its response. In late September it launched a recruitment drive for a sustainability certification program that would undercut the BCI, with the first applications to join due by Friday. The escalating conflict shows how difficult it can be for brands to satisfy demands from western consumers and human-rights groups for greater sustainability without risking open war with China, which has become more willing to wield its clout to defend its policies. It’s also a potential setback for the broader ESG movement that’s rallying institutional investors around the banner of improved environmental, social and governance targets. “It’s really terrible if companies start feeling they can’t speak out against atrocities because of a fear of backlash," said Therese Kieve, stewardship analyst at Sarasin & Partners, which holds shares of Asos Plc and Associated British Foods Plc, owner of the Primark chain. “Then nothing’s going to change." The Geneva-based BCI declined to comment on China for this article. Comfort, convenience and relatively low cost have made cotton the world’s most widely used textile fiber. More than 26 million tons is plucked from shrubs annually and spun into yarn. That’s enough to provide at least two dozen T-shirts for everyone on the planet. But there’s an ugly side to that success. Growing cotton can often require vast amounts of water and pesticides. Labor practices are hard to police in the remote fields where much of it is grown. The Better Cotton Initiative was created in 2009, pooling industry efforts to clean up the supply chain. The group tries to help farmers transition to greener methods, while making sure cotton remains affordably priced. The organization also says it refuses to operate in countries where forced labor is “orchestrated by the government." The confrontation that erupted last October followed the U.S. government’s decision to ban some imports from Xinjiang, where it says Chinese authorities are detaining more than 1 million Uyghurs and other ethnic and religious minorities in “re-education" camps in what constitutes an ongoing genocide. China has repeatedly denied these claims. While the BCI didn’t withdraw altogether from China, it said it would focus on other regions of the country. Beijing responded with fierce criticism of western fashion brands, prompting calls for boycotts. Landlords closed some H&M stores in retaliation for an undated statement on its website that expressed concern about reports of forced labor in Xinjiang. Dozens of Chinese celebrities ended their contracts with BCI member firms including H&M, Adidas AG and Nike, with former Burberry Group Plc brand ambassador and actress Zhou Dongyu saying the trenchcoat maker had not “clearly and publicly" stated its stance on cotton from Xinjiang. The flap highlighted a quandary for the foreign labels, said Veronica Bates Kassatly, independent analyst of sustainability claims in the global apparel sector and a former World Bank economist. “They cannot afford to upset Chinese consumers and they cannot afford to upset Chinese manufacturers, either," she said. The BCI has expanded so quickly — it now has more than 2,100 members — and become so prevalent that its production represents almost a quarter of global cotton output. 2.4 million farmers are licensed to sell cotton certified by the organization, which is funded through membership dues and a levy on sales. There’s also an incentive to becoming a member, as BCI-certified products help fashion giants burnish their sustainability credentials. New members continue to join -- nearly 190 in the first half. Among them is Boohoo Group Plc, the British online fast-fashion retailer seeking to clean up its own supply chain. Few big brands will talk openly about their discussions with the BCI on how to police Xinjiang cotton. Burberry, for example, scrubbed references to the group in its annual report published in June, after citing the organization a year earlier. BCI lists Burberry as a member on its website. The company declined to comment for this story. “Companies are doing everything they can to avoid these types of public conversations," Bertille Knuckey, co-head of ESG Research at Sycomore Asset Management. “Now they are just avoiding really engaging on the topic." Once the BCI published the statement on alleged human-rights violations, some members expressed frustration that it had gone beyond its primary mission of environmental sustainability and strayed into areas where it did not have adequate knowledge or expertise, people familiar with the situation said. Levi Strauss’s new chief sustainability officer, Jeff Hogue, who joined last year, decided not to take up a seat on the BCI council even though the retailer, which backed the formation of the program, was due to hold that position until 2022. Levi’s, which remains a member of the BCI, said Hogue is currently focused on the upcoming release of the company’s first sustainability report and ESG disclosure. At the height of the boycott crisis, BCI said the decision to suspend licensing would prevent almost 500,000 tons of Xinjiang cotton from entering the global supply chain. The provenance of cotton is hard to trace because of the many stages in the production process. It starts with raw cotton produced in remote villages in countries such as China, India or Mozambique. Seeds are extracted, bolls are removed and the fiber is spun into yards. They’re transported to mills that produce and dye the fabric — often with toxic products and little environmental oversight. The textiles are sold to clothing manufacturers, which ship finished products to stores worldwide. The fashion and apparel industry was shaken to its core in 2013 when a garment factory collapsed in Bangladesh. The tragedy resulted in more than 1,000 deaths, putting the spotlight on an industry that long pushed profit at the expense of the wellbeing of those at the bottom of the production chain. Following the incident, brands vowed to improve labor standards, including an increase in the number of labels and certifications meant to show that the industry is tackling abusive working practices. Authorities from France to the U.S. are carrying out investigations that may shed more light on what is happening in Xinjiang. Several French campaign groups lodged a legal complaint in April against two BCI members: Japan’s Uniqlo and Spain’s Inditex SA, the parent of Zara. Also named were French fashion group SMCP SA, which owns brands like Maje and Sandro, as well as Skechers USA Inc. The complaint accused the four companies of profiting from forced labor of China’s Uyghur minority as well as crimes against humanity. French prosecutors started an investigation in June. SMCP and Inditex both strongly denied the accusations and said they will fully cooperate with the probe. Inditex said traceability controls are carried out “rigorously" on its clothing. Fast Retailing said there’s no forced labor in its supply chain and it intends to cooperate with authorities if contacted. Skechers declined to comment on pending litigation, but said previous supplier audits found no use of forced labor. A criminal complaint was filed last month against the C&A fashion chain and other retailers by the European Center for Constitutional and Human Rights, accusing them of “directly or indirectly abetting and profiting from alleged forced labor of the Uyghurs in Xinjiang," and being “involved in crimes against humanity." C&A, a BCI member, says it doesn’t have supplier contracts in the region and doesn’t tolerate forced labor or unauthorized subcontracting in its supply chain. The association uses so-called “mass balance," a widely employed volume tracking system, that allows farmers and manufacturers to mix Better Cotton with conventionally grown fabric while benefiting from the label. The system has allowed the BCI to dramatically increase the volume of Better Cotton sold worldwide. But the lack of transparency and full traceability has raised concerns. “Due to the mass balance approach, there is a potential risk that cotton from the Xinjiang region may be included within BCI cotton," a spokesperson for British apparel chain Next Plc said. To try to avoid that, the company has explicitly banned the use of cotton from the area. The BCI has said it’s moving toward a better traceability program in the coming months. C&A is calling for changes in the program. “It is also time to open up the debate about what are the steps needed to increase the traceability of cotton and what are the opportunities that will arise from it," said Betty Kiess, a spokeswoman. C&A will continue to collaborate with the organization, she said. Incremental progress on environmental goals is better than nothing, some brand owners say. Tendam, the Spanish owner of the Women’secret lingerie label, joined the BCI this summer. The initiative is encouraging growers to adopt “better behaviors," including reduced water usage, said Ignacio Sierra, corporate general manager at Tendam. Whether global brands embrace China’s own sustainable cotton certification program is an open question. They may need to if they wish to keep selling in that market, and some clothes could even be manufactured solely for the Chinese market based on this label, according to a person familiar with the BCI’s work. “The standards of BCI are too general and may not be suitable for cotton grown in China," Wang Wenkui, an executive at the China Cotton Industry Alliance, told the Global Times. The Chinese guidelines will set out specific growing practices, including temperature and regulation of pesticides. “I’m quite confident that our cotton growing standards will replace the BCI standards in the future," Wang said.

Source: Live Mint

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Global supply chain is in a crisis. Here are the issues

Emerging countries have faced a sudden surge in demand for their raw materials as economies reopen and recover from the Covid pandemic. PARIS: Closed factories, clogged ports, no truck drivers -- up and down the global supply chain there are problems, raising concerns that it could disrupt the global economic recovery. Here is a look at the issue: Raw material shortages Emerging countries have faced a sudden surge in demand for their raw materials as economies reopen and recover from the Covid pandemic. "Raw materials still come mainly from emerging nations such as India and Brazil where the management of the pandemic is complicated," said Isabelle Mejean, an economist and professor at Sciences Po university in Paris. With people working from home and shopping online, demand for cardboard to deliver packages has surged. Both the construction and furniture industries have also seen booms in demand as those stuck at home want to improve their living space, with giants like Ikea having trouble keeping items in stock. The competition for wood has caused shortages for book publishers. Another problem can be the high concentration of firms that transform raw materials for use by manufacturers. For example, the closure over the summer of a US factory that makes specialised plastics for the perfume industry caused headaches for the entire industry. Even where it is possible for manufacturers to substitute certain materials, it requires adjustments in factories, said Yann De Feraudy, deputy CEO for operations at cosmetics firm Yves Rocher and head of the France Supply Chain trade If you can't do that, "you have to order three months in advance ... Prices rise until there is nothing" left available. Factories at a standstill The pandemic has demonstrated the dependence of the world on factories in Southeast Asia, said Jonathan Owens, a logistics specialist at the Salford Business School in Britain. He calls for some manufacturing to return to the West to reduce the dependence on one region. "So where the raw products might still come from the Far East, the assembly might be actually manufactured in different regions of the world and then it's distributed," he said. Covid clusters and lockdowns have resulted in the closure of some factories, such as textile and shoe factories in Vietnam that are causing trouble for big brands such as Nike and Adidas. For components like semiconductors, factory closures at chip factories have caused an avalanche of problems. A lack of processors has forced carmakers to idle their factories and is set to cause the industry $210 billion in losses this year, according to consulting firm Alix Partners. And Covid-19 is not the only reason for disruptions: There have also been cyberattacks and natural disasters, along with power cuts in major exporter China. Blocked ports, lack of containers Ports have had trouble handling the surge in goods shipped, as well as disruptions. A container ship blocked Egypt's Suez Canal -- a vital maritime shortcut -- for only six days but it caused a backup in traffic that taxed the capacity of European ports. "After the Suez Canal blockage, it took two months for the small European ports to settle down," said Owens. Another disruption was caused by the two-week closure of the Chinese port of Ningbo-Zhoushan, the world's third-largest in terms of exports. "Freight containers that should be in Egypt right now, they're actually stuck in China," said Owens. The main port on the US West coast at Los Angeles has had dozens of ships waiting to unload their containers, and will now work 24 hours per day in an attempt clear the backlog. All the disruptions have led containers not being in the right place. Shipping costs have jumped by a factor of 10 over the past year-and-a-half. Lack of drivers Increased customs checks following Britain's exit from the European Union have caused problems in the country, which is also suffering from a shortage of truck drivers as many came from EU countries. The government has offered short-term visas to try to help ease the shortage, which other countries also confront to a lesser extent.

Source: Economic Times

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