The Goods and Services Tax (GST) rate for textile machinery has been decided at 18 per cent by the GST Council at its two-day meeting, scheduled to conclude today in Srinagar. The Council has broadly approved the GST rates for goods at nil rate and 5, 12, 18 and 28 per cent to be levied on certain goods. Rates for textiles and footwear are yet to be decided. As per the information uploaded after the GST Council’s decision on the website of Central Board of Excise and Customs (CBEC), the rate of 18 per cent has been decided for the following textile machinery mentioned along with their 4-digit HS code:
8444 - Machines for extruding, drawing, texturing or cutting man-made textile materials
8445 - Machines for preparing textile fibres; spinning, doubling or twisting machines and other machinery for producing textile yarns; textile reeling or winding (including weft-winding) machines and machines for preparing textile yarns for use on the machines of heading 8446 or 8447
8446 - Weaving machines (looms)
8447 - Knitting machines, stitchbonding machines and machines for making gimped yarn, tulle, lace, embroidery, trimmings, braid or net and machines for tufting
8448 - Auxiliary machinery for use with machines of heading 84.44, 84.45, 84.46 or 84.47 (for example, dobbies, Jacquards, automatic stop motions, shuttle changing mechanisms); parts and accessories suitable for use solely or principally with the machines of this heading or of heading 8444, 8445,8446 or 8447 (for example, spindles and spindles flyers, card clothing, combs, extruding nipples, shuttles, healds and heald frames, hosiery needles)
8449 - Machinery for the manufacture or finishing of felt or nonwovens in the piece or in shapes, including machinery for making felt hats; blocks for making hats
8451 - Machinery (other than machines of heading 8450) for washing, cleaning, wringing, drying, ironing, pressing (including fusing presses), bleaching, dyeing, dressing, finishing, coating or impregnating textile yarns, fabrics or made up textile articles and machines for applying the paste to the base fabric or other support used in the manufacture of floor covering such as linoleum; machines for reeling, unreeling, folding, cutting or pinking textile fabrics
9024 - Machines and appliances for testing the hardness, strength, compressibility, elasticity or other mechanical properties of textiles. "As per the announced GST rate, there is no drastic difference in the existing purchase and sales of machineries. Earlier also, the rate for machinery was 12.5 per cent with 5 per cent VAT which totaled to 17.5 per cent. With 18 per cent GST on machinery, there is neither loss nor gain. However, it is too early to say anything as we are yet to have the rates for services and textiles," CB Chandrashekar, CFO, Lakshmi Machine Works Limited, told Fibre2Fashion. Home textile products wholly made of quilted textile materials will attract 12 per cent tax under the new tax regime.
Source: Fibre2fashion
GST on gold deferred as consuming and producing states spar over rates Domestic jewellers recommend 1.25% duty under GST CBEC chief red-flags issues over GST in front of Jaitley Budget hints at roll-out of GST on July 1 Textile sector pins hope on 5% GST rate With the Goods and Services Tax (GST) Council unable to arrive at a consensus on Friday on the textiles sector, the rate announcement has been deferred to June 3. The deferment is understandably due to complexities within the entire textiles value chain, in addition to the industry's anticipation of a fibre neutral taxation across the chain. According to textile industry representatives, differed rates for different parts of the textile value chain with some being taxed and some being exempt has led to tax evasion and flourishing of the unorganised sector. In addition, India has been a cotton heavy region in terms of fibre as compared to the global trend of a skewed in favour of man-made fibre (MMF). Tax variation in textiles has been such that currently, while fabrics do not attract excise duty or sales in most states in India, branded apparels are subject to both excise duty and sales tax. On the fibre front, natural fibre like cotton is exempt from any tax in the country though man-made fibre draws a 10 per cent excise duty. While most states want zero duty on cotton yarn to continue, it is anticipated that man-made fibre may still attract a five per cent incidence. However, the real contention is with regards to input credit. "We are awaiting clarity on what kind of input credit would be given in case the branded garments vertical attracts a higher rate of 18 per cent," said A Sakthivel, former chairman of Apparel Export Promotion Council (AEPC). This gains significance amidst unorganised sector forming a large part of the textile industry, creating a gap in flow of input tax credit since the credit is not availed of, in case registered taxpayers procure inputs from unorganised sources. The textile industry's other concern is compliance issue which may get aggravated in case of a higher rate fixed, especially at the end of the value chain. According to the garmenting sector, the definition of 'branded garment' has also been a contentious issue. While, currently a large part of the unorganised sector also goes along in the name of branded garments by placing private labels, it is to be seen how the same would be defined under GST for better compliance across the industry.
Source: Business Standard
The two-day summit to finalise the goods and services tax (GST) concluded in Srinagar on Friday with most of the job done, but leaving a lot unfinished. The rates of six categories of products, including bidis, gold, agriculture implements, textile, footwear and bio-diesel, will now be taken up at another round of meeting on June 3 in New Delhi. While the GST Council, chaired by Union Finance Minister Arun Jaitley, brainstormed on thousands of items ranging from consumer goods to luxury cars, steel and coal to betting and gambling, in a plush hotel against the backdrop of Dal Lake, the action shifted to historical ‘Chashme Shahi’, a royal spring at one of the Mughal Gardens, for announcing the outcome of the summit on Friday. The choice of venue became a talking point as former prime ministers Jawaharlal Nehru and Indira Gandhi are believed to have often got water to Delhi from the Chashme Shahi spring. But the summit was all about business, even as some government officials were planning to stay back an extra day to take in the sights of Gulmarg. As for rates, the Council members — state finance ministers — deliberated for hours on Friday to get a fix on almost all services, swiftly progressing towards the July 1 roll-out of the unified indirect tax regime. “We are in a state of readiness (for the July 1 roll-out)... The rates are not inflationary,” said Jaitley. Close to 500 services had been slotted in four slabs of 5 per cent, 12 per cent, 18 per cent, and 28 per cent, whereas the currently exempted categories, including health care and education, would continue to be out of the tax net, Jaitley announced at Chashme Shahi. Jaitley said: “Although the GST rate of 18 per cent on services is higher than the 15 per cent existing rate, the actual incidence of tax would be lower as service providers would get credit for the taxes paid on the goods used for the provision of services.” “After a long debate, the GST rates in relation to the services sector have been completely adopted in today’s meeting. Most of the services exempted at present, will be grandfathered and will continue to be out of the GST,” said Jaitley while briefing the media surrounded by lush green mountains, a thick cover of trees and the tightened security of J&K Police, the BSF and the CRPF. Grandfathering of these services essentially means that the Council may decide to impose tax on these sometime in future. Rail, air and road transport will fall in the 5 per cent tax slab. Hotels with tariff under Rs 1,000 will be exempt from the GST. Hotels with tariff between Rs 1,000 and Rs 2,500 will be taxed at 12 per cent, those with tariffs between Rs 2,500 and Rs 5,000 will attract a GST of 18 per cent, whereas hotels with tariffs of above Rs 5,000 will fall under the 28 per cent tax slab. All five-star hotels will fall under the 28 per cent category, making it much more expensive for fine dining. Non air-conditioned restaurants will attract a tax levy of 12 per cent whereas air-conditioned restaurants will fall in the 18 per cent tax bracket. Restaurants with a turnover of up to Rs 50 lakh will have the option of availing of the composition rate of 5 per cent. In fact, categories like five star hotels, gambling, race club betting and cinema have been put in the highest bracket of 28 per cent. The entertainment tax is currently imposed by the states. Now, since local body taxes will be subsumed under GST, states will be free to impose an additional tax over 28 per cent on entertainment to fund the state local bodies, said an official. Cinema is the only category where such a carve out has been created by way of law. A decision on the fitment of rates for lottery is yet to be made. “Services, which are currently taxed 15 per cent will be fitted into the 18 per cent bracket. However, services will get the benefit of input tax credit for the goods used, so real incidence of taxation will be lower than the headline rate,” Kerala Finance Minister Thomas Isaac said after the meeting. The Council had approved rates for 1,211 goods category on Thursday and approved seven key rules. “Most work related to the roll-out is complete. A few things remain like the rates for the six categories. We need more time for discussions. Residuary rules will be put up in the public domain for comments and need to be approved,” he said. The availability of input tax credit to the services industry for the goods will lower prices, according to the minister. He added that the proposed anti-profiteering body will ensure that the companies pass on the benefit of lower tax incidence to consumers. “Dealers can’t charge tax more than the tax they pay. The net effect of GST will not be inflationary,” the FM said. The Council will oversee the state of preparedness of GST Network, the IT backbone of GST. On transport, the Council decided that most services will fall under the 5 per cent category. Railways and air have been kept in the lowest bracket as petroleum is the key input but is out of the GST net. Hence, the sector will not be able to avail the input tax credit. While financial services, insurance and telecom will attract a GST rate of 18 per cent, the Council fixed the tax collection at source for e-commerce companies at 1 per cent as against a provision of up to 2 per cent under the law. This tax will have to be collected by the e-commerce players on behalf of the suppliers, who in turn could avail refund in the next tax cycle. Works contract, that currently see a central tax of 6 per cent and a state tax of 1 per cent or 5 per cent , will now be taxed at 12 per cent. The sector was unable to avail input tax credit for the inputs used like cement and steel that are taxed at 28%. “It currently pays an embedded tax of 28 per cent for cement and steel and an additional tax of central and state levies. Now there will a uniform rate of 12 per cent with all input tax credits,’’ the FM said. Pratik Jain, leader, indirect tax, PwC India, said that the multiple rate slabs, particularly the 28 per cent slab would make GST much more complex. “A 12 per cent rate for works contracts, with full input credit, is an encouraging development as it would be a simpler tax system and should reduce the cash component of the economy. Similarly a 5 per cent rate for transportation, including economy class air travel and cab aggregators is a good move and would ensure that incidence of tax on consumer does not increase for such services,” Jain said.
Source: Business Standard
Mobile and financial Services will cost more, but health and education will be cheaper; Prices of televisions, refrigerators and air-conditioners are set to go up to 5%. Clearing the decks for the final roll out on July 1, the Goods and Services Tax (GST) Council at its meeting in Srinagar on Friday fixed the rules and tax rates for commodity and services. However, GST rates for goods like gold, textile, footwear and precious metals are likely to be decided in the Council's next meeting scheduled for June 3. Education and health services will continue to enjoy exemption, but telecom services will come under 18 per cent tax bracket. The current service tax rate is 16 per cent. Service tax go up on telecom and business class air travel. "There were set of services which were exempted at present. These exemptions will continue. Besides the exempted category of which one of the principal items will be health care and education as a class will be exempted," Union finance minister Arun Jaitley told reporters at the end of two-day meeting. GST Council on Thursday had fixed tax rates of the 1,211 items. In the new tax regime, consumers will pay more for luxuries goods and services. Prices of televisions, refrigerators and air-conditioners are set to go up to 5 per cent from July 1 as the Council has proposed 28 per cent GST on consumer electronics and durables. The Council decided to have four rate slabs for services, 5 per cent, 12 per cent, 18 per cent (standard rate) and 28 per cent for luxury services. Once claimed as the nationwide single tax rate regime, the GST has now altered into four different rates, ranging from 5 per cent to 28 per cent. Out of 12,000 commodities, 81 per cent, items attract GST rate of 18 per cent or less and 19 per cent fall in 28 per cent. Six categories for GST haveyet not been finalised, including gold and precious metal. Rates have been fitted in different slabs as expected. The basic items-- eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour -- are exempted. Essential items such as coffee, tea, spices fall into the 5 per cent tax category. Common use items such as picture books, umbrella, sewing machines, and cellphones fall in the 12 per cent tax category.Standard items such as notebooks, steel products, printed circuits, camera and speakers fall in the 18 per cent tax category; Demerit goods and rich people's items such as aircraft for personal use fall in the 28 per cent category. "I expected two or three slabs. The only unhappy situation that needs to be corrected in next Council meeting - while basic raw food is exempted, the same stuff when packed and branded, which is good for food safety and health will attract 18 per cent. This will need to be corrected. We can't discourage food processing, food packaging so much. Overall, the rates send a positive sentiment, particularly for Aam Aadmi and d also for Urban Middle Class," said former CBEC chief Sumit Dutt Majumder to DNA. Finance Ministry Arun Jaitley claimed that GST Bill will be consumer friendly. He said that "mobile services will be charged at 18 per cent, but they will get input credit. So the tax incidence may occur at present or lower." Transportation services are being proposed to be taxed at 5 per cent under GST. The GST Council has made its intention to tax luxury services at a higher rate quite evident by announcing different rates for services such as hotels, five-star restaurants, based on their tariffs and other factors which distinguish luxury services from non-luxury services. Hotels and five-star restaurants services with tariffs more than Rs 5000, gambling, admission to cinemas and racing events have been kept at the highest rate side- 28 per cent. Travelling on the metro, local train and religious travel including Haj yatra will all be continued to be exempt from GST, Hasmukh Adhia, Secretary(Revenue) said. Council decided to levy 18 per cent GST on AC restaurants and those with liquor license while 5-star hotels have to pay 28 per cent. GST on work contract will be taxed at 12 per cent with credit inputs on some items like steel and cement. "There is still no clarity on whether such services would also attract levy of an additional compensation cess," said Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP said. GST is likely to have limited impact on inflation as the large portion of the consumer price index (CPI) basket exempted from the effective tax regime, said rating agencies Moody's Indian services in a note on Friday. The Council, also, cleared GST rules about composition scheme, valuation, input tax credit, invoice, payment, refund and registration, along with relevant forms and formats. GST was initially described as a single-tax regime. But now it has transformed into a four-slab tax system. Currently, taxes account for about 25 per cent of the average product price. The new regime aims at bringing down tax leakages in the complex tax system.
Source: DNA
Consumers of financial services such as banking and insurance are unlikely to be affected despite the Goods and Services Tax (GST) Council fixing the GST rate higher at 18 per cent. Some tax experts believe thaat the input credits that service providers will get under GST will be passed on to consumers, thereby offsetting the higher GST rate. Currently, financial services are taxed at 15 per cent. S Ravi, Practising Chartered Accountant, said, “Though the GST is pegged at 18 per cent, financial service providers will get the benefit of input credits. In service tax. the input credits are limited. So, under the GST regime, there will be an element of balancing that will happen and the end consumer will not be impacted.” Input (tax) credit allows a service provider to lower the tax its owes the government by allowing it to claim a credit on what it has paid on inputs. The impact of GST will be neutral in the short-run, Ravi said, adding that in the medium to long run, it will be beneficial to entities in the financial services sector as well as their customers. Bank of Baroda Executive Director Mayank Mehta said, “We floated an RFP (request for proposal) to engage a consultant to help us (with GST implementation). I don’t think it (GST) will have any impact on the customer...” More for forex conversion Sachin Menon, National Head, Indirect Tax, KPMG in India said NRIs may end up paying more on foreign exchange conversion. “The maximum GST charges on conversion of foreign currency has gone up from ₹7,000 to ₹60,000. This can hurt NRIs, especially those working in Gulf countries, who earns low wages and make remittances to their families,” he said. Banks are also up against challenges such as multiple registrations and multiple transactions across States, dealing with transaction-wise invoice, and issues relating to valuation on services from certain centralised services like IT and call centres. But a majority of the financial services players said the negative impact would only be in the short term. Mohit Sahney, Founder at Finova Capital, said, “Since financial services form the backbone of growth in the economy, the government should have kept it at the previous rate of 15 per cent. However, given the fact that GST is going to boost the entire economy, the slightly increased cost will nullify in the medium to long run.” Rishi Gupta, MD & CEO, Fino Paytech, a payments company and a future payments bank, said there will be increase in compliance requirements at bank branches. “This is a challenge that banks need to gear up to, including the impact on cost of services to the customers,” he added.
Source: Business Line
MUMBAI: What can be called as a formal ushering of the textile Khadi into corporatisation, Raymond, the Indian textile and apparel conglomerate launched India’s first branded Khadi label- ‘Khadi by Raymond’ today. Raymond seeks to use its brand value to sell Khadi in a range of fabric blends and ready to wear apparel. “It is indeed a moment of pride to have Khadi – the fabric of our nation as a part of our product portfolio. Embodying some of the latest design trends and enhancing its quality Raymond Khadi is set to reposition Khadi as a fabric of choice, in line with the Hon. Prime Minister’s vision of promoting Khadi for Fashion and reinstating our commitment to Make in India initiative,” Gautam Hari Singhania, CMD, Raymond, said. As reported by ET in March, the Khadi and Village Industries Commission (KVIC) had received its largest ever order worth Rs 2 crore from Raymond for the supply of 98000 metres of the fabric. This was following an agreement that was signed between Raymond and KVIC in December, 2016 in which the KVIC had certified Raymond to use the Khadi mark to sell ready-made garments and fabric which would be available at both KVIC as well as Raymond outlets, also select international markets and e-commerce portals. “It is a historical moment that the best brains are coming in to get involved with Khadi. Today the agreement signed between KVIC and Raymond is bearing it's first fruit and the exclusive display of Khadi apparels will open a new avenue for Khadi market and this will serve the cause of rural artisans of our country and support the cause of Hon'ble Prime Minister Shri Narendra Modi for greater use of Khadi by every Indian,” VK Saxena, chairman, KVIC, said at the launch. The mainstreaming of the Khadi fabric is a result of the thrust provided by the Modi-government. Early in January, 2016 the government introduced the use of solar energy to power ‘charkhas’ to make the spinning of the khadi yarn a sustainable affair. Then, later in the year, the Indian Railways and the government passenger airline Air India were encouraged to use khadi products in trains and aeroplanes. KVIC’s sales grew by 24% in 2015-16 and 33% to Rs 2,00f crore in 2016-17. “The ministry of MSME has been undertaking numerous measures to not just revive but also strengthen the ailing units of Khadi. Public-Private Partnerships such as the one with Raymond boosts industry confidence by ensuring market linkages that can lead to demand generation. The increase in demand for Khadi will thus be a positive measure for the economy creating numerous employment opportunities for artisans,” Giriraj Singh, minister of state, MSME, who was also present at the launch, said.
Source: Et Bureau
As Narendra Modi completes three years as prime minister, he must seriously worry about his government’s inability to meet the single biggest promise he had made in his election speeches in 2014 – providing jobs to new entrants in India’s labour market. I recall in several public rallies that Modi would pointedly tell new voters among the youth to give the BJP a chance to improve their lives as they finished their education and entered the labour market. “I cant do much about those in their fifties but I want to transform the lives of those in their twenties who are seeking new employment,” Modi had said. If the NDA is judged on this metric alone, it has proved to be an utter failure. Indeed, this is borne out by its own data provided by the labour ministry. Just one comparative data point tells us the story of the sheer decline in organised sector jobs. During the three years from 2009 to 2011, when India’s GDP was still growing at an average 8.5%, the organised sector was producing on average 9.5 lakh new jobs every year. Bear in mind, even this was seen relatively as ‘jobless growth’. In the last two years, 2015 and 2016, the average employment generation has plummeted to less than 2 lakh jobs a year. This is less than 25% of the annual employment generated before 2011. Why such a precipitous fall in employment growth in organised sectors such as textiles, metals, leather, gems and jewellery, IT and BPO, transport, automobiles and handlooms? The larger question must also centre around what is going wrong in these sectors, where India is supposed to have a competitive edge globally. In 2015, when fresh employment generated in these 8 sectors collapsed to an all time low of 1.5 lakh jobs, the government was so alarmed by the development that it decided to review the methodology for data gathering. It expanded the scope of the organised industry from just eight manufacturing sectors to include some key services industries such as education, health and restaurants. This was clearly done to bump up the employment growth figures because the manufacturing sector was showing a very poor growth trend – around 1.5% annually – whereas the service sector was doing much better and growing at 7-8%. There seemed anecdotal evidence that employment in sectors such as health and education did not suffer during demonetisation. So adding service sectors to the organised sector employment data has helped the government show a slight improvement in new jobs growth in 2016. New jobs generated increased from 1.55 lakh in 2015 to 2.31 lakhs in 2016. This is still only 25% of the organised sector jobs generated in 2009. More importantly, the new methodology helps the NDA government perpetuate another myth – that there was no significant job loss during the demonetisation quarter of October to December 2016. The labour ministry data surprisingly show across-the-board growth in jobs during this quarter, except in the construction sector where there is a marginal decline. Prima facie, it is difficult to believe that industries were hiring when the economy was paralysed by notebandi for about four months. It is possible that the government was hiring in the education and health sectors, which might show a positive uptick. Otherwise the bulk of the organised industry was busy managing the new situation caused by demonetisation, with a fall in the sales of manufactured items nearly across the board. So far we have only discussed the organised sector employment. The unorganised small manufacturers suffered a huge dent in both output and employment. Vrijesh Upadhyay, secretary general of the RSS affiliated Bharatiya Majdoor Sangh, told The Wire, “Even if you take 5 to 10 employees per unit which had shut down during that quarter in which 2.5 lakh units went out of production, there would have been a huge employment loss.” Employment numbers in the unorganised sector is difficult to estimate but economists are unanimous there is a correlation between the trend in the organised and unorganised sectors. They can’t be moving in opposite directions. The government has often claimed that the unorganised sector jobs have in general grown much faster than the organised sector jobs. There is no real data to prove this. Besides, if organised sector employment growth has slowed by over 70% in four years, it is most unlikely that the unorganised sector jobs, which constitute over 85% of the total labour market, would have shown robust growth. Clearly this has proved to be the Modi government’s single biggest failure. What is even more worrying in the coming two to three years is a disastrous prognosis for the hitherto high employment generating sectors like IT and BPO. These two sectors alone employ about 4 million people today and the industry’s own estimate is upto 60% of this workforce will not be of any use with their present skill levels. Says Nasscom president R. Chandrashekhar, “A large part of the workforce will have to undergo retraining. Even after that there is no certainty of their absorption. Automation is impacting existing employment not only in IT and BPO but in a host of other manufacturing sectors like automobiles, engineering etc. We are conducting a joint study with FICCI on this.” Vishal Sikka, CEO of Infosys, was more blunt when he hinted that more than half the current work force in the IT/ BPO sector may become redundant in a few years. The situation is quite grim and there is a sense of denial about this in the government which is busy massaging economic data. At least, I haven’t heard anyone in the government seriously debating the future of employment in India’s organised manufacturing and services sector. Even less is discussed about the unorganised sector. With the kind of victories the BJP is securing in the assembly polls on divisive and emotive issues, the government seems convinced all is well with the economy. This is part of the problem now. Demonetisation is now being pitched as a mega success just because it didn’t harm the BJP in the elections. Modi actually believes that the informal sector is doing well supported by initiatives such as the Mudra Bank. Indeed, some economists in the government are already making convoluted arguments to outline the virtues of self-employment! However, all of this is in the realm of faith and belief, with little data to back up various claims. Election victories in the first-past-the-post system cannot be used as a source of denial about ground realities.
Source: Kashmir Monitor
Mandeep Nagi of Shades of India talks about an international market for yak blankets from Ladakh and cushions fashioned from Uttaranchal sheep wool Mandeep Nagi may have never visited Ladakh, but a small line of yak blankets made by its nomad tribes (to be launched in the US in September) is already building anticipation among her international clients. The design director and co-founder of Shades of India, the eclectic brand of artisanal apparel and home accessories, realised the potential in these blankets during an exhibition in the capital last year. Living Lightly: Journeys with Pastoralists, curated by Sushma Iyengar, highlighted the lives of nomads and their rituals, art and textiles. On seeing the crafts of the tribes of Rajasthan, Himachal Pradesh, Maharashtra and Andhra Pradesh, and on learning that many were now rearing sheep for meat and bigger profits, Nagi began working with NGOs to help them retain their weaving traditions. “The yak blankets are super soft, natural, non-dyed and will be sold as special pieces,” she begins, adding, “They cannot be manufactured at will, as they are made by the tribes to meet their needs. The blankets may be old, going back 10 years, and sometime used. This is something the domestic market is not ready for and will be open to only after it finds success abroad.” She should know, for her Shades of India, which she created with husband, David Housego two decades ago, operated internationally for many years before retailing in India. Nagi is no stranger to the alternative route. Last year, she chose a domestic help from her neighbourhood as the face of her Shades of India collection, Cinnamon. And earlier this year, at Lakme Fashion Week, she had girls from Mumbai’s red light areas walk the runway; the Bagh collection featured fine cottons, metallic weaves and vintage lace on dupattas and dresses. “The term sustainable is used loosely,” she continues. “Our work must generate livelihood and cover a wide strata of society." The yak blankets, in natural brown, follow a minimalist pattern. “We will give it a good cleaning, and nicely finished edges, then bring in our expertise with layering,” says Nagi, who will be retailing them under her new brand in the US, Neem Living. The brand currently has woollen throws, cushions and clothing woven by tribes in Uttaranchal, as well as Gongadi, from the Telangana region, made from the wool of the local Deccani black sheep. They will be used as light rugs, she explains, also making time for Bengal’s extinct Baluchari this year, a woven textile, featuring motifs from the epics, as well as experiments with rose-scented camel milk soap. Priced from $200 (₹12,990) onwards, on neemliving.us.com.
Source: The Hindu
A tree that grows wool is how the Greek and Roman texts described what we call cotton. To this day, the German word for cotton, baumwolle, means exactly that: treewool! Ancient Indians and Peruvians – the original cultivators of cotton, though at opposite ends of the world — knew better. Yet, ironically, neither of the most internationally prized varieties of cotton are immediately associated with these two countries. Egyptian and Sea Island cotton, valued for their extra long staple or ESL, command a premium. Remember the outrage last year in the US when an Indian supplier of “Egyptian cotton” bedsheets to major department stores was found to have used other cotton? The disgust and horror was akin to sturgeon caviar being found to have been diluted with dyed salmon roe or horsemeat being detected in so-called beef products in UK. But how many know that India also produces – alas in ever-diminishing quantities – an equally wonderful ESL cotton variety, albeit rather unimaginatively named Suvin, the result of a “marriage” of a local cotton gal ‘Sujatha’ with a Caribbean cotton lad called St Vincent in the mid-1970s? Today we cultivate abysmally little amounts of Suvin, though it is heartening that we grow a lot of the world’s organic (if short staple) cotton. The fact is, we Indians take our cotton heritage too lightly, like so many other indigenous marvels. Though ancient Indians grew and wore fine cotton while Europeans were still cladding themselves in crude animal pelts and scratchy wool. It is unfortunate that the language of the ancient Indians who lived along the Indus and Saraswati rivers remains unknown to us still. So the 5000 year old cotton fragments found at excavations remain tantalisingly mysterious. And it is shameful that a few thousand years on, we are now slaves to blended textiles and silk, in the name of convenience. How many times have we forsworn cotton in the past few decades because it is “so difficult to maintain”, forgetting that our own recent forebears managed the material quite well? The softest, purest cotton needs no ironing or starching, and those wearing it need no air-conditioning or heating either. So why do we diss it? Textiles Minister Smriti Irani’s campaign to get Indians to reaffirm #CottonIsCool has come not a moment too soon. While magazines like Femina have highlighted Indian celebrities from Kareena Kapoor Khan to Twinkle Khanna stepping out in cotton, we tend to undervalue this amazing natural fibre. No wonder Indian cotton has absolutely no brand recall, unlike Egyptian or Sea Island, though those varieties are less than 200 years old! Given our extreme weather conditions, cotton is truly the fabric of India. It is cooling and lets our skin breathe in the most scorching and sultry weather and yet it can also retain heat, making it the fabric of choice in the coldest places too. Is it surprising that Rajasthan, a land of extreme heat and cold, not only has beautiful traditional printed and tie-dyed cottons but also thick quilts and jackets also made of the same natural fibre? Khadi, whose most passionate advocate of our times Martand Singh or Mapu passed away this month, is but an extra special version of this same super fibre, handspun and hand-woven. The journey of khadi cotton from Bapu to Mapu was both heroic and tragic because each revived it only for a time, the first during the Independence struggle and other in the 1980s. After that, cotton – khadi or otherwise – got lost in the public perception again. Internet campaigns have high visibility among certain sections, but limited longevity. It serves the purpose of highlighting so it’s a welcome first step. A more sustained awareness campaign on the benefits of cotton, and a debate on its socalled negative qualities is needed. A cachet for cotton – especially Indian cotton – has to be recreated and disseminated.
Source: Economic Times
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$ 51.28 per barrel (bbl) on 18.05.2017. This was higher than the price of US$ 50.78 per bbl on previous publishing day of 17.05.2017. In rupee terms, the price of Indian Basket increased to Rs. 3299.35 per bbl on 18.05.2017 as compared to Rs. 3251.16 per bbl on 17.05.2017. Rupee closed weaker at Rs. 64.34 per US$ on 18.05.2017 as compared to Rs. 64.02 per US$ on 17.05.2017. The table below gives details in this regard:
|
Particulars |
Unit |
Price on May 18, 2017 Previous trading day i.e. 17.05.2017) |
Pricing Fortnight for 16.05.2017 (April 27, 2017 to May 11, 2017) |
|
Crude Oil (Indian Basket) |
($/bbl) |
51.28 (50.78) |
49.22 |
|
(Rs/bbl) |
3299.35 (3251.16) |
3162.88 |
|
|
Exchange Rate |
(Rs/$) |
64.34 (64.02) |
64.26 |
Source: PIB
Volumes in the chemical business fell six per cent year-on-year, while the viscose staple fibre business saw revenues rise 12 per cent over the same period to ₹1,945 crore. The cement subsidiary UltraTech Cement had earlier reported net profit falling 11 per cent during the quarter. “We have a dominant market share in viscose staple fibre. We're expecting the market to double in India vis-a-vis other fibres. In cements, net profit at UltraTech may have fallen but we are still market leaders and we have performed better than competition," Dilip Gaur, MD, Grasim Industries, told BusinessLine in an interaction. Profit for the full year for Grasim was ₹3,167 crore, up 26.8 per cent from ₹2,496 crore for FY-16. Capital expenditure for FY-17 had been ₹1,677 crore and is projected at ₹3,040 crore for FY-18, of which ₹2,190 crore will be allocated to UltraTech. The merger between Grasim Industries and Aditya Birla Nuvo, which has been approved by the respective companies' minority shareholders, is expected to be complete by Q2FY-18. The merger is part of a larger restructuring of the two Aditya Birla group companies and will result in Grasim Industries gaining exposure to the Idea Cellular's telecom business and the financial services business that is currently housed under Aditya Birla Nuvo. The board of Grasim Industries has declared dividend of ₹5.50 per equity share. The company’s scrip fell 0.67 per cent to ₹1,121.3 on the BSE on Friday.
Source: Business Line
Remaining members of the Trans Pacific Partnership (TPP) free trade agreement are working on a statement to reaffirm their commitment to it, despite the withdrawal of the United States, sources close to the discussions said. Some still hope for the eventual return of the United States to the deal ditched by U.S. President Donald Trump, because of his readiness to shift position on other issues, Malaysia's trade minister said. Talks are happening on the sidelines of an Asia-Pacific Economic Cooperation (APEC) meeting, the biggest trade gathering since Trump upended the world order with his "America First" policy. The competing visions are evident at this weekend's APEC meeting of ministers from countries that account for well over 40 percent of world trade. While new U.S. Trade Representative Robert Lighthizer will hold bilateral talks with key countries, China will be pushing its favored Asian trade agreement as it puts itself forward as a global free trade champion. Japan is leading the countries that still want to persist with the much more comprehensive TPP agreement, abandoned by Trump in one of his first acts in office and which does not include China. Sources close to the discussions said the so-called TPP-11 nations - the 11 left after the United States withdrew - were planning a statement of commitment to the pact. "There will be two main points: 1. To aim for an early entry into force of the TPP-11, 2. To bear in mind an environment where a signatory country can return," said one source close to the discussions who was not authorized to speak to the media. The agreement is due to take effect next year.
CHALLENGES
Among the challenges is keeping on board Vietnam and Malaysia, which would have been big beneficiaries from the agreement if it included the United States. Some renegotiation would be needed for the deal to proceed without the United States, Malaysian Trade Minister Mustapa Mohamed told Reuters. A Vietnamese official expressed a similar view. Mustapa said there was optimism the United States would return one day, because Trump had shown readiness to shift his position on other matters, such as softening his stance toward China. "There has been less rhetoric and a more realistic approach," he said. However, renegotiating the existing North America Free Trade Agreement (NAFTA) is a bigger immediate priority for Washington. In Hanoi, Lighthizer is due to hold two-way meetings to start making official contact with key trade officials. Nearly all the other 20 members of APEC had requested bilateral meetings, U.S. officials said. Main countries are China, Japan and South Korea, with which Trump wants to renegotiate a free trade deal. Canada and Mexico will be at the Asia-Pacific meetings and are also in the North American trade area. In other talks on the sidelines, China will be driving for progress on its favored trade deal for Asia: the Regional Comprehensive Economic Partnership. The free trade agreement doesn't cover as many areas as the TPP deal or demand tough conditions for members on issues such as protecting intellectual property, labor rights or the environment. Officials said there remained significant points of disagreement in the talks between Southeast Asian countries, China, India, Australia, New Zealand, Japan and South Korea. The United States has never been part of those discussions. Given the uncertainty over TPP, the China-backed deal was now the priority for Malaysia, Mustapa said.
Source: Financial Express
Changing the rules of origin is a win-win solution for complementarity to be efficient between Tunisia and Europe in terms of trade in textiles and clothing since these rules have become obsolete, not adapted to the current industrial reality of EU partners and discriminate between countries, said Constantin Livas, senior expert at Unit DG Grow F4- Tourism, Emerging and Creative Industries at the European Commission in Brussels (Belgium). “The principle of the new rules of origin will have to allow a better control of the quality of the manufactured product which would be exchanged only in the Mediterranean zone, without passing through a third country”, he added. “Tunisia, which is going through a bad period in the textile-clothing sector, will lose if it tries to compete with Asian countries such as Bangladesh which has a labor cost of $ 0.5 against 2, 5 dollars for Tunisia, hence the need to find immediate solutions with Europe, notably through the implementation of trade measures,” said the expert, who took part in a conference organized on Thursday in Tunis, on the sidelines of the festival of young fashion designers on the theme “Tunisia, a platform for Euro-med cooperation in the fashion and clothing sector”. In this regard, the expert pointed out that, in general, Euro-Mediterranean trade has recorded a relative decline against an increase in exports from Asia to Europe. “Tunisia, for its part, has lost its competitiveness and its position on the European textile-clothing markets,” according to Livas. “Among the actions relating to the Tunisian textile-clothing sector, a dialogue should be launched between the industrialists and the administrations on both sides, while examining the possibility for Tunisia to participate in European programs, such as the one relating to SME or COSME, “he said. For his part, Mathieu Gamet, President of MMMM (The Mediterranean Office for the Fashion Industry) in France, emphasized Tunisia’s fashion identity, which remains strong but little integrated in the Mediterranean, calling for showcasing the Tunisian creation to ensure its dissemination. He recalled that four Tunisians were laureates in the fashion contest “Open My Med Prize”, launched since 2010 in France. The main objective of this competition is to bring together a new generation of fashion entrepreneurs in 19 countries of the Mediterranean. President of the Professional Apparel and Clothing Group at the Confederation of Tunisian Citizen Enterprises (CONECT) Samir Ben Abdallah said the fashion sector is the best locomotive to revive the textile and clothing sector, given that young creators are the future of this sector. A partnership agreement between the CONECT Professional Apparel and Clothing Group and the CNA Federmoda (Italy) will be signed to exchange experiences and information, to carry out joint actions and to ensure openness on the outside,” he announced. Fashion shows for young Tunisian fashion designers as well as international designers will be organized during the second edition of the Young Fashion Designers’ Festival 2017. The parades will be followed by the presentation of the Best Tunisian Young Designer Award, best model for the year 2017 and best jewelry designer.
Source: African Manager.com
The European Textile Services Association (ETSA) 2017 conference will kick-start from June 14 in Paris. This year, the bi-annual event is expecting around 120 to 130 participants. The conference open for top management of ETSA member companies and associations is based on the theme 'Innovation and disruption- the textile services sector in transition'. ETSA's mission is to promote the textile services industry and the interests of member companies, in cooperation with national textile services associations from across Europe. At the three-day conference, speakers will elaborate on various topics including Hygiene of domestic washing - Evaluating risks and opportunities, Threat of uberisation? Building on the ETSA 2016 customer expectations' study, The internet: connectivity revolution - impact on textile services, Future of EU policy on resource saving, sustainability and the circular economy, Political disruption, economic innovation and A new paradigm for business creativity. "Every day, millions of people across Europe wear, sleep on, eat off or use rental textiles in some way or other. Rental textiles include workwear and protective clothing, corporate business wear, hospital and surgical textiles, textiles for hotels, restaurants and care homes, hand-drying towels, floor mats and mops and industrial wipers. Textile services include textile selection, garment manufacturing, stock management, logistics and delivery, care and maintenance," Robert Long, ETSA secretary general said. "Our industry association represents the leading textile services companies, as well as the detergent, fabric and garment manufacturers. This industry is a major contributor to the European economy, with a current annual turnover of circa €11 billion (2012) and employing 135,000 people in the EU," Long added.
Source: Fibre2fashion
Women working at a garment workshop on the outskirts of Hanoi. Over half of all jobs in five Southeast Asian countries, including Vietnam, could be automated in the next decade or two. AFP Some 9 million people, mostly young women, employed in the textile, garment and footwear industries in Southeast Asia are facing an uncertain future from the advance of robot technology. Badly paid, overworked and susceptible to injuries ranging from lung ailments to lost fingers, they produce garments and footwear for some of the biggest brand names in the world. As automation takes over more and more jobs in all sectors of the global economy, these workers face the prospect of being replaced by automated assembly lines or "sewbots". Even if automation in garment and shoe factories does not happen immediately, it is on the horizon, and Southeast Asia should be prepared. The International Labour Organization is urging the 10-member Association of Southeast Asian Nations to start planning now to diversify to "avoid considerable setbacks in development". In a report earlier this year, the ILO said companies are attracted to automated technology because of "competitive pricing and quality, and by the mitigation of reputational risk". Gary Rynhart, a senior specialist on employers' activities in Southeast Asia and the Pacific for the ILO, said "technology will get rid of a lot of dirty and dangerous jobs … so that is a plus. "But it will require a fresh approach by countries in the region to seize new opportunities," he told China Daily. "The worry is we don't see a lot of that urgency from policymakers in the ASEAN region. The exception, however, is Singapore." Automation has become a major contributor to Singapore's economic growth, said Walter Theseira, a senior lecturer of economics at the Singapore University of Social Sciences. For more than two decades, the city-state's economic expansion was driven primarily by immigration, particularly of medium and lower skilled workers, he said. But as the technology revolution began to spread around the world, Singapore realized it needed to move into areas of industry that required a highly skilled workforce. According to Theseira, two factors are driving automation in Singapore. "Growth driven by lower-skilled immigration has been linked to low productivity and is unsustainable because of the strain on infrastructure and integration with the resident population. Automation is seen as a solution to this problem. "The export-oriented sectors in Singapore, such as electronics, biomedical and petrochemical manufacturing, are highly productive and use the latest technology," he said. Meanwhile, there is the "more important problem" concerning sectors which are less productive yet resistant to change. These are the industries that cater more to Singapore's domestic market, including construction, consumer services and the food and beverage sector. "These sectors are dominated by small and medium enterprises, do not use significant amounts of technology, and are used to relying on lower cost, low and medium-skilled foreign workers," Theseira said. "There is potential demand there, but there needs to be some policy coordination to convince these sectors to adapt and change." Few would dispute that automation brings increased efficiency and productivity. A recent ILO study said that over half of all jobs in five Southeast Asian countries — Thailand, the Philippines, Vietnam, Indonesia and Cambodia — could be automated in the next decade or two. While that may sound alarming, Rynhart of the ILO made the point that technology is "always replacing jobs, changing them, making them better or creating entirely new jobs". "If you currently work in mobile phone technology, social media or a related sector, then your job didn't exist 10 or at most 15 years ago," he said. Rynhart cited the telephone, commercial airplanes, even modern kitchens, saying they all came along in a transformative way, yet the "sun still came up in the morning". "Societies progressed. And job quality improved as technology replaced the jobs we didn't want to do or need to do," he said. But he went on to explain that today there is some difference. "First, speed. The lag between the inventive and innovation processes and commercialization (from patent to operation) has narrowed considerably," he said. "Technologies are diffusing much faster now than they have in the past. It took the telephone 75 years to reach 50 million users. Angry Birds took 35 days to reach that number," he said, referring to the popular mobile game franchise. Second is the pervasive and transformative nature of new technologies. "Technologies such as 3D printing can be deployed everywhere from high-tech industries such as aerospace to build jet engines, to back garden sheds to produce gardening equipment." He said this technology has now evolved to the extent that it can produce almost any component using metal, plastic, mixed material and even human tissue.
The third difference now, Rynhart said, is the potential impact on developing countries.
Source: Chinadaily.com
LAHORE: Lack of planning and coordination among government departments, and severe water shortage have hit cotton sowing in the country, sparking fear of low production due to lower acreage, official sources said on Friday. As of May 12, 2017, cotton sowing could be completed only on 1.42 million hectares in the country out of the targeted 3.11 million hectares, showing only 45 per cent of sowing if compared with the target. Despite aggressive campaign run by the Punjab Agriculture Department for encouraging farmers to sow cotton in the province, less than fifty per cent of the targeted area could be brought under cultivation as optimum time of plantation is about to end. As many as 1.18 million hectares could be sown with cotton seeds in Punjab province till May 12 out of the target of 2.42 million hectares, only 48 per cent of the target. More worryingly, Sindh's cotton was hit hardest due to acute shortage of water, as farmers sowed only 36 percent of the targeted area. Cotton could be cultivated only on 0.237 million hectares of land out of the total target area of 0.65 million hectares. In Mirpurkhas division, only 40 per cent of cotton crop has been sown up to May 5, as compared to 75 per cent last year. In Hyderabad Division, 35 per cent of the target has been sown as compared to 60 per cent last year. Cotton sowing did not start in Sukkur division until May 5, 2017. Water availability during crucial months of April and May has been very low in Sindh due to abysmally low flows of River Indus and bad coordination among provincial departments, Ministry of Textile and Indus River System Authority (IRSA) about efficiently managing available water, sources claimed. During kharif, Sindh requires water earlier when compared with the northern areas of the country, as cotton sowing starts in April. However, this year, water availability did not pick as per requirement. Areas fed from Sukkur Barrage faced major brunt of the lingering water shortage, hitting farmers hard. In yet another upsetting development, sources said, Punjab Irrigation Department has plainly refused to ensure provision of water for cotton sowing in the province, saying they were not consulted by Punjab Agriculture Department before imposing ban on early sowing of cotton. “It is not possible to provide water for irrigating such a huge area in a short span of time,” a senior official said, blaming officials of the agriculture department for not coordinating with them in a timely manner. There is a deafening silence as far as the Cotton Division of the Ministry of Textiles is concerned. Dr Khalid Abdullah, cotton commissioner of textile ministry, was tight lipped over the state of cotton sowing in the country. Sources claimed that his division could not take up proper measures for coordinating between the departments concerned. Cotton commissioner, who is responsible for all matters pertaining to cotton in the country, failed to coordinate among various cotton related wings of different ministries/divisions, provinces, and stakeholders associations, it was alleged. When contacted, he did not respond to queries about cotton outlook 2017. Despite repeated contacts, spokesman of Punjab Agriculture Department was not available for comment. Farooq Bajwa of Farmers Associates Pakistan (FAP) expressed serious reservations about the role of government departments in facilitating farmers in cotton sowing. He lamented that due to wrong policies of government, cotton was fast losing its status of preferred choice for farmers during kharif in southern Punjab. He also castigated officials concerned for not ensuring water supply for cotton sowing.
Source: International the News
From now on, Bangladesh will take care of the remediation of its more than 4,000 garment factories on its own, at least according to state minister for labour and employment, Mujibul Haque. He said at the the inaugural ceremony of the Remediation Coordination Cell in Dhaka last Sunday that the the tenure of the Bangladesh Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety need not to be extended - both are running out next year. “The remediation of all garment factories must be completed as quickly as possible, and the Remediation Coordination Cell will make a major contribution to this goal,” said Mujibul Haque at the event. The new Remediation Coordination Cell (RCC) is a national initiative, which will monitor and coordinate the post inspection remedial work at Bangladesh's garment factories from now on and thus the safety of millions of garment workers. It is supported by the International Labour Organization (ILO) with funding from Canada, the Netherlands and the United Kingdom. However, initially the RCC will focus on only 1,293 factories but according to the ILO, this number is likely to rise as new factories are established and enter the national initiative and others exit the Accord or the Alliance. It would be useful if the new initiative would cover those factories that so far slipped through the net of either initiative. The RCC will be staffed and supported by members of local regulatory bodies like the department of inspections for factories and establishments, the fire service and civil defense, the public agency responsible for coordinating urban development in Dhaka (RAJUK), the chief electrical inspector and the public works department. They will be supported by private sector engineers who will provide technical expertise for remediation follow-up. However, there was no mention if the RCC would - like the Bangladesh Accord and the Alliance - address issues that go beyond worker safety and remediation efforts but that are no less crucial for improving the RMG sector in Bangladesh. Current concerns are fair wages for garment workers, health care for workers and their families and initiatives like (anonymous) helplines where workers can report all kinds of problems like sexual harrassment at the workplace, violence and intimidation tactics, financial abuse and others.
Source: Fashionunited.in
Kenyan scientists have used modern biotechnology to develop two crop varieties that are expected to be released in the country soon. Simon Gichuki of the Kenya Agricultural, Livestock Research Organization’s (KALRO) Biotechnology Research Institute (BioRI) said that the maize and cotton varieties are already awaiting the National Performance Trials before they can be released for field trials, while gypsophilla flower will follow soon. “The products have been produced within the country by local scientists where risk assessment has been done in accordance with the law,” he said during an agricultural biotechnology sensitization workshop in Nairobi on Friday. Gichuki noted that genetically modified drought- and pest-resistant cassava, sorghum and sweet potato are due to be complete soon. Julia Njagi, a biosafety officer at the National Biosafety Authority (NBA), revealed that the authority has approved 24 crop varieties for laboratory and greenhouse trials, 14 for Confined Field Trials (CFT) and three for environmental trials. She added that the two varieties are pending approval and are at the laboratory and environmental release stages. Research on Bt cotton was completed in 2002-2012 and approved by NBA for National Performance Trials (NPT) by Kenya Plant Health Inspectorate Service (KEPHIS). Insect-resistant and drought-tolerant maize variety has also been approved and is undergoing NPT by KEPHIS experts. Enditem
Source: NewsGhana.com
Pakistan Yarn Merchants Association (PYMA) has appealed to Prime Minister Nawaz Sharif, finance minister, commerce minister and special assistant to Prime Minister for revenue to save polyester filament fabric industry from further disaster, The Nation reports. PYMA (Sindh Balochistan Zone) Chairman Danish Hanif drew the attention of the government towards sinking polyester filament fabric yarn industry, stating that around 300,000 looms and knitting machines have suspended operations during the last five years, resulting in directly and indirectly affecting a total of around five million people. PYMA Chairman said that the inefficient and outdated domestic polyester filament yarn industry does not fulfil even 25% of the total demand of Pakistan. Polyester yarn (PFY) attracts 12% custom duty versus Polyester Fibre, which attracts only 7% custom duty whereas the raw material and the quantity of inputs to produce both are exactly same. He said polyester fibre is consumed by corporate sector versus polyester yarn in SME sector. In addition, local PSF production is enough to suffice Pakistan’s requirement whereas production of polyester yarn is only 25% of the required quantity for Pakistan, still import duty of PFY is at 12% vs polyester fibre’s 7%. The ongoing Anti-Dumping Investigation on Polyester Filament Yarn (PFDY/PDTY), which is basic raw material for the polyester fabric, is totally unjustified, he added. The user industry would be unnecessarily penalised even for those products which are not produced by the domestic industry. Cost for the end user would increase substantially and that would affect the weaving and knitting industry. The domestic producers of polyester filament yarn are also lobbying to impose Regulatory Duty (RD) on the imported polyester filament yarn, which would be detrimental for the entire weaving and knitting industry.
Source: Knittingindustry.com
China has an insurance policy against a full-scale market meltdown: the daily currency fixing. With stocks and bonds in retreat amid anxiety over Beijing’s deleveraging campaign, officials have been guiding the yuan higher against the dollar in a move that’s caught market watchers by surprise. After meeting expectations earlier in the year, the reference rate used by the People’s Bank of China to manage the yuan has come in stronger than the forecasts of four banks who regularly track the measure on 25 of the past 32 trading days. “The PBOC is using the stronger fixings to prevent panic sentiment from spreading to the currency market,” said Xia Le, chief economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong, referring to the reference rate that’s updated each day. “In the short term, no one can fight against the PBOC when it intervenes through the fixings. Investors will likely become more willing to sell the dollar, pushing the yuan higher from current levels.” China seems to be trying to find a balance between tackling financial risks while avoiding a wider selloff that undermines faith in the markets and Beijing’s regulatory powers. Policy makers are railing against speculation and stepping up controls on the banking industry, but also boosting injections of cheap cash amid concern over tight liquidity. The yuan is playing a steadying role, too, with foreign investors citing the currency’s stability in the face of spiking bond yields and equity-market whiplash as one of the reasons they’re sanguine about the clampdown. China Ups the Ante in Bid to Quash Financial Risk: QuickTake Q&A While China has largely stemmed outflows through tougher capital controls, the PBOC is engineering a tronger yuan to preempt a renewal of those pressures amid the stock- and bond-market gyrations, says Khoon Goh, head of Asia research for Australia & New Zealand Banking Group in Singapore. The onshore yuan reached a three-week high on Wednesday.
Unpredictable Moves
“The authorities likely want to ensure that there is no pick-up in outflows and keeping the yuan stable is one way to ensure this,” said Goh, one of the analysts whose forecasts have been trailing the yuan’s reference rates this month. Central bank policy stipulates that the yuan is restricted to moves of no more than 2 percent either side of the reference rate. But officials have never divulged exactly how the daily rate is calculated, with banks having to come up with their own models based on what the fixing has done in the past and bits of intelligence from policy makers. Since mid-2016, the reference rate has been very predictable -- until now. The rate has come in stronger than the median of fixing forecasts provided by the four banks -- ANZ, Mizuho Bank Ltd., Scotiabank and China Guangfa Bank Co. -- every trading day since April 5, according to Bloomberg calculations. The fixing was 0.23 percent higher than the median projection on Friday, the biggest deviation since at least February. The stronger fixing policy will help lure foreign investors to China’s onshore bond market, said Ken Cheung, a Hong Kong-based currency strategist at Mizuho. Offshore funds are set to get increased access to the mainland debt market via a trading link with Hong Kong. The fact the yuan is seeing stability against the dollar, but remains weak versus other currencies, suggests the stronger fixing run is a sentiment-boosting move. The PBOC didn’t respond to questions faxed to its press office on Thursday. Traders have been paring bets on yuan weakness, with odds of a drop beyond 7 per dollar by the end of June at 8 percent, down from 38 percent two months ago, according to options data compiled by Bloomberg. But strategists still see the currency, which traded at 6.8900 per dollar as of 6 p.m. local time on Friday, retreating to 7.05 per dollar by year-end. Treasury Secretary Steven Mnuchin praised yuan strength on Thursday, saying China’s use of foreign-currency reserves to support the currency benefits American workers. U.S. President Donald Trump backed down on a vow to label the country a currency manipulator after meeting with his Chinese counterpart Xi Jinping in early April. While ANZ’s Goh says the yuan’s “stronger bias” will likely persist, it will become difficult for the PBOC to maintain as the market starts to price in further interest-rate hikes from the Federal Reserve. “This is not a fundamental revamp of China’s foreign-exchange policy -- the PBOC will want to keep its policy consistent, which is the cornerstone of yuan stability,” said Mizuho’s Cheung. “But as China eases capital curbs to push for internationalization in the second half, the currency will face mild pressures to weaken.”
Source: Financial Express
