India’s merchandise exports fell in April for a 17th month, and at a sharper pace than in March. The earlier longest declining streak was for nine months, during the 2008-09 global financial meltdown. The decline in April was 6.74 per cent, against 5.47 per cent in March, showed data issued by the government on Friday. Exports contracted to $20.6 billion in April, against $22.05 bn in April 2015. The earlier growth was in November 2014, up 7.27 per cent year-on-year. Beside global slowdown, the dip is attributed to falling commodity prices and sluggishness in the Chinese economy, among others. Imports declined 23.1 per cent to $25.4 bn in April against the year-ago period, when it was $33 bn. “Over $1 billion of savings in the import bill were on account of coal, iron & steel and fertiliser, due to high domestic production and inventories, as well as measures such as the minimum import price and safeguard duties,” said Aditi Nayar, senior economist, ICRA. As a result, the trade deficit in April fell to its lowest level in a little over five years, to $4.8 bn from $5.1 bn in March.
Import of crude oil continued its long decline, falling 24 per cent in April to $5.65 bn against $7.4 bn a year before. Gold imports continued to fall by a large margin, going down 60.5 per cent to $1.2 bn against $3.1 bn a year before. Prices of the yellow metal had fallen by 80.6 per cent in March. Non-oil and non-gold imports, taken as a proxy for an indicator of industrial demand, declined 17.6 per cent to $18.5 bn in April from $22.5 bn a year before. It had fallen 4.4 per cent in March. This implies industrial recovery might take a while — the Index of Industrial Production was almost flat in March.
Exports fall for 17th month in April Our major export products continued to shrink in April, with petroleum products falling 28.1 per cent, followed by engineering goods (minus 18.9 per cent). “Apart from the huge drop, the cost of raw material has gone up, thanks to restrictive measures on crucial imports which go into the export products,” said T S Bhasin, chairman of the Engineering Export Promotion Council. The fall in export of readymade textiles also accelerated, to 8.1 per cent. However, gems and jewellery export increased 17.2 per cent, after March’s rise of 4.7 per cent. The one per cent excise duty imposed on the product in the Union Budget had seen manufacturers shutting shop in April. Among major categories, export of 14 out of 30 went up as against 13 in March. The Federation of Indian Export Organisations said exports might turn around from June. Cumulative export for 2015-16 was $261 bn, about 15.9 per cent less than the $310 bn the previous financial year.
SOURCE: The Business Standard
India’s trade deficit has come down to a five-year low touching $4.8 billion in April 2016 as per the data released by Ministry of Commerce and Industry on Friday. This is much lower than the deficit of $10.9 billion during the same month previous year. In the month of April, exports have declined for 17th month in a row falling 6.74% down at $20.5 billion (Rs.1.36 lakh crore) from $22 billion (Rs.1.38 lakh crore) during same month last year. In the same way, imports have also come down in April, 2016 at $25.4 billion (Rs.1.68 lakh crore) which was 23.1% low when compared to $33 billion (Rs.2.07 lakh crore) in the same month previous year. According to the ministry, the trend of falling exports is in tandem with other global economies. The growth in exports have also fallen in countries like USA (3.87%), European Union (0.04%), China (25.34%) and Japan (1.1%) during February 2016 over the same period last year. This was revealed in the data provided by World Trade Organization (WTO). Aditi Nayar, Senior Economist from credit rating agency ICRA said that the decline in the trade deficit in April was unexpected. This is mostly led by a major fall in imports. The sharp 17.6% decline in non-oil, non-gold imports is startling, given the modest de-growth witnessed over the recent past. Barring November 2015, non-oil, non-gold imports recorded single-digit contraction from May 2015 to March 2016. She said that the government has saved more than $1 billion in the import bill due to high domestic production, inventories and various initiatives such as the Minimum Import Price and safeguard duties. However, the $1.2 billion decline in imports is due to the y-o-y decline in the import of transport equipment and electronic goods in April 2016. As gold imports are likely to start after the end of the jewellers' strike, the merchandise trade deficit may increase significantly in the next month from an average $5 billion recorded in the previous two months. The upsurge in exports of gems and jewellery to $7.1 billion in March-April 2016 from $6.4 billion in corresponding period last year is at odds with the fall in gold imports over the same period from $8.1 billion to $2.2 billion, she commented.
Speaking about the contraction in services exports for the fifth consecutive month, she said the y-o-y decline in the services trade surplus continue to pose concerns. Though the services trade surplus came down to a 14-quarter low in Q4 FY 2016, the current account balance is expected to register a small surplus in that quarter, benefitting from the decline in gold imports in March 2016 after the jewellers' strike. Despite anticipated savings related to major imports, India’s current account deficit is expected to enhance modestly to $25 billion in the next financial year from $21 billion this fiscal due to the upsurge in gold imports and ongoing sluggishness in merchandise exports, she added.
SOURCE: The Dollar Business
The Federation of Indian Export Organisations has said that the decline in exports was arrested to some extent in both March and April, and that exports will hopefully move into positive territory from June onwards. The data for 14 out of 30 products, for which data has been released for April, shows positive growth. Gems & jewellery, organic and inorganic chemicals , plastic goods and electronic goods have shown promising results, which augurs well for the future, FIEO president SC Ralhan said. The decline in imports is encouraging for managing the trade deficit and may help in giving a fillip to domestic manufacturing, but the figures point to a topsy-turvy path, Ralhan said, underlining the need for all-out support to make manufacturing competitive to boost exports and address employment challenges. Ralhan said that some of the recent initiatives like extension of MEIS benefit to all countries and thereby dispensing with landing certificate will add to the competitiveness while simultaneously reducing transaction cost. The revised threshold limit for status holders will enable many more companies to claim such status so as to get various non-fiscal benefits including expeditious clearance of import-export cargo, he said. However, he urged the government to address the problem of simultaneous availment of EPCG (export promotion capital goods) and SHIS (status holder incentive scheme), which he said has landed many exporters into problem for no fault of their own, besides releasing of target plus benefits and incremental exports incentivisation benefit for 2013-14.
SOURCE: The Economic Times
The strengthening of MSMEs (micro, small and medium enterprises) is vital to ‘Make in India’ programme a success, said N Gopal, General Manager, RBI, Bengaluru. Inaugurating an MSME meet, organised by RBI in Mangaluru at the weekend, he said there is a need to handhold MSMEs as they have the potential to create large number of jobs. Urging the commercial banks to focus more on this sector, Gopal said various banks in Karnataka have conducted more than 370 programmes for MSME sector in the last financial year. PI Sreevidya, CEO of Dakshina Kannada Zilla Panchayat, said the Centre’s schemes such as Pradhan Mantri Mudra Yojana have helped provide loans to launch micro enterprises. Now even an uneducated woman from a rural area can become an entrepreneur under such schemes. However, it is essential to have the motivation to become an entrepreneur, she said. AB Ibrahim, Deputy Commissioner of Dakshina Kannada district, said the district grows cash crops such as arecanut, coconut and pepper. However, there are not much agro-processing industries in the region. There is a need for MSMEs from the district to focus on this area, he said. Some of the traditional industries such as beedi manufacturing units are crumbling due to various factors. There is need to promote alternative industries for those employed in such sectors, he said. Sunil Mehta, Executive Director of Corporation Bank, also spoke. Around 350 participants from various sections, including MSMEs and self-help groups, attended.
SOURCE: The Hindu Business Line
Growth of India’s manufacturing sector may decelerate during June quarter due to factors like bleak export outlook, poor demand and high cost of borrowing, a Ficci survey has said. The hiring outlook for the sector also looks unpromising as over 80 per cent survey respondents said they are unlikely to hire in the said quarter, the industry body’s survey said. The outlook for export continues its downward trajectory in the first quarter of 2016-17 with the proportion of respondents, expecting higher exports in the quarter, falling. The proportion of respondents expecting higher exports in Q1 2016-17 is 36 per cent which is much lower than 41 per cent in Q4 2015-16, the survey noted. Besides, only 38 per cent respondents have reported higher order books for the April-June quarter which is less than that of previous quarter (44 per cent).
In terms of investment, for Q1 2016-17, 75 per cent respondents as against 68 in previous quarter reported that they don’t have any plans for capacity additions for the next six months implying slack in the private sector investments in manufacturing to continue. It added that “interest rate paid by the manufacturers seems to have moderated in the last few months, however it still remains high. The interest rate ranges from 6 per cent to 15 per cent with average rates being around 11.4 per cent per annum compared to 11.8 per cent in the previous survey.” Capacity utilisation has improved in cement, food, capital goods and electronics sector. On the other hand, in chemicals, textiles machinery and tyres it (capacity utilisation) has remained same. The quarterly survey gauges expectations of manufacturers for April-June for thirteen major sectors namely textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather and footwear, machine tools, food, tyre, paper and textiles machinery.
Responses have been drawn from 308 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 4 lakh crore. According to a data released by Central Statistics Office, manufacturing sector, which accounts for over 75 per cent of the index, declined by 1.2 per cent in March against a growth of 2.7 per cent in same month a year ago. The sector has not done well in 2015-16 as it grew at meager rate of 2 per cent against 2.3 per cent in previous year. The survey had also indicated revival in the manufacturing activity during the March quarter.
SOURCE: The Financial Express
As one of the world’s top importers of crude oil, India is moving to take advantage of its buying clout and re-doing deals to take full advantage of the shift in the global oil demand-supply situation. The country has done this successfully with Liquefied Natural Gas. Petronet LNG Limited has signed a revised contract with RasGas for its 7.5-million-tonne per annum long-term supply agreement. The new price for the contract, effective January 1, 2016, is less than half of what RasGas was charging in 2015. In 2015, RasGas was selling LNG at over $12/unit (gas is measured in million British thermal units). New Delhi has, with some political intervention, re-negotiated the price to less than $5 a unit, based on prevailing crude rates. Further, Petronet has also signed an agreement for additional supply of 1 mtpa of LNG from RasGas for 12 years from January 1, 2016, at the prevailing market price.
Consumer market
Speaking to BusinessLine , Dharmendra Pradhan, Minister of State (Independent Charge), Ministry of Petroleum and Natural Gas, was emphatic that “India needs to leverage the new scenario. This is a consumer market. There is a massive change in the world oil economy.” “Re-negotiating long-term contracts is not an easy thing. We have already taken full advantage of our long-term contract in both price and supply terms. But with the changed global dynamics we also needed to revisit our contract to ensure that it is win-win for both parties,” he said. The Minister offered two more examples. “Post sanctions, we did a combined bargaining with Iran. We got good terms. In Nigeria, we negotiated a term contract for the first time. Earlier, we used to get only spot purchases from there.”
Hard bargaining
“With some nations, we have renegotiated terms. We have reduced the deciding period for spot purchases. By doing this, we have already started saving. When the Saudi Crown Prince says his country should look beyond oil, it is a big thing. We should leverage this new scenario without compromising our historic relations,” Pradhan said. The government has also allowed public sector oil marketing companies to work out their own crude sourcing mechanism by re-doing the policy for imports. This will provide a more efficient and flexible policy for crude procurement, eventually benefiting consumers.
Policy revamp
Pradhan said “the objective of the oil marketing companies is to earn more profit so that the product price is reduced for customers. To do that they are free to devise their own mechanism.” To ensure transparency and that there are no leakages, the policy being evolved by the PSUs has to be consistent with Central Vigilance Commission guidelines and must be approved by their boards.
SOURCE: The Hindu Business Line
The National Council of Applied Economic Research (NCAER) has scaled up India's economic growth projection to 7.6 per cent for 2015-16, from the earlier 7.4 per cent. It pegged the growth marginally higher at 7.7 per cent for 2016-17, due to a pickup in the agriculture sector on the back of expected normal monsoon. "NCAER's annual model for gross domestic product (GDP), at 2011-12 prices, estimates GDP growth rate at 7.6 per cent for 2015-2016 and forecasts it at 7.7 per cent for 2016-17," the council said in its latest quarterly review. In its previous quarterly review, it had projected the economy to grow by 7.4 per cent in 2014-15. Its new projections are in line with the government expectations for 2015-16. The data would be released by this month end. NCAER predicted exports to contract 1.6 per cent in 2016-17, which would be their third year of decline. Despite the agriculture sector expected to perform better, NCAER believed that the economy would grow just one percentage point higher in the current financial year than that of 2015-16. The government expects the economy to grow in the range of 7-7.75 per cent, but said the growth may turn out to be higher if the farm sector performs well. The council said the agriculture sector has witnessed feeble growth on account of drought for two successive years. The average rate of growth in the agricultural and allied sectors' for 2014-15 and 2015-16 has been a low 0.5 per cent. Two consecutive years of sub-par monsoon have had a significant impact on the output of both food as well as non-food crops. NCAER pegs GDP growth for FY16 at 7.6% The Indian Meteorological Department has predicted monsoon for 2016-17 at 106 per cent of the long period average (LPA). However, in the industrial sector, the manufacturing sector, after showing robust growth in the second quarter, has slowed down consistently in the third and fourth quarter. The Index of Industrial Production (IIP) recorded a 2.4 per cent rise in 2015-16, against 2.8 per cent in 2014-15. In the fourth quarter, IIP manufacturing was in a "recession" (-1.1 per cent) and the overall IIP grew by 0.2 per cent on a y-o-y basis. In the fourth quarter, capital goods contracted by 15.4 per cent and consumer non-durables by 3.9 per cent on a y-o-y basis.
SOURCE: The Business Standard
Chung-Kwang Tien, Ambassador of Taiwan to India, said his country is pushing for a Free Trade Agreement (FTA) with India based on a feasibility study conducted in 2013. In an interview with BusinessLine, he said Taiwan was keen on a level-playing field in India while competing with countries such as Korea and Japan.
Taiwan is primarily an export-led economy, yet your exports to India have remained in a lower range – $5-$7 billion – in the past five years. Do you feel there is more potential in bilateral trade ties?
Taiwan is a shallow economy. Without exports, its economy probably will not be sustainable. So, we want to diversify our investments from China as well as Southeast Asian countries to India.
But, again, we came into the Indian market much after Japan and Korea. But, that does not mean we will never catch up. So are you then looking at a comprehensive trade pact similar to the one India has with Japan and Korea?
The trade volume between India and Taiwan has increased five to six times between 2000-01 and 2015-16. But, an FTA is the next thing that we our going to ask the Indian government to look at seriously. Both nations had even completed a feasibility study in 2013, which said that there is scope for cooperation in sectors such as ICT, automobiles, food processing and logistics. But, we have to institutionalise this into a trade agreement because we are not on a level-playing field in competing with some other countries.
What have you proposed to the government to correct the situation?
We are asking the Indian government to start from somewhere, even though we might sign the trade pacts in five to six years.
Do you think India will be keen on an FTA with Taiwan considering that we are committed to a ‘One China’ policy?
Well, political moves should not act as a hindrance to business. For mutual benefit, we should put political considerations aside.
But, Taiwan is not part of any mega trade pact, be it the Regional Comprehensive Economic Partnership (RCEP) or Trans-Pacific Partnership (TPP). Is that a conscious decision?
We are working very hard to be a part of RCEP and TPP, because these constitute a big chunk of our market. In this regard, we would also ask the Indian government to help us in RCEP.
What about investments from Taiwan? Are Taiwanese companies keen to invest here?
Foxconn (electronics manufacturer) has already promised an investment of $20 billion, out of which $5 billion has already been invested in Maharashtra. Then there is Maxxis Tyres, which has invested about $60 million and has set up a factory in Gujarat. So, we are coming. Food processing is another sector where we want to invest. We are also planning to focus on North-eastern Indian States, which are still under-developed.
SOURCE: The Hindu Business Line
Trade ministers of India and Canada are likely to meet on June 10 for a ‘ministerial dialogue’ to take steps to boost bilateral trade and investment, official sources said.
Market access
While India is expected to demand greater market access in Canada for Indian exports, particularly from sectors such as agriculture, fisheries, textile, clothing, leather and organic products, Canada may stress on the need for signing and early implementation of the proposed bilateral Foreign Investment Promotion and Protection Agreement. The meeting, officially called the ‘annual ministerial dialogue’ on trade and investment, will be held in Canada with Indian Commerce and Industry Minister Nirmala Sitharaman and her Canadian counterpart, international trade minister Chrystia Freeland, leading their respective officials, the sources said. They said such a meeting was being held after nearly four years.
Finding a huge demand for organic products in Canada, India wants to increase its organic products exports to that country. According to industry estimates, Canada is among the world’s top organic food markets, while India is among the world’s leading countries in terms of the number of organic food producers and the highest growth in organic agricultural land. However, India’s major concern is the lack of a ‘bilateral equivalence arrangement’ between both the countries to recognise as ‘equivalent’ — under their own rules — each other's organic production norms as well as accreditation and certification systems.
SOURCE: The Hindu
After the BRICS Bank, the five-member bloc of emerging nations is considering setting up a credit ratings firm in its efforts to challenge western hegemony in the world of finance. The credit rating agency for emerging markets, as it is tentatively called, is likely to take shape at the BRICS Summit to be hosted by India in October. The idea of a non-western ratings firm for the emerging markets has been in discussion among the leaders of the BRICS nations — Brazil, Russia, India, China and South Africa — for the past few years, said officials with knowledge of the plan. Another proposal to be taken up during India's presidency at the BRICS is setting up of the NDB Institute in India to research on and identify projects for utilising the $100 billion that the New Development Bank (NDB) formed by the BRICS nations has in its disposal. The big three — Moody's, Fitch and Standard & Poor's — together account for 90% of the global ratings market. The criteria used by them for rating emerging economies has often come under critical evaluation, these officials said.
Emerging economies claim that western ratings firms are biased, optimistic on developed nations and pessimistic on the developing ones. Russia in particular and China have been perturbed by the western ratings firms. Russia alleges that the western firms had deliberately lowered Moscow's rating after the Ukraine crisis. Sources here said a BRICS ratings firm could also assist other emerging New Delhi: After the BRICS Bank, the five-member bloc of emerging nations is considering setting up a credit ratings firm in its efforts to challenge western hegemony in the world of finance. The credit rating agency for emerging markets, as it is tentatively called, is likely to take shape at the BRICS Summit to be hosted by India in October. The idea of a non-western ratings firm for the emerging markets has been in discussion among the leaders of the BRICS nations — Brazil, Russia, India, China and South Africa — for the past few years, said officials with knowledge of the plan.
Another proposal to be taken up during India's presidency at the BRICS is setting up of the NDB Institute in India to research on and identify projects for utilising the $100 billion that the New Development Bank (NDB) formed by the BRICS nations has in its disposal. The big three — Moody's, Fitch and Standard & Poor's — together account for 90% of the global ratings market. The criteria used by them for rating emerging economies has often come under critical evaluation, these officials said. Emerging economies claim that western ratings firms are biased, optimistic on developed nations and pessimistic on the developing ones. Russia in particular and China have been perturbed by the western ratings firms. Russia alleges that the western firms had deliberately lowered Moscow's rating after the Ukraine crisis.
Sources here said a BRICS ratings firm could also assist other emerging will be able to rate infrastructure and sustainable projects in the emerging economies. The Asian Development Bank estimates that in the next decade, Asian countries will need $8 trillion in infrastructure investments to maintain current economic growth rates. India's Narendra Modi government is desperate to boost the country's infrastructure and has created National Infrastructure Investment Fund (NIIF) where fund rich UAE is putting funds. And the Prime Minister's trip to Qatar early June en route to the US might see Doha also putting in some investments in NIIF. Creation of NDB, the BRICS Bank, was India's brainchild.
SOURCE: The Economic Times
An exit of Britain from the European Union , referred to as 'Brexit', will create a lot of uncertainty within Europe, but can open up opportunities for India, says an SBI research report. British public will vote in a referendum on June 23 to decide whether the country will remain a part of the 28-nation bloc. According to the report by the SBI's Economic Research Department, Brexit may actually strengthen India's position as a truncated EU may have to rework its negotiation strategy in order to gain market access."This referendum will have geopolitical implications and will affect the relation of the rest of the world with Europe. But, our take is that though such an exit brings up a lot of uncertainty within Europe, it definitely opens up opportunities for India," the SBI report said.
From an India point of view, it is also necessary to appreciate that in the event of Brexit, it is unlikely that UK financial market and its financial expertise will evaporate overnight, it said. According to SBI, there is one visible fallout of this referendum -- it does put a question mark on the future of Indo-EU Free Trade Agreement. "If the UK comes out of the EU, then there is no need for this trade deal. Growing discomfort among Indian firms about the existing FTAs, which have led to imports shooting up and Indian businesses becoming uncompetitive, is another reason the government is being cautious while negotiating new trade deals," it said. The Brexit referendum is by far the most testing event that will decide the course of global recovery, it added.
SOURCE: The Economic Times
The US Chamber of Commerce has welcomed India's new IPR policy, saying it hopes the move is a "precursor" to the "concrete, structural" changes necessary for implementation of a strong innovation model. "We hope the announcement is a precursor to the concrete, structural changes that are necessary if India is to implement a strong IP-led innovation model," said Patrick Kilbride, Executive Director of International Intellectual Property of the US Chamber of Commerce's Global Intellectual Property Center (GIPC) yesterday. His remarks came on a day the Indian government announced a comprehensive National Intellectual Property Rights (IPR) policy, in a move to incentivise entrepreneurship, creativity and innovation and curb manufacturing and sale of counterfeits. "We welcome the government's understanding that India's innovative economy requires effective IP protection and hope this commitment will lead to decisive legal reforms," Kilbride said. The policy, with a tagline of 'Creative India: Innovative India', called for updating various intellectual property laws to remove anomalies and inconsistencies in consultation with stakeholders. India must provide enhanced certainty for the rights of innovators in line with international best practices, the US Chamber official said. "We will be carefully reviewing this policy to determine whether this document creates the foundation for such steps. Regardless, IP will continue to be a central issue for any discussions between India and the international business community," Kilbride said.
SOURCE: The Economic Times
A decade ago, not many people in India had tried ‘sushi’, fewer would have used ‘San’ while addressing someone and almost no one would have known of ‘Shinkansen’. However, our Japanese vocabulary has grown rapidly over the past few years, with India and Japan coming closer in friendship than ever before in the history of the two nations. Bonded by the collective ideologies of democracy, broad-mindedness and diversity, the countries share an analogous cultural and social link. With political relations between them continuing to be warm and cordial since India’s independence almost seven decades ago, the relationship between the two has bloomed in the last decade, with Japan making mega investments in India. For Japan, India has huge potential, especially in Shinkansen. The country losing out on its railway bid in Indonesia and Thailand to China, coupled with stiff competition in East Asia and Africa, has resulted in it turning its eyes to India—a lucrative destination for investment opportunities. Moreover, with conventional sources of capital drying up in India, Japan has emerged as the perfect partner and investor to significantly augment growth of infrastructure in the country. This makes the relationship equally relevant for the two nations.
Economic relations between India and Japan got the first major boost with the then Japanese Prime Minister Yoshiro Mori visiting India in 2000 with a vision of developing a global partnership with the country. The current Japanese Prime Minister Shinzo Abe’s visit to India in December 2015, in continuance of his promise of substantial investment in the Make-in-India initiative, has significantly accelerated the stream of investment from Japan to India. In the past decade, trade from India to Japan, and vice-versa, has doubled, which is a clear indication of the two countries’ growing interest in each other. Japanese private sector companies are increasingly focusing on India, and more than 1,200 Japanese organisations now operate in the country. Traditionally, Japan has been a capital-rich country looking for opportunities to invest in emerging economies in order to get the highest return. Japanese companies that make up the Nikkei 225 currently lay claim to cash reserves of approximately $1.5 trillion, which means they are very well-placed to pursue new M&A opportunities. Japan’s Government Pension Investment Fund, with assets of over $1.1 trillion, amended its portfolio norms in 2015. This has the potential to unleash more than $100 billion into international bond markets. Japanese organisations with such ‘deep pockets’ are on the lookout for the right opportunity. It is up to India to strategise and implement reforms in the country and present a bright prospect to these organisations.
In this scenario, it is relevant to mention the investments made by Japan in Asian countries, especially in Thailand, where it is the top foreign investor, with most of its investments being in the automotive, metal processing, electrical appliances and electronics industries. What makes Thailand an attractive investment destination are competitive costs, incentives relating to duty-free import of machinery, clear and transparent foreign investment regulations, etc. Further, the country has a special incentive scheme—exemption from corporate income tax (without a cap) for certain specified sectors such as creative product design and development centres, some manufacturing sectors, and the electronic design and software domains.
India needs to make a concerted effort to attract substantial investment from Japan. The government has already put in place schemes such as the Modified Special Incentive Package Scheme (M-SIPS) to invite investment in the country’s electronics manufacturing sector. As we know, M-SIPS is aimed at promoting investment in the electronic system design and manufacturing sector by offering various inducements, including cash incentives (amounting to 20-25% of capital expenditure), reimbursement of indirect taxes for capital equipment, etc, to eligible investors meeting its prescribed thresholds (which varies from R1 crore to R5,000 crore, depending on the type and nature of product being manufactured). In addition, the government has made certain amendments in M-SIPS, including extension of the term offered to investors by another five years and widening its scope to cover additional verticals in order to make the scheme more attractive to foreign investors. The special economic zone (SEZ) policy announced in April 2000 was a step taken in this direction by the government with a view to overcome the shortcomings experienced on account of multiplicity of controls and clearances and the absence of world-class infrastructure. The policy was intended to promote SEZs as an engine for economic growth, supported by quality infrastructure complemented by an attractive fiscal package with the minimum possible regulations.
The commerce minister has recently proposed that units located in SEZs should be allowed to sell their products in the domestic market after paying the same preferential tariffs applicable to manufacturers in countries with which India has a free-trade agreement, in order to counter the hit faced by SEZs due to a fall in global demand. The Indian government fully understands the importance of this opportunity and has been making a conscious endeavour to further it exponentially; for example, by setting up a special committee of officials, which is separate from the ‘Japan Plus’ team, to research, reach out to, promote and facilitate Japanese businesses in India. These and other socio-political efforts have borne fruit, and India and Japan are inking several agreements on development of infrastructure in the country. The most recent of these initiatives is Japan’s proposal to build India’s first high-speed railway; the construction of which is expected to begin in 2017 and completed by 2023. The total cost of the project is estimated at $12 billion, and Japan has offered to finance it at a negligible interest rate. Moreover, it has agreed to modernise 400 railway stations across the country and invest $140 billion in the Indian Railways over the next five years. In the past, the Japanese government had given a loan to India to develop the Western Dedicated Freight Corridor (DFC) under the Special Terms for Economic Partnership (STEP). The DFC is an ambitious project that involves the construction of two corridors, the Eastern and Western, which will eventually link the four metro cities of Delhi, Mumbai, Kolkata and Chennai.
In addition, demonstrating its support towards Make-in-India, Japan has announced a special financial package of $12 billion for Japanese companies wanting to invest in India for Make-in-India-related projects. This is called the ‘Japan-India Make-in-India Special Finance Facility’. India has also made a commitment to initiate some special benefits to attract investments in industrial townships set up by Japan in India; and 11 sites have been identified, including Tumkur in Karnataka, Ghilot in Rajasthan, Mandal in Gujarat and Supa in Maharashtra. The townships will support the growth of industrial areas to boost economic development. A giant stride was taken in development of the India-Japan economic relationship during the visit of PM Abe to India when it was decided that Japan would, for the first time, import cars manufactured by Japanese companies in India.
With the signing of the MoU on civil nuclear energy, both the countries have exhibited that their cooperation goes beyond trade into strategically important areas. This deal will enable India to import Japanese nuclear technology and services. The final agreement will be signed after the technical details are finalised. In order to deepen defence relations, the two countries have signed deals on security-related operations and manufacturing of defence merchandise.
India’s strategic location between the Middle East, China and newly emerging economies such as Bangladesh, Bhutan, Burma and Sri Lanka makes it conveniently accessible for a large part of the world. Compared to Japan, it is geographically easier to tap markets such as Africa from India, since the country is a bridge between the East and the West. India’s strength lies not only in its geography, but also in its culture. With similar societies that have strong cultural ties and a progressive outlook, this partnership between Japan and India, therefore, not only seems desirable, but also inevitable.
India and Japan are compatible partners. Japan has an ageing population and India a young one; India needs investment and Japan is looking for an opportunity to grow its economy. Therefore, they understand each other’s requirements and realise that making a concerted effort to strengthen ties between them is the need of the hour. Moreover, we have to bear in mind that while India ranks low in ‘ease of doing business’, it offers attractive business opportunities and has enormous business potential, and at a time when most global economies are showing a downward trend, it is on an upward trajectory. These are catalysts that attract Japanese investment.
SOURCE: The Financial Express
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 45.17 per barrel (bbl) on 13.05.2016. This was higher than the price of US$ 45.07 per bbl on previous publishing day of 12.05.2016.
In rupee terms, the price of Indian Basket increased to Rs. 3015.52 per bbl on 13.05.2016 as compared to Rs. 3001.46 per bbl on 12.05.2016. Rupee closed weaker at Rs 66.76 per US$ on 13.05.2016 as against Rs 66.60 per US$ on 12.05.2016. The table below gives details in this regard:
|
Particulars |
Unit |
Price on May 13, 2016 (Previous trading day i.e. 12.05.2016) |
Pricing Fortnight for 16.05.2016 (28 Apr to 11 May, 2016) |
|
Crude Oil (Indian Basket) |
($/bbl) |
45.17 (45.07) |
43.00 |
|
(Rs/bbl |
3015.52 (3001.46) |
2859.50 |
|
|
Exchange Rate |
(Rs/$) |
66.76 (66.60) |
66.50 |
SOURCE: PIB
The leading textile industrialists have announced to extend every kind of practical support to the Higher Education Commission (HEC) in establishing a world class Textile Centre for Advance Studies & Applied Research for carrying out research, innovation and value addition in the textile industry. A high level committee comprising of experts from the academia and representatives of the textile industry will be constituted after approval by the government to explore the possibilities regarding the establishment of the national centre. After working on the idea, the HEC would send a proposal to the federal government for instructions. Sources in the HEC said that the site for the center would be decided by the government and the industry. The consensus was developed in a recent meeting under the University Industry Technology Support Program (UITSP).
Presiding over the meeting, HEC Executive Director Dr Arshad Ali said that it is an initiative to develop and strengthen linkages between academia and industry to contribute towards the creation of knowledge based economy. He was of the view that enormous opportunities existed in the textile sector which further developed and contributed to the economy. More than 40 participants including vice chancellors, faculty members from various universities and representatives from the leading textile industry attended the meeting. They discussed suggestions to improve the relationship between the two sectors for the betterment and provide solutions to the problems being faced by the industry. The participants agreed to work out and find out areas of interest where academia and the textile industry could collaborate and support each other. They stressed the need to analyse the gaps between the two sectors and to find out avenues to bridge them. HEC Advisor Dr Muhammad Lateef, National Textile University Professor Tanveer Hussain, University of Management and Technology Rector Dr Hassan Sohaib Murad and other senior faculty represented academia were among the participants of the meeting.
SOURCE: The Daily Times
Bangladesh, the world’s second largest exporter of apparels of western brands, will close 319 more garment factories amidst intense global competition and challenges like devaluation of the US dollar, a top trade association has said. Expressing worries over the drop in productivities, Bangladesh Garment Manufacturers and Exporters Association’s (BGMEA) President Siddiqur Rahman on Saturday said Bangladesh’s garment industry was facing myriad challenges. “It is a matter of concern that 618 factories shut down in past three years after their productivities dropped due to various reasons. 319 more factories are also going to close down,” Rahman said. The garment sector is facing the challenge of gas and power crisis, high interest rate of bank loans, devaluation of US dollar and cut in price of its products, he said. Noting that the export had been growing by an average of 10 per cent over past five years, Rahman demanded halving the tax at source for the sector to 0.3 per cent in 2016-17 like the previous fiscal year. He also suggested that no value added tax should be imposed on garment accessories, and duty-free import of fire extinguishers should be allowed to help the entrepreneurs tackle the challenges. “We need 12 per cent annual growth in order to reach the export target of $50 billion by 2021. But the growth was only 6.81 per cent over past 22 months,” Rahman was quoted as saying by the bdnews24.com. “So we are 3.19 percentage points behind from the expected average growth and 5.19 percentage points behind from the expected growth for the 2021 target,” he added.
Bangladesh is second only to China in apparel exporter of western brands. Sixty per cent of the export contracts of western brands are with European buyers and about forty percent with American buyers. In 2012 the textile industry accounted for 45 per cent of all industrial employment in the country yet only contributed 5 per cent of the Bangladesh’s total national income. BGMEA is one of the largest trade associations in the country, representing the readymade garment industry.
SOURCE: The Business Standard
Vietnam textile and garment industry believed to be the biggest beneficiary from TPP and other free trade agreements (FTAs), are experiencing tough days as orders have moved from Vietnam to Myanmar and Laos. According to Pham Xuan Hong, chair of the HCMC Textile, Garment, Knitting and Embroidery Association, the orders for the second quarter of the year have come, but the number is lower than predicted. Chair of the Vietnam Textile and Garment Association (Vitas) Vu Duc Giang also said at a meeting with the Prime Minister some days ago that many loyal partners have shifted to place orders with producers from Myanmar and Laos, because the two countries enjoy preferential tariffs when exporting products to the US and EU. Meanwhile, TPP and the Vietnam-EU FTA which offer preferential tariffs to Vietnam’s exports still have not taken effect. Cambodia now enjoys zero percent tariff under the GSP program applied to underdeveloped countries, while Vietnam has to bear a tax rate of 9.6 percent.
Vietnam not only has to compete with Myanmar and Laos which are now attracting orders, but also with Cambodia, which outstripped Vietnam in exports to the EU, one of Vietnam’s largest export markets, in 2015 due to which many Vietnamese small and medium sized garment companies have had to shut down. The strong rise of Cambodia is worth paying attention to as Cambodia has become the direct rival for Vietnam. Vietnamese garment companies have to compete fiercely with each other to scramble for contracts. While the input costs have been increasing rapidly due to the higher basic wage, insurance premiums and land rentals, they dare not raise the selling prices. A businessman noted that the new decision by the State Bank on stopping short-term loans in foreign currencies has also increased production cost (dollar loans always have lower interest rates than Vietnam dong loans). According to Le Quang Hung, chair of Garmex Sai Gon, Vietnamese products are getting less competitive as Malaysia, Bangladesh and India – the biggest rivals for Vietnam – in 2015 devalued their currencies sharply in order to boost exports. Meanwhile, the Vietnam dong has lost 5 percent only in value against the dollar. Garmex Sai Gon, which once put high hopes on TPP, previously set the target of VND1.9 trillion in revenue for 2016, but has decided to lower the targeted figure to VND1.55 trillion. Vietnam in the first four months of the year touched $8 billion figure, an increase of 6 percent compared with last year’s same period. In 2015, Vietnam exported $27.4 billion worth of textile and garment products.
SOURCE: Yarns&Fibers
The Botswana government has given the go-ahead for the Textile and Clothing Institute of Botswana (TCIB), the first of its kind in the country, to overcome a chronic shortage of skilled workers that has negatively impacted the textiles sector for many years. Its founder, Shahid Ghafoor, president of the Botswana Textile and Clothing Association, said TCIB was offering one-year certificate courses in clothing manufacturing in a wide variety of skills, Botswana's news website Mmegi Online has reported. “Our faculty and staff will be dedicated to providing candidates with face-to-face teaching, hands-on learning and workforce development to ensure our country has an educated, skilled population and competitive workforce,” he said. Ghafoor, who is also the Managing Director of Western Apparels, said the institution, with an area of 1,000 square metres, is located at the Gaborone West Industrial. It aims to be a renowned training and technical service provider to cater for the growth and needs of the textile and clothing industry. “Our mission is to facilitate sustainable development of the regional and local textile and clothing industry by nurturing a competent workforce with specialised skills,” he said. The courses, known as certificate in clothing manufacture, will have three levels covering cutting, embroidery, design and pattern making, garment assembly, sewing, commercial sewing skills and mechanics. Ghafoor said all the programmes were designed by clothing industry professionals so that students who take up the course, can thrive in the textile and clothing industry. Preparations for the official opening are at an advanced stage. He said the establishment of the training centre was motivated by shortage of skilled manpower. “Getting skilled manpower is a big challenge for the local textile industry,” he added. “This hampers our wishes of developing this industry so that it can end up exporting to the US through African Growth and Opportunity Act (AGOA).” He said the establishment of TCIB and the recent extension of AGOA will offer opportunities for local clothing manufacturers to export their products. AGOA is a unilateral trade arrangement by the U.S for African countries to penetrate the U.S market duty-free. But currently, there is only one company in Botswana is taking advantage of this trade arrangement, the website said.
SOURCE: Fibre2fashion
As Thailand considers Pakistan an important country for strengthening economic cooperation as both countries has great potential to offer a lot to each other. A delegation of Islamabad Chamber of Commerce and Industry, led by its president Atif Ikram Sheikh, called on Suchart Leingsaengthong, Ambassador of the Kingdom of Thailand, and discussed various options for further enhancing trade relations between the two countries. The current volume of bilateral trade between Pakistan and Thailand is around 1 billion dollars and there existed good scope to increase it to $ 2 billion by improving connectivity between their private sectors. The Ambassador said that Pakistan and Thailand were making efforts to sign a free trade agreement and hoped that FTA would be finalized by the end of 2016. The conclusion of FTA would not only boost trade but help in strengthening ties between the two countries. He said that given the size of Pakistan’s economy, Thailand considered it a promising country for business relations and assured that his Embassy would facilitate businessmen in improving trade volume between the two countires. He further added that Pakistani textiles were very popular in Thailand and it wanted to increase import of textiles products from Pakistan.
Speaking at the occasion, Atif Ikram Sheikh, President, Islamabad Chamber of Commerce and Industry stressed upon the need of strong linkages between the private sectors of both countries to increase trade volume. The exchange trade delegations and holding single country exhibitions on reciprocal basis was the best way for promoting bilateral trade between Pakistan and Thailand. As many Pakistani products including textiles, readymade garments, leather products and many others could find good market in Thailand and it should focus on importing these products from Pakistan. Also the Thai investors should invest in Pakistan’s various sectors. He also stressed that governments of both countries should work together to provide leading role to private sectors for improving bilateral trade and assured that ICCI would like to work with Embassy of Thailand for bringing both countries even closer in trade and economic relations. The close cooperation between Pakistan and Thailand would be a win-win situation for both countries as they could facilitate each other in getting better market access in their respective regions. Apart from this Pakistan could facilitate Thailand in promoting trade with South and Central Asian countries whereas Thailand could help Pakistan in accessing to the ASEAN region.
SOURCE: Yarns&Fibers
Nepal will give preferential access to Bangladeshi readymade garments following a Memorandum of Understanding signed by the two countries. Readymade garments are among 50 Bangladeshi products that Nepal will provide preferential treatment. A nine-member team led by Nepalese Commerce Secretary Naindra Prasad Upadhyaya and a Bangladeshi team led by Senior Commerce Secretary of Bangladesh Hedayetullah Al Mamoon signed a MoU to this effect. The two sides decided to form a secretary level mechanism to enforce the provision, according to which at least 108 Nepali products will have duty-free access to Bangladesh. The Nepal-Bangladesh commerce secretary-level talks also agreed to remove Technical Barriers to Trade (TBT) to expand trade volume between the two countries. Commerce Secretary Upadhyaya said the mechanism will propose the modality on implementation of the agreement. Upadhyaya said the two countries also agreed to take initiative to implement a previous bilateral agreement. He said the two countries also discussed issues like promoting bilateral trade, trade facilitation, development of trade related infrastructure and removing non-tariff barriers.
SOURCE: Fibre2fashion
China’s economy resumed its grind toward slower growth in April, weighed down by overcapacity industries such as steel and coal. Industrial production climbed 6 percent in April from a year earlier, down from 6.8 percent in March and missing economists’ estimates for 6.5 percent. Retail sales also missed analyst forecasts, rising 10.1 percent, while fixed-asset investment increased 10.5 percent in the January-April period versus economists’ expectation for 11 percent. After a rocky start to 2016 marked by a sliding yuan, capital outflows and tumbling shares, China’s economy stabilized and even picked up in March, led by a surge in new credit and rebound in the housing market. A pullback in lending and Saturday’s tepid readings dash hopes the economy has turned a corner. Top leaders this week signaled a shift away from debt- and stimulus-fueled growth, stressing the need for deleveraging, upgrading industrial capabilities and cutting excess capacity. "All the engines suddenly lost momentum," said Zhou Hao, an economist at Commerzbank AG in Singapore. "The policy tightening will be only a short-term phenomenon." The slower industrial output was due to weak external demand, a sharp drop in mining, high energy-consumption and overcapacity sectors including steel and coal, as well as seasonal effects, the National Bureau of Statistics said in a statement released after the data. It pointed out that the output of the steel and coal industries both fell from a year earlier. Retail sales were weighed down by a pullback in automobile sales, which increased 5.1 percent from a year earlier versus a 12.3 percent jump in March, the NBS said.
Slowest Pace
Private investment in fixed assets decelerated to the slowest pace since at least 2012. "Due to weak market demand, companies’ reluctance to invest and market entrance barriers, China’s private fixed-asset investment has been decelerating since the start of this year," the statistics bureau said in a statement. "This will hurt the steady growth of investment and it deserves a lot of attention." It wasn’t all down arrow, with home sales continuing to grow, signaling that tightening measures designed to stem a home-price surge in some large cities have yet to slow the market’s upward momentum. New-home sales gained 63.5 percent to 793.7 billion yuan ($122 billion) last month from a year earlier, according to Bloomberg calculations based on NBS data. The increase followed a 71 percent surge in the previous month. Data Friday showed China’s broadest measure of new credit rose less than expected last month. Aggregate financing was 751 billion yuan in April, the People’s Bank of China said, below all 26 analyst forecasts in a Bloomberg survey.
China’s central bank sought to reassure investors that monetary policy will continue to support the economy after the sharp slowdown in new credit. The deceleration was mainly due to a pick-up in a program to swap high-cost local government debt for cheaper municipal bonds, with no less than 350 billion yuan of such swaps conducted last month, while aggregating financing growth was affected partly by a decrease in corporate bond issuance, according to the central bank. China’s monetary policy remains prudent and policy moves must support economic growth while fully considering the impact on future prices and the need to prevent financial risks, People’s Bank of China research bureau chief economist Ma Jun said in an e-mailed statement from the bank. "The recovery appears to be fragile," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. "The reduction in loan extension in April as well as housing tightening policy may be having some negative impact already."
SOURCE: The Bloomberg
