The consensus in the non-handloom part of the organised textile industry seems to be for a uniform goods and services tax (GST) rate. The GST Council meets this Saturday to discuss it.
At present, the sector doesn’t have fibre neutrality in taxes. Cotton fibre has no excise; synthetic fibre has 12.5 per cent; fabric has nil. Branded garments have the option of a low rate if no input credit is claimed. The average is five to eight per cent.
Says S C Kapur, director-general, Association of Synthetic Fibre Industry, “A 12 per cent GST is advisable for the whole value chain. Cotton and manmade fibre need to be taxed at the same rate. The government has been talking of fibre neutrality since long and implementation of GST is the right time.”
He explains that if the entire industry is taxed at the lowest GST rate of five per cent, then input credit can't be fully claimed. Garments, being value added items, are likely to be taxed at 12-18 per cent, it is reported. Then, 80 per cent of fabric is a blend of cotton and synthetic yarn. To ensure full compliance and avoid GST arbitrage, the rate of tax for both segments should be equal, Kapur said.
The Clothing Manufacturers Association of India has, however, proposed a five cent GST rate across the value chain. This, it says, will increase the compliance from all segments which are at present out of the tax net. Those who disagree say differential rates allow scope for mis-declaration.
Narain Agarwal, chairman, Synthetic and Rayon Textile Export Promotion Council, said: “Bangladesh, Vietnam and China had implemented a 15-16 per cent GST several years ago and they are growing much faster than Indian textile industry. Hence, a uniform 12 per cent GST should not hinder growth.”
At present, the sector doesn’t have fibre neutrality in taxes. Cotton fibre has no excise; synthetic fibre has 12.5%; fabric has nil
Source: Business Standard
The textile industry fears that the Rebate of State Levies (ROSL) scheme will be withdrawn prematurely, with Goods and Service Tax (GST) subsuming all other taxes and benefits and hence urged the government to continue with the ROSL scheme post GST for the benefit of made up exports.
ROSL scheme was introduced in March 2017 initially for three years. Under ROSL, exporters of made ups get incentives of 3.9 percent of the value of exported goods.
The ROSL benefit not only ensured Indian made ups were competitive in the world markets but also encouraged Indian players to expand capacity to meet overseas demand.
Ujwal Lahoti, Chairman of The Cotton Textiles Export Promotion Council (Texprocil) said that when the scheme was introduced, many small, medium and large companies started working on capacity expansion. A number of companies are currently in various stages of capacity expansion despite the fact that the scheme is just three months old.
The objective of the scheme was to provide rebate on state levies consisting of state value added tax (VAT) and central sales tax (CST) on inputs including packaging, fuel, duty on electricity generation and duties and charges on purchase of grid power, as accumulated through the stages of production from yarn to finished made ups.
Many leading companies manufacturing "made ups" are reportedly drawing up plans for investments in this sector after the scheme has been announced. The ROSL scheme will certainly lead to an increase in exports of made ups articles which in turn will create more employment.
Any increase in the exports of made ups will create additional employment in the entire value chain such as spinning and weaving besides the made ups sector especially in the rural areas and for women, said Lahoti.
Earlier, a package including the ROSL scheme was announced for the garments sector in July 2016. Since both "garments" and "made ups" fall under the category of "cut & sew" products and the requirement for labouris more or less similar in both the sectors, increase in the exports of made ups will certainly lead to the creation of more employment and the effect can be seen in the next three to six months.
According to data released by the Ministry of Textiles, after the package was announced, between July 2016 and March 2017, garment exports increased to $13.47 billion from $12.37 billion during the same period in the preceding year.
Source: Yarns & Fibres
West Bengal Finance Minister Amit Mitra expressed "serious doubts" about the country's preparedness to meet the July 1 deadline for the Goods and Services Tax rollout.
West Bengal Finance Minister Amit Mitra had expressed “serious doubts" about the country’s preparedness to meet the July 1 deadline for the goods and services tax (GST) roll-out. But numbers suggest otherwise.
Data from the Kolkata Commissionerate of the service tax department show the pan-India GST enrolment rate at 84 per cent. But West Bengal logged 89.4 per cent. The numbers were shared with Business Standard by the The Confederation of Indian Industry (CII).
The numbers, as on May 1, show the proportion of taxpayers who have enrolled themselves on the GST portal. This is required for them to pay taxes once the new indirect tax regime is implemented.
This percentage is an indicator of the state’s preparedness to adopt GST, said Bijay Kumar, principal commissioner of service tax at the Kolkata Commissionerate. Enrolment rate in Maharashtra and Delhi NCR were at 87.90 per cent and 84.6 per cent, respectively.
Under the current framework, taxpayers can either pay taxes via the Central Board of Excise and Customs (the central government’s interface) or use the VAT tax payment system (using the state government’s interface). “Taxpayers will have to migrate to the new GST system from their original network, which is either with the CBEC or the VAT department," he said. According to the service tax department’s data, the GST enrolment percentage via the Central Board of Excise and Customs (CBEC) route was 82.4 per cent pan-India average. It was 91.2 per cent in West Bengal, the highest in this category. In value-added tax migration, West Bengal stood at 86.9 per cent.
Kerala is the only state, apart from West Bengal, which registered more than 90 per cent GST enrolment under the CBEC route. The average of both these routes was 85.56 per cent.
Typically, large-scale manufacturers and the service sector use the CBEC interface, while smaller taxpayers, retailers and others opt for the VAT network. The findings of the service tax department suggest at the all-India level, the preparedness of large-scale industries was 82.4 per cent, while that of the smaller players was 86 per cent. On May 30, Mitra had expressed “serious doubt" about the country’s preparedness in accepting the July 1 cut-off for GST. “Even large-scale industries are not ready. The requisite ERP is not in place and the software to connect the GST Network is not ready as well." He had written to Finance Minister Arun Jaitley for postponement of the roll-out date, as small- and medium-scale sectors were not yet prepared for the new tax regime.
But latest the enrolment rate of GST puts West Bengal at the third spot in terms of preparedness, contrary to the state’s finance minister’s claims.
While Mitra will be taking up his case for lower GST rates on certain categories of goods and service with Jaitley in the forthcoming GST Council meeting on Saturday, Mitra is also on the lookout for support from other states.
Source: Business Standard
The government on Wednesday retained its estimate of GDP growth at 7.1 per cent for 2016-17, but with the economy reeling under the note-ban exercise last year, growth in the fourth quarter of the fiscal is projected at a mere 6.1 per cent.
According to the provisional estimates of national accounts released by the Central Statistics Office, growth in gross value added (GVA) at basic prices in 2016-17 is pegged at 6.6 per cent, against the advance estimate of 6.7 per cent. It was 7.9 per cent in 2015-16.
Despite the boost from the updated base year and baskets for the index of industrial production (IIP) and the wholesale price index (WPI), demonetisation seems to have impacted the economy: GDP growth in 2016-17 rose at the slowest pace since 2013-14, when it grew by 6.4 per cent.
For the fourth quarter, India lost the tag of the world’s fastest-growing economy as China’s GDP grew 6.9 per cent in that quarter.
For 2016-17, growth in GVA in all sectors barring construction and financial, real estate and professional services were revised upwards as compared to the advance estimates, while for these two sectors, it was scaled down.
However, TCA Anant, Secretary, Ministry of Statistics and Programme Implementation, said it was difficult to analyse policies like demonetisation on a post-hoc basis.
The data comes ahead of the second bi-monthly monetary policy on June 6 and 7, and the clamour for rate cuts is likely to continue.
“The impact of demonetisation is visible,” said DK Pant, Chief Economist, India Ratings.
Terming demonetisation as a temporary shock, Chief Economic Adviser to the Finance Minister Arvind Subramanian said he expected the economy to pick up by 60-70 basis points. “The 7.1 per cent growth is robust,” he said.
The growth rates for 2015-16 have been revised up to 8 per cent from 7.9 per cent while for 2014-15 to 7.5 per cent from 7.2 per cent.
Bearing the brunt of demonetisation, GVA growth in the third and fourth quarters of the last fiscal came in at 6.7 per cent and 5.6 per cent, respectively, against 7.3 per cent and 8.7 per cent a year ago.
In Q4, gross fixed capital formation, dipped 2.1 per cent although for the fiscal it grew 2.4 per cent. However, analysts see growth reviving this fiscal. Moody’s said the note ban would have limited impact, and the economy will grow 7.5 per cent in fiscal 2017 and 7.7 per cent in fiscal 2018.
Source: Business Line
The growth of eight core sectors declined to 2.5 per cent in April, mainly due to lower coal, crude oil and cement production.
The growth rate of eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity – was 8.7 per cent in April last year.
According to government data released on Wednesday, coal, crude oil and cement production recorded negative growth of 3.8 per cent, 0.6 per cent and 3.7 per cent, respectively.
Slow growth in key sectors would also have implications on the Index of Industrial Production (IIP), as these segmnts account for about 38 per cent to the total factory output.
Growth in refinery products and electricity output slowed down by 0.2 per cent and 4.7 per cent in April, against 19.1 per cent and 14.5 per cent, respectively, in the same period last year.
However, natural gas, fertiliser and steel reported positive growth at two per cent, 6.2 per cent and 9.3 per cent, respectively.
Source: Business Standard
With banks reeling under a mountain of bad debt, they have sought amendments to the Scheme for Sustainable Structuring of Stressed Assets (S4A).
In a meeting with Reserve Bank of India, bankers have asked for a number of changes, including a fresh moratorium (on payment of interest), extending the repayment schedule, waiving the requirement of personal guarantee by promoters, and doing away with the requirement that the sustainable portion of the debt should not be less than 50 per cent of current funded liabilities, The central bank had introduced the S4A scheme in June 2016.
The level of sustainable debt (that which can be serviced), according to bankers, should be based on an independent techno-economic viability (TEV) study and not be constrained by the minimum percentage of debt that will be sustainable.
While determining the sustainable debt level, factors such as the stressed company’s moves towards strategic/non-core asset sale and clubbing cash flows of subsidiaries/associates with the main operating/holding company should be taken into account, they added.
Further, bankers have told the RBI that the clause that projected cash flow be based on available cash flow from the current as well as immediately prospective (not more than six months) level of operations is impractical and needs to be done away with.
A senior banker said under the resolution plan for companies facing financial stress, a fresh moratorium needs to be granted on interest or principal repayment for servicing the sustainable portion of debt. The current S4A guidelines do not allow this.
Since the current guidelines are silent on price conversion in case of conversion of debt into equity, the bankers said not only should the conversion take place at an average of the 52-week high and low price, but the lenders or new strategic/financial investors should be exempt from making an open offer.
Bankers said that since in some cases the factors causing stress are beyond the control of the promoters, it is not feasible to require them to furnish personal guarantee. This is more so in the case of listed companies.
Given that most of the stressed companies have resorted to external commercial borrowings (ECBs) and also borrowed from financial institutions and non-banking finance companies, there is a need to expand the ambit of S4A’s coverage to include other lenders.
S&P Global Ratings has assessed that Indian banks’ credit profiles are unlikely to improve over the next 12 months, with the banking sector’s total stressed assets expected to increase to 13-15 per cent of total loans by end March 2018.
Source: Business Line
"The per capita income at current prices during 2016-17 is estimated to have attained a level of Rs 1,03,219 as compared to the estimates for the year 2015-16 of Rs 94,130 showing a rise of 9.7 per cent," an official release said.
The data forms part of the 'Provisional Estimates of Annual National Income 2016-17 and Quarterly Estimates of Gross Domestic Product 2016-17' released by the Ministry of Statistics and Programme Implementation today.
Per capita income is a crude indicator of the prosperity of a country.
In real terms (at 2011-12 prices), per capita income in 2016-17 rose 5.7 per cent to Rs 82,269, against Rs 77,803 a year ago.
The rate of growth in real terms was, however, slower than 6.8 per cent in the preceding year.
The country's Gross National Income (GNI) at 2011-12 prices was estimated at Rs 120.35 lakh crore during 2016-17, against Rs 112.46 lakh crore a year ago.
"In terms of growth rates, the gross national income is estimated to have risen by 7 per cent during 2016-17, in comparison to the growth rate of 8 per cent in 2015-16," it added.
Source: Business Standard
India and Spain on Wednesday emphasised the need for restarting negotiations for the European Union (EU)-India Broad-based Trade and Investment Agreement (BTIA), as President Mariano Rajoy pressed for “solid progress” on the proposed pact, after holding talks with Prime Minister Narendra Modi.
The importance of making progress on the pact was highlighted in a joint statement issued after Prime Minister Modi met Spain’s top leaders in Madrid. Modi and Rajoy underlined the importance of EU–India relations and the need to deepen the existing EU–India dialogues.
“They acknowledged the positive results of 2016 EU–India Summit in March 2016, which marked a new momentum in the EU– India relations. They reconfirmed their commitment to the EU- India Agenda for Action 2020 and to the development of cooperation in the areas of foreign and security policy, trade and investment, global issues, natural movement of persons and people to people contacts,” the statement said.
Source: Business Standard
At a time when global online platforms, such as eBay, Amazon and Alibaba, are engaging with medium, small and micro enterprises (MSMEs) to push their products, policy-related discrepancies need to be removed to boost exports of ‘Made in India’ products via e-commerce, says a FICCI-IIFT study.
The study estimates $26 million B2C e-commerce export potential, of which $3 billion can be achieved in the next three years from 16 product categories.
“There is an urgent need for the government to recognise retail e-commerce exports as an industry and work towards removing regulatory barriers, including reviewing of the Foreign Trade Policy (FTP) in terms of its limitation to certain categories and of a limited amount (like in the case of gems &jewellery), simplifying customs duty procedures and allowing exporters to claim duty drawbacks,” says the report, ‘Exploring Potential of E-commerce for Retail Exports of Indian MSMEs in Manufacturing Sector’, by industry chamber FICCI and Indian Institute of Foreign Trade (IIFT), released here on Tuesday.
Noting that the huge potential for Indian exports through an online mode has not been “exploited to its fullest due to lack of conducive policy environment”, the report said policy strategies need to be aimed at motivating Indian MSMEs to migrate to an e-commerce platform,
There is need to reduce the distance between the producer and consumer and e-commerce can help in bridging this gap. Besides, it will also reduce the cost of products, said SN Tripathi, Additional Secretary & Development Commissioner, MSME Ministry. Sanjay Bhatia, President, FICCI-MSME, said: “There is no way we can undermine the contribution of MSMEs to our economy and it is in fact very important that we continue to explore synergies to integrate this very important sector with the latest emerging trends. E-commerce is one such trend which is massively changing the mechanism of global businesses”.
Commenting on the report, Navin Mistry, Director Retail Exports, eBay India, which supported the study, said: “Since 2012, eBay India has always been proactively driving the agenda for Cross Border Trade in India. We are happy to have contributed to the study given our understanding of working with over 25,000 small and medium entrepreneurs who actively leverage our platform to sell across 200+ countries.”
Source: Business Line
Exporters and importers will have to declare the Goods and Services Tax Identification Number (GSTIN) from July 1, the scheduled date for the implementation of the new indirect tax regime, to carry out overseas trade. The 15-digit GSTIN is issued by the Goods and Services Tax Network (GSTN), the IT backbone of the proposed tax regime.
“Declaration of valid GSTIN in Customs documents (BE/SB) would be mandatory w.E.F. 0000 hrs of July 1, 2017, the likely implementation date of GST, to avail IGST credit on Imports or GST refund on exports,” the revenue department said. The declared GSTIN would be validated for correct IEC (Import Export Code Number)/PAN linkage. The process to enrol taxpayers on the GSTN portal, which was suspended on April 30, will start again on June 1 for 15 days. “All concerned may make use of the special drive by GSTN from June 1 to June 15, 2017 for updation of IEC in GSTIN,” the department's advisory said.
Meanwhile, exporters have raised concerns over the tax refund process under the GST.They are demanding that the current system of ab initio exemption should be continued in the GST also. Under the GST, exporters will have to first pay the required duty and seek a refund. As per estimates, exporters’ working capital of up to Rs 1.85 lakh crore annually could get struck because of the refund process.
Source: PTI
In the run-up to the crucial GST Council meet on June 3, India Inc’s chorus seeking a government re-look at the GST rates fitment is rising.
Industry bodies and trade associations have gone into a tizzy shooting off representations and petitions to get the government to hear them out before the roll-out from July .
The clamour for a review of rates is spread across products, including shampoos, kajal, agarbattis, ayurvedic products, dry fruits, blended oils, school bags, children activity books and even some furniture items, among others.
Traditional items
Take, for instance, the personal care segment. With most products being put under the highest tax slab of 28 per cent, barring hair oils, toothpaste and soaps, FMCG companies are making a case for a lower tax rate for products such as shampoos and hair dyes, stating that these products are also used by the common man. Dinesh Dayal, President, Indian Beauty & Hygiene Association, said: “The current cascading rate of duty on personal care items works out to be around 22 per cent; so, under the GST regime, the tax incidence on these products will become significantly higher. A product like shampoo has 92 per cent rural penetration, while nearly 50 per cent of the sales volumes for hair dyes come from rural markets.”
The association has also pointed out that kajal, which is currently grouped along with other traditional items, such as bindi and sindoor, has been inadvertently left out of the new GST rate structure. They have urged the government to re-insert kajal in this grouping of traditional items that will attract nil duty.
Similarly, associations of Indian importers and traders believe that the proposed 12 per cent GST rate on dry fruits and nuts will make them unaffordable, and have petitioned the government that these be put in the 5 per cent GST slab in line with the current value-added tax structure. Dealers of consumer products, too, are hoping to get clarity on input credit available on transition stocks in the upcoming meeting of the GST Council. Consumer products companies are pushing for higher input credit on these stocks to avoid sales disruptions.
Besides asking the government to reconsider the rate of cess on aerated beverages, the Indian Beverage Association has also sought lower tax rate on non-sugar sweetened drinks and aerated beverages that contain fruit juice. Multiplexes and amusement park industries, too, are disappointed at being put under the highest tax slab along with casinos and gambling.
Review unlikely
Bimal Jain, Chairman, Indirect Tax Committee, PHDCCI, said: “Certain product categories are facing classification issues as they have been classified in 7-8 different categories under various tax slabs. In some other sectors, the indirect tax incidence has gone up significantly so they are hoping that the government will re-look the GST rates.”
The Finance Ministry has already indicated that a review of rates is unlikely and companies should work out their product pricing to ensure that the benefit of input tax credit is passed on to consumers. It has argued that though the headline rate under GST of taxing some items may be higher, the effective rate will be much lower.
“A review of rates can only happen at the highest political level or if a group of States call for it collectively,” said a source.
HSN-based classification
Officials said the GST Council in its June 3 meeting will focus on fixing the rates of only a handful of items, including gold, agricultural implements, bidis and cigarettes, textiles and footwear and packaged food items. Revenue Secretary HasmukhAdhia also clarified some questions on Twitter.
“The effective tax rate under GST is higher than the existing rate for some items primarily because of the harmonised system nomenclature (HSN) based classification and differing rates of VAT in States,” said an analyst, adding that in some cases, the government seems to have taken the highest VAT rate rather than a weighted average of the VAT rate for finalising the GST levy.
Source: Business Line
India and Russia are going to explore the potential of trade and investments between India and the Eurasian Economic Union (EAEU) during the upcoming visit of Prime Minister Narendra Modi to St Petersburg, Russia where he is expected to meet Vladimir Putin. Modi will also address the St Petersburg International Economic Forum (SPIEF) often called a “Russian Davos”.
The EAEU, comprising Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia established in 2015 and seen by experts as Russia’s attempt to strengthen its position in the region at the backdrop of its tensions with the West, could emerge as a prospective partner for India which so far had limited trade with CIS countries, say experts.
On June 3, on the sidelines of SPIEF, Nirmala Sitharaman, Minister of State for Commerce and Industry, and Veronika Nikishina, Board Member and Minister for Trade of the Eurasian Economic Commission (EEC), are expected to sign an MOU to begin talks on a free trade agreement (FTA) between India and EAEU.
Two years ago at the same Forum, Sitharaman had signed an agreement for establishing a Joint Feasibility Study Group on India-EAEU FTA. As both sides have accepted the report prepared by the group, the formal negotiations would begin after the new MOU is signed, the official at EEC said.
Trade potential
Currently, bilateral trade between India and EAEU is around $9 billion, and it was at $11 billion at its peak in 2012-2014. “Supported by the modern instruments of trade policy, the trade could grow significantly,” Nikishina told BusinessLine in the e-mailed response.
Belarus, according to her, will benefit the most with the potential of trade growth with India up by 20 per cent, followed by Russia (18 per cent) and Kazakhstan (12 per cent). For EAEU as well as for India, the potential export growth is the estimated at around 18 per cent once the FTA is in place.
The Joint Feasibility Study Group report published earlier this year showed a potential growth of bilateral trade between India and EAEU up to $37-62 billion.
The exports from the EAEU to India have the potential of additional growth up to $23-38 billion while in case of exports from India to the EAEU, there is potential additional growth of $14-24 billion.
So far EAEU has only one FTA agreement — with Vietnam.
According to Eurasian Economic Commission, in 2016 the mutual trade of the union with Vietnam increased just 1.5 per cent, however, in the first quarter of 2017 calendar year the bilateral trade volumes jumped 29.3 per cent.
“Obviously the main driver of this growth was the FTA that entered into force and has a provision for annual gradual decrease of tariffs from both parties mutually,” Nikishina said. She added that EAEU is currently in the various stages of FTA talks with Israel, Egypt, Singapore and Iran.
Source: Business Line
New Delhi: Prime Minister Narendra Modi will on June 6 take stock of the readiness of the country for the roll out of goods and services tax on July 1.
“It will be a review of the state of preparedness,” a government official privy to the matter said. The Centre is in no mood to postpone the scheduled implementation and is making all efforts to ensure that the switchover to GST remains as smooth as possible for both industry as well as consumers.
The GST Council has favoured implementation of the new tax system from July 1, but a section of industry and some states such as the West Bengal have demanded that it be postponed to September. Some industrial segments are unhappy with the rates and have approached the government seeking changes.
Goods and Services Tax (GST) seeks to replace multiple central taxes such as excise duty, countervailing duty, cesses and state taxes including value-added tax, octroi, purchase tax and luxury tax with a single levy.
The GST Council has decided upon a four-slab structure for both goods and services, with the rates being 5%, 12%, 18% and 28%. Luxury and sin goods such as tobacco face an extra cess.
West Bengal finance minister Amit Mitra, who did not attend the last council meeting in Srinagar, on Tuesday raised issues with rate structure.
Meanwhile, most of the groundwork regarding the crucial tax reform seems on track with the crucial GST already getting approval of Parliament and a number of state assemblies.
The GST Council has cleared rates for most goods and services, as also the rules. It will on June 3 take up rates of six items, including gold and packaged food items, leather footwear, as well as the rules dealing with transition and returns.
Separately, a detailed review would be held by the finance ministry on the readiness of the IT systems of the Centre and states to migrate to the new tax system. Some states have chosen to build their own framework and then link it with the GST Network.
Source: Economic Times
Demonetisation had a pronounced and rather broad-based adverse effect on the economy in the fourth quarter of last fiscal, official data showed on Wednesday, even as the agriculture and mining sectors held up and consumption, despite a sequential slowdown, was still robust. Manufacturing, construction and major services were hit by the currency squeeze, pulling down real gross domestic product (GDP) growth in Q4FY17 to 6.1% from 7% in the previous quarter. Construction contracted 3.7% in the final quarter of last fiscal, compared with a growth of 6% in the year-ago quarter.
GDP grew 7.1% in FY17 versus a revised 8% (7.9% as per previous estimate) in FY16, the Central Statistics Office said, releasing its provisional estimate; its two advance estimates earlier had predicted the same growth for FY17. A downtrend in GDP growth was setting in even before the note ban and the event exacerbated it. India’s GDP growth in the January-March quarter was lower than China’s 6.9% for this period, depriving the country of the fastest-growing major economy status, albeit temporarily.
Analysts saw a likelihood of the Reserve Bank of India providing room for the policy guidance to soften next week, given the tempering of growth and inflation projections. The recent revision of the IIP and WPI series with 2011-12 as base year hasn’t significantly altered the rates of real GDP expansion for later years, disproving many who predicted otherwise. This was because the push effect on real GDP from higher IIP growth figures and the (largely) lower inflation figures from the respective new series has been less strong than assumed. The effect of new series has been “mediated”, chief statistician TCA Anant said; for example, he said, IIP data was used for measuring gross value added (GVA) in manufacturing only to the extent of the non-corporate sector and if annual survey of industries data wasn’t available.
The lower-than-expected real GDP growth in Q4FY17 was also due to the firming up of commodity prices, which drove up the WPI. The GVA growth in Q4FY17 was pegged at just 5.6%, as an unfavourable base also impacted the estimate (GVA grew a robust 8.7% in Q4FY16). The GVA expansion slipped sharply to 6.6% in FY17 from 7.9% in FY16.
Pertinently, although growth in real term slipped in FY17, nominal GDP expansion touched 11% in the year against 9.9% in FY16, owing to higher inflation, especially at the wholesale level. Despite several policy initiatives taken by the Narendra Modi government to promote investments and some pick-up in public investments, gross fixed capital formation (GFCF) has ceded its share in GDP from 31.2% in the first quarter of FY16 to just 28.5% in the final quarter of FY17. In fact, for the first time in the new GDP series, GFCF contracted in Q4FY17 — it was 2.1% less than in the year-ago quarter.
Unless the government stepped up consumption substantially and private consumption also picked up since the third quarter (it has slowed a bit in Q4 owing to the note ban), FY17 growth would have been even lower. The share of private consumption expenditure in GDP went up sharply from 53.3% in Q1FY16 to 57.3% in Q4FY17.
“Excluding agriculture and government spending, Q4GVA expanded by just 3.8% from a year earlier,” noted A Prasanna, economist at ICICI Securities Primary Dealership. According to Aditi Nayar, principal economist at Icra, “Demand and purchases during the festive season and a favourable base effect appear to have couched the impact of the note ban on consumption growth in Q3 FY2017, which was followed by a sharp dip in Q4 FY2017.” Helped by a good monsoon, the agricultural sector posted a huge jump in growth as it expanded by 4.9% during FY17, compared to a dismal 0.7% in the previous year. In the fourth quarter of last fiscal, the agriculture GVA rose 5.2% against 1.5% in the year-ago period. Radhika Rao, group economist at DBS, said: “Agriculture and public administration have been the main drivers of growth, barring which the momentum on the ground is soft — especially manufacturing, construction and financial services.”
Prasanna added: “While we agree that a slowdown in H2, concentrated in Q4, fits in with the theme of a slowdown post-November currency swap, the extent of slowdown is puzzling… Further, the GDP deflator for Q4 has come in at 5.7%, which is clearly at odds with the WPI and CPI data for Q4.”
Shubhada Rao, chief economist at Yes Bank, said the fourth-quarter GDP growth reflects the lingering impact of demonetisation, but incremental data in April show that growth impulse was improving and economic activity was picking up on the ground. “We continue to expect the RBI to remain on pause, with any rate hikes ruled out.
However, the tone will be less hawkish given that both inflation and growth are lower than RBI’s projection,” she said. Most analysts pointed out that the biggest challenge was the near absence of private investment given the kind of stressed balance sheet of corporates and alarmingly high non-performing assets of the banks.
Source: Financial Express
INTERNATIONAL
A speech by a Federal Reserve governor Tuesday underscored a basic shift in Fed policy: The central bank now needs to be convinced that quarterly rate increases are a bad idea.
After years in which any sign of economic weakness was reason enough for the Fed to maintain its stimulus campaign, the Fed is now willing to shrug off at least a little bad data. Lael Brainard, a Federal Reserve governor, told the New York Association for Business Economics that the Fed should raise its benchmark interest rate “soon,” despite new evidence that inflation remains below the level the Fed desires.
The comments by Ms. Brainard reinforced expectations that the Fed will raise rates in mid-June at its next meeting, particularly because she has been a consistent advocate of caution. If she is ready to raise rates, there is probably little internal opposition.
“On balance, when assessing economic activity and its likely evolution, it would be reasonable to conclude that further removal of accommodation will likely be appropriate soon,” Ms. Brainard said.
But beyond June, Ms. Brainard added, she might reconsider the wisdom of additional rate increases if there is not evidence of stronger inflation. Fed officials have said they would like to raise rates at least once more in the second half of the year.
The Commerce Department reported Tuesday morning that the Fed’s preferred measure of inflation rose just 1.5 per cent over the 12 months ending in April, well below the 2 per cent annual pace that the Fed regards as economically optimal. The annual pace of inflation, moreover, has fallen in each of the past three months.
“If the soft inflation data persist, that would be concerning and, ultimately, could lead me to reassess the appropriate path of policy,” Brainard said in New York.
The Fed raised its benchmark rate in December and again in March, to the current range of 0.75 per cent to 1 per cent. The chances of another quarter-point increase in June stood at roughly 89 per cent at the close of futures trading in Chicago on Tuesday, according to CME Group.
The Fed has kept rates at low levels since the financial crisis to stimulate economic activity by encouraging borrowing and risk-taking. It is gradually raising rates toward historically normal levels as the economy improves. Fed officials have said they hope to return rates to a neutral level by the end of the year.
“My view still is that three rate hikes this year makes sense,” John Williams, the president of the Federal Reserve Bank of San Francisco, told Bloomberg News in Singapore on Monday. “Nothing has pushed me away from that. We should continue this gradual process of policy normalization in interest rates.”
Ms. Brainard on Tuesday also offered an upbeat assessment of the economy. She said it appeared to be rebounding from a weak first quarter, with data showing that consumer spending had strengthened in line with the Fed’s expectations. She noted the continued decline of the unemployment rate, which fell to 4.4 per cent in April. The government will publish the May jobs report on Friday.
Ms. Brainard, who has carved out a reputation as the Fed official who takes the most active interest in the health of the global economy, also noted that the international outlook has brightened. “For the first time in many years, we are seeing signs of synchronised economic expansions at home and abroad,” she said.
Inflation remains the outstanding problem. The Fed aims to maintain moderate inflation, rather than price stability, because that lets the Fed cut interest rates more sharply during an economic downturn.
Inflation also eases downward economic adjustments. Employers, for example, can cut costs by raising wages more slowly than inflation, which may be easier for workers to accept than an outright pay cut.
The Fed also wants to avoid deflation, or price declines, because as things become cheaper each day, consumers and businesses postpone buying and economic activity shrinks more. Measures of inflation are imperfect, and prudence dictates maintaining some distance from zero.
Analysts attribute some of the recent dip in inflation to a price war among providers of cellular service. But forecasters are now predicting that inflation may not reach 2 per cent until next year, setting up 2017 as the latest in a long series of years that inflation was predicted to rebound and then failed to meet expectations.
Ms. Brainard described this persistent sluggishness as something of a mystery, particularly given the Fed’s view that the labour market is back to normal.
“The puzzle today is why inflation appears to be slowing at a time when most forecasters place the economy at or near full employment,” she said.
She described the weakness as a “source of concern,” but given the overall strength of the economy, she said, it was not reason enough to delay a rate increase.
Source: Business Standard
LOWELL — The University of Massachusetts Lowell is returning to its textile roots, albeit with a high-tech spin.
The school plans to open the Fabric Discovery Center later this year with the help of an $11.3 million grant from the state, Governor Charlie Baker and university officials announced on Wednesday.
The facility, which will be built on two floors of converted textile mill in downtown Lowell, is one of several centers the state is rolling out as it invests in developing a wave of sophisticated fabrics that incorporate sensors and technology to help industries, hospitals, the military, and consumers.
The Lowell center will concentrate on the development, testing, and manufacturing of consumer and commercial fabrics that are blended with flexible electronics. The state announced the launch of another center last week at the Massachusetts Institute of Technology’s Lincoln Laboratory that will focus on developing fabrics for military use.
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“This is a perfect example of honoring the past and building and looking to and grabbing as fast as we can to the future,” Baker said in announcing the funding.
UMass Lowell was born out of the Lowell Textile Institute, founded in 1895 as the city became a center of fabric manufacturing in the Industrial Revolution. At that time, the school was focused on researching the production of traditional fabrics, such as cotton and wool.
Those traditional textile mills, along with the thousands of labor-intensive manufacturing jobs they provided, are gone.
But the Fabric Discovery Center seeks to spur a new generation of textile manufacturers and high-tech jobs, said Julie Chen, the vice chancellor for research and innovation at UMass Lowell.
The center will look at creating fabrics that incorporate technology to detect, for example, when a wearer is dehydrated or that can be wrapped around pipes so companies know if there’s a leak, or be inserted into the body to help organs heal, Chen said.
The grant money will fund the building of the facility and the purchase of equipment needed to test and manufacturer the fabrics and train students to work with this next generation of textiles, Chen said.
Companies and startups in the region are experimenting with these new fabrics but can’t always invest in the expensive equipment to test for durability, moisture, and temperature and to manufacture samples to show investors, Chen said.
The UMass facility and its equipment should open more opportunities to these firms, with the aim of also drawing other startups to consider moving their companies nearby, she said.
“We’ll be able to help them to get a sample, a prototype,” Chen said. “We’re hoping that this will draw people to think about Lowell as a place they’d want to locate their business.”
Massachusetts has set aside about $100 million to invest over five years in advanced manufacturing.
The federal government has also poured money into innovative textile development.
Last year, the Department of Defense announced it had invested in a $317 million venture run by the Advanced Functional Fabrics of America, an independent nonprofit founded by MIT, to support projects that integrate fibers and yarns with circuits, LEDs, and solar cells, among other technologies.
For the companies that have been working on textile technology and flexible electronics, the investment and interest by the state and federal government, along with academic institutions, can’t come soon enough.
Joseph M. Kunze, the founder of SI2 Technologies Inc., a military contractor in Billerica that manufactures miniature communication antennas, said that when he started his company in 2003 he expected the technology to print electronics into any material would be available within a few years.
He’s still waiting, Kunze said, but he hopes the investment by the state will speed up innovation.
“There’s a lot of work left to do,” he said. “This provides visibility into these efforts.”
The 4th edition of Heimtextil India & Ambiente India, India's finest home fashion business platforms, will be inaugurated by Union textiles minister Smriti Irani on June 20 in New Delhi. Over 180 leading companies from India, Bangladesh, China, Korea, Nepal, and Thailand will present their dining, living and home furnishing collections at the 3-day fair.
The minister will address the gathering and unveil the world's largest cushion representing ‘Fabrics of India’ at the fair.
One of the central attractions at the show, the ILA Experience Zone will feature innovative concepts in interior spaces through a design face-off between product and textile designers. Live demonstrations of different art forms by specially-abled children will be held at the Special Skills Zone.
Top home fashion players, including D’décor, Welspun, Reliance, Raymond, AWKenox Steel, Flair Houseware, Organic Home (Stonemen Crafts), Lifestyles 360 Degree, Gomaads are expected to launch the latest collections aimed at Diwali and upcoming festive seasons in India.
Heimtextil & Ambiente are the world’s largest trade fair brands for the home textiles and consumer goods sector which set the trend barometer globally. In India, the sister fairs Heimtextil India & Ambiente India, organised by Messe Frankfurt Trade Fairs India, present the first-look of the new season’s collections for the Indian market.
India is carving a distinct place for itself in home textile and interior décor space worldwide. The country accounts for 7 per cent of global home textiles trade with Indian products gaining a significant market share in the past few years. Spanning virtually across all the categories of textiles in the world markets, the country has emerged as the second largest supplier of home textile products only after China while domestic demand is constantly on the rise. (KD)
Source: Fibre2fashion
Top-notch knitting and hosiery enterprises, including Zhejiang Yexiao (knitting machinery product development and manufacturing enterprise) and Hefei Opek (fully computerised jacquard hat and scarf knitting machine manufacturer) will present their technology and production equipment at the 18th edition of YiwuTex being held during June 13-15, 2017 in China.
Zhejiang Yexiao and Hefei Opek will be part of the “Functional Knitting Machinery Zone” of the show.
Yexiao will mainly display computerised hosiery machine and flat knitting machine, along with its star product “6F Computer Terry / Flat Machine”, which is capable of weaving one main colour and five secondary colours for each line and in which each sock can be weaved in thirteen colours. It is also capable of weaving 3D pattern socks, is equipped with stepping motor to regulate tension of yarns and weaving density and comes with sensor for automatic protection of computer and electronic parts.
Hefei Opek, a manufacturer of high-speed fully computerised jacquard hat and scarf knitting machines, will showcase the “OPEK 365 H-Speed Hat and Scarf Knitting Machine”, which features advanced technology from Germany, fast weaving of various complex patterns and colours with high precision, and supports customised knitting based on product design features.
In addition to “Functional Knitting Machinery Zone”, YiwuTex 2017 also features “Smart Apparel Machinery Zone” and “Digital Printing Machinery Zone”.
Other famous exhibitors to participate at the show include Santoni (Italy), Lonati (Italy), L.G.L. (Italy), Yamagen (Hong Kong), Groz-Beckert (Germany), BTSR (Italy), Fenghua Xingyu, Shanghai Ruifang, and Honst Textile Machinery.
The show will also have a series of symposiums on topics such as “the commonly-used compression stockings in China and the newest pressure testing standard”, "high-end customised single needle socks machine made in Italy", "DRYARN®, the unique fibre for every sport" and "running of the smart production line".
A knitwear display zone will showcase the latest knitting techniques, fabric technologies and printing patterns. (SV)
Source: Fibre2fashion
