Synopsis India's industrial production increased to 3.8% in December 2023, up from 2.4% in November, according to data from the Ministry of Statistics and Programme Implementation. Factory output growth was 5.1% in December 2022, while IIP growth was 6.1% during April-December 2023-24. Power generation and mining output declined by 1.2% YoY and 6.8% YoY respectively. The manufacturing sector saw a 3.9% YoY growth in December 2023, while capital goods and consumer durables saw growth. India's industrial production rose to 3.8 per cent in December 2023 as against 2.4 per cent in November 2023, revealed the data provided by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday. IIP in October was recorded at 11.7 per cent in October 2023. The factory output growth measured in terms of the Index of Industrial Production (IIP) had stood at 5.1 per cent in December 2022, the Ministry said in a press release. During April-December 2023-24, the IIP growth works out to be 6.1 per cent, up from 5.5 per cent in the corresponding period a year ago.
Meanwhile, power generation declined further by 1.2 per cent YoY against 5.8 per cent in November. Mining output dropped to 5.1 per cent compared to 6.8 per cent in the previous month. However, in the year ago period, mining output stood at 10.1 per cent. Manufacturing sector output grew by 3.9 per cent YoY in December last year, after growing 3.6 per cent in December 2022. According to use-based classification, the capital goods segment grew by 7.8 per cent in December 2022, but it shrank by 3.2 per cent in the same month of last year. The output of consumer durables grew by 4.8 per cent during the month compared to a decline of 11.2 per cent in 2022. The output of non-durable consumer goods shrank by 2.1 per cent after expanding by 7.9 per cent in December 2022. Goods related to infrastructure and construction saw a marginal growth of 4.1 per cent in December 2023, against a 11 per cent expansion YoY. The data also revealed that, in comparison to the same period last year, the output of primary goods increased by 4.6 per cent in the month as against 8.5 per cent. In November, the output of intermediate goods did not change from 3.5% to 3.5%. The core sector makes up 40.27 per cent of the Index of Industrial Production (IIP), making it a lead indicator of industrial activity
Source: Economic Times
In a significant step towards bolstering trade and connectivity between India and Bangladesh, the first trial movement of vessels on Indo Bangladesh Protocol (IBP) Route no. 5 & 6 was successfully conducted today. The historic event was marked by the flagging off of the vessels by Shantanu Thakur, minister of state for ports, shipping, and waterways, from Maia Inland Customs Port in West Bengal, India. This initiative aligns with prime minister Narendra Modi's Act East Policy, aiming to strengthen India's ties with its eastern neighbours. The new waterway route, stretching from Maia Port in India to Sultanganj Port in Bangladesh, promises to significantly enhance the efficiency of trade between the two nations. By utilising this route, the distance for cargo transport to Dhubri via Aricha is reduced by approximately 930 kilometres compared to the traditional Dhulian-Maia-Kolkata-IBP-Dhubri route. Consequently, it is anticipated that 2.6 million tonnes per annum (MTPA) of export cargo will transition from road to waterways, marking a substantial shift in the transportation modalities between the two countries, the ministry of ports, shipping, and waterways said in a press release. The riverine passage connecting the Port of Call Maia in India and the Port of Call Sultanganj in Bangladesh spans 16 kilometres, with 4.5 kilometres of waterways in India and the remaining 11.5 kilometres in Bangladesh. This short but strategic route is expected to open new avenues for economic collaboration and ease the movement of goods across the border. The launch event saw the participation of transport and state transport ministers from the West Bengal government, the member of parliament from the Jangipur Lok Sabha constituency, members of the state legislature from Raghunathganj and Lalgola legislative constituencies, and other dignitaries, highlighting the importance of this development for both India and Bangladesh. “Under the visionary leadership of prime minister Narendra Modi and able direction of Union minister of ports, shipping and waterways Sarbananda Sonowal, India has embarked on a transformative journey focusing on a comprehensive multi-pronged plan to harness the power of its inland waterways sector. The trial movement from Maia to Sultanganj through IBP route no. 5 & 6 will add new dimensions to the wwaterways- basedtransportation between India and Bangladesh as it is the shortest waterway route between the two countries,” said Shantanu Thakur.
Source: Fibre2fashion
Investment in important sectors identified to spur domestic manufacturing under the flagship Production-Linked Incentive (PLI) scheme of the Centre is slowing just a year after their launch. Investment growth is “significantly slow” in textiles, information technology hardware, and speciality steel this financial year, according to a review report by an inter-ministerial panel which does periodical stocktaking of the scheme. The government was hoping to see investment worth Rs 49,682 crore in FY24. Of this, 61.8 per cent or over Rs 30,695 crore has been made in all the 14 sectors during the first nine months this financial year. Apart from the above-mentioned three sectors, progress has been slow in the case of medical devices, automobile and auto components, ACC batteries, and white goods. According to an assessment made in a review meeting, PLI schemes for mobile phones, bulk drugs, pharmaceuticals, telecom, drones, and food processing are doing well and are on track to achieve or exceed investment, production/sales as well as employment targets envisaged by the government. “The progress of PLI Schemes of IT Hardware, Textile Products and Specialty Steel is significantly slow in terms of investments (in FY24),” according to the minutes of the meeting reviewed by Business Standard. The panel comprises key stakeholders of the PLI schemes, the respective ministries/departments, NITI Aayog, and Department for Promotion of Industry and Internal Trade (DPIIT). Even as the investment exceeded the government’s estimate in the previous financial year, progress was not uniform across all schemes. Up to FY23, under all PLI schemes, Rs 75,917 crore was invested against a target of Rs 60,345 crore, resulting in production/sales of Rs 5.96 trillion and 367,000 direct jobs against targets of Rs 5.78 trillion of production/sales and 254,000 jobs, respectively. “Under PLI Schemes for bulk drugs and medical devices, while the target of investment has been met, actual production/sale has been below target. Under the PLI Scheme for automobile and auto components, production/sales target was achieved but the target of investment was not achieved,” according to the minutes. There have been “shortfalls” in progress under PLI schemes for textile products, IT hardware, and speciality steel with regard to targets of investment. On a cumulative basis, the scheme has resulted in investment worth Rs 1.03 trillion till now and has led to exports surpassing Rs 3.20 trillion since its implementation. The investment has led to production worth Rs 8.61 trillion and direct and indirect employment of over 678,000, according to the DPIIT data. The Rs 1.97 trillion worth PLI scheme aims to make India a manufacturing powerhouse, improve the cost competitiveness of locally produced goods, create employment opportunities, curb cheap imports, and boost exports The scheme has been launched for 14 sectors including mobiles, drones, telecom, textiles, automobiles, white goods, and pharmaceutical drugs. While these 14 schemes were rolled out between 2020-21 and 2021-22, incentive disbursement to companies participating in the scheme started last financial year.
Source: Business Standard
The Reserve Bank of India (RBI) Governor Shaktikanta Das (RBI) on Monday (February 12) said he is confident of the central government sticking to its fiscal glide path of bringing the deficit below or to 4.5% levels by the end of the financial year 2025-26. On how credible the government's fiscal consolidation plan is, Das stated categorically, "The market was expecting 5.2%, 5.3 %but it is 5.1%. So therefore I think there is every reason to believe the government will adhere to the path of fiscal consolidation, whether 30, 40, 50 we would not like to comment on that." Speaking to reporters after the central bank’s customary post-budget board meeting with the Finance Minister in New Delhi, the Governor said he also expects the cut in FY25 government borrowing to help stabilise and moderate inflation.
Source: Financial Express
New Delhi: The Union government plans to introduce 14 quality control orders (QCOs) covering 129 new products by the end of the year, two people aware of the matter said, in a move aimed at making India-made products more competitive globally.The move comes as India negotiates free trade agreements (FTAs) with several countries. These deals will ultimately lower import duties on manufactured items, which requires India to be on guard against imports of substandard goods into the country.
Source: Live Mint
A new law that mandates that any payment made to registered micro, small or medium (MSME) enterprises beyond 45 days of receiving goods or services will not be recognised as an expense and added to the profit of the company for taxation purposes has caused a significant discomfort amid the organised apparel retailers, top sources told FE. “Essentially, the amendment, which was introduced recently to the Finance Act 2023 under Section 43B (h), stipulates that payments to registered MSME suppliers beyond 45 days will be added to the profit of the company instead of being treated as an expense. This will mean that companies will have to pay income tax on MSME payments in the event of non-compliance,” says Rahul Mehta, chief mentor, The Clothing Manufacturers Association of India (CMAI), an apex industry body, is pursuing the matter with the Finance Ministry. The proposed regulations are tighter in the absence of a written agreement, as the stipulated time of payment will be 15 days instead of 45 days. The body has requested the Finance Ministry to temporarily hold the implementation of the rule for the 2023-24 financial year, suggesting a staggered implementation over three years instead. It has also requested that payments from one MSME to another MSME for goods sourced should be excluded from the rule. CMAI says that some apparel retailers have already begun cancelling their orders to registered MSMEs as they remain uncertain about meeting the March 31, 2024 deadline of the rule for the ongoing financial year. Cancellations could increase in the coming weeks and the loss as a result of cancellations could touch Rs 5000-7,000 crore depending on the order size. While the rule affects all firms, the most aggrieved, said tax experts include fast-moving consumer goods (FMCG) and pharmaceutical firms, apart from apparel retailers, who depend on fairly long credit cycles when making payments to suppliers including registered MSMEs. Many of them also source from MSME suppliers on a regular basis and fear business models could be jeopardised due to the new payment rule. “FMCG, apparel and pharma companies have credit cycles that extend up to 3-6 months when it comes to their suppliers and trade partners. Quite often payment to the value chain is contingent upon the revenue from sales, which is why a 45-day credit structure is too short a period for them,” Riaz Thingna, partner, Grant Thornton Bharat, said. Tarun Arora, chief executive officer, Zydus Wellness, the maker of the Complan brand of health food drinks, said that his company made payments to registered MSMEs within the stipulated time. “We are hardwired to make payments within the stipulated time. Any amendment to existing rules does not affect us,” he said. But chief executives of some FMCG firms, who declined to be quoted, admit that the de-recognition as an expense of payments to registered MSMEs is harsh. “While the move to protect the MSME sector is welcome, the fallout of the new rule will be that companies may not want to deal with MSME suppliers in the future,” says one CEO. “The other impact here is that MSMSE suppliers may choose to de-register themselves for fear of loss of business from their clients,” he says.
Source: Financial Express
The Indian government may postpone Section 43B(h) of the Income Tax Act 2013, amended for timely payment for micro and small enterprises, after demands for the same were raised by trade and industry organisations from across the country. Union finance minister Nirmala Sitharaman recently assured representatives of several trade and industry organisations that the new payment rule will be postponed. The delegation that met last week was led by C R Patil, member of parliament from Navsari (Gujarat), and comprised office bearers of the Confederation of All India Traders (CAIT), Federation of Surat Textile Traders Association (FOSTTA), and a few other trade bodies. Following the meeting with the finance minister, trade and industry organisations, primarily from Ahmedabad and Surat in Gujarat, promptly disseminated the assurance and message from the government to their members and the media. The Textile Association of Ahmedabad & Surat (TAAS) issued a press statement after the meeting last week to inform that the new provision may be postponed for one year, as assured by the finance minister. However, TAAS clarified that the government has yet to issue an announcement in this matter. Therefore, traders and businessmen should make trade decisions cautiously. Trading activities have been hindered to some extent since January 2024 due to the implementation of the new payment rule. The provision came into effect in the current fiscal 2023-24, which ends on March 31, 2024. Trading activities have slowed down across the country as buyers will not be able to make payments within the stipulated period under the provision within the current fiscal. Trade and industry organisations have also demanded to implement the rule in a phased manner so that traders can follow the new provision without disrupting their business.
Source: Live Mint
The Union government is planning to introduce 14 quality control orders (QCOS) covering 129 new products by the end of the year, two people aware of the matter said, in a move aimed at making India-made products more competitive globally. he move comes as India negotiates free trade agreements (FTAs) with several countries. These deals will ultimately lower import duties on manufactured items, which requires India to be on guard against imports of substandard goods into the country. BIS standards apply to products manufactured in India that are meant for domestic supply, and imports, whereas products for exports adhere to global standards. The notified QCOs are not applicable to goods meant for export. But this clause may be reviewed in the future, the people cited above said. They said some countries already accept BIS-certified products and that with manufacturing standards keeping to QCO orders, more countries may start recognizing BIS-certified goods.
Source: Live Mint
An unrelenting disruption in the Red Sea could significantly affect India's foreign trade, according to India Ratings and Research (Ind-Ra), which recently noted that the working capital cycle of companies is likely to aggravate by 15-20 days, and the impact could be stronger for sectors like agriculture and textiles. The impact is likely to raise the share of freight and forwarding (F&F) cost in the total cost by 25-30 per cent for companies involved in international trade, it said in a note. Pressures on cash flow, although moderate for large entities, will further increase borrowings for several sectors, including chemicals and textiles, which have seen a year on-year (YoY) rise in net leverage in the first half of fiscal 2023-24 (FY24). “The challenge is significant for the entities having low value addition therefore thin margins. Although large entities have adequate elbow room to accommodate such incremental cost, delays and disruptions in supply chains will be key factors to watch for. For medium-sized entities, the challenge is two-fold, both cost and supply and consequently working capital cycle. These entities have not benefitted much from the softening of commodity prices, as free cash flow has remained sluggish for most of them”, said Soumyajit Niyogi, director, core analytical group, Ind-Ra. The initial reaction can be seen in freight rates rising by 150 per cent in the past 45 days. The Red Sea route constituted 40 per cent of the total oil imports and 24 per cent of the total exports during April to October 2023. Between 20 to 25 per cent of India's foreign trade logistics is through the Suez Canal, and key sectors like crude oil, chemicals and textiles are being affected, noted Ind-Ra. Indian exports are facing higher shipping costs due to rerouting, leading to reduced export volumes, affecting small and medium enterprises (SMEs) dealing with a high volume of low-value products. Higher shipping costs due to the rerouting erode profit margins, making Indian exports less competitive. A sustained crisis could start impacting liquidity and credit condition of borrowers, it said. The credit profile of SMEs involved in foreign trade might face additional liquidity pressure owing to an elongation of the working capital cycle. An elongation of the working capital cycle along with lower cash flow generation may increase the reliance on external sources of funding at higher rates, thus putting pressure on their financial risk profiles.
Source: Fibre2fashion
The IMF and World Bank warned on Monday that the Gaza war and the related attacks on shipping through the Red Sea pose threats to the global economy. The Israel-Hamas war raging since October has already hit the Middle East and North Africa region's economy, said the International Monetary Fund's managing director Kristalina Georgieva. Its knock-on effects could impact the world the longer the fighting drags on, Georgieva told the World Governments Summit, an annual gathering of business and political leaders in Dubai. "I fear most a longevity of the conflict because, if it goes on and on, the risk of spillover goes up," she said. "Right now we see a risk of spillover in the Suez Canal," she said, as Yemen's Iran-backed Huthi rebels have attacked Red Sea shipping leading to the crucial maritime passage. The Huthis say they are targeting what they consider Israeli-linked shipping in solidarity with Palestinians in Gaza, pushing some cargo carriers to take longer and more expensive routes to avoid attacks. The UN Conference on Trade and Development warned late last month that the volume of commercial traffic passing through the Suez Canal had fallen more than 40 percent in the previous two months. Georgieva said that if there are other "consequences in terms of where the fighting goes, it could be more problematic for the world as a whole". On a personal note, she added that "as a woman, as a mother, grandmother... I pray for peace". The Gaza Strip has been under intense Israeli assault for over four months, in retaliation for the October 7 Hamas attack on southern Israel. Hamas's unprecedented attack resulted in the deaths of about 1,160 people, mostly civilians, according to an AFP tally based on official Israeli figures. Israel vowed to destroy the militant group and launched air strikes and a ground offensive that have killed at least 28,340 people, mostly women and children, according to the health ministry in the Hamas-run territory. Despite the war-related uncertainties, Georgieva said the IMF is "very confident that the world economy is now poised for this soft landing we have been dreaming of". "I expect to see by mid-year interest rates going in the direction inflation has been going for the last year now," she said, when asked about interest rates being cut in leading economies. Also speaking at the summit, World Bank President Ajay Banga said that "what's going on Gaza, but also the challenges of Ukraine... and the Red Sea" are among the top challenges to the global economic outlook. When "you add these variables to what is already turning out to be probably the lowest growth of the last 35, 40 years that's something we've got to keep a close eye on," he said.
Source: Economic Times
Bangladesh readymade garment industry is currently fraught with apprehension, stemming from the recent government decision to withdraw cash incentives for key garment items and reduce subsidies for others. These changes, which took effect on January 1, 2024, have sent shockwaves through the industry, as stakeholders get ready to deal with the implications of reduced support with Bangladesh standing on the verge of transitioning from a least developed country (LDC) in a couple odd years. The government decided to withdraw cash incentives for five garments items which account for a sizeable chunk of the industry’s total exports while cash incentives for other apparel items have been reduced by half, dropping from 1 per cent to 0.5 per cent. The government also cut subsidies for other export items. Apparels accounting for nearly 84 per cent of Bangladesh’s total exports, garment exporters receive the highest cash incentives consequently. However, due to this decision, there would be effectively no cash assistance for virtually 56 per cent of the apparel exports, informed industry insiders to Fibre2Fashion. They explained that the product rate is determined by reducing the subsidy amount when fulfilling orders from the overseas buyers. As a result, garment manufacturers will count considerable losses owing to the sudden announcement of withdrawing the assistance without prior intimation. “The decision is pretty much unanticipated and abrupt, I personally feel,” claimed Mohammad Mehroz Jalil, the deputy managing director of MBM Group, speaking to Fibre2Fashion, adding, “Considering that we are in the month of February and there’s still some time left for the next budget to be presented, which is usually when anything new related to incentives and other fiscal measures are introduced, the announcement caught us off guard.” What surprised Jalil more is the fact that many the people’s representatives elected this time around in the general elections are related to the apparel sector. They understand well the industry’s relevance for Bangladesh’s economy and are expected to advocate for its interests. The garment industry—contributing more than 84 per cent of total exports, 28 per cent to the GDP and employing approximately four million people—serves as the lifeline to Bangladesh’s economic growth and stability, making it imperative to consider the implications of policy changes carefully. “It is sort of a double whammy; first there was the wage hike and now we have the export subsidy cut…Given the challenging business landscape we are operating in currently, this is going to have ramifications for sure,” expressed Jalil. MBM Group is an HR-driven organisation steeped in its core values of CSR, innovation in products, processes and sustainability, which has helped it to forge long-term partnerships with a wide range of brands and retailers from across geographical locations, including names like Levi’s; H&M; G-Star RAW; American Eagle Outfitters; Lee; Wrangler; JCPenney; Kohl’s; OVS; O’Neill; Pepe Jeans; Gas, and many more. On January 30, 2024, the Bangladesh Bank issued a circular to commercial bank CEOs, outlining the government’s decision in anticipation of Bangladesh’s exit from the LDC category. The government aims to stimulate export trade by providing incentives or cash aid to 43 sectors in fiscal 2023-24. However, in compliance with World Trade Organization (WTO) regulations, export-dependent subsidies will be phased out as Bangladesh transitions from LDC status, posing challenges for export sectors post-2026. To prepare for this transition, the government has initiated a gradual reduction in cash assistance rates for various sectors since January 1, 2024. During this period, 43 products will continue to receive incentives or cash aid, ranging from 0.50 per cent to 15 per cent. Earlier, exporters received a maximum support of 20 per cent. Notably, agricultural produce, processed agricultural produce, diversified jute, potatoes, and halal meat will receive a maximum of 15 per cent support for export. Additionally, a 3 per cent subsidy will replace duty bonds and duty drawbacks for the export-oriented domestic textile sector, while small and medium industries in the export oriented readymade garment sector will receive 4 per cent support. Furthermore, 3 per cent assistance will be given for new products and markets in the textile sector, specifically targeting exporters in the eurozone. Moreover, the textile sector will receive an additional 1 per cent special assistance, totalling 4 per cent, along with special cash incentive of 15 per cent for readymade garments, 7 per cent for jute final products, 5 per cent for jute, and 12 per cent for leather goods exports. These measures aim to facilitate a smooth transition for Bangladesh’s export sectors as the country prepares to leave the league of least developed countries. However, stakeholders must adapt to the gradually diminishing support and prepare for potential challenges post the LDC graduation in 2026. “Choosing to cut/reduce subsidies suddenly will not help anyone,” underlines Md Fazlul Hoque, managing director of Plummy Fashions Ltd, speaking with Fibre2Fashion, reflecting a widespread belief among industry players who feel the decision is a bit premature, and might have been taken to safeguard the overall fiscal health as Bangladesh continues to battle currency fluctuations and dwindling foreign reserves. Spread over six acres of lush green and landscaped gardens at Narayanganj, 20 kilometres south of Dhaka, Plummy Fashions Ltd, is purportedly the highest-ranked knit apparel unit globally, which successfully caters to a wide range of global clientele. Elaborating further, Fazlul maintained garment manufacturers receive incentives post shipment, which typically takes 10 months to a year to materialise. As such, he noted, the government could have utilised the fund to address the immediate fiscal pressures, expressing scepticism about the decision’s rationale while also emphasising the importance of consulting the stakeholders beforehand. His sentiments were echoed by many others in the industry, who apprehend a ripple effect across the sector in the days to come, affecting potentially everyone, more so the textile millers. Their primary concern centred around the fate of approximately 200 export-oriented spinning mills that supply fabrics for local garment production. There is a palpable anxiety that these mills could face existential crisis in the absence of sufficient fiscal support. This will not augur well for the garment industry and its overall stability. In response, businesses petitioned the finance minister to postpone the proposed measures until Bangladesh reached the middle-income status. They highlighted the urgency of reinstating earlier cash incentives and even recommended to increase their scope further, to address the industry’s myriad challenges. They are for immediate action to safeguard the industry’s competitiveness. Under mounting pressure, from the trade bodies and business leaders included, the finance minister affirmed his government’s willingness to revisit the decision. It helped to reinstate some confidence amongst the apparel makers. "We can only hope the government listens to our plea, keeping the larger interest in perspective," stressed Mehroz Jalil, highlighting the importance of reassessing the incentive rollback decision and the industry's resolve to overcome the challenges, to end on a positive note.
Source: Fibre2fashion
