INTERNATIONAL
Garment manufacturers in Tirupur are exploring the possibility of enlarging their market with the use of woollen yarn and wool-blended fabric in the manufacturing process. The foray into wool-based products though may take a while. But the enthusiasm evinced by the 150-odd manufacturers, who attended the ‘Wool workshop’ organised by The Woolmark Company at Velan Hotels in Tirupur last evening signalled their interest. Not that the knitwear cluster is unaware of the use of wool in manufacture of garments. A handful of manufacturers in this traditionally cotton-based product- making hub have already forayed into wool. Many more are expected to follow with technical support from NIFT TEA. Leveraging its strength and commitment towards educating manufacturers about the benefits of Merino Wool, The Woolmark Company in association with NIFT TEA demonstrated the opportunities and benefits of working with this premium fibre in the garment industry.
2% usage only
Arti Gudal, Country Manager (India), The Woolmark Company said use of wool in textile was a mere 2 per cent, globally. “India imports about 7-8 per cent of Australian wool, whereas, the import of such wool by China is as high as 80 per cent,” she said. Highlighting the trans-seasonal benefits of Merino wool and dispelling the perception that woollen garments are heavy and more suited for colder climate, she said “this drive is in line with the Prime Minister’s Make in India campaign as the wool is grown in Australia, but value-addition happens in India.” Sharing the global trends and new categories of products such as Athleisure, she said “the potential is enormous.” Raja Shanmugham, former Chairman of the Confederation of Indian Industry, Tirupur, said NIFT TEA will play a facilitating role in the use of wool by the garment industry.
Yoga wear foray
“Such blended garments will probably hit the market next year, if we start work right away. The industry will have to make some changes in process methodologies, but the capital investment may not be huge,” he said, quite unable to commit on the quantum required towards capex investment at this juncture. He however said the Tirupur cluster would get into every product from yoga wear, cricket and casual wear to inners and more.
SOURCE: The Hindu Business Line
The suicides of R. Thamaraikannan (40), a garment-sector entrepreneur, his wife and two children, have come as an eye-opener for the different stakeholders involved in the business growth of Tirupur knitwear cluster. In the wake of the incident, garment manufacturers’ forums are coming together to set up facilities in Tirupur for industrialists and textile unit workers to get tailor-made counselling to overcome stress caused due to various factors related to business or work. “Tirupur Thozhil Pathukappu Kuzhu (TTPK) and Sripuram Trust, two industrial forums, will try to set up not only a counselling centre but also carry out interactive de-stressing sessions.”
SOURCE: The Hindu
India’s merchandise exports may have suffered for a second straight year in 2015-16 in value terms, but volumes of outbound shipments rose in most cases, suggesting the contraction in export value was driven more by a global commodity price crash than by a slowdown in overseas demand, showed a report by the directorate general of foreign trade (DGFT). Commodities — including organic and inorganic chemicals, cotton yarn, basmati rice, base metals, dyes, paint, varnish and allied products — recorded growth in volume terms in 2015-16 (in the range of 3.8% to over 47%) even though their export value contracted from a year before. The DGFT report is based on an analysis of 168 principal commodities — excluding petroleum and bullion products — for which data are available in both value and volume terms. The value analysis in the report is in rupee terms. This mirrored the phenomenon after the global financial crisis, when exports value suffered to a lower extent but volume growth remained almost stable (in 2009-10). In good years, though (for instance, 2010-11, when export grew nearly 40% in dollar terms), the rise in export value was driven by a broad-based and an even sharper rise in volumes, a senior commerce ministry official told FE.
Interestingly, certain items — value-added ones such as drug formulations, biologicals, bulk drugs, drug intermediaries and also items like spices, coffee, unmanufactured tobacco — managed to beat the global crash in commodity prices, as export value of these products rose in the last fiscal even when volumes shrank (in the range of 1.2-44.8%). Global commodity prices plunged 28% in 2015-16 from a year before, driven by a sharp 40% crash in prices of oil, 20% in industrial metals and 7.5% in gold, according to a report by Yes Bank. So, the maximum impact of the commodity crash was reflected in oil export value, which makes up for roughly 20% of the country’s total outbound shipments. Consequently, roughly 55% of the $48-billion fall in India’s exports in the last fiscal was caused by lower petroleum exports. So while the country’s overall exports plunged almost 16% in dollar term and 10% in rupee term, excluding oil, the exports dropped just 8.7% in dollar terms and just 2.1% in rupee terms.
Export of both, goods and services, in real term, dropped 5.2% in 2015-16, compared with a 1.7% rise in the previous year, showed the latest GDP data. According to the DGFT report, yet another category of items showed a rise in exports in both value and volume terms, defying a demand slowdown. These commodities include plastic raw materials, agro chemicals, cotton (including waste), sugar, tea, cereal preparations and ayush & herbal products.
Taking note of a slowdown in China and financial market volatility, the World Trade Organization in April trimmed its 2016 global trade growth forecast by 1.1 percentage points. It predicted that global trade would rise 2.8% in 2016, lower than its previous forecast of 3.9% announced in September last year. This will be the fifth straight year of trade growth below 3%, which is also much lower than the average annual expansion of 5% since 1990, according to the WTO data.
SOURCE: The Financial Express
Telangana government has inked a memorandum of understanding (MoU) with California state of the US for cooperation in a number of sectors, including business innovation, alternative energy and education. "This MoU will open new avenues for exchange of innovative ideas between startups in Telangana and Silicon Valley . I am confident that startups in both geographies would benefit immensely from this MoU," Telangana IT Minister K T Rama Rao said in a statement. The southern Indian state and the California Governor's office have pledged to work together in alternative energy, environmental technology, health, agriculture, business innovation, technology-based industries, research and development, among others, for which a delegation led by Rao signed the MoU. Panorea Avdis, Director, California Governor's Office of Business and Economic Development (GO-Biz) said India and California have strong economic ties that make our respective regions natural partners. "The agreement with the Telangana government provides a framework for collaboration that will help innovative Indian companies invest in California and help innovative companies in our state access the Indian market," Avdis said. "The MoU aims to connect the respective innovation programmes and help foster economic cooperation and development, facilitate joint industrial research and development through their respective innovation ecosystems, and enhance business relationships and educational opportunities in areas such as renewable energy, cleantech, smart cities, water conservation, biotech and agri tech," an official release said.
"Through this agreement, the companies that participate in the Telangana T-Hub will have access to resources and contacts within the GO-Biz Innovation Hub (I-Hubs) network, which stretches from Redding to San Diego (in USA) and includes 15 distinct I-Hubs, making it the largest state-sponsored innovation network in the US," the release said. Likewise, this agreement opens opportunities for California companies to connect with the partners and companies within T-Hub network, it added.
SOURCE: The Economic Times
In the event that Prime Minister Narendra Modi’s US visit fails to address the issue, India is readying itself for a full-blown dispute with the US at the World Trade Organization (WTO) over a law that has hiked visa fees sharply for non-immigrant workers. While Commerce Secretary Rita Teaotia recently said India was trying to resolve the conflict through bilateral consultation, a government official said dialogue was unlikely to resolve the matter. “A Commerce Ministry team is putting together numbers and arguments it has to be ready with when it seeks a dispute settlement panel,” said the official, on condition of anonymity. Once a panel is formed, everything moves according to strict timelines, and arguments and counter-arguments have to be produced sticking to the schedule. The controversial US law, which introduced an additional fee of $4,000 and $4,500 for certain categories of H-1B visas and L-1 visas, respectively, was passed last December. It essentially extended an older law that lapsed in September 2015, but in a more stringent form. The US has argued that the legislation is not specifically targeted at Indian IT professionals. However, Indian companies will be hit as the increased fee is applicable only on companies that employ more than 50 foreigners, or which have more foreigners than locals working for them.
According to Nasscom estimates, the move could lead to an annual loss of $400 million for the Indian IT industry. The government has asked the IT industry to produce data to show that the higher fees had hit their profits. “While Nasscom is assisting the government, individual IT companies are not too forthcoming as they are apprehensive of rubbing the US government the wrong way,” the official said.
SOURCE: The Hindu Business Line
In his first interview since taking over, R B Barman, the newly appointed chairperson of National Statistical Commission (NSC), tells Dilasha Seth that India’s economic growth exceeding the eight per cent mark in 2016-17 is a distinct possibility. This would be backed by agriculture sector growth surpassing the 3-4 per cent rate if monsoon turned out to be well spread as predicted, he adds. Edited excerpts:
India’s economy grew 7.6 per cent in 2015-16 and the fourth quarter of the year yielded 7.9 per cent growth rate. What is your growth forecast for 2016-17?
Given the momentum, if the monsoon turns out as predicted with precipitation well spread, the growth in agriculture will well surpass the trend rate of three per cent to about four per cent, as the base effect will contribute at least one per cent more. This is likely to result in a positive income effect on consumption demand and so on. The downside risk is the possibility of oil price rise and not so favourable global economy impacting consumption, investment and net exports. The contribution of the government sector is likely to improve further through the ongoing investment in infrastructure and other policy measures for attracting foreign capital. On the whole, GDP growth surpassing eight per cent in FY17 is a distinct possibility.
Experts and economists are still coming to terms with the new methodology of the GDP. Many are finding it difficult to corroborate the numbers with the situation on the ground...
The GDP estimation methodology is thoroughly examined by the Advisory Committee on National Accounts under the guidance of some of the best experts. The Committee examines various options and decides on the methodology which is the most suited under a given situation. It is necessary to continue with a methodology for comparability till revision overtakes the earlier method. As I understand, certain issues have been raised relating to indices being used for deflation of a few items to convert them into constant prices. Work is in progress to construct appropriate indices for the services sector. WPI (whole-sale price index) and IIP (index of industrial production) are also due for revision of base. NSSO (National Sample Survey Organisation) will undertake a nation-wide survey to collect relevant data on the services sector in GDP. We will examine how to take this work forward for the revision of methodology, when due. However, it is not advisable to undertake ad-hoc measures as such actions might compromise the cause of comparability.
Is there scope for further improvement in the GDP methodology, taking into account the suggestions from outside experts and the finance ministry?
Improvement of methodology is an ongoing process. All suggestions will be considered by the committee on merit.
A three-member committee under former NSC chairman Pronab Sen had worked on audit report and found the GDP numbers under the new methodology to be perfect. However, it has flagged discrepancies arising on account of the Annual Survey of Industries numbers. What will be the course correction going forward?
NSC will examine the report when made available and take a view. At this stage, NSC does not have any view on this.
What are the broad issues that the NSC will look into over the next six months to a year?
As set out in the Report of National Statistical Commission headed by C Rangarajan, “The adequacy, credibility and timeliness of the data generated by the statistical system are essential for the purpose of policy formulation and for monitoring the progress of various sectors of the economy.” NSC is constituted as an independent statistical authority to advise the government towards this end. NSC has made significant progress in this direction in the past decade. We look forward to making use of advanced technology to ensure the quality of collected data, data governance and analytics for a multi-dimensional view of processed data to enhance credibility and timeliness. We have a well set system of developing methodology consistent with concepts and definitions set out for international comparability. The feedback from the users is extremely useful in flagging issues for further improvement. NSC will consider these issues for appropriate action involving all stake holders.
SOURCE: The Business Standard
Government will come out with revised IIP and WPI indices by the end of this year with a new base year of 2011-12 in order to make them more representative of the changing economic scenario. "IIP is due for revision, it is under process at a very advanced stage. WPI is also up for revision. Similar to IIP, it is also at the very advanced stage. Both of these will be revised, as per my expectations shortly within the current year," Chief Statistician TCA Anant told in an interview to PTI. The present indices of IIP and WPI have base year of 2004-05. As part of the revision, the basket of items and weightage assigned to different entries on the basis of which indices is computed will be updated, he said.
With the new series in place, both the Index of Industrial Production (IIP) and Wholesale Price Index (WPI) will become more comparable with the GDP numbers than it is currently, he said. "All of these will become comparable to the GDP basket in the 2011-12 series. The new series will be have 2011-12 as the base year", Anant said. The National Statistical Commission has recommended to revise the base year of all economic indices every five years. Government had last revised these indices in 2011 with the base year of 2004-05. In addition to this, the Chief Statistician also informed that the Ministry of Statistics and Programme Implementation (MoSPI) which releases the data of national income (GDP) as well as WPI and Consumer Price Index (CPI) is working on bringing out an index for the services sector. "There is work is going on. There is a lot of work both on prices and on quantities. But at the moment most of these are experimental," he added. At present there is no such index for the services sector.
SOURCE: The Business Standard
The next round of negotiations for the proposed mega trade deal Regional Comprehensive Economic Partnership (RCEP) would begin from June 12 in Auckland. "This meeting is crucial and important as it would be followed by a ministerial meet which is scheduled in August. So the members need to work hard this time on all fronts including goods, services and investments, an official said. The one week long meeting is also likely to deliberate on the maximum level a member can eliminate duties on products, he added. India has decided to offer greater access to its market for Asean countries -- with which it has a free trade agreement in place -- and has proposed to eliminate duties or tariffs on 80 per cent of items for the 10-nation bloc under this proposed pact. Similarly, for Japan and South Korea, it has offered to open up 65 per cent of its product space. For Australia, New Zealand and China, Delhi has proposed to eliminate duties on only 42.5 per cent of products. As India does not have any kind of FTA with these three countries, its offer is less for them. The 12th round of negotiations was concluded in April in Perth.
The Regional Comprehensive Economic Partnership (RCEP) is a mega trade deal which aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights. As part of its goods proposal, India has not offered any duty cut on steel to China, Australia and New Zealand in the proposed free trade agreement among 16 Asian members. The RCEP talks started in Phnom Penh in November 2012. The 16 countries account for over a quarter of the world's economy, estimated to be more than $75 trillion. The RCEP deal is also important amid the Trans Pacific Partnership (TPP) agreement led by the US. Indian industry is apprehensive that TPP would impact Indian exports. India already has FTAs with the Asean grouping, Japan and South Korea. The 16-member bloc RCEP comprises 10 Asean members ( Brunei , Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam ) and their six FTA partners -- India, China, Japan, South Korea, Australia and New Zealand.
SOURCE: The Economic Times
President Barack Obama is looking forward to discussing a number of issues including security and defence cooperation, economic growth priorities and climate change with Prime Minister Narendra Modi during his visit here, the White House has said. "The visit will highlight the deepening of the US-India relationship in key areas since the President's visit to New Delhi in January 2015," White House Deputy Press Secretary Jennifer Friedman told reporters abroad Air Force One while travelling with Obama to Miami, Florida. "Among the issues that the President looks forward to discussing are progress made on climate change and clean energy partnership, security and defence cooperation, and economic growth priorities," Friedman said. "There is a whole host of issues where our relationship and partnership is robust and important-everything ranging from climate to military steps we're taking, to a whole host of economic steps that we're working on together," she said.
Prime Minister Modi is scheduled to arrive in Washington DC on June 6 on a three-day visit. This will be his fourth visit to the US. Soon after his arrival, he is scheduled to lay a wreath at the Tomb of Unknown Soldier at Arlington National Cemetery where he will be accompanied by US Defence Secretary Ashton Carter, Pentagon said. He is scheduled to meet Obama at the White House on June 7 and address a joint meeting of the US Congress on June 8. He will only be the fifth Indian Prime Minister to address a joint session of Congress.
SOURCE: The Business Standard
With intent to give a push to India- Qatar ties, Prime Minister Narendra Modi and Emir Sheikh Tamim bin Hamad Al-Thani today held detailed talks here on a wide range of issues. At the outset, Modi personally extended greetings to the Emir, who celebrated his 36th birthday two days back. The Prime Minister had called him on that day to convey the greetings over phone. Before the talks, Modi was given a ceremonial reception at the Emiri Diwan, the seat of power of Qatar's ruler. "The full splendour of an Arab welcome as PM @narendramodi receives ceremonial honours at Emiri Diwan in Doha," External Affairs Ministry spokesman Vikas Swarup tweeted along with a photo. Cooperation in energy is expected to be high on the agenda of the talks that were to cover various aspects of the relationship. Qatar is an important trading partner for India in the Gulf region with bilateral trade in 2014-15 standing at $15.67 billion.
Qatar is also one of India's key sources of crude oil. This Arab country has a large population of Indians who number over 6.3 lakh. While landing here yesterday, Modi had said India attaches great priority to strong ties with Qatar and that his visit seeks to expand the bilateral ties further. The Prime Minister has been focusing on improving ties with the Gulf region which is crucial for India's energy security. He has already visited United Arab Emirates and Saudi Arabia. His trip marks a Prime Ministerial visit after eight years. The then Prime Minister Manmohan Singh had visited Doha in 2008. The Emir of Qatar had visited India in March 2015. Previously, the then Emir of Qatar had visited India in 1999, 2005 and 2012.
SOURCE: The Economic Times
In a step forward, Cyprus has said it is “very close” to revising the bilateral tax treaty with India as the island nation has accepted “in principle” proposals made by the Indian side on taxing capital gains. Cyprus, a source of significant foreign fund flows into the country, said rising importance of India, both as the “largest emerging economy and a major security player in the new geopolitical chess game, necessitated a serious re-appraisal and upgrading of the bilateral relationship”. As part of larger efforts to curb illicit fund flows, Indian government has been working on revising tax treaties with various countries, including Cyprus and Singapore. Last month, India announced revising taxation agreement with Mauritius — a major source of FDI — that would allow levy of capital gains tax on investments coming from that nation. “Cyprus and India are very close to concluding a revised Double Taxation Agreement. The Cyprus authorities have expressed their readiness to the Indian authorities to finalise the revised agreement. “After final and formal approval by both sides, the new agreement will be ready for finalisation, signing and entry into force,” a Cyprus government official told PTI.
Responding to a query on whether both sides have been able to resolve pending issues related to taxation, the official said, the Cyprus authorities have accepted the main proposals submitted by the Indian side, as an indication of good faith. “The few pending issues, including on source-based taxation of capital gains from alienation of shares, have been accepted by both sides, in principle. Therefore, they are expected to be formally agreed upon soon,” the Cyprus foreign ministry official said in e-mailed responses.
Expressing hope on finalising amendments to the tax treaty with India in “the next few months”, the official also said bilateral ties have been on a “new and ambitious trajectory” since the new government came to power at the Centre in May 2014. Last month, a senior Indian government official said India hopes to revise tax treaty with Cyprus in line with Mauritius by the year-end. From April 2000 till March 2016, India received Foreign Direct Investment (FDI) worth Rs 42,680.76 crore from Cyprus, as per latest data available with the Department of Industrial Policy and Promotion. According to the Cyprus official, the island nation have sent to the Indian authorities their acceptance regarding Article 13. Under the double taxation convention between the two countries, Article 13 pertains to technical fee — payments made to any person who is not an employee of the entity making the payments. “Conclusion and finalisation of those amendments should be achieved in the next few months, at the latest, with a view to signing the revised double taxation agreement,” the official noted. The official noted that new partnerships in economic sectors, energy and renewables, agriculture as well as defence cooperation, “including maritime security, intelligence exchange and counter-terrorism, are in the order – all of which have significant economic benefits, over and above the political and security advantages for each side”.
In this regard, the Joint Economic Committee would be meeting on June 8 in order to elevate the relationship to a modern economic plateau, actively pursuing partnerships and promoting mutually beneficial investments, the official added. India and Cyprus have long standing ties dating back to the 1950s. Noting that India has been a reliable and consistent partner of Cyprus, the official said co-operation on issues of common interest is ongoing in the context of international organisations, notably at the United Nations and the Commonwealth. “Third, in bilateral relations, there is much at stake through the conclusion of a number of important bilateral agreements (Air Services, Merchant Shipping, Avoidance of Double Taxation, Social Security, Transfer of Prisoners, Cooperation in Legal Matters), not least because of the significant economic benefits for both sides,” the official said.
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$ 46.89 per barrel (bbl) on 03.06.2016. This was higher than the price of US$ 46.83 per bbl on previous publishing day of 02.06.2016.
In rupee terms, the price of Indian Basket increased to Rs. 3153.15 per bbl on 03.06.2016 as compared to Rs. 3149.48 per bbl on 02.06.2016. Rupee closed stronger at Rs 67.24 per US$ on 03.06.2016 as against Rs 67.25 per US$ on 02.06.2016. The table below gives details in this regard:
|
Particulars |
Unit |
Price on June 1, 2016 (Previous trading day i.e. 31.05.2016) |
Pricing Fortnight for 16.06.2016 |
|
Crude Oil (Indian Basket) |
($/bbl) |
46.89 (46.83) |
46.76 |
|
(Rs/bbl |
3153.15 (3149.48) |
3146.01 |
|
|
Exchange Rate |
(Rs/$) |
67.24 (67.25) |
67.28 |
SOURCE: PIB
Pakistan's Finance Minister Ishaq Dr has announced a zero-rated tax regime to boost the country's declining textile exports. The textile sector is the primary manufacturing sector of Pakistan. In his Budget speech, Dar proposed extending the existing scheme on drawback of local taxes for the next year. Technology up-gradation fund scheme for the textile sector has been formulated to benefit SMEs to invest in new technologies to make Pakistan's exports globally competitive. He also proposed that duty free import of textile machinery will continue for FY2016-17 and scope would be widened to include more garment specific machinery. This incentive, along with LTFF and TUF, would encourage new investment in textile sector to increase exports. Dar also announced withdrawal of Customs Duty on man-made fibres. “Concessionary customs duty on the man-made fibers that are not manufactured locally will continue,” he said. The Finance Minister prposed ad Plant Breeders Right Act as a top priority of the government is to ensure provision of quality seeds to growers. “ For this purpose, it is important to honor scientists with intellectual property rights of varieties they develop. The draft law is ready which will be implemented after approval of the Parliament,” Dar said.
SOURCE: Fibre2fashion
Vietnam has topped the list of most-preferred manufacturing locations by companies worldwide edging out China, according to a recent report released by the Korea Trade-Investment Promotion Agency (KOTRA). It attributed the development to the recent trade agreements signed by Vietnam and the country's cheaper workforce. KOTRA considered 31 of the latest manufacturing plants that were set up or transferred in the six most probable production base countries such as China, Indonesia, Malaysia, Thailand, Mexico, and Vietnam, out of which, maximum number of companies were found to have already entered Vietnam or are in the process of moving into the country. Out of the factories that were transferring their setups, 11 plants were preparing to shift from China, out of which four were headed towards Vietnam. The Trans-Pacific Partnership (TPP) that was signed recently by Vietnam also plays a major role in this pattern shift, as it will reduce 18,000 tariffs, apart from solving issues regarding intellectual property, environment, investment regulations, and labour. “Labour-intensive industries such as textile and apparel companies tend to favour Vietnam over China as the mainland no more offers a cheap workforce,” said Jang Soo-young, Analyst at KOTRA. Vietnam is also a part of the ASEAN (Association of Southeast Asian Nations) economic community and Asia Infrastructure Investment Bank (AIIB). While being a part of ASEAN economic community is a lower recognized fact in the country, being a part of AIIB will help Vietnam with funding for basic business infrastructure construction, the report said.
SOURCE: Fibre2fashion
In fiscal year ended March 31, 2016, Japan’s clothing and accessories’ imports increased by 1.7 per cent year-on-year to 3,382.180 billion yen ($31.07 billion). Of this, 93.2 per cent or 3,152.387 billion yen ($28.96 billion) worth of goods were imported from Asia, provisional trade statistics released by the ministry of finance showed. Among the Asian countries, imports from China stood at 2,241.292 billion yen ($20.59 billion), showing a decrease of 3.3 per cent year-on-year, the data showed. During the 12-month period under discussion, Japan imported apparel and accessories worth 168.399 billion yen ($1.05 billion) from the EU, showing an increase of 3.6 per cent year-on-year. The Far Eastern country also imported 18.244 billion yen ($0.17 billion) worth of clothing and accessories from the US, down 6.7 per cent.
Meanwhile, value of Japan’s import of textile yarn and fabrics increased by 1.8 per cent year-on-year to 965.107 billion yen ($8.87 billion) in April-March 2015-16. A bulk of these imports valued at 857.010 billion yen ($7.87 billion) were supplied by the countries in the Asian region, with China alone accounting for 541.342 billion yen ($4.97 billion), while imports from Asean nations stood at 191.772 billion yen ($1.76 billion). Japan imported yarn and fabric worth 63.167 billion yen ($0.58 billion) from the EU countries, whereas its imports from the US were valued at 27.490 billion yen ($0.25 billion), during the last fiscal.
SOURCE: Fibre2fashion
In Troyes, where the union protests rocking Paris seem far away, a 123-year-old plant churning out cotton underwear and striped tops is finding itself in agreement with president François Hollande’s newfound mantra that France may at last be “getting better”. In this bastion of France’s old textile industry, which has been decimated by industrial decline, 1,000 Petit Bateau employees bend over thrumming machines that knit Californian cotton fibres and dye long strips of fabric round the clock. Each week, the factory produces about 35 tons of garments that are snapped up by customers willing to pay a little more for good-quality, boasts Jean-Claude Sacquepey, the 56-year-old in charge of Petit Bateau’s knitting operations. “We’re at very high levels of production now,” says Mr Sacquepey, who has worked for the clothing brand for 15 years. “It’s getting better here. We’re not bad.” Optimism is creeping back into the French economy. The number of French jobless declined for two months in a row in March and April, the first consecutive-month decline in the rate since Mr Hollande was elected in 2012. One year before presidential elections, this is good news for the deeply unpopular Socialist leader who has pledged not to run for re-election next year if unemployment does not come down. But Mr Hollande has yet to convince voters he has anything to do with the improving economic picture. According to a Cevipof survey this week, only 5 per cent of the French say they are satisfied with his policies. The government’s reforms intended to introduce a dose of flexibility in the jobs market has been met with union protests and strikes disrupting fuel supplies and transport. Even so, privately owned Petit Bateau is one of many French businesses experiencing a pick-up in sales. After four years of near-stagnation and uncertainty, clouds over the eurozone’s second-largest economy are beginning to clear and it is expected to grow at more than 1.5 per cent in 2016.
Record-low interest rates, a cheaper euro and looser fiscal policies in France and in the eurozone have boosted business and consumer confidence. Measures such as €40bn in tax breaks awarded to companies by Mr Hollande in 2014 have improved profit margins, giving much-needed financial breathing room. French companies have stepped up investments by 2.4 per cent in the first quarter. Households are buying more goods and homes. “Time to stop beating ourselves up,” says Gilles Moec, an economist at Bank of America Merrill Lynch. “This cyclical recovery has legs — provided the disruptions brought about by the strikes and ensuing political uncertainty do not last for too long.” Mr Moec cites a moderate expansion in domestic demand, progress on businesses’ competitiveness and exports. There is widespread evidence of the turnround. In a small rural village, 500km from the French capital, a family-owned car-parts manufacturer is breathing a sigh of relief.
Delfingen, a 60-year-old maker of tubes and knitted sleeves that protect electric wires and fluid pipes in cars, nearly went bust in 2008, when more than half of its revenues vanished following the Lehman Brothers collapse. The Paris-listed company sought the help of the then French centre-right president Nicolas Sarkozy, who scrambled to salvage the country’s motor industry from the brink. Now, sales have recovered in the US. The company reported that net profit rose by 30 per cent rise in 2015. Revenues this year are up 5 per cent year on year in Europe and 8 per cent in France, says Damien Personeni, the company’s chief commercial officer. After tightening their belts, consumers are catching up on car purchases, which they can fund with cheap loans. “The trend is positive,” he says.
However, economists warn that the recovery could be threatened by an increase in oil prices or a tightening of the European Central Bank’s monetary policy next year, that would end the era of record-low interest rates. Petit Bateau and Delfingen have both fought hard to stay afloat and maintain headquarters in their hometowns. But to do so, they have had to adapt to a changing world where France’s relatively high labour costs and cumbersome labour rules have been an impediment. Their stories point to a broader tale of French industrial decline. While services businesses are now adding jobs on a net basis, French industry cut 12,400 jobs in the first quarter, after cutting 8,400 in the previous quarter. Delfingen, for example, has moved its manufacturing base abroad. In 1992, about 95 per cent of its 85 employees were based in its home town of Anteuil. Now 95 per cent of the 1,900 workers it employs are based abroad. The company has kept his research team in Anteuil, and has set up plants in Latin America, India and China. “The French automotive industry hasn’t stopped destroying jobs,” Mr Personeni says. “There is a problem of labour cost in France.” In Troyes, Nadege Darnet who has been a seamstress for Petit Bateau for 20 years, puffs when asked about Mr Hollande’s upbeat message about the economy. One of her two sisters is unemployed and another struggled to find a waitress job, she says. “Around me there are a lot of people out of work,” says the 57-year-old, halting her sewing machine to look over pink-rimmed glasses. “So getting better, that’s an exaggeration.”
SOURCE: The Financial Times
