The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 17 JANUARY, 2022

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Start-up Inc urges policy push, focus on smaller towns for sector's growth

Founders and investors laud move to celebrate National Start-up Day on January 16 - but say that more needs to be done to help sector While welcoming Prime Minister Narendra Modi’s announcement on Saturday to celebrate January 16 as National Start-up Day, six years after the Start-up India Action Plan was launched by the government, stakeholders in the ecosystem say that more needs to be done at the policy level to unleash the next phase of growth in the sector.“The Startup India programme’s launch in 2016 was a turning point – that is when the promoter came to be known as the founder in the country and the word ‘entrepreneur’ entered the common lexicon. But now we need a Start-up India 2.0 now for the next phase of growth of the ecosystem”, said Siddarth Pai, managing partner of venture capital (VC) firm 3one4 Capital.Pai says that Startup India 2.0 must look at promoting Startups headquartered in tier II,III & IV cities and solving the problems of Bharat. “Startups invest heavily into their clusters through the capital they raise and solving local problems. Encouraging India’s unicorns to expand there will democratise growth and drive development in areas,” he said.“As an entrepreneur, it is encouraging to see the efforts to build a strong and inclusive start-up culture fueled by innovation, technology and sound policies. This will encourage more startups to emerge in tier 2 and tier 3 towns and will play a key role in increasing our country’s GDP.” - Mabel Chacko, co-founder and CEO of neobanking start-up Open. www.citiindia.org 15 CITI-NEWS LETTER However, she also has a long prescription for what more needs to be done – foreign direct investment (FDI) inflows and compliances need to be simplified and made efficient, share swaps still remain a complicated procedure that should be eased, grants and tax holidays for developing talent, and eligibility criteria for various schemes and regulatory regimes to be based on credibility and talent rather than factors like net-worth, among other things.Gautam Chopra, founder and CEO of healthtech start-up BeatO, which was one of the winners of the National Start-up Awards 2021 declared on Saturday, says that the government was receptive to the ideas that start-ups proposed in their interactions on Saturday. Union Minister Piyush Goyal, PM Modi and top bureaucrats spoke to a group of more than 150 start-ups on the weekend about what more can be done to give a fillip to the sector.“In the healthtech category, we asked for things such as simpler regulatory processes for approvals and assistance from government medical institutions like AIIMS with clinical trials. The Prime Minister took a keen interest in the ideas we floated,” he says.One of the most important steps that the Start-up India programme took was to create a fund of funds with an approved corpus of Rs 10,000 crore for contribution to various Alternative Investment Funds (AIFs) registered with Sebi. According to the government, the programme has led to investments of Rs 8,000 crore in start-ups through various AIFs, 543 companies have been supported through the scheme and commitments of over Rs 6,044 crore are in the pipeline as of December 6, 2021.“Earlier, almost all of the capital comin into the Indian ecosystem was being managed by foreign fund managers. The Fund of Funds Scheme helped a lot of fund managers in the country with the seed capital to set up homegrown VC firms. In a way, fund managers have also been empowered like entrepreneurs,” said Pai.With 42 unicorn start-ups being created last year and India racing to the milestone of one billion internet users, the country will soon make a century of unicorns, Prime Minister Narendra Modi said on Saturday. “Your hard work, businesses, job creation and wealth creation are for the country’s benefit. I want to match shoulder to shoulder with you to transform the youth's enthusiasm into country's enthusiasm,” he told start-ups.

Source: Business Standard

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RCEP Trade Agreement aims to create an integrated market

At the same time, however, Japan will face difficulties keeping China’s growing influence in the region in check, particularly with the US, its ally, remaining at odds with China over human rights and other issues. Regional Comprehensive Economic partnership (RCEP) trade agreement took effect for most of the 15 member countries on January 1, 2022. The RCEP is a Free Trade Agreement (FTA) between the 10 ASEAN members plus Australia, China, Japan, New Zealand and South Korea. The RCEP is the world’s largest FTA, as it covers 2.3bn people or nearly a third of the global population. Its member countries together contribute US$ 25.8 trillion or about 30% of global gross domestic product, and account for US$ 12.7 trillion, over a quarter of global trade in goods and services, and 31% of global FDI inflows, according to UNCTAD. The RCEP took effect in Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Thailand, Singapore and Vietnam on January 1. South Korea will follow on February 1, but Indonesia, Malaysia, Myanmar and the Philippines have yet to ratify the deal. Significantly, the RCEP is Japan’s first trade agreement involving both China and South Korea. The RCEP aims to create an integrated market making it easier for products and services of each of these countries to be available across the region. The focus is on trade in goods and services, investment, intellectual property, dispute settlement, e-commerce, small and medium enterprises, and economic cooperation. The RCEP was pushed by China in 2012 in order to counter the US led Transpacific Partnership (TPP) that excluded China. However, in 2016, US withdrew from TPP, since then RCEP has become a major tool for China to counter the US efforts to prevent trade with Beijing. India decided against joining the RCEP amid concerns its economy would be flooded with cheap Chinese goods and farmers could be hurt by agricultural imports from Australia and New Zealand. A section of Indian industry felt that being part of RCEP would have allowed India to tap into a huge market. Some like pharmaceuticals, cotton yarn and the services industry were confident of making substantial gains Among the major benefits of the RCEP is that tariffs on more than 65% of trade in goods are expected to immediately reach zero and to around 90% over 20 years. Trade is an important driver of growth for Asia, and RCEP is expected to put Asia back on its preCovid growth trajectory. Another key benefit is its common ‘rules of origin’ framework, as RCEP exporters will generally only need to source at least 40% of inputs from within the bloc for their final goods to qualify for tariff preferences when exported to other members.Intra-Asian tradealready larger than Asia’s trade with North America and Europe put together-will receive a further boost with RCEP’s standardized rules of origin. Further, RCEP hopes to make it easier for companies to use Southeast Asia as a production base and could accelerate the diversification of supply chains and the reallocation of FDI already under way in Asia. Besides tariff concessions, RCEP standardizes rules on investment, intellectual property and e-commerce, among other things, and promotes optimization of supply chains in the region. The RCEP could also help to streamline existing free trade agreements in Asia-Pacific and strengthen intraregional trade linkages. Trade agreements have always been shaped more as economic weapons designed by the rich to extract advantages from the developing nations that are vulnerable to exploitation. Financial services, for instance, favor the rich countries who can target large populations of banks depositors, pensioners and insurance targets in the less developed nations. That developing countries gain from being exposed to modern financial services is a disingenuous argument, for instance, infrastructure, climate change mitigation and health spending tend to be underfinanced in advanced economies while short deployment of savings takes priority. Developing countries had stock markets virtually thrust upon them from outside instead of focusing more on bond market development that would have served their development needs better. All this argues in favor of a less interventionist model of economic partnership and the RCEP arguably supplies it. It is of a less ‘high level’ nature than the original TPP, but it may not be a bad thing. The irony is that just as the US was poised to capitalize on its economic agenda, Trump withdrew from the TPP. As the world’s top trading nation and second largest economy (and because of the absence of the US), China is the dominant partner within the RCEP. China began gathering support for the pact in 2012, to counter growing US influence in the Asia Pacific region. Backing for the RCEP gained momentum in 2017, after theUS withdrew from the rivalTPP. When the RCEP was signed in November 2019, Chinese premier Li Keqiang said it was ‘a victory of multilateralism and free trade.’ China hopes to expand exports and speed up its industrial transformation as its exporters face rising freight rates.China is ready to fulfill 701 binding obligations as new milestones in China’s opening.China will gradually lift tariffs for imports of coconut milk, pineapple products and paper products from ASEAN countries. Trade between China and other RCEP members totaled 10.96 trillion yuan (US$1.72tr) in the first 11 months of 2021, accounting for 31% of China’s total foreign trade value. Intra-regional investment, at 30% of total, has significant room for growth. FDI, investment by multinational enterprises and global value chains emanating from the region are all likely to benefit from the RCEP. Since the pandemic, signatories have seen a decline of 15% in FDI to a combined $310b in 2020. The Least Developed CountriesCambodia, Laos and Myanmar-are the most likely to benefit as they typically receive more FDI from neighboring RCEP members. Investment in infrastructure and industry would also improve their participation in global trade. Japan, another major member of the grouping, views RCEP’s impact on its economy as rosy. Japan would benefit most from RCEP tariff concessions, largely because of trade diversion effects. China’s tariffs on Japan’s auto parts and others will be reduced in steps, leading to a jump in exports of Japanese industrial goods to China to 86% from the current 8%. As for imports, Japan will abolish tariffs from 56% of farm products from China, 49% of those from South Korea and 61% from ASEAN, Australia and New Zealand. Meanwhile, Japan retained tariffs on five sensitive agricultural product categories-rice, beef, and pork, wheat, dairy and sugar-and on poultry and poultry products-to protect its domestic sector. RCEP incorporates Japan’s first economic partnership agreement with China and South Korea, the two main destinations of its exports in Asia. Japan’s annual exports are expected to rise by $20b, 5.5% increase from its 2019 exports to other RCEP members.Overall, the trade within the bloc is expected to increase by nearly $ 42b, equivalent to 2% rise from the 2019 level, driven mainly through trade diversion away from non-member nations. Japan expects to raise its GDP by 2.7% and add some 570,0000 jobs. At the same time, however, Japan will face difficulties keeping China’s growing influence in the region in check, particularly with the US, its ally, remaining at odds with China over human rights and other issues. Meanwhile, absence of India from RCEP is also a cause for worry as it means that the intra-RCEP trade could be lopsided in favor of China. Another priority, thus, forJapan to contribute to the regional evolution is to persuade India to join RCEP down the road, as an expanded agreement including India would also broadly dilute China’s influence within the region. In addition, the US, in case it decides to go soft on China, there will be even more worries for Japan. It is feared an overdependence on China is a sure recipe for disaster. China touted the signing of the RCEP as a victory for its leadership in the region, particularly since key US allies Australia and Japan are a part of the RCEP. During the pandemic, countries like Australia which depend heavily on export to China, have seen how Beijing uses the economic stick to its advantage. In addition, even a steady flow of Chinese goods into the economies of other RCEP could pose a threat since China already enjoys a favorable balance of trade with some. It could also boost its BRI, from which Japan has stayed away. Hence, China’s overwhelming presence in the RCEP could in the future allow it to dictate terms to the other RCEP members. The TPP was an attempt by former US President Barack Obama to deepen trade links among the US and other Asian nations-in part to curtail China’s growing influence. This was broader in scope than the RCEP, but Trump pulled out saying he would pursue bilateral deals instead. If they try to push together and change China’s direction, then it would be through the lens of development and trade, infrastructure and connectivity. In May 2020 China indicated willingness to join the 11-member Comprehensive and Progressive Agreement for Transpacific Partnership (CPTTP), the successor of TPP, but is unlikely to gain traction because the high standards for regulations on e-commerce, IPR and state-owned enterprises, suggesting the amount of government intervention in the Chinese economy will not meet CPTPP requirements. Further, although not a member of the CPTPP, the US can exercise the “poison pill” within the US-Mexico-Canada agreement to prevent Canada and Mexico from voting in favour of Chinese application. The contours of CPTPP 2.0 could feature the US in the future. US presence will dilute China’s influence in the region.  The US under Biden is exploring the development of an Indo-pacific economic framework, as during the East Asia Summit in October 2021. In November the US sent USTR to Japan, India and other parts of Asia to start discussions on potential negotiations that could begin in 2023. The framework could comprise multiple agreements such as digital trade, supply chain resilience, clean energy and infrastructure, among others. The US is not a member of RCEP or the CPTPP. China appears to be determined to build an economic network outside the US influence. China has been criticized for its stance on intellectual property and market distorting subsidies. Whether China will comply with the rules of RCEP will be key in determining the future course of things.

Source: Financial Express

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Want to bring together mutually beneficial FTA for India, Britain: UK Minister

The UK minister and Commerce and Industry Minister Piyush Goyal on January 13, formally launched negotiations for the proposed FTA, which is expected to help double bilateral trade to over USD 100 billion by 2030 and boost economic ties between the two countries. UK's Secretary of State for International Trade Anne-Marie Trevelyan has said that both India and Britain want to bring together a free trade agreement (FTA), aimed at boosting economic ties, which is mutually beneficial for both the countries. She also expressed www.citiindia.org 6 CITI-NEWS LETTER hope that both sides would conclude the negotiations for the trade pact by end of the year or early 2023. The UK minister and Commerce and Industry Minister Piyush Goyal on January 13, formally launched negotiations for the proposed FTA, which is expected to help double bilateral trade to over USD 100 billion by 2030 and boost economic ties between the two countries. The two sides are hoping that the negotiations would conclude by the end of this year. Both sides are looking to conclude an interim agreement by Easter. "We want to bring together an FTA which is mutually beneficial for both the countries... We look forward to bringing together an exciting, vibrant and broad FTA...," Trevelyan told PTI. On setting up an ambitious deadline to conclude the talks, she said that there are positive views from both sides "that we can do that, so we will throw all our energy and weight behind it". When asked about key concerns being raised by UK businesses in India, the minister said that there are tariff barriers which British businesses are keen to see reduced. Digital trade is also an important area which is raised by many businesses, she added. Further the minister said that promoting investments from both the sides would also be an integral part of this trade deal. Already investments are flowing in both the countries, but there are many more opportunities for the business community of India and UK, she said. The UK minister has stated that both the countries have a "golden opportunity" to forge a new economic partnership as India's economy is set to grow rapidly. According to Goyal, the pact will help in boosting Indian exports from several sectors such as leather, textile, jewellery and processed agri products. India will also seek special arrangements for the movement of its people. India's exports to the UK stood at USD 8.15 billion in 2020-21, while imports aggregated at USD 4.95 billion. India's main exports to the UK include ready-made garments and textiles, gems and jewellery, engineering goods, petroleum products, transport equipment, spices, pharmaceuticals and marine products. Imports from Britain include precious and semi-precious stones, ores and metal scraps, engineering goods, chemicals and machinery. In the services sector, the UK is the largest market in Europe for Indian IT services. Commerce Secretary B V R Subrahmanyam has said the total trade of goods www.citiindia.org 7 CITI-NEWS LETTER and services between India and the UK is about USD 50 billion (USD 35 billion services and USD 15 billion goods) and it would cross USD 100 billion in ten years' time.

Source: Economic Times

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Trade recovery: Exports hit record $37.8 bn in Dec, imports surge too

The CAD, according to an ICRA estimate, could rise to 1.4% of GDP in FY22, against 0.9% in the pre-pandemic year (FY20). Of course, it will still be well within the government’s comfort zone. Merchandise exports touched a monthly record of $37.8 billion in December, up almost 39% from a year earlier and 39.5% from the pre-pandemic (same month in FY20) level, according to the provisional estimate released by the commerce ministry on Friday. Keeping with the recent trend, imports, too, jumped nearly 39% on year to $59.5 billion, driven by elevated global crude oil prices and massive purchases of coal and cooking oil. Consequently, trade deficit in December remained at an elevated level of $21.7 billion, down only marginally from a record $22.9 billion in the previous month. Although high import signals improving domestic demand following a Covid-induced compression last fiscal, it will also pressure current account deficit (CAD). The CAD, according to an ICRA estimate, could rise to 1.4% of GDP in FY22, against 0.9% in the pre-pandemic year (FY20). Of course, it will still be well within the government’s comfort zone. Given that export between April and December hit $301.4 billion, also a record for the first three quarters of any fiscal and up 50% from a year before, the country is all set to realise its lofty FY22 goods exports target of $400 billion despite potential short-term risks to the global supply-chain from the new Covid-19 strain. A spurt in demand for goods in the wake of an industrial resurgence in advanced economies and global commodity price rise have boosted exports this fiscal, after a Covid-induced slide in FY21. Merchandise exports had remained below par in the past decade, having fluctuated between $250 billion and $330 billion a year since FY11; the highest export of $330 billion was achieved in FY19. So, a sustained surge in exports for a few years will be crucial to India recapturing its lost market share. Core exports (excluding petroleum and gems and jewellery) in December stood at $28.9 billion, up 29.7% from a year before and 37.3% from the pre-Covid period. Similarly, such imports rose 34.3% on -year in December to $35.5 billion and 47.3% from the prepandemic level. The official data showed petroleum products were the biggest driver of exports with a year-on-year surge of 152%. Huge rise was also reported in the exports of engineering goods (38%), electronics (34%), cotton yarn/fabrics/made-ups, handloom products etc. (46%) and plastic & linoleum (58%). Gems & jewellery, organic & inorganic chemicals, drugs & pharmaceuticals and garments, too, witnessed a decent rise. As for imports, among the key commodity segments, purchases of coal jumped 73%, organic and inorganic chemicals 73%, petroleum 68% and vegetable oil 51%. A Sakthivel, president of the exporters’ body FIEO, said exports from labour-intensive sectors have witnessed a significant rise this fiscal, “which is a good sign”. However, the sustained surge in imports is a matter of concern and needs to be analysed, he added. Mahesh Desai, chairman of the engineering exporters’ body EEPC India, said: “While the order pipeline has been remarkably good, we could see some slowdown in case Omicron \ disrupts the global supply chain. In recent weeks we have seen some signs of volatility and uncertainty due to the ongoing pandemic wave across the world….” Desai, therefore, called for urgent government intervention to reduce soaring raw material prices as well as logistics cost.

Source: Financial Express

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Shri Piyush Goyal urges Global Venture Capital Funds to focus on Startups from Tier 2 and 3 cities

Union Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution and Textiles, Shri Piyush Goyal has called upon the Global Venture Capital (VC) Funds to focus more on Startups from Tier 2 and 3 cities. Chairing the 4th Roundtable with Global Venture Capital Funds, organised by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Shri Goyal invited the VCs to explore new sectors for investing, promote and protect the intellectual property created by the young Indian entrepreneurs, provide expertise to scale-up and explore greater capital infusion including risk capital. The Government has already taken a number of steps to support the Startups and would do so in the future also, he added. It was pointed out in the meeting that India is home to over 61,000 recognised Startups spread across 55 industries, with 45% of them emerging from Tier 2 and 3 cities and 45% of Startups having at least one Woman Director, a testimony of diversity, spread and inclusivity of the Indian Startup ecosystem. It was also highlighted that specifically for Startup ecosystem, 49 regulatory reforms have been undertaken by the Government to enhance Ease Of Doing Business, Ease Of Raising Capital and Reduce Compliance Burden. The Roundtable was held through video conference as part of the Startup India Innovation Week. Over 75 VC fund investors from across the United States, Japan, Korea, Singapore, and some Global Funds domiciled in India participated in the deliberations.  These funds have a total Assets Under Management (AUM) of more than USD 30 billion in the Indian Region. A number of suggestions were made by the Global VC funds, which they felt could further the investors’ sentiment in the sector. The intent of this roundtable was to share progress report of the current Indian StartupVC Ecosystem, insights on impact investing, India’s global outlook and the opportunities and interventions for the way ahead of VC investments in India. The roundtable discussion covered topics like Building for the World from India, An Impact, SDG and Digital India Outlook, Regulatory updates for Global and Domestic Funds, India Opportunity - How policies have shaped up the Ecosystem and Way Forward and Vision for India @ 2047. The session also covered the top regulatory issues to be addressed with the Government of India. The meeting was attended by Shri Anurag Jain, Secretary, DPIIT and major Indian regulators, policymakers, along with Global VC Funds. DPIIT is organizing Startup India Innovation Week from 10th to 16th January 2022. In the context of 'Azadi ka Amrit Mahotsav’, this virtual innovation celebration is designed to showcase the spread and depth of entrepreneurship across India. The programme is bringing together top policy makers, industry, academia, investors, Startups and all ecosystem enablers from across the globe.

Source: PIB

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Telangana among top five states that aided MSME sector

Telangana is among the top five states in the country for providing relief to the micro, small and medium enterprices (MSME) sector from becoming Non-Performing Assets (NPA) as a result of the Covid-19-induced economic slowdown. Various schemes were availed by nearly 4.9% of the units in the state. The central government has released loans under Emergency Credit Line Guarantee Scheme (ECLGS). Amongst states, Gujarat with 12.4% has been the biggest beneficiary, followed by Maharashtra (11.4), Tamil Nadu (10.3), Uttar Pradesh (8.0), Telangana (5.9), West Bengal (5.9), Andhra Pradesh (5. 3), Rajasthan (5.0), Karnataka (5.0) and Kerala (4.4). According to a recent report from the State Bank of India (SBI), in financial year 2021, the central government has disbursed loans worth 9.5 lakh crore to the MSME sector, which is significantly higher than preceding years of Rs 6.8 lakh crore in FY 2020, owing primarily to the ECLGS. www.citiindia.org 14 CITI-NEWS LETTER Telangana is among the top five states in terms of private company ownership among MSMEs. The micro and small enterprises’ loans in banks share around 80% of the total MSME loan portfolio. The trading sector has benefitted the most, followed by food processing, textiles and commercial real estate. The top ten sectors accounted for 75% of the outstanding amount saved for becoming NPAs. Hyderabad is the major growth engine and hub of MSME. Telangana is estimated to have 2.6 million MSMEs, with 56% of them located in rural areas and 44% in urban parts. Since the formation of the state, 63.388 million registered MSME units have begun operations, with an investment of 11,487 crore

Source: Times of India

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Despite price rise in cotton, garment manufacturers of Tiruppur hesitate to use man-made fibre

According to sources, while the consumption of cotton yarn is around 700 tons per day in the garment industry in Tiruppur, the entire consumption of man-made fabrics is 2,000 tons per year. Garment manufacturers, except a few, are reluctant to move towards man-made fabrics even though price of cotton yarn is hovering above Rs 350 per kilogram. A Kondasamy, partner in Aviram Knitters, said, "There is a big market for man-made fibres in India and around the world as they offer several advantages." "These fabrics (except polyester) are mostly biodegradable and offer much more comfort than cotton fabrics. Even many fabrics offer cool temperatures to the human body. Most importantly, modern technology and textile processing have made the fabric softer than cotton. These fabrics have moisture retainability, which helps absorb wetness," he added. According to sources, consumption of cotton yarn is around 700 tons per day in the garment industry in Tiruppur. But, the entire consumption of man-made fabrics is 2,000 tons per year. Explaining reasons why garment units are reluctant in using man-made fabrics, general manager of Alagendran Exports, Thirunavukarasu, said, "Traditionally we flourished in the cotton yarn market. Processing technique is different from cotton yarn and man-made fibres. Besides, we haven’t received orders for man-made products." Elaborating, treasurer of Tiruppur Exporters Association P Mohan said, "Tiruppur garment industry is comprised of small, medium and bigger garment units. Cotton yarn is the foundation of the industry and this why units refuse to move towards man-made fibres and fabrics. In of processing, manmade fabrics need a different process. Dyeing units refuse to take risks." "Among man-made fabrics, viscose is widely used but there are several concerns. Viscose is a delicate fabric, and many dyers claim that after dyeing the fabric loses strength. Besides, colour correction is a problem in man-made fabrics. In terms of shrinkage, cotton has 5 per cent, viscose has 7 per cent. If the dyeing isn’t proper, it increases to 12 per cent,' he added. Cotton yarn According to sources, consumption of cotton yarn is around 700 tons per day in the garment industry in Tiruppur.

Source: New Indian Express

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India-China trade grows to record $125 billion in 2021 despite tensions in eastern Ladakh The total trade between China and India in 2021 stood at USD 125.66 billion, up 43.3 per cent from 2020, state-run Global Times reported, quoting data from the General Administration of Customs. The India-China bilateral trade touched a record high of over USD 125 billion in 2021, crossing the USD 100 billion-mark in a year when the relations hit a new low due to the prolonged standoff by the militaries in eastern Ladakh, while India's trade deficit too mounted to over USD 69 billion, according to official data released on Friday. The total trade between China and India in 2021 stood at USD 125.66 billion, up 43.3 per cent from 2020, state-run Global Times reported, quoting data from the General Administration of Customs. China's exports to India from January to December rose 46.2 per cent to USD 97.52 billion, while India's exports to China grew by 34.2 per cent to USD 28.14 billion. The trade deficit for India grew to USD 69.38 billion in 2021. India has been highlighting its concerns over the growing trade deficit with China for over a decade and calling on Beijing to open its markets for India's IT and pharmaceutical products. Observers say much of China's exports increase this year to India was attributed to the import of medical products and raw materials for India's burgeoning pharmaceutical industry due to the massive second wave of COVID-19 and recurring bouts of the virus in the country. The landmark increase of the bilateral trade crossing USD 100 billion went without much fanfare as the relations remained frosty over the lingering military standoff in eastern Ladakh. The border standoff between the armies of India and China erupted on May 5 last year following a violent clash in the Pangong lake areas and both sides have gradually enhanced their deployment by rushing in tens of thousands of soldiers as well as heavy weaponry. As a result of a series of military and diplomatic talks, the two sides completed the disengagement process in the Gogra area in August and in the north and south banks of the Pangong lake in February. The two sides held the 14 round of Corps Commander-level talks on January 12 to resolve the standoff in the remaining areas and agreed to hold a new round of talks soon. Each side currently has around 50,000 to 60,000 troops along the Line of Actual Control (LAC) in the mountainous sector.

Source: Economic Times

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Third wave: Growth to slow down in Q4, small companies to be hit

GDP in Q4 may now grow only at around 3-3.2%. With the third wave of the pandemic likely to disrupt businesses and households, economists are paring their growth estimates for FY22. The anaemic growth in factory output in November may be partly the result of supply shortages and the recovery may regain momentum in March and April. But for the moment, some retracing of the demand for services, high inflation could slow demand and shave off two percentage points of growth in the March quarter. GDP in Q4 may now grow only at around 3-3.2%. www.citiindia.org 13 CITI-NEWS LETTER The big concern is that manufacturing margins of small firms which have been squeezed over the last couple of years could be further hit. The larger listed companies will continue to do well as they gain market share and pass on some increase in input costs. Despatches of two-wheelers in December were subdued suggesting limited purchasing power with middle-income households; the dull demand for tractors indicates rural incomes too may not be as robust as expected. Indeed, demand could stay weak in the next few months as 6% retail inflation leaves prices high and the rising prices of crude oil adds to price pressures.

Source: Financial Express

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India better positioned to navigate any financial turbulence: UN body

The report projected Indian economy to grow at 9% in FY22 and 6.7% in FY23 as base effect wanes India is in a better position to navigate financial turbulence due to Fed monetary tightening compared to its situation during the “taper tantrum” episode after the 2008- 2009 global financial crisis even though it remains vulnerable, the United Nations said in its "World Economic Situation and Prospects" report. “This is due to a stronger external position and measures to minimize risks to bank balance sheets. In the medium-term, scarring effects from higher public and private debt or permanent impacts on labour markets could reduce potential growth and prospects for poverty reduction (in South Asia),” the report said. The report produced by the United Nations Department of Economic and Social Affairs (UNDESA) said India’s monetary policies remain accommodative with interest rates close to record lows and liquidity measures still in place in most economies. “Yet the monetary cycle is gradually shifting as global financial conditions tighten and the recovery gains steam. The Reserve Bank of India has begun to taper liquidity by increasing the volume of reverse repo operations and the cash reserve ratio; it is expected to raise interest rates throughout 2022,” it said. Accelerated global monetary tightening could increase volatility, trigger capital outflows and disrupt credit growth, especially in countries with elevated debt, large financing needs and high levels of foreign-currency-denominated debt, the report said. “Significant financial distress could emerge as highly leveraged firms face greater refinancing costs, particularly in sectors hit harder by lockdowns, even more so if the removal of forbearance measures uncovers a large deterioration in balance sheets,” it added. The report projected Indian economy to grow at 9 per cent in FY22 and 6.7 per cent in FY23 as base effect wanes. “India’s economic recovery is on a solid path, amid rapid vaccination progress, less stringent social restrictions and still supportive fiscal and monetary stances. Robust export growth and public investments underpin economic activity, but high oil prices and coal shortages could put the brakes on economic activity in the near term. It will remain crucial to encourage private investment to support inclusive growth beyond the recovery. India has taken an important step by committing to 50 per cent of its energy mix coming from renewable sources by 2030 and to reaching net-zero emissions by 2070,” it said. India’s fiscal deficit is projected to decline gradually as policy priorities have shifted towards capital expenditure. “Pressures for fiscal consolidation will likely increase from higher public debt and rising borrowing costs. Amid elevated social needs, a still fragile recovery and lagging employment, it is imperative to avoid premature consolidation, however. The weak debt situation emphasizes the need for revenue mobilization,” the report said. The UNDESA expects inflation to decelerate throughout 2022, continuing a trend observed since the second half of 2021 when relatively restrained food prices compensated for higher oil prices. “A sudden and renewed rise in food inflation, however, due to unpredictable weather, broader supply disruptions and higher agricultural prices, could undermine food security, reduce real incomes and increase hunger across the (South Asia) region,” it added.

Source: Business Standard

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Việt Nam ranks third for best operating costs in Asia

Việt Nam has the third lowest operating costs among nine countries in Asia, just behind Cambodia and Myanmar, according to Asia-Pacific’s leading business transformation consultancy TMX. Under the recent TMX report "The great supply chain migration – breaking down the cost of doing business in Asia," the average total operating cost for a manufacturing company in Việt Nam ranges from US$79,280 to $209,087 per month, compared to leader Singapore at $366,561 and second placed Thailand at $142,344. As for labour, which forms up to 55 per cent of the total costs across the countries, Việt Nam ranks fourth most affordable, after Cambodia, Myanmar and the Philippines, with an average $108,196 per month, according to the report. Việt Nam, along with several other countries like Thailand and the Philippines, offers a sizable and relatively affordable pool of labour. While Việt Nam offers abundant employment opportunities, it has fewer highly skilled talent in many sectors with a talent competitiveness of around 35 points, compared to 40 points for the Philippines and Thailand, the report said. Regarding the competitive scorecard, Việt Nam was rated fifth behind Singapore, Malaysia, India, and Thailand. In respect of warehouse rental, the second-largest factor in the total cost of each of the nine countries, Việt Nam came fourth in terms of affordable costs, with an average rental of $5 per square metre per month, after Thailand, Myanmar and Cambodia. When it comes to logistics costs, Việt Nam was classified as a high potential market, which means that the country has relatively higher logistics expenses but is capable of expanding its operations. Except for Singapore, the other eight countries fell into at least one of the three stages of the manufacturing value chain, comprising ‘basic assembly lines,' ‘developing supply chains,’ and ‘early automation.' www.citiindia.org 35 CITI-NEWS LETTER Countries in the first stage – Cambodia and Myanmar – are suitable manufacturing bases for businesses in sectors like textiles and garments. Meanwhile, the likes of the Philippines, Indonesia, and Việt Nam, which are categorised in the intersection of the first two stages, offer good bases for businesses in sectors like electronics, which do not require manufacturing sophistication or highly skilled labour, according to the report.

Source: Ein News

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South Asian textile exports rise as global demand returns

Textile exports from South Asian countries are surging, as the region begins to recover from the impact of Covid-19 on manufacturing processes. Specifically, Thailand exported 64.8 billion baht ($1.95 billion) of garments and 188.6 billion baht ($5.67 billion) of textiles in the first 11 months of 2021, according to the Thai Garment Manufacturers Association president Yuttana Silpsarnvitch, as quoted in The National Thailand. The figure for Thai textile exports was up from 28.8 billion baht ($866 million) in the first five months of the 2020/21 financial year, according to a US Department of Agriculture Foreign Agricultural Service report from March 2021. Thailand’s textile and garment industries were severely impacted in 2020, with approximately 3,000 factories halting normal business and focusing on producing PPE suits and face masks. However, renewed global demand has helped the industry return to full capacity. The news comes as Nike’s subcontractors in Vietnam recently resumed production in the country, after the Delta variant forced nearly 200 factories to close, causing the company to lose over 160 million pairs of shoes. However, despite the majority of the workforce returning, analysts expect the supply chain to remain slow to begin with, due to social distancing measures.

Source: Charged Retail

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Bangladesh, S Korea have great potential to boost trade: BGMEA President

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Faruque Hassan said Bangladesh and South Korea have great potential to derive more mutual trade benefits through collaboration, especially in the area of apparel and textile industry. “There are huge opportunities for Bangladesh and South Korea to further engage in trade and investment and develop mutually beneficial economic ties,” he remarked during a meeting with Ambassador of South Korea to Bangladesh Lee Jang-keun who paid a courtesy visit at BGMEA Gulshan office here on Sunday, said a press release. Former president of Dhaka Chamber of Commerce and Industry (DCCI) Shams Mahmud, BGMEA Vice Presidents - Shahidullah Azim and Miran Ali, and First Secretary of the Embassy of South Korea Lee Jungyoul were also present at the meeting. During the meeting, they discussed possible areas of expanding trade between Bangladesh and South Korea and how both countries can collaborate in a meaningful way to pave the way for boosting bilateral trade. BGMEA President Fauque Hassan requested Ambassador Lee Jang-keun to encourage Korean businessmen to invest in the backward linkage industry of Bangladesh, especially the non-cotton textile sector. The Korean envoy pointed to extending incentive facility to RMG factories inside the export processing zone (EPZ) against their exports to new markets.

Source: TBS News

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Syria Joins China’s Belt And Road Initiative

Syria has signed a Memorandum of Understanding (MOU) on China’s Belt and Road Initiative (BRI) as the country is seeking post-war reconstruction. The signing took place at Syria’s Planning and International Cooperation Commission in Damascus and was attended by Fadi Khalil, the head of the commission, and Feng Biao, China’s ambassador to Syria. The move came two days before the scheduled visit of the Iranian foreign minister to China – as part of the intensive visits to China of Middle East and Gulf Cooperation Council officials. At the signing, Khalil said the admission of Syria into the BRI revives the old role of Syria in the ancient Silk Road and will help in boosting bilateral cooperation with China and multilateral cooperation with other countries. Feng added that the cooperation between the two countries provides the greatest contribution to the economic reconstruction and social development of Syria and it also enhances the harmonization between the BRI and the eastward strategy proposed by Syria. Syria, having survived a ‘çolour revolution’ and civil war, has entered a stage of reconstruction, and its decision to sign the MOU with China will assist with this. Syria’s signing of the Syrian BRI MoU has come while China has been engaging in intensive diplomacy in the Middle East, with foreign ministers from Saudi Arabia, Kuwait, Oman and Bahrain along with the Secretary-General of the Gulf Cooperation Council (GCC) Nayef bin Falah al-Hajrah in China to discuss energy security and a potential free trade agreement, while the foreign ministers of Turkey and Iran are also scheduled to visit China on Wednesday and Friday this week. Syria is under strong Western sanctions and has been struggling economically. Damascus is eager to rebuild amongst an isolated situation in the West, who had wanted President Bashar Al-Assad removed amongst claims of human rights abuses during the civil war. The subsequent conflict between East and Western views as concerns Syria have left the country largely in ruins, with Damascus facing serious power shortages due to destroyed and inefficient infrastructure. China, along with Russia and the Middle-East countries are likely to be the solution. Syria is the only significant crude oil producing country in the Eastern Mediterranean region; and also possesses significant gas reserves. Syria’s attractiveness lies within its ‘Five Seas” capability, a plan to link the Caspian, Black, Mediterranean and Red Seas with the Persian Gulf.

Source: Silk Road Briefing

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China's trade surplus hits a record $676 billion in 2021

Export growth beats expectations; some analysts point to import slowdown China posted a record trade surplus in December and in 2021, as exports outperformed expectations during a global pandemic, but some analysts pointed to a slowdown in international shipments in the coming months.The trade surplus hit $676.43 billion in 2021, the highest since records started in 1950, up from $523.99 billion in 2020, according to data from the statistics bureau.China also posted a record trade surplus for the month of December as exports remained robust while import growth slowed sharply, customs data showed on Friday. The trade surplus rose to $94.46 billion in December, the highest since records started in August 1994. That was up sharply from a $71.72 billion surplus in November and above a forecast for a $74.50 billion surplus in a Reuters poll.China’s hefty trade surplus with the United States, a key source of contention between the world's two biggest economies, hit $39.23 billion in December, widening from $36.95 billion the month before, but below this year's high of $42 billion in September. China’s commerce ministry said on Thursday that it hopes the United States can create conditions to expand trade cooperation, after Chinese purchases of U. S. goods in the past two years fell well short of the targets in a Trump-era trade deal.China's exports outperformed expectations for much of 2021, but shipments have been slowing as an overseas surge in demand for goods eases and high costs pressure exporters. It was unclear how the Omicron coronavirus variant would affect that trend.Exports increased 20.9 per cent year-on-year last month, beating expectations for a 20 per cent rise, but down from a 22 per cent gain in November.The trade data provided some support to the yuan, which looked set for the biggest weekly gain in two months.“Exports remained strong last month but may soften in the coming months amid growing disruptions at ports,” said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note.China reported a total of 143 local confirmed Covid-19 cases for January 13, its health authority said on Friday, including in the key northern port city of Tianjin.But Zhang Zhiwei, chief economist at Pinpoint Asset Management, said exports may already be benefiting from Omicron’s disruption to other countries’ supply chains.“We expect China's exports to remain strong in Q1 because of resilient global demand and worsening pandemic in many developing countries. Currently the strong exports may be the only driver helping China's economy,” said Zhang.Import growthThe world's second-largest economy staged an impressive recovery from the pandemic, with exports helping to buoy growth as several other sectors were faltering, but there are signs the momentum is flagging.A property downturn and strict Covid-19 curbs could hurt the 2022 outlook, with some analysts pointing to the slowdown in import growth as evidence that this is already happening.Imports rose 19.5 per cent year-on-year in December, the customs data showed, missing a forecast for a 26.3 per cent rise and down sharply from a 31.7 per cent gain in November.“Imports dropped back sharply, consistent with continued domestic weakness, especially in the property sector,” said Evans-Pritchard.Customs data showed China's imports of the key steelmaking ingredient iron ore slipped from the month before on steel production curbs and slowing property construction.“We expect import growth to remain muted in H1 this year as China's domestic demand will continue to be dampened by the property slowdown and weak consumption,” said Louis Kuijs, head of Asia economics at Oxford Economics, in a note.China's economic growth is likely to slow to 5.2 per cent in 2022, before steadying in 2023, a Reuters poll showed, as the central bank steadily ramps up policy easing to ward off a sharper downturn.China releases fourth quarter gross domestic product data on Monday.For all of 2021, total exports rose 29.9 per cent, compared to a 3.6 per cent gain in 2020. Imports for the year gained 30.1 per cent percent, after falling 1.1 percent in 2020.

Source: Business Standard

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