The Government of Gujarat had set up a Task Force Committee in the month of February 2022 under the Chairmanship of Dr. Hasmukh Adhia, former Finance Secretary in Government of India for working out the strategy of Government of Gujarat for making India a USD 5 trillion economy as per the vision of Prime Minister of India. The Task Force Committee has already submitted its Final Report to Gujarat Chief Minister Shri Bhupendra Patel. The Committee has completed this big task within three months. India intends to achieve the GDP target of USD 5 trillion by 2026-27 in nominal terms. In 2021-22, India became a USD 3.09 trillion economy in nominal terms. Average annual nominal growth for the last 10 years (2012-13 to 2021-22) is nearly 10.5 percent. Therefore, if the past growth rate is sustained, India would be a USD 5 trillion economy by 2026-27. Let us see what the Report says. The target of a USD 5 trillion economy by 2026-27 is contingent on growth at the State level. Five states i.e. Gujarat, Tamil Nadu, Maharashtra, Uttar Pradesh and Karnataka constitute approximately 49 percent of the nominal GDP of the country. All five states have grown at an average annual nominal growth of nearly 10 percent or more during the pre-COVID period (2012-13 to 2019-20) and have the potential to continue to grow at a rapid pace in the coming years, if everything goes well. The contribution in the economy of big states like Bihar state is also important but unfortunately Bihar is not doing well in industry. There is a big scope in packaging and food industry in Bihar but somehow this state is not focusing in this sector even though production of vegetables and other agri products is higher than other states. The central bank, major multilateral institutions and rating agencies released their latest FY22 real GDP growth forecasts for India. As per these forecasts, GDP growth ranges from 8.3% (World Bank) to 10% (ADB). These exceptionally high levels of growth do partly reflect a base effect since India’s GDP had contracted by (-)7.3% in FY21. The FY23 growth forecasts, therefore, indicate a more normal level of growth in the narrower range of 7.5% to 7.9%. Taking a longer-term view, as per the October 2021 issue of IMF’s World Economic Outlook, the Indian economy is poised to become the global growth leader FY22 onwards. Not only does it overtake China amongst major economies in FY22, it is projected to retain this position for the next five years. India is a big economy in the world after the US, Russia and China. Gujarat plays a key role to boost the Indian economy. PM Narendra Modi rightly says that Gujarat ka Vikas Desh ka vikas- Gujarat’s development for Nation’s development. Gujarat is a national leader in automobiles & auto-parts sector, pharma and medical devices, chemicals and petro-chemical, sanitary/ceramics goods, textiles, garments & apparel etc. Gujarat is also world’s largest petroleum hub, global leader in diamond processing (Surat), Asia's largest dairy (Amul). Gujarat contributions on all these sectors will help to boost the Indian economy. The country has to depend on Gujarat’s economy growth to achieve target of USD 5 trillion economy besides Maharashtra, Tamilnadu, UP and Karnataka. In next financial year picture will be more cleared whether nation will be able to achieve this target or not.
Source: The Week
• The trade negotiations with the UK assume special significance for the domestic textile sector as duty-free textile exports would bring the Indian textile industry at par with major textile exporters such as Bangladesh and Vietnam India and UK concluded the fourth round of Free Trade Agreement (FTA) negotiations closing 11 out of the 26 chapters, a commerce ministry official said on Monday, adding that both the countries will begin the fifth round next month. The trade negotiations with the UK assume special significance for the domestic textile sectors as duty-free textile exports would bring the Indian textile industry at par with major textile exporters such as Bangladesh and Vietnam. Government officials said that the India and UK FTA trade negotiations that began in January this year will for the first time cover issues ranging from gender, labour and environment and not tariffs on merchandise goods. “For this round of negotiations, detailed draft treaty text was advanced across the majority of chapters. Technical experts from both sides came together for discussions in 71 separate sessions covering 20 policy areas," the joint statement released by the British High Commission stated. The commission added that the negotiation officials undertook these technical talks in a hybrid fashion – with some of the teams meeting in London and most officials joining virtually. The agreement is estimated to double India-UK bilateral trade to about $100 billion by 2030. Besides, the pact aims to cover 65% of goods and up to 40% of services, with the coverage in goods expected to go up to 90% in the full agreement. Mint had reported that India and the UK had covered significant ground in the last two rounds with the UK agreeing to eliminate duty on rice and textile goods, while India is likely to allow the duty-free entry of British apples, and UK-manufactured medical devices, and machinery. India had a $3.3 billion trade surplus with the UK in 2020-21. The UK is India’s seventhlargest export market, accounting for 2.8% of its total exports, as of June 2021
Source: Live Mint
The EU, even after the Brexit, continued to be India’s largest export destination (as a bloc) in FY22, though it has lost some appeal. Senior officials from India and the EU resumed the much-awaited negotiations for a proposed free trade agreement (FTA) here on Monday, after a gap of almost nine years. Both the sides are set to focus on the “deliverables” first during the course of the negotiations, before moving on to contentious matters, sources told FE. Duty-free access to the EU market for labour-intensive industries, mainly textiles and garments, will be among India’s key demands. The negotiations restart at a time when the US and the EU, India’s top markets that accounted for as much as 44% of the country’s merchandise exports in FY22, are staring at a recession. Any collapse in economic growth in these economies could, therefore, potentially put the brakes on the resurgence in India’s exports witnessed in FY22. Before the negotiations began, commerce and industry minister Piyush Goyal met European Commission executive vice-president Valdis Dombrovskis on June 17 and “discussed ways to fast track negotiations”. Formal negotiations between the two sides for the FTA were stuck over stark differences after 16 rounds of talks between 2007 and 2013. The EU insisted that India scrap or slash hefty import duties on sensitive products such as automobiles, alcoholic beverages and dairy products, and open up legal services. Similarly, India’s demand included greater access to the EU market for its skilled professionals, among others. However, both the sides have now decided to take the negotiations to their logical conclusion. The EU, even after the Brexit, continued to be India’s largest export destination (as a bloc) in FY22, though it has lost some appeal. The country’s outbound shipments to the EU jumped 57% on year in FY22 to $65 billion, albeit on a contracted base. Similarly, its imports from the EU jumped 29.4% last fiscal to $51.4 billion. In April, the EU and India decided to set up a trade and technology council to boost bilateral ties, as the bloc’s president Ursula von der Leyen met Prime Minister Narendra Modi here. This move underscored growing co-operation between New Delhi and Brussels, as the US is the only other country that has a technical agreement with the EU, along the lines of the one signed with India now. The council is aimed at providing political-level oversight of the entire spectrum of the India-EU ties and to ensure closer coordination. India signed an FTA with the UAE in February, New Delhi’s first such pact with any economy in a decade, and sealed another trade deal with Australia in April. Currently, it is also negotiating FTAs with the UK and Canada. The Gulf Cooperation Council, too, has evinced to sign an FTA with India. The negotiations are a part of India’s broader strategy to forge “fair and balanced” trade agreements with key economies and revamp existing pacts to boost trade. The move gained traction after India pulled out of the China-dominated RCEP in November 2019.
Source: Financial Express
Manufacturing has benefited from GST as lifting of embargo on ITC has reduced costs, says EY India. If real estate developers are allowed to consider land value at actuals, it would reduce burden on homebuyers. It is high time, real estate was fully brought under GST. GST has had a positive impact on the manufacturing sector by removing the cascading effect of taxes. Further, with the embargo on input tax credit being removed, there has been a reduction in manufacturing costs, says Achal Chawla, tax partner, EY India. PostGST, contribution of the sector to the GDP has, however, been constant from 15%-17%. The Aatmanirbhar Bharat programme and the PLI schemes are going to be pivotal in the post-pandemic era, when companies will reconfigure their sourcing, manufacturing, and distribution patterns.
Real estate: GST rates since FY20 is 5%/1% sans ITC. This added to the cost of developers, as ITC gets passed on to the homebuyers. An option to choose between GST rates with ITC and without ITC in the hands of developers is worth considering, says Sagar Shah, tax partner at EY India. He adds developers should have option to consider land value at actuals or adopt deemed valuation. Actual land valuation could have a positive impact and may reduce the GST burden on buyers. “It’s high time that the real estate sector is fully brought under GST and stamp duty is also subsumed under GST law at the earliest,” he says.
Source: Financial Express
Sustainability is essential for the healthy growth of society and the preservation of the planet. The textile industry has seen an increase in demand for sustainable products. Sustainability in the textile industry is more than the use of organic cotton or better working conditions, companies have many reasons to emphasize on sustainability, including reduced costs, protection of the environment and sustained goodwill from their customers for eco-friendly practices. In response to that, a lot of textile companies have undertaken different initiatives. Among various concerns, the two main challenges in the textile industry are complex supply chain networks and the involvement of various stakeholders dealing with a wide range of raw materials and methods. The implementation of sustainability at the industrial scale would necessitate the involvement of all supply chain stakeholders, as well as a well-organized traceability system for monitoring and analyzing various elements of sustainability. Furthermore, traceability is an integral part of the recycling process which backs toward sustainability. From a sustainable standpoint, the textile industry is a highly criticized sector. The textile chain consumes a huge amount of water and energy, along with the use of various chemicals and harmful substances. Most textile industries discharge a huge amount of harmful waste, posing a threat to natural bodies in other words it is one of the highly polluting, resource consuming and labour-intensive industries. Due to the involvement of numerous stakeholders—including different suppliers, fibre producers, yarn manufacturers, etc.— it gets difficult to act in the best interest of the planet. The chemical compounds used in the industry complicate matters furthermore as if not used properly they get washed away with the effluents. The non-biodegradable and carcinogenic components of these chemicals directly contaminate the nearby water resources and affect the locality severely. Moreover, the latest trend of fast fashion has not only reduced the fashion lifecycle but complicated matters for the environment further. Manufacturers are making conscious efforts to introduce sustainability in fashion- it ranges from using innovative materials, less dependency on power, water etc. and focusing on reducing, reusing and recycling. Some companies are setting sustainability and circularity in all realms of their value chain, sourcing raw supplies, production, supply chain, and waste recycling. To remodel from linear to circular operations, they are concentrating on pre-and post-consumer waste. They are committing to plastic recycling for packaging as they are substituting virgin polyester with recycled LDPE. The Indian fashion industry is trying to make use of natural sources, and modern biotechnology methods to evolve materials that are sustainable for the style business and making a huge reduction in polluting waste. Moreover, manufacturers are now implementing ZLD (Zero Liquid Discharge) which is a cutting-edge wastewater treatment process that eliminates all liquid discharge from a system. The textile industry has also introduced ETP plants which are designed to reduce waste water-related issues in the industry. Consumers are loving the eco-friendly fashion vibe and they’re becoming their favorite. Moreover, environmentalists and social workers have made people aware of the damaging scars on the environment caused by the fashion industry and with education, our consumers are also becoming more responsible. If the textile industry wants to make conscious progress without further harming nature, companies should implement manufacturing practices which reduce carbon footprint, invest in research & development to use sustainable raw materials and produce environment-friendly finished products. Numerous big brands are driving the Sustainability Mission as they are best positioned to push customer assessment and also back-connect it to the creation and getting rehearsals. Moreover, the sector should also focus on the three E’s – Equity, Environment and Economics. They are dedicated to protecting and fostering the natural environment by returning more to nature than it draws from nature. The industry is moving forward toward eco-friendly textiles where waste material is processed into a fibre (like the use of PET bottles to make recycled polyester fibre, they make a good substitute for polyester), with this method loss of essential resources is minimized. With such initiatives, the textile industry will soon become a sustainable industry that can compete efficiently in the global market while also contributing towards environmental protection.
Source: Times of India
From revising some rates to deciding on the thorny issue of compensation extension for states, here is what the Council is likely to take up The two-day Goods and Services Tax (GST) Council meeting, which begins on Tuesday in Chandigarh, is likely to be action-packed. Shrimi Choudhary explains the issues that the Council is likely to take up:
Compensation extension Issue: While the Centre has in-principle agreed to extend the compensation cess until March 2026 for repaying debt, many states are seeking at least two-year extension of the regime citing revenue shortfall. The cess, meant to compensate states for GST-linked loss of revenue, is to end on June 30, 2022.
Expected: The Council is unlikely to consider states’ demand for status quo as official data suggests that revenue shortfall for states has narrowed in FY22.
Rate revision, pruning & exemptions:
Issue: An interim report of a GoM on rate rationalisation, suggesting correction of the inverted duty structure and removal of some items from exempt list, will be tabled. Also the report of the Fitment Committee, which suggested tweaking rates for a handful of items and issuing clarification in case of majority of items, will be discussed.
Expected: The Council will review the GoM report, suggesting higher rates for leather goods, printing ink and LED lights etc, and removing exemptions for mass products. It may defer rate restructuring, including changes in the current GST slabs, for three months as requested by the GoM due to inflation concerns
Online gaming & e-way Bill on gold movement
Issue: Argument over distinction between online skill gaming and gambling.
Expected: A GoM report suggests imposing a flat 28 per cent on online gaming at par with gambling and betting. The Council to clarify on tax treatment with respect to valuation.
E-way bill on gold:
Issue: Currently, e-way bills are compulsory for inter-state movements of consignments valued over Rs 50,000, except gold. This exemption leads to tax evasion.
Expected: The Council to take suggestions of a ministerial panel suggesting a minimum threshold value of Rs 2 lakh for generating such e-way bills, leaving it to states to take a call.
Easing compliance:
Issue: Due to disruption caused by Covid, industry sought certain relaxation in compliance for taxpayers.
Expected: The Council likely to waive the requirement for filing refund claims and may also extend the timeline for certain return filing without late fees.
Source: Business Standard
Tamil Nadu Chief Minister M K Stalin inaugurated 5 new industrial estates, which would provide jobs to about 22,200 people and a common facility centre at the integrated textile park in Chengalpattu district on Monday. These industrial estates were established at a cost of Rs 171.24 crore in Chengalpattu, Tiruvannamalai, Salem, Namakkal and Pudukottai districts by the Tamil Nadu Small Industries Development Corporation (SIDCO). These would ensure direct employment to 7,200 people and indirect employment to 15,000 people. Also, the CM virtually unveiled a new building for common facility centre at the integrated textile park at Thandarai village in neighbouring Chengalpattu district, built at an estimated cost of Rs 2.22 crore. PWD Minister E V Velu, MSME Minister T M Anbarasan and senior officials were present on the occasion.
Source: The Print
Shares of Nahar Spinning have hit the 5 per cent upper circuit on Monday after reports of yet another possibility of production-linked incentive by the Centre for the textile sector. At 11.19 a.m, the shares of the company traded at Rs 305. Since the start of the year 2022, they, however, declined around 40 per cent on a cumulative basis. Incorporated in 1981, the company manufactures and exports woollen and cotton hosiery knitwears and woollen textiles. Addressing the SIMA Texfair 2022 in Coimbatore on Saturday, Union Minister Piyush Goyal said that the government is mulling over coming up with one more productionlinked incentive (PLI) scheme for the textile sector soon. “The textiles sector also has PLI scheme in which a large amount of investment is coming up all across the country including in Tamil Nadu. We are coming up with one more PLI scheme in Textiles Sector,” he said. “We will create crores of jobs in Textiles Sector so that our compatriots get a better quality of life and more prosperity and our farmers get a higher price for wonderful cotton that they are producing,” Goyal added at the event. In its first leg, the government had approved the production-linked incentive (PLI) scheme for textiles products — namely MMF Apparel, MMF Fabrics, and Products of Technical Textiles — for enhancing India’s manufacturing capabilities and enhancing exports with an approved financial outlay of Rs 10,683 crore over a five-year period. Nahar Spinning is a multibagger stock as it had accumulated 150 per cent returns for its investors over the past 5 years.
Source: The Print
The proposed policy, he said, will help in setting up of new industries in the state and facilitate ease of doing business. The micro, small and medium enterprises (MSME) minister Rakesh Sachan said that the state government will introduce a new MSME policy soon. The proposed policy, he said, will help in setting up of new industries in the state and facilitate ease of doing business. “Besides, a big loan fair would be organised across the state on June 30. Loans will be made available to one-lakh handicraftsmen, artisans and small entrepreneurs. During the last five years 96 lakh entrepreneurs were given loans worth ₹2.5 lakh crore in the state,” he said at the two-day Uttar Pradesh MSME seminar organised by ASSOCHAM on Monday. He said the state government is taking several steps for the convenience and encouragement of small entrepreneurs and investors. “This includes no objection certificate (NOC) being issued within 72 hours to entrepreneurs investing in the state,” he added.
‘Promote Bio Indigo to reduce carbon footprints’ LUCKNOW Use of alternatives like Bio Indigo as dye for denims will lead to sustainable development and environmental conservation which would usher in a positive change within the textile industry, said Yawer Ali Shah, co-founder and CEO of Lucknow-based AMA Herbals. Shah said this at the two-day Uttar Pradesh MSME seminar organized by ASSOCHAM in Lucknow. “We have Bio Indigo as a sustainable natural dye option. If we want to reduce the carbon footprint, then Bio Indigo has to be promoted. Instead of using a kilogram of synthetic indigo, using Bio Indigo, the carbon footprint can be reduced by up to 10 kilogram in less cost and effort. Bio indigo has been created to meet the challenges due to which the textile industry is facing increasing pollution levels,” he added. He also described Bio Indigo as a future cash crop. “If farmers cultivate Bio Indigo, then their income per acre will be much higher,” he said and said the Centre must provide subsidies on natural dye to make it cost effective. “This can reduce carbon footprint impact from textile processing and reduce import of synthetic indigo from China. It will help provide employment to large numbers of farmers,” he added. “To promote handloom and handicraft like Chikan and zardozi, we must upgrade them to meet international requirements. That will be possible if the government sets up special facility clusters to provide eco-friendly textile processing,” he added.
Source: Hindustan Times
IRS officer Nitin Gupta has been appointed as the new CBDT chairman, a recent government order said IRS officer Nitin Gupta has been appointed as the new CBDT chairman, a recent government order said. Gupta, an Indian Revenue Service (IRS) officer of the 1986 batch of the Income Tax cadre, is serving as the Member (investigation) in the Board and is scheduled to retire in September next year. The order issued on June 25 said the "Appointments Committee of the Cabinet has approved the appointment of Shri Nitin Gupta, IRS (IT:86), Member Central Board of Direct Taxes (CBDT) as chairman, Central Board of Direct Taxes from the date of assumption of the post." The post of the CBDT chief was being held in an additional capacity by Board member and 1986-batch IRS officer Sangeeta Singh after J B Mohapatra retired on April 30. The CBDT is headed by a Chairman and can have six members who are in the rank of special secretary. It is the administrative body for the Income Tax department. There are five members in the Board at present with 1985-batch IRS officer Anuja Sarangi being the senior most. The other members are Pragya Sahay Saksena and Subashree Anantkrishnan, both from the 1987 batch of the IRS.
Source: Business Standard
The people added that the council could decide to remove certain tax exemptions, reduce compliance burden, establish an institutional mechanism for dispute resolution, and impose higher duties on online gaming. The shadow of the Gujarat assembly election later this year and high inflation will loom over the two-day meeting of the Goods and Services Tax (GST) Council starting on Tuesday, and force it to defer a plan to raise GST on items of mass consumption, three people familiar with the matter said on condition of anonymity. The people added that the council could decide to remove certain tax exemptions, reduce compliance burden, establish an institutional mechanism for dispute resolution, and impose higher duties on online gaming. States, especially those ruled by non-NDA (National Democratic Alliance) parties are expected to push for extending the compensation period for another three to five years, they said. The compensation period, with an assured 14% annual growth in revenue, ends June 30. The 47th Council meeting, which is being held in Chandigarh on Tuesday and Wednesday, may also consider elaborate, item-wise tax rate rationalisation proposals to correct inverted duty structure and remove imprudent tax exemptions, they added. “While rates could be increased for certain items such as online gaming etc, it is unlikely that GST on items of mass consumption would be raised immediately due to political and economic reasons,” one of the three, who is associated with the rate rationalisation exercise, said. The council is expected to impose 28% GST on online gaming at par with services such as casinos, race-course, and gambling. Experts said the council may avoid any major rate hike that would have an adverse impact on the economy. “A major rate rationalisation exercise could lead to inflationary pressures as the process would entail increasing the rates on certain products. Since inflation control is one of the key priorities at present, we could see the rate rationalisation exercise deferred to a later period when inflation has cooled down,” said MS Mani, partner at Deloitte India. India’s retail inflation surged to a 95-month high of 7.8% in April, cooled to 7.04% in May, but is still well above the Reserve Bank of India’s (RBI’s) official upper tolerance level of 6%. Any attempt to change rates will also have political implications in the crucial assembly elections of Gujarat, which is scheduled for December, the second person said. “Such political considerations cannot be ignored. Recently, an emergency session of the council was convened for only one agenda item on behest of Gujarat and the decision to raise taxes on textiles was postponed.” The 46th meeting of the council was convened on December 31, 202,1 under the “emergency provisions” of the law, after Gujarat proposed deferring a September decision by the council to move certain textile items to a higher tax slab, a move originally meant to correct inverted duty structure. The third person said the two-day meeting will, however, take several key decisions to ease compliance, reduce exemptions, and set up long-pending GST tribunals for expeditious resolution of disputes. “There is no point in extending GST exemptions to regulators and financial institutions. Anyway, these taxes will be paid by businesses dealing with these institutions and they can always claim it through input tax credit,” the person said. The council may announce the creation of a Goods and Service Tax Appellate Tribunal (GSTAT) for expeditious resolution of indirect tax litigations—a move that means taxpayers will no longer be forced to appeal in high courts, which is expensive and a time consuming process, the person said. HT on February 5, quoting revenue secretary Tarun Bajaj, reported that the Union finance ministry planned to raise this matter in the GST Council. The third person added the meeting, which is being held days ahead of expiration of the five-year compensation period, may see a lengthy discussion on this matter, particularly on the demand of states such as Delhi, Punjab, Kerala, and West Bengal. Speaking to CNBC-TV18 on Monday, Delhi’s deputy chief minister Manish Sisodia said the extension of compensation is one of the key issues for states, and the Union government should extend it beyond June 30. Several states have urged Union finance minister Nirmala Sitharaman to extend the compensation period for another three to five years because of severe devastation caused to their economies by the Covid-19 pandemic and supply chain disruptions due to the Ukraine war, the third person said. The GST law assured states a 14% rise in their annual revenue for five years from July 1, 2017, and guaranteed that any shortfall would be made good through the compensation cess levied on luxury goods and sin products such as liquor, cigarettes, other tobacco products, aerated water, automobiles, and coal. While the legally binding five-year period of compensation ends on June 30, the Union government on June 24 notified that the compensation cess on sin goods and luxury items will continue till March 31, 2026, with the amount thus raised being exclusively used to retire debt ( ₹2.69 lakh crore) raised from the market to compensate states during the pandemic period—2020-21 and 2021-22. Commenting on the June 24 notification, Abhishek Jain, Partner-Indirect Tax at KPMG in India, said: “To implement the decision of the GST Council, these Rules have been issued to extend the levy of the Compensation Cess till March 2026 to cover the shortfall earlier. The issue whether the states would be compensated beyond five years or not may get decided in the upcoming meeting The GST law assured states a 14% rise in their annual revenue for five years from July 1, 2017, and guaranteed that any shortfall would be made good through the compensation cess levied on luxury goods and sin products such as liquor, cigarettes, other tobacco products, aerated water, automobiles, and coal. While the legally binding five-year period of compensation ends on June 30, the Union government on June 24 notified that the compensation cess on sin goods and luxury items will continue till March 31, 2026, with the amount thus raised being exclusively used to retire debt ( ₹2.69 lakh crore) raised from the market to compensate states during the pandemic period—2020-21 and 2021-22. Commenting on the June 24 notification, Abhishek Jain, Partner-Indirect Tax at KPMG in India, said: “To implement the decision of the GST Council, these Rules have been issued to extend the levy of the Compensation Cess till March 2026 to cover the shortfall earlier. The issue whether the states would be compensated beyond five years or not may get decided in the upcoming meeting.
Source: Hindustan Times
"First came COVID, then came multiple waves of COVID, then came the war and now rising prices, it just seems like an ongoing crisis," says Balu Agre, Director of Dreamstar India Appliances, a Pune-based MSME. Agre’s company is one of the few MSMEs that was able to benefit due to the world’s China Plus One policy, which is a strategy to avoid investing only in China. But after COVID and the ongoing war, he is now faced with inflation and demand woes just like other MSMEs. On the occasion of MSME Day, we try to find out the challenges MSMEs face. India is home to around 6.3 crore MSMEs. As per IBEF data, the number of registered MSMEs stood at 80.16 lakh units as of March 31, 2022 – from that 64 percent of the registered MSMEs were service enterprises, while manufacturing covered 36 percent. As of March 31, 2022, under the top five state-wise Udyam registrations, Maharashtra recorded the maximum number of registrations with 16.29 lakh units, followed by Tamil Nadu (8.55), Gujarat (6.48), Uttar Pradesh (6.32), and Rajasthan (6.30). At present, soaring inflation and low demand are aching the MSMEs. Adding to it, are the rising interest rates and the temporary labour concerns. Prashant Patel, President of the Federation of Indian Micro and Small & Medium Enterprises (FISME), said, “Raw materials prices over the last one year have doubled. However, the prices have declined but that is not even close to what it was a year ago.” He added prices are just down by 10-15 percent after the government intervention. “If inflation continues to persist then challenging times lie ahead for the sector,” Patel said. According to CRISIL Research’s SME Report 2022, more than a quarter of India’s MSMEs lost a market share of over 3 percent due to the pandemic, and half of them suffered a contraction in their earnings before interest, tax, depreciation and amortisation (EBITDA) margins because of a sharp rise in commodity prices last fiscal, compared with the pre-pandemic (fiscal 2020) level. Patel said the low demand in the international market is due to the ongoing UkraineRussia war and the lockdown imposed in China. “The low demand in the market for most sectors, accompanied by inflation is a cause of concern. In addition, MSME exporters are unable to use the currency depreciation to their benefit. Meanwhile, as a country, the rupee depreciation is impacting our forex reserves as we are a net importer country,” he added. By July-August, Patel hoped the market would improve and then there would be some demand. He added that according to the international market scenario, India was doing better than other countries. “But the fact of the matter is that MSMEs are facing a lot of issues like shrinking demand and rising interest rates. We are already facing challenges related to shortages in raw materials or higher prices in raw materials. In the longer term, it will hamper the growth of MSMEs,” he said. In August 2021, the MSME ministry announced a target to boost MSME's contribution to the GDP to 50 percent by 2025. But the present scenario may delay this target. Data shows MSMEs contributed 30.5 percent to India's GDP in FY19 and 30 percent in FY20. MSMEs contribute nearly 40 percent of overall India’s exports, contributing to around 6.11 percent of the country’s manufacturing GDP. Rupa Naik, Senior Director, WTC Mumbai, said, “Shrinking demand in the US and Europe is affecting MSMEs. Though pandemic has not affected our country, it has affected consumers' buying pattern.” Thus, affecting the traditional sectors like handicrafts and textiles, Naik added. She added sectors like textiles, plastic, paper, and engineering are hit as they are finding it difficult to get raw materials from China, adding to it are volatile crude oil prices and rising freight costs. Capital crunch can be a cause of concern for MSMEs in the near future – due to rising interest rates and input costs (as margins are hit due to rising input costs). According to the data released by CRIF High Mark, the overall disbursements to the MSMEs grew 5 percent to Rs 37.29 lakh crore in FY22 compared with the year-ago period. The report added that it has more than doubled compared to FY20. The average ticket size of an MSME loan stood at Rs 72.4 lakh in FY22. Despite these growing numbers, Naik still feels capital is still a constraint for most MSMEs. "If the government can introduce some scheme like an interest subvention scheme, it will help MSMEs," added Patel. Currently, many MSMEs have put on hold or slowed down on investments over the fear of capital constraints.
Yet another challenge faced by MSMEs is related to labour. In May, there are a number of festivals and social functions in Uttar Pradesh, Bihar and Jharkhand – most labourers come from these regions. So, many workmen go to their respective states of origin. Patel added after July workmen will resume work. However, Patel added, “As an industry, we have to focus on automation and digital technology. Going forward, we will face workmen shortage.” At present, MSMEs employ around 11.1 crore people.
Source: CNBCTV18
The International Monetary Fund (IMF) expects the US economy to slow in 2022-23 but narrowly avoid a recession. Reducing inflation and providing price stability will protect real incomes and help sustain growth over the medium term. There are, nonetheless, material risks that the current headwinds prove more persistent than expected, it said recently. If the US economy gets hit by another negative shock, it would turn the slowdown into a short-lived recession, IMF noted in the Concluding Statement by the IMF of the 2022 Article IV Mission. A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit to a country. The expected slowing of US demand, combined with the needed tightening of global financial conditions, has significant potential to affect individuals, firms and countries that are leveraged in US dollars and that face sizable near-term funding needs, it said. The US economy has staged a strong recovery from the COVID-19 shock and the positive effects of unprecedented policy stimulus, combined with the advantages of a highly flexible economy, have been clear, said IMF. The unemployment rate and other measures of labour force under-utilisation have returned to end-2019 levels and output is close to its pre-pandemic trend. Rapid wage increases for lower income workers have reduced income polarisation, poverty fell to 9.1 per cent in 2020 (from 11.8 per cent in 2019), and there were even larger reductions in poverty for female-headed households, children, African Americans and Hispanics, IMF noted. A total of 8.5 million jobs have been created since the end of 2020. There has, however, been a relatively slow recovery of labour force participation and there are important concerns around the potential longer run effects of the pandemic on education outcomes and productivity. Over the past two years, US financial institutions and corporates have been resilient, albeit with the aid of significant policy support. Stress tests show the banks to be very liquid and highly capitalised. The 2021 external position remains moderately weaker than the level implied by medium-term fundamentals and desirable policies. The current account deficit has risen over the past two years as the composition of consumer demand shifted away from services to tradeable goods, a huge fiscal stimulus was put in place, and the United States recovered faster than trading partners, IMF noted. Supply chain constraints proved more persistent than expected and there are new concerns linked to the Russian invasion of Ukraine and Chinese lockdowns. Most saliently, though, a broad-based surge in inflation—that was viewed as the leading economic risk at the time of the 2021 Article IV—has become a reality, posing systemic risks to both the US and the global economy, IMF said. After more than a decade of belowtarget inflation, the rapid depletion of slack, rising energy prices, and ongoing global supply disruptions have led to a significant acceleration in inflation. More determined action is needed to achieve the administration’s climate goals and to facilitate a smooth, speedy transition to a low carbon economy, IMF noted. In the absence of legislative approval of the climate provisions in the Build Back Better plan, the current reliance on regulatory and executive actions appears insufficient to incentivise the transition to a low carbon economic model, it said. A significant shift in market incentives will be required and this could be achieved most effectively by a broad-based pricing of carbon and other pollutants, sectoral feebates, regulatory restraints on emissions, the elimination of subsidies for fossil fuels and carbonintensive agriculture, subsidies to incentivise the development of new technologies, and a reprioritisation of public spending toward mitigation and adaptation goals, it added.
Source: Fibre2 Fashion
The UK's Consumer Prices Index (CPI) rose by 9.1 per cent in the 12 months to May 2022, up from 9 per cent in April, according to the Office of National Statistics (ONS). This is the highest CPI 12-month inflation rate in the National Statistic series, which began in January 1997. Indicative modelled consumer price inflation estimates suggest that CPI would last have been higher around 1982, where estimates range from nearly 11 per cent in January down to approximately 6.5 per cent in December. There was an offsetting downward contribution of 0.08 percentage points to the change in the rate from clothing and footwear. Prices of clothing and footwear rose by 1.1 per cent this year but rose by a larger 2.3 per cent a year ago, the data showed. Last year’s rise in prices of clothing and footwear was higher than usual for the time of year. It was influenced by a large fall in the amount of discounting recorded in the dataset as the country continued to open following the coronavirus (COVID-19) lockdown in the first quarter of 2021. The effect came from women’s clothing and, to a lesser extent, men’s clothing and footwear.
Source: Fibre2 Fashion
A new report from the International Labour Organization (ILO) says that although Asia remains a leading global garment maker, it faces an array of challenges. The ILO report calls Asia the “garment factory of the world,” but also warns the sector faces an array of challenges many of which have been accelerated by the Covid-19 pandemic. Challenges include rising labour costs, production and process automation, ‘reshoring’ and ‘nearshoring’, as well as increased pressure to transition towards a more sustainable business model, with improved wages and working conditions. ‘Employment, wages and productivity in the Asian garment sector: Taking stock of recent trends’ reviews employment, wages and labour productivity in the Asian garment sector over the 2010-19 period and highlights how the industry still accounts for 55% of global textiles and clothing exports and employs some 60 million workers. David Williams, manager of the ILO’s Decent Work in Garment Supply Chains Asia programme, says that while in many countries the sector has seen growth in both wages and productivity, the relationship between government policies and external forces is not always clear and simple. “Backed up by genuine support for social dialogue and collective bargaining and concrete incentives from brands, the industry can create a virtuous cycle in which higher wages drive higher productivity, and vice-versa,” Williams says. The report highlights the sector’s evolution following different trajectories across the region. While economic diversification and upgrading have reduced its importance in countries like China, Thailand and the Philippines, it remains the key economic driver in nations like Cambodia and Bangladesh. Asia’s share in global textiles and clothing exports has grown significantly since the early 2000s, peaking at 58% in 2015, before declining to about 55% in 2019 the report notes. “These trends were largely driven by China,” states the report, “which saw continuous export growth in both sub-sectors until 2015, after which its declining share in wearing apparel exports was only partly offset by an increase in the share of other Asian clothing exporters, specifically, Vietnam, Bangladesh, Myanmar and Cambodia.” This could suggest that nearshoring, rather than relocation to lower cost destinations, has taken place during these years. Despite the recent decline, China’s dominance remains unmatched with 34% of global GTF exports in 2019, followed by Vietnam (5%), Bangladesh and India (4.3% each). In recent years, the sector has relied heavily on low labour costs to secure global market advantages, the report says. Real wages in the sector have increased in most countries although working conditions remain challenging in general, including long and intense working hours, poor occupational safety and health as well as violations of fundamental rights at work. Gender pay gaps persist across the Asian garment sector. Female employees are overrepresented among the sector’s low pay workers, and countries with the lowest shares of female workers also have among the highest gender pay gaps in the garment sector. “Although women represent a large share of garment workers, gender pay gaps persist, and are particularly elevated in countries where there are broader systematic labour market challenges for women. In some contexts, women workers are victim to physical and sexual violence, due to the gendered nature of their workplaces,” the report says. While labour productivity in Asia’s garment sector has risen in recent decades, it remains low relative to other manufacturing sectors. Few garment producing countries have successfully moved up the value-chain in apparel production, with most manufacturers remaining engaged in low-skilled ‘cut-make-trim’ operations. Data in the report does reveal a positive association between growth in labour productivity and wages in the sector, suggesting that investments in labour productivity may play an important role in helping elevate worker pay. The full report, produced under the International Labour Organization Decent Work in Garment Supply Chains project, and supported by the Government of Sweden, can be downloaded from here.
Source: Just Style
Major apparel exporting countries like China, Bangladesh, Turkey, India and Sri Lanka saw their exports to Russia decline post the commencement of Russia-Ukraine war in last week of February this year. The SWIFT ban on Russian banks created new hurdles for financial transaction with that country. The disturbed global ship movements was also a key factor. China’s apparel exports to Russia fell to $122.165 million in March from $151.089 million in February 2022. But the export improved to $129.828 million in April, according to Fibre2Fashion’s market insight tool TexPro. The export was $255.786 million in January 2022, $288.413 million in December 2021 and $203.901 million in November 2021. Likewise, China’s home textiles exports to Russia fell to $26.543 million in March from $38.499 million of February 2022. The export was $38.221 million in April. The export stood at $50.057 million in January 2022, $57.030 million in December 2021 and $63.931 million in November 2021. Bangladesh’s earnings from garment export to Russia stood at $482.23 million during July 2021-February 2022, with an average monthly earning of $60.15 million. However, the average monthly earning during March to May 2022 from the Russian market declined significantly to $27.05 million. Similarly, apparel export from Turkiye to Russia fell to $17.483 million in March from $30.441 million in February 2022. But it improved to $21.212 million in April 2022, as per TexPro. The export was $22.322 million in January 2022, $17.476 million in December and $18.836 million in November 2021. Turkish home textiles export to Russia fell to $2.353 million in March from $5.935 million in February 2022. The export stood at $4.878 million in April 2022. The export was $6.051 million in January 2022, $5.128 million in December and $8.677 million in November 2021. India’s apparel exports to Russia too registered steep decline after February 2022. The export declined to $2.056 million in March from $8.561 million of February. The export was $5.304 million in January 2022, $6.475 million in December, $5.452 million in November and $5.790 million in October 2021. India’s monthly home textile export declined to $0.197 million in March from $1.814 million in February 2022. The monthly export was $2.121 million in January 2022, $2.141 million in December, $1.709 million in November and $2.743 million in October 2021. Sri Lankan apparel export to Russia also registered a drop in value. The export reduced to $0.112 million in April from $0.717 million of February 2022. However, the export recovered in April from March 2022 when it came to almost standstill and stood at mere $24,528. The export was $1.060 million in January 2022, $0.960 million in December and $1.003 million in November 2021.
Source: Fibre2 Fashion
Most consumers (66 per cent) who are aware of microplastic pollution, know that most of it is caused by washing clothing made from synthetic fibres, according to US’ Cotton Incorporated’s Lifestyle Monitor Survey. Around 40 per cent are aware of the concerns that microfibres from clothing are polluting the global water bodies, up from 35 per cent in 2021. In 2020, Cotton Incorporated experts led research to show impacts of fabric fibres. Cotton microfibres are natural and biodegrade in tested water environments in about a month’s time compared to non-biodegradable synthetic fibres like polyester. Further research in 2021 demonstrated that cotton microfibres treated with common textile finishes, such as silicone softener, durable press finish, water repellent finish, and dye, biodegrade by more than 60 per cent over a period of three months; a rate similar to a natural oak leaf, Cotton Incorporated said in a press release. “Cotton’s versatility and durability makes it an ideal ingredient for reusable products. All fabrics shed microfibres or fibre fragments through everyday wash and wear. It’s important to understand the origin of the fibre and what happens in the environment as those fibres build up or break down when developing products and shopping for clothing, sheets, towels, and personal care products,” said Mary Ankeny, vice president of product development and implementation operations for Cotton Incorporated. “Shocking scientific research about microplastics in our drinking water and the impact plastic pollution is having on our environment is getting people’s attention. Cotton is a plant-based and renewable ingredient. It can pull carbon dioxide from the atmosphere and nourish the soil; it can break down in water or soil. Discarded fabrics or garments can be recycled into something new. These benefits continue to position cotton as the go-to fibre for the fashion and textile industry looking to change sustainability standards,” said Jesse Daystar, Cotton Incorporated’s vice president and chief sustainability officer.
Source: Fibre2 Fashion
