The budget announcements have brought cheer to textile manufacturers in the State as funds have been allocated for Technology Upgradation Fund Scheme and basic customs duty has been exempted for import of specified fabrics (for manufacture of garments for exports) of value equivalent to one per cent of FOB value of exports in the preceding financial year. A. Sakthivel, president of Tirupur Exporters’ Association, said this will give a boost to garment manufacturers in the State. According to M. Senthil Kumar, chairman of Southern India Mills’ Association, the Government has met one of the main demands of the industry and is continuing the optional Cenvat route on cotton textiles. Apart from the allocation of Rs. 1480 crore for Technology Upgradation Fund Scheme, there should be more funds for pending subsidies since September 2014 under the scheme. The basic customs duty has been reduced only for specified varieties of manmade fibre and filaments from five per cent to 2.5 per cent. It would marginally benefit technical textiles.
Indian Texpreneurs Federation has said that the levy of two per cent excise duty on branded readymade garments of more than Rs. 1,000 MRP seems to be a move to prepare the sector of GST regime. Cotton Textiles Export Promotion Council chairman R.K. Dalmia has said that duty free imports of certain fabrics for export of garments should be available for made up sector too. Confederation of Indian Textile Industry has said that the move to reduce customs duty on specified fibres and yarns will improve India’s competitiveness. The excise duty on readymade garments could have been postponed till the integration with GST, covering the entire textile value chain.
SOURCE: The Hindu
Expressing displeasure over the Union Budget presented on Monday, experts said they were surprised that finance minister Arun Jaitley did not utter a word about the textile industry, which is the second largest employment provider in the country after the agriculture sector. The industry in Ichalkaranji, which provides directly or indirectly provides employment to more than 80,000 people, was expecting incentives to powerlooms and grants for modernization. However, experts said the Budget is beneficial only for companies of big brands instead of the common entrepreneurs, who have been doing business for decades. Ichalkaranji, Bhiwandi and Malegaon are the textile hubs of Maharashtra, where cloth is produced using cotton imported from Vidarbha and other cotton producers. Kolhapur also hosts India's two of the 21 textile parks. "There is hardly anything for the common textile industry in this Budget. I am surprised that the minister forgot the textile industry, which is the second largest employer in India. The industry was expecting something from the Budget as we were aiming for programmes such as Make In India. The export is declining for the last 11 months. We are worried. Under such circumstances, we were expecting incentives from the government to boost export," said Dhanpal Tare, chairman of Indian Powerloom Federation. He said the textile industry provides more than 50% employment to women and unskilled workers. "What the government has offered in the Budget is reduced basic customs duty on specified fibres and yarns. The duty has been reduced from 5% to 2.5%, which will benefit readymade garment manufacturers, especially big brands," Tare said. "Indian technical textile contributes only 1% to the world industry and the minister should have focused on it. The technical textile industry is dominated by China and Western countries. I think we have missed the bus again," he said. Prakash Awade, former Maharashtra textile minister, too expressed unhappiness over the Budget. "We were expecting Jaitely to rescue the industry from recession. Instead, he chose to watch the situation. The powerloom modernization programme started during the earlier Union government's regime may receive a setback," he said. In the meantime, Maharashtra's textile policy restructuring committee has decided to wait and watch until the discussion over the Budget speech concludes. Ichalkaranji MLA Suresh Halwankar, who is also the chairperson of the committee, said he will have to study the Budget speech and watch the discussion over it before commenting on anything. "At a outset, I could not found any substantial provisions for the textile industry. But we are sure that the finance minister will consider our request of reducing taxes for the industry. Let all the details come out. Thereafter, we can take a call on what is better for Maharashtra," he said.
Textile scenario in India
* It is one of the largest contributors to India's exports with approximately 11% of total exports
* The industry realised export earnings was worth $41.4 billion in 2014-15, a growth of 5.4%, as per reports of The Cotton Textiles Export Promotion Council (Texprocil)
* The industry, estimated at around $108 billion, is expected to reach $223 billion by 2021
* It is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly
* The industry contributes approximately 5% to India's GDP and 14% to overall Index of Industrial Production (IIP)
SOURCE: The Times of India
The Union Budget of 2016-17 has come as a relief for the textile industry. The basic customs duty on fibers was reduced from 5% to 2.5%. Similarly, there is no mandatory duty imposed on cotton yarn. In the previous year’s budget there was an applicable duty on cotton yarn. However, the Govt made it a point in this budget, to announce that duty on cotton yarn was made nil. This year’s budget has recognised the importance of infrastructure and has increased funds for infrastructural developments and MNREGA. These measures will lead to an overall development of the industry as a whole. They will also help in the realisation of Make in India initiative of the government which would boost rural demand and consumption. However reactions from the industry heavyweight such as R.K.Dalmia, Chairman, Texprocil revealed, that “the 2% duty on textiles on the branded ready-made garments was not in existence in the previous budget. The government will have to look into this issue as there would be a compliance issue. This duty was present during the tenure of Pranab Mukherjee as Finance Minister, however it did not yield results due to the same compliance issues,” he added.
Kavita Gupta, the textile commissioner had a very positive response to the budget. She said, “the budget is very forward looking. We can say the budget to be transformative and a budget of change. The increase of funds in the MNREGA scheme has the capability to increase the industry on a larger scale and also improve the purchasing power.” The overall picture that the budget drew in certain key areas was it proposed changes in the customs and excise duty rates, simplified the duty structure which would play an important role in incentivising the domestic value addition to the Make in India campaign.
SOURCE: The Dollar Business
The Union Budget 2016-17 is a balanced, growth-oriented and forward-looking Budget as it will ensure an overall development of the garment industry by focusing on skilled labour, infrastructural improvement and manufacturing sector's growth, the Apparel Export Promotion Council (AEPC) has said. Commenting on the Budget, Ashok G Rajani, chairman of AEPC said, “Addition of 1 per cent Free on Board (FOB) value of exports in specified duty-free fabrics will enable garment exporters to produce those garments which they were not competitive enough of producing till now.” Additional exports worth Rs 7,500 crore is expected in the year 2016-17 due to incentives in the Budget, he estimated. In 2016-17, fabrics worth Rs 1,000 crore approximately will be eligible for imports, and custom duty worth Rs 110 crore will be saved on them. This will give avenues for new product development, which will give additional exports of Rs 2,500 crore, he said in a statement. Duty-free import of trimmings and embellishments of 5 per cent FOB will enable additional exports of Rs 5,000 crore. Explaining this, he said, the benefit of Notification No 41/2012 is now effective from 1-7-2012. Here the government has changed the post manufacturing drawback rate from 0.18 per cent to 0.21 per cent. Its effect will be additional 0.03 per cent drawback on service tax of garment exports on FOB value. This is subject to the passing of Finance Bill, he stated.
SOURCE: Fibre2fashion
Tax sops such as slashing of basic customs duty on specified fibres and yarns, continuation of duty free import of trimmings and embellishments announced in the busget will generate additional garment exports worth Rs 7,500 crore in 2016-17, an industry body said. "Total additional exports of Rs 7,500 crore in 2016-17 are envisaged by the incentives announced in this Budget," Apparel Export Promotion Council Chairman Ashok G Rajani said. He said the addition of 1 per cent Free on Board (FOB) value of exports in custom duty for specified fabrics would enable garment exporters to undertake production where they were not competitive. "In the year 2016-17, fabrics worth around Rs 1,000 crore (1 per cent of Rs 1 lakh crore) would be eligible for imports and custom duty of Rs 110 crore would be saved by garment exporters.”This will give avenues for new product development. It would provide additional exports of Rs 2,500 crore in a complete year," Rajani said. Besides, the continuation of duty free import of trimmings and embellishments to the extent of 5 per cent of FOB would give additional garment export of Rs 5,000 crore in 2016-17, he said.
SOURCE: The Economic Times
In the budget 2016-17, Union Finance Minister Arun Jaitley said that he propose to change the excise duty on branded readymade garments and made up articles of textiles with a retail price of Rs 1,000 and above from ‘Nil without input tax credit or 6 per cent/12.5 per cent with input tax credit’ to ‘2 per cent without input tax credit or 12.5 per cent with input tax credit. With the Union government levying excise duty on readymade products of Rs1000 or more, the prices of branded garment are set to move up by 2 to 5 percent. The garment industry in Punjab described the levy as “most deplorable” step and said that prices of readymade garments will go up in the range of 2 to 5 per cent. Ajit Lakra, Head Textile, Federation of Industry and Commercial Organization and a garment maker said on Monday that prices of readymade garment will go up in the range of 2 to 5 percent depending upon the retail price of the product. They strongly condemn this move of the Finance Minister as it will hurt small and medium size industries that are manufacturing garments for big brands. Condemning the government for bringing small and medium enterprises engaged in garment manufacturing under the ambit of indirect tax, industry questioned the rationale behind the move when the Centre was pushing for bringing Goods and Service Tax (GST) from next fiscal.
SOURCE: Yarns&Fibers
The garment manufacturing industry in Ludhiana unhappy with the third budget of the NDA government as it has imposed a two percent excise duty on branded readymade garments having retail price of over Rs1000, with an aim to bring in readymade garment manufacturers in the excise duty net but this will lead to increase in price of all branded garment by almost 1.8-2 percent. This move will be a setback to the micro-small and medium garment manufacturers who make branded garments for big garment houses. Till now, manufacturers who did not claim input tax credit had to pay zero excise duty. In the present budget, Finance Minister Arun Jaitley has proposed to levy the duty on all garments that sell over Rs 1,000, on those manufacturers who want to claim the input tax credit or CENVAT paid on various raw materials.
Though attempts have been made in the past to levy excise duty, it has been withdrawn following protests by manufacturers. Ajit Lakra, president of the Ludhiana Knitters Association and head of the textile division of the Federation of Industrial and Commercial Organisations, said that though the budget was inclusive and aimed at giving a fillip to the under-privileged, the garment manufacturing micro, small and medium enterprises (MSME)had been discriminated against condemning the imposition of the excise duty. As no branded garment is sold for less than Rs 1,000, almost all garments will invite the levy of two percent excise duty. This brings all manufacturers under the excise net and removes any ease of doing business as they will have to maintain records besides breeding corruption in an apparent interface with taxation authorities. He said that the manufactures would protest this levy. The Ludhiana garment manufacturing industry alone generates a turnover of around Rs 3,000 crore per annum, with most sales being in domestic market.
Sandeep Jain, executive director of Nahar Group of Companies, said that with the Goods and Services Tax rollout expected soon, no was no need for bringing this new levy, especially when the textile industry was passing through a rough phase. Komal Jain, chairman of Duke Fashion India Ltd, said that to promote garment manufacturing, which is a highly labour-intensive industry, they were expecting some concessions and impetus to technical upgrade. With the new levy, they have been hit hard. This will disturb the trade, which is mostly in the MSME category.
SOURCE: Yarns&Fibers
The textile sector was looking up to the Budget for incentives but nothing has been done in this direction, said Telangana State Federation of Textile Associations (TSFTA) president Ammanabolu Prakash on Monday. He expressed disappointment over the absence of measures to support textile traders. The Federation president Ammanabolu Prakash said that traders play a pivotal role… pay a variety of taxes to the State and Central governments but the Finance Minister has disappointed them by not granting concessions or allocating funds to [help] compete with global market. While, A Sakthivel, Regional Chairman of Federation of Indian Export Organisations (FIEO) welcomed the broad thrust of Budget even while expressing concern on the proposal of excise duty on branded readymade garments and made up, articles of textiles, whose retail sale price is above Rs.1,000. Dr. Sakthivel, in a release, complimented the Finance Minister for allocating Rs.3,350 crore for textile industry, which includes Rs.140 crore for amended TUF and Rs.300 crore for development of mega clusters. Federation president Ammanabolu Prakash however, appreciated the Budget’s approach to develop agriculture, infrastructure and education sectors and not tax the other sectors unduly. The thrust on rural development would yield positive results in the long run.
SOURCE: Yarns&Fibers
In a first-of-its-kind exercise, all central government ministers will be launching a media campaign on the Union Budget 2016-17 explaining policies, programmes and budgetary allocations given to their respective ministries, to the public. All ministers have been asked to hold discussions with correspondents covering their ministries, either through press conferences or meetings in the next 15 days, official sources said today. They said ministers will explain priorities of the government and key programmes being undertaken by their ministries. Ministers will be responding to the opposition parties' allegations against the union budget for 2016-17 presented by Finance Minister Arun Jaitley yesterday and highlight its "pro-poor" agenda, the sources said. A senior minister has been made in-charge to coordinate with the implementation of this exercise, they said. The decision assumes importance as opposition parties have termed as "mere rhetoric" projection of the budget as pro-poor and said government will not be able to "fool" the agrarian community with "hollow promises".
Congress has said the budget "failed to create an immediate stimulus" to address economic challenges including employment generation. All ministers have been asked to hold these interactions as early as possible, the sources said. Prime Minister Narendra Modi has said the 2016-17 budget is pro-village, poor and farmers with focus on bringing about qualitative change in the country and alleviate poverty through a slew of time-bound programmes.
SOURCE: The Economic Times
The slew of proposals announced by finance minister Arun Jaitley in the Budget on Monday will lead to an increase of coal-based electricity prices by 10-12 paise per unit, due to the doubling of cess on coal. Additionally, the reduction in accelerated depreciation (AD) and withdrawal of income tax exemption for new plants are likely to bump up prices for renewable energy. The Budget increased the cess on coal to Rs 400 per tonne under the ‘clean environment cess’, which translates into a tariff hike of nearly 3% over the average tariff. Similarly, the reduction in AD to 40% from 80% earlier will likely see higher tariff for solar and wind energy for developers to realise acceptable return on investment. This will also dissuade smaller, non-power companies from investing in the sector, thus reducing competition. “The proposed doubling of cess impacts us more, increasing the cost of generation by 12 paise per unit,” Kameswara Rao, leader – energy utilities & mining, PwC India, said in a statement. He added that solar tariffs will likely see an increase of 10 paise per unit due to withdrawal of income tax exemption for new power plants, along with a cut in AD. A government official told FE on condition of anonymity that higher funds collected through the coal cess would be utilised in promotion of renewable as well as transmission projects through various means, including viable gap funding for projects. Experts said while the weaning away of subsidies — reduction in AD and withdrawal of IT exemption — would lead to higher tariff, it was necessary for the healthy growth of the sectors as it would mark a further shift of the renewable energy sector away from non-traditional investors, and towards pure-play power companies. “In the immediate period, the cut in AD will spur a higher level of wind and solar investment in the first half of 2016, as companies will vie to secure the most of the remaining tax break,” Rao said. However, Tulsi Tanti, chairman, Suzlon Group, disagreed : “We hope the government will reconsider reduction in AD limit and reiterate that it should remain at 80% till 2022, to boost manufacturing under the Make in India vision,”. Suzlon group is engaged in manufacturing wind turbines.
SOURCE: The Financial Express
Despite improved manufacturing conditions – new orders accelerated at a five-month high – the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) in February remained constant at January’s level of 51.1. “Manufacturing business conditions in India continued to improve, with new orders, exports, output and purchasing activity all rising in February. However, a faster expansion in new business inflows failed to lift growth of output, and workforce numbers were left broadly unchanged again,” it said in a release on Tuesday. The PMI data also highlighted a weaker rise in costs and the first cut in selling prices since September last year. A reading above 50 on the PMI indicates contraction while a reading above 50 reflects expansion. The reading of 51.1 in January was a four-month high. “Although businesses saw a stronger rise in new work, data implied that this was partly driven by price reductions,” said Pollyanna De Lima, Economist at Markit, adding that goods producers also continued to benefit from lower global crude oil prices.
Noting the low inflationary pressures, she also pitched for further monetary easing by the Reserve Bank of India. “In light of these numbers, the RBI has scope to loosen monetary policy to spur the economy,” Lima said. Closer home, Chief Economic Advisor to the Finance Ministry Arvind Subramanian had also noted that “given the low inflation expectation, there is scope for more easing of monetary policy by the RBI”. However, RBI Governor Raghuram Rajan on February 2 left the key interest rate unchanged due to concerns over inflation and growth, while pegging further easing of monetary policy to the government’s Budget proposals. Meanwhile, according to the PMI, while input costs rose for the fifth month running in February, employment levels remained unchanged in manufacturing sectors remained unchanged. “Manufacturers’ buying levels rose for the second successive month,” it noted, adding that backlogs of work were accumulated amid reports of delayed payments from clients.
SOURCE: The Hindu Business Line
The 42 free trade agreements (FTAs) signed by India so far have led to more imports than exports as the country has had to go for larger tariff reductions than its FTA partners because of relatively high tariffs, the Economic Survey 2015-16 said. Mint reported on 16 February that the survey will assess the impact of FTAs on India. The survey said that in the current context of slowing demand and excess capacity, with threats of circumvention of trade rules, progress on FTAs, if pursued, must be combined with strengthening of India’s ability to respond with measures consistent with the World Trade Organization, such as anti-dumping and conventional duties and safeguard measures. “Analytical and other preparatory work must begin in earnest to prepare India for a mega-regional world,” it said. The survey said in the case of the Asean (Association of South East Asian Nations) FTA, India has benefitted on both sides of trade flows, with a statistically significant 33% increase in exports and 79% increase in imports. “The trade increases have been much greater with Asean than other FTAs and they have been greater in certain industries such as metals on the import side. On the export side, FTAs have led to increased dynamism in apparel, especially in Asean markets,” it said. The survey said the overall effect of an FTA on trade is positive and statistically significant. “The cumulative effect between the year of the FTA and 2013 on trade with ASEAN, Japan, and Korea is approximately equal to 50%. India’s increased trade with FTA countries is not due to diversion of imports from more efficient non-FTA countries,” it said. On the import side, a 10% reduction in FTA tariffs for metals and machinery increased imports by 1.4% and 2.1%, respectively, compared to other products from FTAs or all products from non-FTA countries, the survey said.
SOURCE: The Live Mint
The Union Budget has failed to address the major concern of exporters on decline in export growth, according to Walter D’Souza, convenor of Committee on Ports and Logistics of Federation of Indian Export Organisations (FIEO). He told Business Line that the exports are expected to register a decline in growth of about 16 per cent at around $255 billion during 2015-16 as against $303 billion during 2014-15. “The budget has failed to address this major concern in terms of pragmatic, need-based and result-oriented incentives that would have reversed the negative trend in the near future starting with immediate next financial year 2016-17,” he said.
‘No specifics’
D’Souza, who is a cashew exporter, said the budget speech made a mention of ‘more measures to support exports’ without specifics except the proposal to ‘widen the scope of duty draw back’. It was imperative for the Finance Minister to announce measures that empower the Indian exporters to improve their level-playing capacity with their peers in the rest of the world, which is conspicuous by its absence. However, he said the budget has addressed quite a few of the concerns of commerce and industry. Proposals such as setting up 1,500 multi skill training institutes and National Board for Skill Development Certification in partnership with trade and industry will go a long way in the employability of the educated youth, thereby helping the industry in achieving greater output. Investments on roads and highways, if extended to last mile connectivity of hinterland to ports, will ensure seamless logistics. Proposals to modernise ports and set up Greenfield ports are certainly welcome measures, he said. Single window mechanism at Customs in major ports and airports will reduce transaction costs for exporters, he added.
SOURCE: The Hindu Business Line
In October last year, trade ministers from 12 countries reached an agreement on the Trans-Pacific Partnership (TPP). On 4 February, the agreement was signed. These developments have intensified debates within India about whether the country could fit into the TPP’s structure, either now or in the future. US President Barack Obama, right and Indian Prime Minister Narendra Modi arrive to attend the India-US business summit in New Delhi, India on 26 January 2015. Union Minister of Commerce and Industry, Nirmala Sitharaman, has hinted at India’s position on the agreement. During her address to the Confederation of Indian Industry (CII) Partnership Summit, Sitharaman reassured industry stakeholders: ‘There is nothing to worry about the adverse impact of TPP on India. We have taken necessary steps to boost India’s trade and investment in the wake of emerging new trade architecture’.
At another CII event, the Commerce Minister said the TPP would affect India’s export sectors and, given the TPP’s higher standards compared to WTO norms, India should consider improving its own standards. The TPP has been the basis of the Obama administration’s economic policy towards the Asia Pacific. Improving US access to Southeast Asian markets is central to this agenda. According to US Trade Representative (USTR) Michael Froman and President Obama, this would create new jobs in the United States while improving labour and environmental standards across both sides of the Pacific Rim. The USTR argues that such trade will help, inter alia, in facilitating cross-border trade and opening up domestic markets, eventually integrating regional economies across the Asia Pacific beyond the Trans-Pacific border.
Despite having been invited by the United States to discuss the TPP during Vice President Joe Biden’s visit to India in July 2013, India has so far not sought TPP membership, though it is closely watching international developments. India may incur considerable trade diversion costs from not joining the TPP. Peter Petri and Michael Plummer estimate that India’s exclusion could result in a trade loss of US$2.7 billion per year, which would only rise with an increase in the number of member countries. A study by C. Fred Bergsten estimated an annual export loss of up to US$50 billion if China and the rest of APEC form a second stage of the TPP that still excludes India, though this seems a distant possibility. According to World Integrated Trade Solution statistics, 25 per cent of India’s exports went to TPP countries in 2014. But since India has already signed free trade agreements (FTAs) with Japan and ASEAN, resulting in preferential or zero duty access for five TPP countries, its trade diversion risk may not be as severe as many expect.
Despite having signed 13 FTAs, India has failed to significantly improve its export base. At the same time, these FTAs have allowed greater access to Indian markets, leading to a significant rise in imports, a dip in Asian exports and increased trade deficits. Many of these FTAs were signed for geopolitical rather than economic gains. India has arguably failed to reap significant trade benefits from the South Asian Free Trade Agreement, despite the advantages of similar consumer preferences and logistics. This is due to inadequate physical infrastructure, high levels of protectionism within the South Asian Association for Regional Cooperation countries and high barriers to foreign direct investment. Working on FTA management is key for India both in handling existing FTAs and preparing for the TPP. Structural reforms with good trade policy would strengthen India’s FTA record by enhancing its exports with trade partners, bringing benefits to each of these countries. Such reforms should include the early imposition of a goods and services tax, subsidy reduction, reduction of non-tariff barriers as well as simplified land and labour laws.
India’s reform agenda can be guided by the trade rules outlined in the TPP and pursued by the United States, which are set to become a new global trade paradigm. This could help raise India’s share of global trade above its current level of 2.1 per cent. From now until the TPP becomes operational, India should implement its own innovative way of doing business so as to minimise any potential losses. The ‘zero defect and zero effect’ manufacturing, part of the ‘Make in India’ initiative, is one recent positive step. Dubbed ‘ZED’, the program focuses on improving ease of doing business in India, ensuring the quality of export goods and minimising the manufacturing industry’s environmental impact. Expected to be launched in March 2016, ZED is a promising sign of things to come for India’s manufacturing industry and its place in the global economy. India should look for new ways to manage existing FTAs, pursue reforms in key areas such as labour and land acquisition, and take steps towards becoming a global manufacturing hub. If India follows this path and improves trade on its own terms, not only will it be ready for the TPP, but it will play an increasingly central role in international trade for years to come.
SOURCE: The East Asia Forum
Outstanding issues relating to the existing Double Taxation Avoidance Agreement (DTAA) are under negotiation between India and Mauritius through the mechanism of Joint Working Group (JWG), Parliament was informed today. "India has proposed changes in the existing DTAA to address concerns relating to treaty abuse, around tripping of funds, double non-taxation and revenue loss. Both sides are working bilaterally to resolve these issues," Minister of State for Finance Jayant Sinha said in a written reply to Rajya Sabha. The last JWG meeting between India and Mauritius was held from June 29 to July 1, last year in Delhi to discuss outstanding issues. In a reply to a separate query, Sinha said the Income Tax Department has implemented the Non-Filer Monitoring System (NMS), which analyses and assimilates all in-house information as well as transactional data received from third parties including Annual Information System (AIR), tax deduction at source and Tax Collected at Source (TCS) statements. "About 1.36 crore non-filers with potential tax liability have been identified under NMS amd more than 52 lakh returns have been filed by the target segments," the minister said. Sinha said for the assessment year 2014-15, the number of taxpayers of income tax is 5.45 crore, which works out to be 4.36 per cent of estimated population of 125 crore.
SOURCE: The Economic Times
Talks between India and Iran to open bank branches in each other’s country have made some progress with the lifting of trade sanctions from the Islamic Republic, even as exporters continue to face payment problems. Recently, a delegation from the Central Bank of Iran visited India. During their meeting with the Finance Ministry, they forwarded applications for opening three banking outlets here, a top official involved in the talks told BusinessLine . The Finance Ministry is yet to approve the applications. The official said both sides also held talks on reviving the traditional Asian Clearing Union (ACU) system to smoothen the process of payment between entities and exporters doing business between both countries. This is because although trade sanctions have been lifted, the US’ secondary sanctions have not yet been lifted. As a result, the option of conducting transactions in dollars is not yet available to the traders. “This has created problems not only for banks but also for insurance firms because the risk factor is involved in it. Even global insurance firms are apprehensive. So, talks are on to revive the ACU,” the official added.
Headquartered in Tehran, the ACU was founded by Iran for seamless business transactions between member countries on a multilateral basis. The ACU is approved by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). Meanwhile, the Reserve Bank of India (RBI) has not yet informed all banks that payments to Iran can be made in hard currencies, such as Euro, not just in rupees. The Commerce Ministry has, therefore, urged the RBI to send an official communication to banks telling them that foreign currency payment to Iran is also allowed. “The Commerce Ministry is now in touch with RBI on the issue. It is expected that the required communication will be sent at the earliest to all banks so that there is smooth flow of payments,” said another official.
SWIFT mechanism
Exporters have also complained that the SWIFT mechanism, which allows global financial institutions to obtain information on financial transactions in a secured manner, has not yet been restored in all banks in Iran making payments difficult. “For most of the connected banks, SWIFT has been restored, but for others, including some major ones, the facility is still not available which is creating problems,” said Ajay Sahai, Director-General and CEO, Federation of Indian Export Organisations.
SOURCE: The Hindu Business Line
With the government deciding to end the income tax holiday for special economic zones (SEZs), it is the end of the road for them. Most of these SEZs have become real estate with promoters planning to use the land for redevelopment, say tax experts. In the Monday’s Budget, the government said it would not allow any deduction to units commencing manufacture or production on or after April 1, 2020, in an SEZ. Units are allowed to claim 100 per cent deduction of profits derived from exports from SEZs for five years beginning with the year of manufacturing and deduction of 50 per cent of the profit for the next five years. The change in the latest Budget will impact the sale and rent of SEZ units of companies like Adani Port, which has large SEZs in Mundra, Gujarat, say analysts. The Mukesh Ambani-owned SEZ near Mumbai will also lose tax benefits but as it is situated in proximity to Mumbai, it will become a real estate play, say tax experts. The SEZs were initially set up to take on competition from Chinese SEZs, which were exporting to the rest of the world with special tax incentives from the local government. The Indian SEZs, especially those in manufacturing, failed to take advantage of the scheme due to a combination of factors. Many Indian companies, including the Mukesh Ambani-owned Reliance Industries, decided to set up SEZs but later curtailed plans due to opposition from landowners.
For SEZ developers, abolishing tax sops which provide for deduction of profits derived from development of SEZ infrastructure means bad news. According to the Budget, the government will provide deduction of 100 per cent of the profits on investments made by companies on infrastructure and development of SEZs, provided the facility commences commercial operation and starts claiming deduction on or before March 31, 2017. This will impact companies like Concor, Gateway Distriparks, Allcargo, Gujarat Pipavav Port and Adani Port, which claim Section 80IA benefits on the capital expenditure repeatedly, says a Kotak analysis of the Budget. The sunset clause will also impact IT services companies operating in SEZs. In the last Budget, the Finance Minister had stated his intention to remove tax incentives. This means all Indian IT companies will be taxed post 2020. "We maintain our positive outlook on the IT sector (the current revenue growth slowdown is temporary) and our preference remains companies with the most beaten down valuations and the lowest expectations," says an Ambit report.
SOURCE: The Business Standard
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 33.22 per barrel (bbl) on 01.03.2016. This was higher than the price of US$ 31.86 per bbl on previous publishing day of 29.02.2016.
In rupee terms, the price of Indian Basket increased to Rs 2264.23 per bbl on 01.03.2016 as compared to Rs 2185.97 per bbl on 29.02.2016. Rupee closed stronger at Rs 68.16 per US$ on 01.03.2016 as against Rs 68.62 per US$ on 29.02.2016. The table below gives details in this regard:
|
Particulars |
Unit |
Price on March 01, 2016 (Previous trading day i.e. 29.02.2016) |
Pricing Fortnight for 01.03.2016 (12 Feb to 25 Feb, 2016) |
|
Crude Oil (Indian Basket) |
($/bbl) |
33.22 (31.86) |
30.61 |
|
(Rs/bbl |
2264.23 (2185.97) |
2096.17 |
|
|
Exchange Rate |
(Rs/$) |
68.16 (68.62) |
68.48 |
SOURCE: PIB
A huge delegation of Turkish businessmen with President Recep Tayyip Erdoğan will be visiting Abuja to hold business-to-business meetings where Nigerian businessmen will have the opportunity to meet with their potential Turkish partners on Wednesday. The reciprocal promotion and protection of investments deal is among one of the agreements on the agenda. Tony Ejinkeonye, the chairman of the Abuja Chamber of Commerce and Industry, said that Turkish businessmen should expect a very warm welcome from friendly businessmen from all around Nigeria. Nigeria, with a population of nearly 200 million is a candidate to become the strongest country in Africa. The United Nations expects the country to become the third-most crowded country in the world by 2050. The energy-rich country sells almost 45 percent of its oil to the U.S., and 80 percent of the country's budget depends on oil sales. Since Nigeria has no middle-income class, industrialization grows slowly and, after the discovery of oil, the country stopped investing in agriculture and some other sectors. Small- and medium-sized enterprises make up 85 percent of companies in Nigeria. Lack of electricity is a big problem in Nigeria. The government aims to reach 10,000 megawatts of electricity production in 2016, but it is still too low for its 200 million people, but is an opportunity for investors. Textiles is also a promising sector for Turkish manufacturers. Turkey sends 70,000 tons of textile products to Nigeria weekly, but this is mostly suitcase trading. The construction industry, agricultural products and equipment, health services, education and furniture are also promising sectors. Even in some sectors like agriculture the Nigerian government does not ask for taxes for five years. Over 2,600 Turkish businessmen have investments in Nigeria. The big challenges for Turkish investors are learning consumption habits of Nigerians and logistical problems.
SOURCE: Yarns&Fibers
The Nepal government in order to enhance the competitiveness in production of readymade garment as the cost of production is considered to be relatively high in the region, is all set to develop a garment processing zone (GPZ) within Simara Special Economic Zone (SEZ), located in Bara district. The government’s move is expected to bring down the production and export costs. SEZs are set up especially to facilitate export-oriented industries. As per SEZ Development Committee, GPZ in Simara SEZ will be completed within three years, will house 69 blocks for garment industries and will be equipped with all required facilities — power, road connectivity, water supply and sanitation, among others. The concept of the GPZ came into light after the United States extended zero tariff preference for 66 products, including apparels, into its market through ‘Trade Facilitation and Trade Enforcement Act’. The world’s largest economy is all set to provide preference for Nepali products through a separate act to support the country’s aspiration to graduate to the league of developing nations by 2022 through sustainable and robust economic growth.
The United States through the act, which is expected to come into effect after a month, has declared it would provide duty-free access to 66 Nepali products and support the country in trade capacity enhancement. Nepali apparel entrepreneurs are excited with the recent development because the United States was a major export market for Nepali apparels until Multi Fibre Agreement (MFA) was phased out on January 1, 2005. The country had exported readymade garments worth Rs 12.5 billion in fiscal 2001-02. Garment industry, which is on the verge of collapse after MFA was phased out, is expected to revive once again. The SEZ Development Committee has sought Rs 2.5 billion with Ministry of Finance for the development of GPZ, according to Chandika Prasad Bhatta, executive director of SEZ Development Committee. The GPZ is expected to compensate high transport and shipment costs due to Nepal’s landlocked status because the proposed zone is located near the country’s only rail-linked dry port in Birgunj. Apparel entrepreneurs are also optimistic about the government’s initiative to develop separate zone for garment factories and its ancillary industries. Chandi Prasad Aryal, acting president of Garment Association Nepal said that a separate GPZ will also help lure foreign direct investment.
Ministry of Commerce has urged various agencies of the government to work collectively in export promotion stating that the current piecemeal approach has failed to boost export. In this regard, the government is preparing to set up an export promotion cell to streamline export promotion activities and deal with supply side constraints. The cell will comprise officials from Ministry of Commerce, Ministry of Industry, Ministry of Finance, Ministry of Labour and Employment, and Nepal Rastra Bank. Apparel entrepreneurs have also been demanding for a separate labour law within SEZ. Entrepreneurs have also sought implementation of ‘cargo ambulance’ concept that Bangladesh has been extending to exporters. Neighbouring Bangladesh is a giant exporter of readymade garments in the markets of developed economies. Apparel entrepreneurs here are confident they can compete with the products of other exporters in the United States market by utilising zero tariff preference. The United States has extended zero tariff facility for 66 Nepali items with value addition above 35 per cent that are not covered by the generalised system of preferences. It has to be noted though that garment entrepreneurs are still not even sure whether the new law of the United States has incorporated readymade garments. This is because entrepreneurs have interpreted the provisions of law as being similar to the African Growth and Opportunity Act (AGOA), which has provided preference to African countries in export to the United States market to stimulate growth. According to former commerce secretary Purusottam Ojha, classification of goods incorporated in ‘Trade Facilitation and Trade Enforcement Act’ does not incorporate major readymade garment items produced in the country. Articles of leather, bags, belts, harness, travel goods, handbags and similar containers; carpets and other textile floor coverings; headgears; pashmina products have been incorporated in the law.
SOURCE: Yarns&Fibers
The European Parliament's decision to support negotiations on a free trade agreement with New Zealand has been welcomed by Trade Minister Todd McClay. "The European Union is the notable missing link in our network of FTAs with our major trading partners and it is a big missing link, with total GDP of more than $20 trillion," said Mr McClay, who last month travelled to Europe to meet with counterparts and push for an agreement. New Zealand has for years attempted to improve trade conditions in what is a market of 500 million consumers. Current settings are about 30 years old and many New Zealand exporters have become steadily disadvantaged as FTAs and preferential deals have been done with other countries. "The importance of completing an FTA with the EU cannot be understated. It has progressively expanded its own FTA network and our exporters have become increasingly disadvantaged -- for example, manufactured products face tariffs of up to 39 per cent," Mr McClay said. "And our agricultural exporters face average tariff rates into the EU of 31.3 per cent. Competitors from countries like Chile, Singapore, South Africa, Argentina, Vietnam and Korea enter the EU tariff-free."
SOURCE: The New Zealand Herald
Manufacturing activity across much of Asia shrank in February with China suffering a seventh straight month of decline, a blow to policymakers who only a day earlier resumed an easing cycle in a fresh effort to spur growth. Business surveys from China to Indonesia showed no signs of reversing a weakening trend, forcing factories in the trade-reliant region to shed yet more jobs and cut prices, a move that could worsen a global.Surveys of manufacturing output from other parts of the globe will be released later on Tuesday. Asia's grim readings will sharpen the focus of officials in the world's leading economies who declared at a weekend G20 meeting that they needed to look beyond ultra-low rates and printing money to reanimate growth.G20 meeting that they needed to look beyond ultra-low rates and printing money to reanimate growth.
Economists at Citi said last week that the chances of a global recession - which it defines as global growth falling below 2 percent - are rising. China aims to lay off 5-6 million workers from "zombie enterprises" over the next two to three years, two sources with ties to the country's leadership told Reuters. Australia's central bank governor, Glenn Stevens, observed on Tuesday that conditions have become more difficult for a number of emerging market economies and noted that "China's growth rate has continued to moderate." Stevens, who attended the Shanghai G20 meeting, made those comments after leaving interest rates at a record low 2.0 percent. He kept a conditional easing bias in a widely expected outcome. Survey after survey served to remind how challenging the current environment is.
INDIA AS A STANDOUT
Japan's factories saw their weakest growth in eight months, while Indonesia and Malaysia contracted for the 17th and 11th month respectively, according to survey compiler Markit. Taiwan went into reverse gear for the first time in three months as orders wilted. India was perhaps the only standout, and for merely maintaining modest growth driven by cutting prices to attract demand. The Nikkei/Markit Manufacturing Purchasing Managers' Index held steady at 51.1, the second month above the 50 mark that separates growth from contraction. By contrast, China's official Purchasing Managers' Index (PMI) stood at 49.0 in February, down from 49.4 and below the 50 mark for a seventh month. A private survey, the Caixin/Markit China PMI, which focuses on small and mid-sized companies, fared no better, falling to 48.0, from 48.4, and undershooting market expectations of 48.3. Analysts said some of the weakness in China's PMIs was probably due to the long Lunar New Year holidays, but they pointed to a worrying fall in the index's employment gauge which dropped to its lowest since January 2009. "The big question is do we see a pick up in the second quarter once China does pass through the seasonal disruption, but at the moment there is little hope for that to happen in any significant way," said Angus Nicholson, market strategist at brokerage IG in Melbourne. Underscoring how a slowdown in China is putting trade-reliant economies on the skids, South Korean exports in February tumbled in their 14th consecutive month of declines.
PRESSURE ON POLICYMAKERS
Job destruction from a slowing Chinese economy and reform of bloated state enterprises will put pressure on policymakers to come up with measures to create employment as Beijing finalises its plan for China's development over the next five years. Late Monday, the People's Bank of China (PBOC) announced it was cutting the amount of cash that banks must hold as reserves for the fifth time since February 2015. The 50-basis-point cut to the reserve requirement ratio (RRR) is designed to release an estimated $100 billion of long-term cash into the bank system, in hopes it will flow through to the wider economy. Analysts expect the PBOC will have to do more including cutting interest rates this year. "Following the latest move, we add another 50 basis point RRR cut, and continue to look for two rate cuts in the first half of 2016," analysts at Barclays Capital wrote to clients. "Risks to our 6.0 percent baseline GDP growth forecast in 2016 remain tilted to the downside."
SOURCE: The Economic Times
Euro zone manufacturing activity expanded at its weakest pace for a year last month as deep price discounting failed to put a floor under slowing order growth, a survey showed on Tuesday. Although the overall expansion was slightly better than previously thought, Markit's Purchasing Managers' Index (PMI) will make gloomy reading for the European Central Bank, coming little more than a week before its next policy setting meeting. "Concerns are growing that the region is facing yet another year of sluggish growth in 2016, or even another downturn. Lacklustre domestic demand is being compounded by a worsening global picture," said Chris Williamson, Markit's chief economist. Markit's manufacturing PMI for the euro zone dropped to 51.2 from January's 52.3. That was slightly better than an earlier flash estimate of 51.0 and above the 50 mark that separates growth from contraction. A sub-index measuring output, which feeds into Thursday's composite PMI and is seen as a good growth barometer, also fell to a one-year low. It registered 52.3 compared to January's 53.4, up from the 51.9 flash estimate.
Worryingly for policymakers, the slowdown came as factories cut prices at the steepest rate since mid-2013 -- the output price index slumped to 47.6 from 48.3. Input prices fell at their fastest rate since July 2009.The ECB wants inflation near 2 percent but prices across the bloc fell 0.2 percent last month, short of already depressed expectations and virtually ensuring another round of policy easing. An additional cut to the ECB's deposit rate is almost certain on March 10 and there is an even chance the central bank increases the size of its 60 billion euro a month bond buying programme, a Reuters poll found last month. [ECILT/EU]. "With all indicators -- from output and demand to employment and prices -- turning down, the survey will add pressure on the ECB to act quickly and aggressively to avert another economic downturn," Williamson said.
SOURCE: The Reuters
