The Emergency Credit Line Guarantee Scheme (ECLGS) was one of the most significant announcements by the government during the peak of the COVID-19 lockdown. In the last two-and-a-half years, the scheme has come up with regular changes. Tag along as we look at its performance: Aviation, hotels and tourism are the sectors most hit by the pandemic. But so far, including all the extensions, the total amount of guaranteed loans availed and the ECLGS 2.0 is less than 21 percent of the guarantees given by the government in total, with sectors such as real estate and textiles being the major beneficiaries. ECLG 3.0 has even fewer takers. Specifically designed for sectors such as civil aviation, hospitality, travel and tourism, sports and leisure. This was first announced in March 30, 2021, almost a year after the nationwide lockdown, but before the disastrous Delta wave. However, off-take under ECLGS 3.0 has been almost negligible and less than 4 percent. The Finance Minister has increased allocation for this scheme by around Rs 50,000 crore in the Budget. However, total off-take stands at less than Rs 12,000 crore. The reason for the poor off-take under this window — The COVID waves have become less life-threatening, especially with the vaccination drive gaining momentum. So businesses and cash flow for these sectors has been picking up, even if their recovery has been little sluggish. But restaurants and hotels have asked the government to simplify the application process and tweet the eligible criteria to make it less restrictive. Now, the ECLGS 1.0 was announced in May 2020 and subsequently enhanced by over Rs 1 lakh crore in June last year as a response to the Delta wave. A whopping 76 percent of the government guaranteed loans under the overall ECLGS have been registered under this window, with government guarantees touching almost Rs 2.7 lakh crore. Interestingly, most of the beneficiaries under this scheme are from the trader community and entities that belong to the textiles, service sector and food processing. The key reason for the success of ECGS 1.0 is that it was announced at the height of the nation-wide COVID-19 lockdown. And it specifically targets micro and small enterprises. Now, with Rs 1.5 lakh crore worth of guarantees still available, there has been some speculation as to another extension of this scheme. But this may not be on the cards. The government is genuinely of the opinion that despite the economic recovery being slow and uneven there is still a recovery. And so, keeping this key beyond the financial year-end may not be warranted. The final call, of course, will be taken by the Finance Minister, in the next Budget.
Source: CNBCTV18
To meet US commerce secretary, trade representative in Los Angeles next week Commerce and Industry Minister Piyush Goyal will attend the first in-person Indo Pacific Economic Framework for Prosperity (IPEF) ministerial in Los Angeles on September 8-9, an official statement said on Friday. The minister will hold bilateral meetings with US Secretary of Commerce Gina Raimondo and US Trade Representative Katherine Tai on the sidelines of the ministerial meeting with an eye on strengthening trade and economic ties between both nations. Goyal will be on a six-day visit to San Francisco and Los Angeles starting Monday, which will also include attending the India-US Strategic Partnership Forum conference. During his visit, he will interact with eminent business persons, US officials and industry leaders to fortify the partnership between the two nations and strengthen trade and economic ties. “The US is a very important strategic, trade and commercial partner. This visit is very important for India in that regard… He (Goyal) will also attend the IPEF ministerial, in which he will also be interacting with the counterparts from the rest of the (IPEF) member countries,” a senior government official said. “This meeting will enable ministers to have detailed discussions and expect the core elements of each of the four pillars (of IPEF) and broad scope of engagement and possibly some mechanisms on how these engagements will go forward will emerge from these discussions,” the official said, referring to the agenda of the meet. The IPEF was launched jointly by the US and other partner countries of the Indo-Pacific region on the sidelines of the Quad Summit in Tokyo on May 23. It seeks to strengthen economic partnership among participating countries with the objective of enhancing resilience, sustainability, inclusiveness, economic growth, fairness and competitiveness in the region. IPEF is also seen as an economic initiative to counter China’s influence in the South and Southeast Asia. This is the first plurilateral deal that India has agreed to join after exiting RCEP deal at the last minute in 2019. Apart from India and the US, the 12 other members of the IPEF are Australia, Brunei, Fiji, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam. Goyal is also expected to interact with technology, entrepreneurship, and academic communities in the Bay Area, specifically, in the Silicon Valley to undertake focused discussions with American companies looking to invest or expand in India across sectors such as electronics, including semiconductor, technology, fintech, among others. In San Francisco, the minister is expected to meet the heads of companies such as Rocketship, Mayfield, Google, Oracle, Visa, Levi’s, Nexus Capital, among others. “India and the US enjoy a comprehensive global strategic partnership covering almost all areas of human endeavour, driven by shared democratic values, convergence of interests on a range of issues, and vibrant people-to-people contacts. Regular exchanges at the leadership-level have been an integral element of the expanding bilateral engagement. The outcomes emerging from these visits have been instrumental in further strengthening the multifaceted ties between the two countries,” an official statement said.
Source: Business Standard
Ahead of approving proposals for Mega Integrated Textile Region and Apparel (PM MITRA), the Central Government has asked states to provide a long-term projection for power tariffs that would be charged at these parks. As per reports, about 13 states had sent 18 proposals for the textile park. While Madhya Pradesh has sent four proposals, Maharashtra and Karnataka have sent two each. The Government will most likely select only one proposal from each state. Punjab, however, did not fulfil the criteria of providing 1,000 acres of litigation/encumbrance-free land. Two months back, Union Minister of Textiles, Commerce and Industry Piyush Goyal had said that the states that will ensure support measures such as affordable power, land and effective labour laws will get preference in the selection for the proposed MITRA parks scheme. The scheme was announced in Budget 2021 and given a budget of Rs. 4,445 crore for seven years up to 2027-2028. Seven such parks are due to be approved. As per Government officials, the states, where mega textile parks will be set up, have almost been finalised, but the Government is trying to get a few things from the states by way of concessions. “We are trying to get states agree to a better power regime. In some states, the cost of power is quite high and we are trying to get it reduced. They have been asked to give us a long-term roadmap – say 15 years – of the power tariff that will be charged at these textile parks. We are telling them to refrain from raising power charges for 15 years, but we are looking for some kind of a projection regarding the same,” an official said.
Source: The Hindu
According to the PMI survey, manufacturing activity in August was boosted by strengthening demand conditions and softening input cost inflation. Production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook. Firms were at their most optimistic for six years. India’s manufacturing sector activity in August reported the second-strongest improvement in operating conditions in nine months, signalling continued economic momentum and strong business confidence, according to the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI). The index was little changed from July’s reading of 56.4, posting 56.2 in August. According to the PMI survey, manufacturing activity in August was boosted by strengthening demand conditions and softening input cost inflation. Production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook. Firms were at their most optimistic for six years. The PMI data came on the back of two sets of data released on Wednesday that pointed to weakness in India’s manufacturing industry. According to the national income data, manufacturing activity remained subdued in June quarter, with growth of 4.8% despite a favourable base effect. Analysts attributed this to the sector being constrained by supply issues and the fact that a part of the local demand was met through imports. Besides, growth in the output of eight core infrastructure sectors decelerated sharply for a second straight month to hit a six-month low of 4.5% in July from a year before, as a conducive base effect waned. The core sector growth was as much as 13.2% in June and 19.3%, a 13-month peak, in May. According to the PMI data, manufacturing production volumes were supported by a pick-up in exports and upbeat projections for the year-ahead outlook. Firms were at their most optimistic for six years, it added. The index stayed above the 50-mark that separates growth from contraction for the 14th straight month in August. “Indian manufacturers continued to benefit from the absence of Covid-19 restrictions, with rates of growth for both output and new orders picking up yet again to the strongest since last November,” Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said. The latest results also indicated that recent inflation concerns somewhat faded, as business sentiment strengthened further from June’s 27-month low. The degree of optimism was at its highest in six years. Predictions of stronger sales, new enquiries and marketing efforts all boosted confidence in August, the survey said. On the inflation front, although manufacturers continued to signal higher prices for a wide range of materials in August, the overall rate of cost inflation softened to a oneyear low as commodity prices (particularly aluminium and steel) moderated. “Inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August as seen by a jump in business confidence to a six-year high,” Lima said. The rate of input cost inflation softened to the weakest in a year, but the passing of higher freight, labour and material prices to clients kept the pace of increase in output prices little changed from July, the survey said. However, Crisil noted on Thursday that global growth is projected to slow, as central banks in major economies withdraw easy monetary policies to tackle high inflation. “This would imply lower demand for our exports. Together with high commodity prices, especially oil , this translates into a negative in terms of a trade shock for India. High commodity prices, along with depreciating rupee, indicate higher imported inflation,” it added.
Source: Financial Express
Opportunities to strengthen economic ties between the U.S. and Tamil Nadu are high in a wide range of sectors, said Judith Ravin, U.S. Consul General, Chennai. At an Indo-American Chamber of Commerce (IACC) roadshow here on Friday, she said the private sector was the engine driving growth in both the countries. “We look forward to further strengthening our partnerships particular in areas of aero space, IT, education, manufacturing, energy, entrepreneurship, and climate change,” she said. The last 10 years had seen substantial progress in improving the trade ties between the two countries. The bilateral trade of goods and services between the two countries in 2021 was over $ 159 billion. Foreign direct investment into the U.S. from India stood at $ 12.7 billion and FDI from the US into India was at $ 41.9 billion. According to Gaurav Daga, Associate vice-president of Guidance Tamil Nadu, over 300 U.S. companies have invested nearly $ 11 billion in Tamil Nadu in sectors such as automobile, building materials, and chemicals. The Guidance Tamil Nadu is also promoting starts ups in the U.S. to invest in the State. Coimbatore, Tiruppur, Erode, Salem, Namakkal and the Nilgiris are export hubs in the western region of the State. A. Sakthivel, president of Federation of Indian Export Organisations, said India and the U.S. had a lot of potential to strengthen economic ties. India had a positive trade balance and bilateral trade between the two countries should reach $ 500 billion by 2027. Sanjay Jayavarthanavelu, Chairman and Managing Director of Lakshmi Machine Works, said the tie up between the U.S. and India was growing stronger and it was not just in trade but in investment too. Chairman of Indo-American Chamber of Commerce - Tamil Nadu, Arun Miranda, said that in the last five years there was a huge shift of manufacturing to countries such as India, Indonesia and Vietnam. The IACC chose Coimbatore for the roadshow as the region was a leader in sectors such as precision engineering and textiles. K. Ramasamy, convenor of Indo-American Chamber of Commerce Roadshow, said the U.S. offered good opportunity to Indian businesses not only to export and import but to invest too. S. Chandrasekar, co-ordinator of the Roadshow, said the website www.iacckonguconnect.com was a permanent data base of manufacturers and exporters in the western region and it was a platform to connect businesses here and those in the U.S.
Source: The Hindu
The commerce and industry ministry in October is expected to come out with the ranking of states for 2022 in terms of the logistical support they provide to promote trade. The LEADS (Logistics Ease Across Different States ) 2022 exercise is scheduled to be completed by the end of September, which shall be followed by the release of the report in October, the ministry said on Friday. The LEADS survey assesses the viewpoints of various users and stakeholders across the value chain including shippers, terminal infrastructure service providers, logistics service providers, transporters and government agencies to understand the enabler and impediments to the logistics ecosystem. The annual survey processes the data received from stakeholders (perception data) and States/ UTs (objective data) and ranks the logistics ecosystem of each State/ UT using a statistical model. The survey for 2022 was rolled out in April. It has identified issues and bottlenecks which need immediate action and can help synergize the supply chain. It added that all 36 states/UTs have formed State Logistics Coordination Committee; 34 have formed Network Planning Group and have formed Technical Support Unit.
Source: Economic Times
The robust GST collections for a consistent period of 6 months are one of the key indicators showcasing that there has been a very low impact of inflation on the Indian economy. The timing for penning down our thoughts on growth in GST collections in the country couldn’t have been better when India emerges as a fifth largest economy in the world. The robust GST collections for a consistent period of 6 months (with April 2022 recording the highest collections in this fiscal year) are one of the key indicators showcasing that there has been a very low impact of inflation on the Indian economy. The Ministry of Finance has recently released the gross GST collections made in August 2022. As per the press release, the collections have risen 28 per cent on year-on-year basis to Rs 1.43 lakh crore. The States / Union Territories of India like Mizoram and Ladakh, have recorded the highest growth in collection with 73 per cent, and 34 per cent respectively. The sharp increase in GST collections in these areas are indicative of increased consumption of goods/ services in these areas, which in turn can be said to be indicative of development in these regions. The increase in collections is due to the various measures adopted by the Government such as automation of GST compliances, extension of e-invoicing mechanism to increase the taxable base and robust administration by the tax department. The GST Council, its 47th meeting, which coincided with the 5th year anniversary, had recommended rationalisation of GST rates and had also recommended withdrawal of exemptions on certain goods. While the intent of the changes was to reduce and correct the inverted duty structure and allow credits on inputs and input services on goods which were previously exempted, the change in GST rates has also pushed collections in the last month. The GST Council is likely to take decisions on further rationalisation of GST rates and the applicable rate on online gaming in upcoming council meetings. Also, with the COVID wave stabilising, there has been a rise in the demand for various goods/ services leading to signs of economic recovery. At this juncture, it is important to highlight that the steps taken by the Government for ‘Make in India’ in the form of introduction of Production Linked Incentive (PLI) schemes, focus on deep localization within the country are also one of the contributors to increasing GST collections. PLI schemes introduced by the Government in sectors such as mobile phones, automobile, white goods, textile, food products, etc. require significant investment in capex for next 3-5 years by the successful applicants of the said schemes. Any capex investment is typically subjected to levy of GST at a median rate of 18 per cent. However, it must be kept in mind that external factors such as the Ukraine war, rise in inflation have also led to increased price of commodities, which has also contributed to higher GST collections. When we look at the collections of compensation cess, which is levied on motor vehicles, aerated drinks, etc. there appears to be steady decline. While the collections in June 2022 stood at Rs 11,018 crore, the collections in July and August 2022 were Rs 10,920 crore and Rs 10,168 crore respectively, thereby showing the demand on high end goods have gone down due to rising inflation on daily use goods. That being said, with the festive season around the corner, the demands are likely to be robust, keeping up the pace in the collections of GST in the coming months. Further, the steps taken by the Indian Government to promote domestic manufacturing in India would have a far reaching impact on the Indian economy leading to likely consistent pace in GST collections.
Source: Financial Express
The Indian economy has undergone a large structural shift in the last eight years and is currently the 5th largest economy in the world after overtaking the United Kingdom. Going ahead, India is expected to pip Germany in 2027 and Japan by 2029 at the current rate of growth, as per a State Bank of India research report. The path taken by India since 2014 reveals India is likely to get the tag of 3rd largest economy in 2029, a movement of 7 places upwards since 2014 when India was ranked 10th, according to a research report from the State Bank of India's Economic Research Department. India should surpass Germany in 2027 and most likely Japan by 2029 at the current rate of growth. This is a remarkable achievement by any standards, said the report, authored by Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI India, a former British colony, leapt past the UK in the final three months of 2021 to become the fifth-biggest economy. The calculation is based in US dollars, and India extended its lead in the first quarter, according to GDP figures from the International Monetary Fund. India's GDP growth in Q1 FY23 was 13.5 per cent. At this rate, India is likely to be the fastest growing economy in the current fiscal. Interestingly, even as estimates of India's GDP growth rate for FY23 currently range from 6.7 per cent to 7.7 per cent, we firmly believe that it is immaterial. In a world that is ravaged by uncertainties, we believe 6 per cent to 6.5 per cent growth is the new normal, the report noted. The share of India's GDP is now at 3.5 per cent, as against 2.6 per cent in 2014 and is likely to cross 4 per cent in 2027, the current share of Germany in global GDP. Broad-based growth of empowerment will also lift India's per capita income from current levels and this could also as a force multiplier for a better tomorrow. The Indian economy is forecast to grow more than 7% this year.
Source: Economic Times
China became India's fourth largest export destination during the period, slipping from the second position during the same period a year ago Amid a slowdown in economic activity in China, India’s exports to its northern neighbour dropped 35 per cent to $6.8 billion during AprilAugust period at a time the country's overall exports rose 17.1 per cent. China became India’s fourth largest export destination during the period, slipping from the second position during the same period a year ago. Multiple shocks have hit China’s economy, including the drag on consumption from the zero-Covid policy, the prolonged impact of the property sector downturn and declining export demand, all of which have slowed down economic activity. While exports of petroleum products such as naptha to China rose 81 per cent to $1.2 billion during April-July due to elevated crude oil prices, shipments of organic chemicals (-38.3 per cent), iron ore (-78.5 per cent) and aluminium products (-84.2) saw sharp decline, disaggregated data available on Commerce Ministry website showed. However, China increased its imports of non-Basmati rice (141.1 per cent) and marine products (18.7 per cent) during the period. A cut in steel output in China has also led to sharp dip in iron ore exports from India. On the other hand, imports from China were up 28 per cent during April-August at a time when India’s overall imports grew 45.6 per cent, leading to a trade deficit of $37.1 billion in the first five months of FY23. India’s rising trade deficit with China—the highest with any country — has been a cause for concern. “The growth of trade deficit with China could be attributed to two factors: narrow basket of commodities, mostly primary, that we export to China and market access impediments for most of our agricultural products and the sectors where we are competitive in, such as pharmaceuticals, IT/ITeS, etc. Our predominant exports have consisted of iron ore, cotton, copper, Aluminium and diamonds/ natural gems. Over time, these raw material-based commodities have been over-shadowed by Chinese exports of machinery, power-related equipment, telecom equipment, organic chemicals, and fertilizers. We continue to engage the Chinese side for addressing market access issues,” the Indian Embassy in China explains on its website. China’s economy is bracing for more pain as Chengdu’s lockdown, the sixth largest city in the country’s west, damaged business and consumer activity in the area and hurt sentiment more broadly. The hit to global production and shipping from China’s strict Covid lockdown policies have also set back recovery in global supply-chain activity. Moody’s last week lowered its growth forecasts for China for both 2022 and 2023 to 3.5 per cent and 4.8 per cent, respectively, down sharply from 8.1 per cent in 2021. July trade data showed a surge in China's trade surplus to a record $101.26 billion, up from $97.4 billion in June. “China's recovery beyond 2023 will depend on knock-on effects on other sectors resulting from troubles in the property sector and measures by authorities to stabilize it, and the impact on households’ balance sheets and their consumption-saving decisions. A strong revival of domestic consumption demand, alongside the increased infrastructure spending that the government is already undertaking, will be key to sustaining a solid recovery,” Moody’s said.
Source: Business Standard
Stable freight availability and rates translated to steady free cash flow for transporters month-on-month. India’s freight activity remained stable in August, in line with the trend seen in the second quarter of 2022, after a spike in the first three months of the year. According to CRISFrex, overall freight rates remained stable on-month in August. While freight availability improved marginally for the ‘market load’ category, cement saw a slight decline. Categories such as auto carriers, fast- moving consumer goods/durables (FMCG/FMCD), parcel/ loose goods, textiles, petroleum tankers, steel, mining products (largely coal) and container applications saw similar freight availability levels as in July, as per the CRISIL pan-India freight index.Stable freight availability and rates translated to steady free cash flow for transporters on-month. The industry’s FCF remained at 20% in August, CRISIL said. In August, the increase in utilisation was least in ‘market load’ while the decline was mildest in ‘cement’ applications. Utilisation remained unchanged for all other commodities, according to CRISFrex.Freight rates rose marginally for commodities such as agri- products, auto-carriers, market load, steel, textiles, parcel/ loose goods and discretionary goods such as FMCG/FMCD. They dropped slightly for mining (largely coal), cement, and petroleum tankers.As a result, CRISFrex remained similar in August, compared with July. CRISIL incorporates the views of 100-150 transporters to understand freight dynamics and operational aspects such as number of trips undertaken and key cost heads (fuel, driver, toll, tyre, and maintenance).The exercise is conducted on a closed sample of 159 route-commodity combinations, spanning 32 routes, 11 commodity types, and five truck platforms with differing load bodies, depending on the commodity carried.The analysis provides an aggregated view of the data collected to arrive at a holistic picture of the overall trucking scenario in India.
Source: Live Mint
The Regional Comprehensive Economic Partnership agreement came into effect on Jan 1. How will its implementation influence China's export structure? What industrial chains will benefit from the agreement for further development? Will it be a boon for, or a bane of, China's exports, and how should China make use of the agreement to boost its exports and improve trade quality? The implementation of the RCEP pact has facilitated the sound growth momentum of China's exports to other member countries of the agreement. During the first six months, exports and imports between China and other RCEP countries hit $939.3 billion, accounting for about 32 percent of China's total trade. China's exports to other RCEP member countries were worth about $468.5 billion during the period, growing 14.7 percent year-on-year, which was 2.3 percentage points higher than the average annual growth rate of China's exports to other RCEP member countries in the past 20 years. Chinese exports to other major RCEP member countries have increased significantly during the first half, except for Vietnam and Japan. Other RCEP countries' contributions to China's exports have also increased during the period, and the share of non-RCEP member countries in China's outbound shipments dropped by 1.11 percentage points from a year earlier. In addition, shares of most RCEP countries in China's exports have all risen, except for Japan, Vietnam and New Zealand. Japan's smaller share in China's total exports was mainly due to the sharp depreciation of the Japanese yen since the end of May, which has weakened Japan's import capacity. In the first four months before the sharp depreciation of the yen, Chinese exports to Japan accounted for 4.97 percent of China's total exports, higher on a yearly basis. Vietnam's share decline is probably attributable to two factors. One is some competition between China and Vietnam in machinery manufacturing, textile and garment industries. Vietnam's preferential tariffs for many of these Chinese products are not yet fully in place. Also, Chinese exports to Vietnam mainly focus on upstream mechanical and electrical products, and Vietnam's demand for those products is softer this year as it focuses on boosting end product production to meet overseas demand. The RCEP has facilitated China's exports to Japan and South Korea. The implementation of the trade pact has for the first time established direct free trade relations between China and Japan, and Japan will eventually remove 88 percent of tariffs on Chinese imports. The RCEP is also the first free trade agreement involving China, Japan and South Korea, which helps with economic integration in Northeast Asia. To consider the RCEP's influence on the structure of China's exports, there are three aspects to consider. Compared with products from other RCEP countries, are related Chinese products more competitive? Are they highly competitive with lower tariffs? Or do such products face competition from other RCEP countries? Products that do not have export or other competitive advantages over products from other RCEP members cannot significantly boost China's export performance, and the RCEP has limited impact on such exports. For Chinese exports that only enjoy competitiveness over products from RCEP countries, such advantages may not last long. For instance, because of their bulky weight or short shelf lives, products like leaf tobacco and paper products only have export advantages vis-a-vis neighboring RCEP countries. Global energy supply contracts and food price surges can also swiftly alter competitive advantages for China's exports. Chinese products having certain competitiveness and significant export advantages in the RCEP region will usually enjoy high-level preferential tariff treatments, and export strength of such products is unlikely to subside over the short term. Chinese products that have strong competitiveness in global markets but moderate advantages in the RCEP region will enjoy more export room in high-end markets, but must pay attention to competition from other RCEP countries. Thanks to preferential tariff treatment over the long term, competitiveness of some Chinese products, such as integrated circuits, automatic data processing equipment and automotive parts, will remain strong. Products such as midstream manufactured goods, which include electromechanical machine parts and storage equipment, do not face fierce competition in the region while enjoying protective tariffs under the RCEP agreement. As domestic industrial chains upgrade, export volume and value of such products are expected to grow. Yet for traditionally labor-intensive products, such as furs, suitcases, clothing, household items and toys, they will be more likely to get replaced by products from the Association of Southeast Asian Nations, although tariff treatment under the RCEP may extend export opportunities for some time. That is because while China's environmental protection regulations tighten and labor costs grow, ASEAN member states have been gradually receiving transfers of related capacity from China, especially in textile and clothing industries, thanks to their rich labor resources, low cost and foreign investment incentives. The RCEP will reduce tariff and non-tariff barriers among member countries, thereby boosting trade, which is called the trade creation effect. At the same time, China and other RCEP members have similar industrial systems and resource endowments, and therefore face certain competition in export markets. The implementation of the RCEP will therefore have a "substitution" effect on China's exports. However, the creation effect is more influential than the substitution effect. Due to the resurgence of COVID-19 cases in China, ASEAN's capability to replace China in global export markets increased temporarily. The share of China's textile products in global export markets has been partially replaced by ASEAN, but that was the result of the transformation and upgrades of China's manufacturing industry and the relocation of relatively low-end industrial chains. China's textile and apparel industry has moved up the value chain toward two ends of the same spectrum－conception and marketing that command higher added value on the one hand, as well as the core manufacturing aspect on the other. ASEAN has had a relatively strong substitution effect on China's textile product exports, but its export substitution effect on China's electromechanical products is very limited. China's capital and technology-intensive industries in the electromechanical sector provide ASEAN with upstream products and high-end intermediate products, which are difficult to be replaced by ASEAN. No matter whether one is talking short term or long term, the RCEP will play an important role in supporting China's export growth. Some studies show that from 2020 to 2035, the RCEP will lift China's exports by about 7.6 percent compared with the baseline scenario. With the recovery and expansion of ASEAN production capacity, the deep implementation of the RCEP agreement and the recovery of China's supply chain, the value chain in the RCEP region will become a pillar of China's exports. China and ASEAN are each other's largest trading partners. In the short term, China's role in the operations of regional industrial and value chains is very firm, especially that of ASEAN. For one thing, ASEAN needs China's supply of intermediate goods to produce end products. Most of the ASEAN countries have weak industrial foundations and support facilities. Foreign investment has led to an increase in ASEAN plant construction and machinery purchases, and its imports of intermediate and high-end machinery and equipment have increased. The implementation of the RCEP agreement boosts China's exports of electromechanical equipment and chemical products. Also, the ASEAN manufacturing sector is increasingly dependent on the Chinese market. China has become the largest market for manufactured products from ASEAN, taking in more than 30 percent of the final products from ASEAN manufacturers. To boost the RCEP's positive effect on China's exports while alleviating side effects, the following measures are recommended. First is making full use of RCEP accumulative rules of origin. Raw materials sourced within the region can be treated as part of valueadded products from the region to enjoy tariff treatment, which will help reduce costs for enterprises. Chinese enterprises should accelerate adaptation to such rules and make better use of them. China should also promote digital transformation and upgrade to grasp new opportunities presented by digital trade as the RCEP requires member countries to adopt a more open attitude toward digital trade. China should also promote upgrades in manufacturing and product design to face competition properly, while strengthening regional value chain cooperation and domestic policy optimization. The nation is also advised to provide relevant training and professional assistance to enterprises, improve infrastructure and financial support for foreign trade market entities, enhance the business climate, and promote multilevel and mechanism-based communication and cooperation with other RCEP members.
Source: China Daily
The Council for the Development of Cambodia (CDC), which is Cambodia’s highest decision-making body for large-scale investments, has given the go-ahead to 17 investment projects involving a total of $141.72 million – plus or minus $0.805 million to account for rounding – that are expected to create 11,197 jobs. The projects cover sectors like textiles, tourism, healthcare, solar panel manufacturing, and mining. The new investment projects will be implemented in Phnom Penh and three other provinces in Cambodia, according to a media release by the CDC. Hen Jiu Garment Accessory Co Ltd intends to establish a plant to manufacture fabric pieces and thread rolls in the Kambol district of Phnom Penh, added the release. The Kambol project, which will require an investment of $5.1 million, will help employ 463 local people.
Source: Fibre 2Fashion
Clothing sector workers in South Africa have secured a 7 per cent wage hike from September 2022. The Southern African Clothing and Textile Workers’ Union (SACTWU), which is affiliated to the Congress of South African Trade Unions (COSATU), settled its wage dispute after three rounds of wage negotiations and two dispute meetings. Around 50,000 clothing workers in South Africa will benefit from this wage increase settlement. The wage negotiations were conducted under the auspices of the National Bargaining Council for the Clothing Manufacturing Industry, according to a press release by the SACTWU. The new collective agreement was adopted at a constitutional meeting of the clothing bargaining council on August 31, 2022. Along with the wage hike, the two-year agreement provides for the following improvements to the terms and conditions of employment. A further wage increase of Consumer Price Index (CPI) plus 1 per cent in Year 2, effective from September 1, 2023 would be carried out. Moreover, a 0.25 per cent increase in employer provident fund prescribed contribution rates with effect from February 1, 2023 for non-metro areas as well as a further 0.25 per cent increase in employer provident fund prescribed contribution rates, effective from February 1, 2024 will be passed. The agreement also prescribed that non-metro workers be paid for public holidays which fall on a Saturday. Consultation with the union was made compulsory prior to the introduction of short time in those geographic areas where no such provision is currently prescribed in the industry main agreement. For the year 2 wage increase, the CPI of June 2023 as determined by Statistics South Africa (STATS SA) will be used. In year 2, if the CPI plus 1 per cent increase is less than the rand value of this year's wage increase, the wage increase will be the rand value of this year's increase. If it is more, the parties will renegotiate. The usual wage increase implementation date for the clothing industry is September 1 each year. The new wage collective agreement was concluded with employers represented by the Apparel and Textile Association of South Africa (ATASA), the South African Apparel Association (SAAA), and the South African Clothing Manufacturers' Association (SACMA), added the release. The new substantive agreement for the clothing sector will be submitted to South Africa’s department of employment and labour, with a request for the relevant minister to gazette its extension and applicability to all clothing companies nationally.
Source: Fibre2 Fashion
Industry insiders warn that garment exports may take a hit in the coming months as the war in Ukraine is pushing inflation in Europe and America Bangladesh has maintained an upward trend for exports in the new fiscal year, posting a 36.18 percent year-on-year growth in August in the face of intensifying global economic headwinds. Exporters shipped goods worth $4.61 billion last month, 7.14 percent higher than the target, according to data released by the Export Promotion Bureau. In July, the first month of the fiscal year, export receipts crossed $3.98 billion, a 14.72 percent increase from a year earlier. Readymade garments, home textiles and other apparel products have played a notable role in the high growth of exports. In the first two months of fiscal 2022-23, garment exports rose 26.1 percent to $7.11 billion from the same time last year, surpassing the $6.63 billion target. Buoyed by last year's earnings of $52 billion, the government has set a target of $58 billion in export receipts for FY23. The coronavirus pandemic and the Ukraine-Russia brought about numerous trade hurdles, triggering fears of a decline in Bangladesh’s export revenues. But the South Asian nation has managed to keep those concerns at bay so far. However, industry insiders have warned that garment exports may take a hit in the coming months as the war in Ukraine is pushing inflation in Europe and America, two of Bangladesh’s top garment export markets. Several leaders of the BGMEA and BKMEA said last week that some western buyers are cutting back on apparel orders. Many others have also deferred the delivery of already produced goods.
Source: BD Nxews24
On Tuesday August 30, some of China's mega-cities have introduced new lockdowns lasting several days, an attempt to fight the pandemic that is consistent with the ‘zero Covid’ strategy deployed by the Chinese government, aimed at stopping all outbreaks as soon as they crop up. This could however lead to potential production stoppages, something that, as happened in the spring, is a cause for concern among international buyers. Last month’s lockdown measures were mostly imposed in smaller cities, but the restrictions’ recent tightening and extension is now affecting major cities too. And this time, the Beijing region has not been spared, with nearly four million people in lockdown in Hebei province, which encircles China’s capital. Tianjin, the port city catering to Beijing, has made testing mandatory for 13 million people this week. A little further east, in the other port city of Dalian, three million people were placed in lockdown on Tuesday, until Sunday. The restrictions are compelling non-essential staff to work from home, while manufacturing companies have to reduce the number of employees active on their production sites. The situation is being closely monitored by Western importers, still affected by the congestion in Chinese ports caused in part by the spring lockdowns. In the southern region of Guangdong, Longhua, a district of Shenzhen with 2.5 million inhabitants, closed down various entertainment venues and wholesale markets on Tuesday, and suspended major events. The decision caught the attention of international textile/apparel buyers, since Guangdong province is a mainstay of China's textile industry, home to more than 28,000 manufacturers and exporters. These new restrictions should theoretically end on Saturday September 3. Residents must meanwhile present proof of a negative test to access residential complexes, and restaurant capacity is limited to 50% of covers, local authorities said. On Monday August 29, similar measures were introduced in three other districts of Shenzhen, home to more than 6 million inhabitants. Chengdu, one of central China’s biggest mega-cities, is meanwhile faced with lockdown measures affecting 21.2 million people. Here again, Beijing is prioritising its ‘zero Covid’ policy at the risk of slowing down the local economy, which has already been put to the test by the spring lockdown restrictions, as well as the energy shortages that punctuated the autumn and winter 2021-22. China reported 1,717 Covid-19 infections on August 29, including 349 symptomatic and 1,368 asymptomatic cases, according to official data released on Tuesday. In Hong Kong, the number of cases is on the rise, and government advisers are expecting to see the number of infections reach 10,000 per day this week, prompting fears that restrictions in this strategic city for the maritime export trade, which were recently relaxed, will be tightened again.
Source: Fashion Network
On 30 March 2022, the European Commission adopted the long-awaited EU Strategy for Sustainable and Circular Textiles (Strategy), a document that outlines the EU’s vision for the future of the fashion industry and the major reforms that will affect the sector in the coming years. The EU’s overarching goal is to make textile products on the EU market “long-lived and recyclable, made as much as possible of recycled fibers, free of hazardous substances and produced in respect of social rights and the environment” by 2030. Here, we’ve compiled the key elements of the Strategy and address their potential impact on the fashion industry in the near future. Smarter product design and new circular business models Against the background of consumers’ continuously increasing demand for textiles around the world, the production of which almost doubled between 2000 and 2015, the Commission noticed the need to introduce new rules to extend the life of textile products and foster new circular business models. The first step towards circularity in the textile sector was identified in the design stage of the products that are responsible for the biggest environmental impacts. Under the Ecodesign for Sustainable Products Regulation (the Ecodesign Regulation), proposed together with the Textile Strategy, the EU plans to introduce new binding ecodesign requirements for textiles to increase their durability, reusability, repairability, fiber-tofiber recyclability and mandatory recycled fiber content. Furthermore, hazardous chemicals in textile products will be subject to new rules requiring producers to minimize or even substitute them in clothes and footwear. In addition, the EU plans to boost new circular business models, such as reuse, renting, repair, product-as-a-service, take-back services and second-hand retail. When? The work to develop new EU-wide ecodesign requirements will start in 2022. At the moment, the focus seems to be on personal and household textiles, but the Commission plans to launch a public consultation by the end of the year that could identify further priorities. Microplastics and synthetic fibers Part of the effort to improve the design of textiles is the reduction of microplastic pollution. According to the EU, textiles made of synthetic fibers (such as polyester) are the main source of unintentional release of microplastics in the environment. To tackle this issue, the Commission plans to adopt an initiative to address the unintentional release of microplastics from textile products. The initiatives are likely to include obligations such as pre-washing of textiles made of synthetic fibers at industrial manufacturing plants, labeling and promotion of innovative materials. There may be challenges for brands that have focused on the production of textiles from recycled plastic polymers in an attempt to boost upcycling and reuse of materials. In particular, the EU has focused on textiles made of polyethylene terephthalate (PET) bottles, highlighting that such materials are not considered in line with the circular model for PET bottles in the EU and that related claims about the sustainability of such products can be misleading. As a result, the fashion industry can expect a change in the framework related to labeling and environmental claims for clothing and footwear made of these polymers. When? The initiative addressing the unintentional release of microplastics from textile products is to be adopted in 2022, with binding requirements to be applicable to companies indicatively in 2024 or 2025. Digital Product Passport The lack of reliable information about products on the EU market is seen as one of the major barriers to the availability of more sustainable options for consumers. The Commission plans to respond to this issue by introducing the Digital Product Passport, a tool that electronically registers, processes and shares information about the product across the whole supply chain – from manufacturers to consumers, other businesses and competent authorities. The general information that all the companies in scope will need to report in the Digital Product Passport is set in the Ecodesign Regulation. For textiles, it is expected that such reporting will include mandatory information on circularity, fiber composition, substances of concern and repairability. When? The Digital Product Passport for textiles is expected to be presented in 2024. Although the debate around the product passport may take some time, companies should start preparing their operations for the upcoming change now and engage with policy makers that seem open to collaborating with the industry to develop the most efficient mechanisms. In addition to the Digital Product Passport, the EU will also review the Textile Labelling Regulation by establishing new mandatory disclosure information on sustainability, circularity and country of manufacturing. Discussions around a digital label are also under way. Green claims In addition to the information that companies will be required to provide in the Digital Product Passport, the fashion industry will also be subject to stricter rules related to sustainability claims about their products. Firstly, general environmental claims (such as “green,” “eco-friendly” or “good for the environment”) will be allowed only for textiles with a certified environmental performance (based on the EU Ecolabel, type I ecolabels). Specific conditions will also be established for making green claims related to the future (eg, “climate neutral by 2030”). Additional voluntary sustainability labels will be subject to a third-party or public authorities verification. Furthermore, consumers might be empowered to receive information at the point of sale about a commercial guarantee of durability and details about repairing products. The EU is also exploring the idea of introducing a repairability score, illustrating how easy it is to repair the product. When? New rules related to all types of environmental claims, including textiles, will be proposed in 2022 through various initiatives, such as “Empowering Consumer for the Green Transition,” the “Green Claims Initiative” and a revision of the EU Ecolabel criteria for textiles and footwear in 2024. Ban on the destruction of unsold textiles In an attempt to reverse overproduction and waste of unsold or returned textiles, which – according to the text of the Strategy – have increased due to the rapid growth of online sales, the Commission proposes to ban the destruction of unsold consumer products, including textiles and footwear. The Commission will also introduce a general transparency obligation for all economic operators who discard unsold consumer goods. Under the latter, companies will have to disclose information on the number of unsold products discarded per year and why they were discarded and subsequent waste treatment operations. In terms of preventive measures, the EU also plans to work with the industry to explore how emerging technologies, such as digital precision technologies, could reduce the high percentage of returns of clothes bought online or even foster on-demand custom manufacturing. When? The transparency obligation is established in the proposed Ecodesign Regulation and is expected to be approved by the co-legislator in 2023. The introduction of bans on the destruction of unsold products for specific product groups, such as textiles, is subject to endorsement from both the European Parliament and the Council of the European Union and, if approved, may follow via delegated acts adopted by the Commission as of 2024. Textile waste and extended producer responsibility To complete the circularity puzzle that fashion producers and retailers are required to implement from the design phase of the products to their end of life, the EU also plans to introduce harmonized EU extended producer responsibility (EPR) rules for textiles. This means that textile manufacturers would be obliged to take financial and operational responsibility for the separate collection, recovery and subsequent management of collected waste, incentivizing more sustainable design (with less blended materials), reuse and recycling. When? European legislation already requires EU member states to introduce separate collection of textile waste by 1 January 2025. France is currently the only EU member state to have an EPR scheme in place for textiles, while several other states (such as the Netherlands and Sweden) are in the process of developing EPR requirements. To avoid national fragmentation and favor harmonized criteria, new requirements for textiles with eco-modulation of fees will be proposed at the EU level in 2023.
Source: Lexology
