INTERNATIONAL
Hyderabad, Jun 5 (PTI) Ministry of Textiles is in the process of finalising draft guidelines of National Textiles Policy and same will be sent to the union cabinet for approval next month, a senior official said today.
Pushpa Subramanyam, additional secretary of Textiles Ministry said the Centre is awaiting a formal request from the Telangana Government for a formal request for assistance for the proposed Textile Park at Warangal.
"We have done stakeholder consultations with all segments, with all handloom weavers, big manufacturers (on the textiles policy). We have reached out to all the segments. We are almost ready (with the draft).
"Soon after the Textiles India-2017 is over, we will enrich the document with the more inputs from the event. In July it may go to cabinet for approval," Subramanyam said.
The policy aims to achieve USD 300 billion (over Rs 20 lakh crore) worth of textile exports by 2024-25 and create an additional 35 million jobs.
She was in the city to participate in a roadshow to promote Textiles India 2017 a mega exhibition and convention of the Indian textile industry to be held in Gandhinagar, Gujarat from June 30 to July 2.
The event is expected to be inaugurated by the Prime Minister Narendra Modi and attended by several union ministers and chief ministers of various states.
Replying to a query, she said there was seven per cent growth in the textile and garment exports from India between July 2016 and April 2017 (over previous year) on the back of some schemes announced by the Centre.
Last year the total exports stood at USD 40 billion while, the Ministry is targetting USD 45 billion this year, she said.
On the proposed Textile Park in Warangal, she said there is no dearth of funds for the project.
"We are waiting for the proposal from the State Government. We have funds. As soon as it comes we will sanction it," the official said.
In a bid to boost textile industry, the State Government had proposed to set up a fibre to fabric textile park in Warangal. PTI GDK RMT RYS.
Source: India Today
CHENNAI: The ministry of textiles has received representations from the textile industry requesting the Centre to exempt textile jobs from service tax, and is examining it, according to a senior official.
"These are the recent representations we have received from the industry. We are examining it," A Madhukumar Reddy, Joint Secretary, Ministry of Textiles, told TOI, to a question on service tax.
TOI had reported that while the GST rate of 5% brought cheer to manufacturers makers of cotton textiles, the textile industry wants the government to lower the levy for manmade fibre (MMF) products. MMF fabric and yarn, dying and printing units as well as embroidery items would attract 18% GST.
"It (GST) won't impact (the industry). The excise duty was 14%, plus there was CST and in some states, the VAT was 4%. So cumulative impact was more than 18% already," he said.
"The synthetic weaving mills were only ruing the fact that there was a window where fibre neutrality (all fibres should be taxed at the same level) could have been achieved. For reasons of the special characteristics of our economy (use of cotton and natural fibres being higher than synthetics) (we could not do this as it) will impact the cotton and jute farmers and sericulturists. From the point of view of textiles, we consider that this (18% GST) is not going to add to the cost of inputs," he said.
Earlier, he told reporters that the GST rate of 5% on the textile sector has seen a lot of "positive response" from the industry. He briefed reporters about Textiles India 2017, an international exhibition to be held from June 30-July 2 at Gandhi Nagar, Gujarat. Prime Minister Narendra Modi will inaugurate the event.
Representatives from various countries will participate in this event, and around 2,500 international buyers and 15,000 domestic buyers are likely to attend, he said.
Source: Times of India
New Delhi, June 7:
Giving significant relief to car and consumer durables manufacturers, the Finance Ministry on Wednesday released the final rules for transition provisions under the Goods and Services Tax (GST), allowing them to carry forward input tax credit for 90 days, against the earlier provision of 60 days.
The new rules by the Central Board of Excise and Customs (CBEC) also allow dealers and makers of such goods to claim as much as 60 per cent of the input tax credit on stocks lying unsold up to June 30. Higher credit will be allowed for goods that attract GST at 18 per cent or more. For other goods, credit of 40 per cent will be available.
In the case of goods where Integrated GST (IGST) is paid, a credit of 30 per cent will be given for those taxed at 18 per cent or above and 20 per cent for items taxed at lower rates. The rules were finalised by the GST Council at its meeting on June 3, and are expected to give some relief to dealers and companies concerned about the status of inventories at the time of GST rollout.
Eligible and registered assessees are expected to submit a declaration within 90 days — of the amount of input tax credit they are entitled to.
Credit transfer draft
Additionally, the CBEC released the draft credit transfer document to pass on full credit of excise duty to a dealer for unsold stocks before the end of the month. However, this facility will be available only for high-end goods priced over ₹25,000 that “are identifiable as a distinct number, such as chassis or engine number of a car”. The document has to be issued within 30 days of July 1, the planned GST rollout date.
The facility will, however, be exclusive of the transition provision, meaning, those using it will not be eligible to claim input tax credit on unsold goods.
The CBEC has also warned of a severe penalty and using “provisions for recovery of credit, interest and penalty under the CENVAT Credit Rules, 2004” against manufacturers who take tax credit twice on the same goods. Dealers and manufacturers will be expected to submit an online declaration within 60 days on the GSTN.
Too late?
But, with just about three weeks left for the implementation of GST, tax experts point out that the guidelines have been issued too late for the industry and stakeholders to fully benefit. Many consumer durable and apparel manufacturers have already begun sales and promotional offers to ensure that most of their inventory is sold by the month end.
Further, the transition rules include a provision that could allow each State to specify the methodology for calculation of VAT to avail of input tax credit. This could create confusion.
“It remains to be seen if such powers in the hands of States bring subjectivity to this common GST law,” said Rajat Mohan, Director, Indirect Taxation, Nangia & Co.
Hoping for more clarity on the Credit Transfer Document after the next meeting of the GST Council, PwC said: “It is necessary to address several aspects in the draft rules for issuing the CTD such as issuance of CTD by an importer, definition of ‘per piece’.”
Source: Business Line
CHENNAI: The GST rate of five per cent on the textile sector has seen a lot of "positive response" from the industry, a top Central government official said today.
Whether cotton, jute or silk, "we said that the textile sector should have a five per cent GST," A Madhukumar Reddy, Joint Secretary, Ministry of Textiles, told reporters here.
The same rate applied to the sale of garments with a value of less than Rs. 1,000, he added.
"In terms of items of mass consumption, the GST rate has been limited to 5 per cent and because of this the entire industry has welcomed it," he said.
Briefing reporters here about Textiles India 2017, an international exhibition scheduled later this month, Reddy said the rate was 18 per cent for Man Made Fibre (MMF) and even in this segment "there has been no increase".
"On the whole, in the broad sense, there has been a lot of positive response from the industry," on the GST rate, he added. K Selvaraju, secretary-general, South India Mills Association, also welcomed the GST rate for the textile sector, calling it an "excellent tax structure."
"It would definitely strengthen our industry since we are predominantly cotton-based. Sustainability and competitiveness will sustain," he said. The net increase on the common man will be "very negligible," he added. He said a "lot of disparities" have been sorted out by the government ahead of the GST rollout.
"In my opinion, for the first time we are having an excellent tax structure," he added. Earlier, briefing about the Textiles India 2017 event, Reddy said it will be held from June 30-July 2 in Gandhi Nagar, Gujarat, with Prime Minister Narendra Modi slated to inaugurate the international exhibition.
The exhibition will showcase India's strength in the entire textile and apparel value chain from fibre to fashion, he said.
Various countries including China, the US, Bangladesh and Vietnam among others would participate in the event, he said adding, about 2,500 international and 15,000 domestic buyers were likely to attend the three-day expo.
Source: Economic Times
DINDIGUL, India (Thomson Reuters Foundation) - The pots and pans in Anandi Murugesan's home lie empty. A handful of vegetables litter the floor below. Dinner is far from ready.
The last meal that 15-year-old Murugesan ate was some rice and leftover lentils. More than eight hours later, and there is still no freshly cooked food in sight.
"There is rice and my younger sister will make some rasam (tamarind based soup)," she said from the cramped kitchen of her two-room home in Manjanaickenpatti village in Tamil Nadu.
Back from a 10-hour shift at a spinning mill, she says she is "not very hungry anyway, just very tired".
Murugesan is one of up to 400,000 workers employed by some 1,600 mills in the southern state of Tamil Nadu, a major hub in India's $40 billion garment and textile industry.
Like most adolescent girls employed by the industry, she is overworked, underweight, anemic and hungry at work, according to doctors who have been running health camps in the region.
"More than 50 percent of the girls are hungry through the day, skipping meals or barely eating in their rush to get to work," said Dr Bobby Joseph, head of the community health department at the Bengaluru-based St John's Medical College.
In studying health in the garment sector, Joseph has mapped girls in Coimbatore, Dindigul, Tirupur and Erode districts.
Nearly 45 percent are underweight, the study found, with most of the girls rarely eating fruit or veg.
Source: Reuters
NEW DELHI: The rupee on Thursday depreciated 7 paise to 64.40 a dollar level in morning trade ahead of former FBI director James Comey’s congressional appearance later in the day.
Reports suggested that a written testimony from the fomer FBI director overnight did not add major revelations about an investigation into Russian meddling with last year’s US presidential election. Dollar index, which tracks dollar movement against a basket of six currencies, stood at 96.72 level.
“In the near-term, the USD-INR spot is likely to appreciate even more as uncertainty with respect to Trump’s administration will keep the American currency pressurised in turn favouring the Indian currency,” Angel Broking said in a note.
The RBI on Wednesday maintained status quo on the policy rate and lowered its inflation expectation to 2.0-3.5 per cent in the first half of the year and 3.5-4.5 per cent in the second half, which also lifted the local currency.
Analysts said the policy review by the ECB and snap elections in UK general election later in the day would also influence currencies globally. It will have a bearing on the rupee-dollar exchange rate as well, they said.
Meanwhile, most Asian currencies weakened in the early Thursday trade, with Japanese yen depreciating to 109.91 a dollar level, compared with 109.79 level in the previous session. Korean won slipped 0.23 per cent, while Singapore dollar inched 0.10 per cent lower. Thai Bhat, Malaysian ringgit and the Chinese yuan were down up to 0.20 per cent.
The domestic currency has appreciated 5.6 per cent against the US dollar so far this year, which has been in line with 5-7 per cent appreciation seen in other peer currencies.
Source: Economic Times
NEW DELHI: The Cabinet today approved signing of an initial pact with South Korea for export credit facility of USD 9 billion for infrastructural development in India.
The MoU is proposed to be signed between the Export- Import Bank of India (EXIM Bank) and Export-Import Bank of Korea (KEXIM) during the forthcoming visit of Finance Minister Arun Jaitley to Korea during June 14-15, 2017 for the Annual Financial Bilateral Dialogue, an official statement said.
The decision is expected to promote the country's international exports, and deepen political and financial ties between India and Korea, it added.
According to the statement, the export credit will be utilised through lending by EXIM Bank for promoting projects for priority sectors, including smart cities, railways, power generation and transmission etc in India, and for the supply of goods and services from India and Korea as part of projects in third countries.
Under the implementation strategy, the parties to the MoU will hold mutual consultations to structure the financial assistance, review the existing arrangements and related procedures.
EXIM Bank will identify viable projects in India, the statement said, adding "for projects in third countries, both parties will jointly identify viable projects."
The statement said it is understood from EXIM Bank that the $9 billion would be extended by KEXIM by way of Investment Credit (typically export credit facility to finance projects with a certain level of Korean import content and interest rates as per OECD export credit guidelines).
Noting that the supply of goods and services from India and Korea as part of projects in third countries will be an additional avenue which this MoU will enable, the statement said it will help in exchanging mutual experience, sharing information on financing export and import operations, project assessment and knowledge generated in respective fields of activities.
Source: Economic Times
NEW DELHI: India is among the top five consumer markets in Asia offering retailers consumer spending growth of an average of 6.1 per cent over the next five years, says a report.
According to BMI Research, a Fitch group company, China, Sri Lanka, Vietnam, India and Indonesia represent five favourite consumer markets in Asia, offering retailers the strongest consumer spending growth over its forecast period to 2021.
"Consumer spending in India will maintain strong levels of growth through to 2021, as the country's positive economic outlook continues," BMI Research said adding real consumer spending growth is expected to see an average of 6.1 per cent over this five-year period, with 2017 coming in at 6.2 per cent.
Some of the key factors responsible for increase in consumer spending include, increasing access to consumer credit, lower inflation, and a more favourable regulatory environment for foreign-owned retailers bodes well for India's consumer sectors over the coming years.
The report further said India has a thriving e-commerce segment, with online retail sales expected to continue growing at double-digit rates over our forecast period.
"Due to limitations on the activity that overseas retailers are allowed to undertake, e-commerce has so far been dominated by local firms such as Flipkart and Snapdeal.
"However, Amazon is making a real push into the market and recently announced USD 500 mn investment to roll-out online food retailing in India. Bricks-and-mortar retailers are also beginning to enter the e/m-commerce segment, due to the high mobile penetration in the country," it added.
Source: Economic Times
After agreeing to a trade truce with China (“The global political economy”, April 21) on his recent visit to Europe for a Group of Seven summit meeting, US President Donald Trump opened another front in his global trade war: This time the enemy is Germany. (Incidentally, the truce with China has nothing to do with that country having agreed to register “Trump” as a brand name earning royalties for several high-priced goods and services to be sold in China, soon after Trump’s meeting with Chinese President Xi Jinping.) But this apart, Trump is right on one point: The US’ external trade deficit leads to lower domestic growth, output and employment. The other side is that surely one of the more important reasons underlying the deficit is an overvalued dollar whose exchange rate is market-determined and there are no capital controls. Eswar Prasad would approve of these policies (see “Prospect of China’s domination”, June 1) — and, by implication, its consequences in terms of growth and employment?
The origin of this preference for market-determined exchange rates and a liberal capital account is in the theory of market efficiency — that market-determined asset prices reflect all fundamentals, and allocate capital in such a way as to maximise returns. This is an integral part of the laissez faire ideology propagated by the so-called Chicago school of freshwater economists, founded by Milton Friedman. Empirical evidence does not support the theory as economists such as Robert Shiller, Stephen Golub, James Tobin and others have proved. Tobin had also proposed a tax on short-term, cross-border capital flows to curb the volatility of exchange rates. Powerful lobbies of banks, who make a lot of money from currency trading, made sure it went nowhere.
Leaving aside technicalities, there are many examples of asset prices having nothing to do with fundamentals: From the tulip bulb mania in Amsterdam in the 17th century to Bitcoin, the artificial computer-created “crypto-currency” today. The latter has no intrinsic value, but the price more than doubled last year, and is up another 150 per cent so far this year (It is around $3,000, and the market capitalisation of the asset is close to $50 billion!) Gold is of course an age-old example. Tobin has argued that it derives value “almost wholly from guesses about the opinions of future speculations”. Keynes described man’s fascination with gold as a “barbaric relic of human irrationality”. As for allocative efficiency of markets, he saw little evidence that “investment policies which are most profitable” are socially desirable. This is surely true of exchange rates the role of which as a speculative asset now overshadows the original purpose as a means of exchange.
Another point I had made in last week’s article was Martin Jacques’ prophecy that China’s impact on the world will not be limited to the economy, but encompass ideology and culture as well; it may end the era of global dominance of the West. This possibility has become stronger after Trump withdrew from the Paris agreement on climate change to which most of the rest of the world subscribes. On climate issues, global leadership seems to be passing to Europe and China. On the question of a liberal capital account, both Paris and Berlin are far less enamoured of finance capital than London and Washington. With China joining them as a co-leader of the global economy, will capital controls and managed exchange rates once again become the norm?
To be sure, China’s rise in the global economy is unlikely to be in a straight
IIline. There are two major question marks:
The outsized banking sector with assets almost 300 per cent of gross domestic product and a huge shadow banking sector selling all kinds of investment products. Are there large, hidden problems in the asset quality? The pace of Chinese companies taking over businesses abroad reminds one of a similar spree by Japanese companies in the 1980s. Have Chinese entrepreneurs learnt from their Japanese counterparts’ experience then?
Tailpiece: Last week, one day after the media reported the debt servicing problems of Reliance Communications, a major international rating company downgraded its rating on the company. Surely, rating should be a leading, not lagging, indicator of a borrower’s financial health? Last week, the same agency was fined 1.24 million by the European Securities and Market Regulator for breach of regulations. Sadly, our policymakers plead with such companies, which so liberally distributed the coveted AAA ratings on thousands of mortgage-backed securities almost until the bubble burst in 2007, to improve India’s ratings.
Source: Business Standard
The Reserve Bank of India (RBI) seems to have taken an over-cautious stand by opting for a status quo on interest rates. In its first bimonthly policy of the current fiscal year, the RBI’s inflation projection is 2-3.5 per cent in the first half of the year and 3.5-4.5 per cent in the second half. This is substantially lower than its earlier projection of 4.5 per cent in the first half of FY18 and 5 per cent in the second half. At the same time, the forecast on gross value added (GVA) growth has been mildly reduced to 7.3 per cent. Even then, all that the RBI has done is to maintain its neutral policy stance, citing inflation risks on which it apparently wants to get more clarity. The policy statement says at the current juncture, “global political and financial risks materialising into imported inflation and the disbursement of allowances under the Seventh Central Pay Commission’s award are upside risks, though the implementation of the goods and service tax is not expected to have a material impact on overall inflation”.
The RBI has given other justifications, too for its decision. These include the lack of clarity about the“transitory”effectsofdemonetisation,fiscalslippagesduetofarmloan waivers and inefficient transmission of earlier rate cuts. On the face of it, it still considers rising inflation a bigger threat than a more prominent slow down. Possibly that is why the fact that Q4 FY17 gross valued added fell to 5.6 per cent or that GVA (excluding agriculture and the government sector) fell to 3.8 per cent do not figure in the statement. Instead , the RBI takes note that, according to the May-end provisional estimates, the full year GVA for FY17 was just 10 basis points lower than the estimates in February.
Many in the markets have, however, latched on to the overall softer tone of the policy to say the door has been left open for a rate cut in August. But the concern is it may remain only a hope as there is no clarity on whether the RBI will prefer to wait till the inflation trend is even lower than its own projections. No wonder, the decision was not unanimous as one external member of the monetary policy committee dissented. In fact, by all available metrics, the timing was ripe for a rate cut. Inflation had been trending down — retail inflation for April came in at less than 3 per cent, which was a multi year low.On the economic growth front, the latest CSO data showed that a domestics low down had set in since the start of the 2017 financial year and this trend accentuated after demonetisation in November which saw credit growth and private investment plummet. On top of that, crop production is expected to hit record levels, including a glut in pulses, and the forthcoming monsoon is going to be normal. There is more: Internationally, crude oil prices are expected to remain in a comfortable band.
In that sense, the decision to go ahead with a pause on the repo rate and allowing only a 50 basis point cut in the SLR (the portion of money banks need to invest in government bonds and gold) is a disappointment. In any case, the latter is of hardly any use to the system given that banks have already excess holdings in government securities. In its concluding statement, the RBI has said, “premature action at this stage risks disruptive policy reversals later and the loss of credibility.” The question is if growth does not rebound sharply soon enough, policy reversals and loss of credibility may come back to haunt the central bank.
Source: Business Standard
New Delhi: FM Arun Jaitley signed the multilateral convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (BEPS) at Paris on Wednesday. More than 65 countries, including India, signed the convention and several other countries are expected to join soon.
The multilateral convention is an outcome of the OECD/G20 project to tackle BEPS or tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The project identified 15 actions to address BEPS in a comprehensive manner.
The convention will operate to modify tax treaties between two or more parties. It will modify India's treaties in order to curb revenue loss through treaty abuse and BEPS strategies by ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created. India was part of the ad hoc group of more than 100 countries and jurisdictions from G20, OECD, BEPS associates and other countries, which worked on an equal footing on the finalisation of the text of the multilateral convention, starting May 2015.
The convention enables all signatories to meet treaty-related minimum standards that were agreed as part of the final BEPS package, including the minimum standard for the prevention of treaty abuse.
Source: Times of India
The leading position of China as the main supplier of textiles and apparel to the EU has continued to be eroded in 2016, by the increasingly vigorous entry of other production zones. Undeniably, the main beneficiary of this was the SAARC zone, which has grown slowly but steadily since 2010, according to the European Apparel and Textile Confederation.
Mediterranean countries have experienced the same scenario as China between 2010 and 2015, but import shares have stabilised or even improved in 2016, the European Apparel and Textile Confederation (Euratex) said in its bulletin no. 01/2017.
The Euratex report analyses the 2016 EU external trade for the textile and clothing sector as well as the main EU suppliers and customers, evaluates the weight of regions and sectors in total EU trade and includes detailed tables and graphs for the 33 main EU trade partners.
In 2016, four zones—China, Mediterranean, SAARC and ASEAN—accounted for over 86 per cent of total extra-EU textile and clothing imports. EU-28 imports originating from these groupings primarily related to clothing goods.
In terms of products, China prevailed as the main supplier of woven garments to EU last year. However, China’s share continued to decline to the benefit of South Asian and Mediterranean countries. Concerning imports of knitted garments, China was overtaken by the SAARC zone, the report said.
Analysing EU-28 exports scenario, the report states that exports struggled to grow in a difficult global economy and faced issues in maintaining market shares, principally in made up articles.
Compared to last year, EU exports’ shares remained stable for the four main defined country groupings: NAFTA, EFTA, the Mediterranean countries and the group of autonomous countries. These four groups accounted for 58 per cent of extra-EU textile and clothing exports in 2016.
Woven fabrics were the major textiles exported by the EU. The NAFTA zone and the Mediterranean countries were the biggest purchasers of textile goods, while EFTA and NAFTA areas made up the two main buyers of clothing articles. However, in absolute value, there was little growth in EU exports to these EFTA and NAFTA zones. (RKS)
Source: Fibre2fashion
East African Community partner states have agreed to grant garments and textiles manufacturers a three-year waiver of duties and value added tax (VAT) on inputs, fabrics and accessories not available in the region to boost local production and reduce the cost of production. This is one of the strategies to promote textiles and leather industries while slowing down the importation of used clothes, shoes and other leather products from outside the region.
The EAC partners will now adopt a three-year strategy (2017-2019) for the phase-out of importation of used clothes and shoes, through increased levy on these products, compliance with EAC Standards licensing of importers, and categorisation of products per bale of imports.
A policy on the recommendations on the modalities for promotion of textile and leather industries states that "The EAC shall grant all EPZ companies an increase of domestic quota supply from the current 20 per cent for a period of three years.
The off-loaded portion shall be subjected to payment of requisite common external tariffs (CET) rates and must strictly comply with EAC rules of origin," adding, "Partner states to establish Cotton Lint Banks modelled around Uganda cotton buffer stock model to ensure availability of cotton lint for spinning mills and downstream value addition.
KARACHI: The government has once again lost the opportunity to revive the national economy through the federal budget 2017/18, as the current budget has failed to support the export-oriented industries, including textiles, said Zahid Mazhar, senior vice chairman of All Pakistan Textiles Mills Association (Aptma).
In a statement on Wednesday, Mazhar said that the government failed to bring in fundamental reforms to encourage exports, industry and employment.
The government has not announced any measures to generate employment, promote exports and encourage import substitution, he added.
The industry had requested reduction in turnover tax. On the contrary, the government has increased the turnover tax from one percent to 1.25 percent, he said, and urged the government to reduce the minimum turnover tax to 0.25 percent.
He also urged the authorities to do away with the imposition of two percent further tax on the textile industry.
He requested the government that before passing the federal budget from the National Assembly, it should ensure zero-rating of all inputs, including packaging materials, spare parts and fuel and energy in true spirit.
The government has again extended delay in arranging timely sales tax refunds, which will further lead to disastrous consequences, he said.
Presently, more than Rs200 billion has been stuck-up in sales tax refunds, resulting in creation of severe liquidity problems for the industry, he said, and demanded immediate resolution of the issue.
Mazhar said the export-led growth package announced by the prime minister in January this year for the textile industry was merely an eyewash, as only an amount of Rs1 billion has been released by the State Bank of Pakistan so far and the government has budgeted a meagre amount of Rs4 billion only for the next financial year against the total package of Rs180 billion for a period of 18 months based on the requirement of Rs10 billion per month.
Source: The News
The global economy is on course this year for its fastest growth in six years as a rebound in trade helps offset a weaker outlook in the United States, the OECD forecast on Wednesday.
The global economy is set to grow 3.5 percent this year before nudging up to 3.6 percent in 2018, the Paris-based Organisation for Economic Cooperation and Development said, updating its forecasts in its latest Economic Outlook.
That estimate for 2017 was not only a slight improvement from its last estimate in March for 3.3 percent growth, but it would also be the best performance since 2011.
Yet despite this brighter outlook, growth would nonetheless fall disappointingly short of rates seen before the 2008-2009 financial crisis, OECD Secretary General Angel Gurria said.
"Everything is relative. What I would not like us to do is celebrate the fact that we're moving from very bad to mediocre," Gurria told Reuters in an interview.
"It doesn't mean that we have to get used to it or live with it. We have to continue to strive to do better," he added.
While recovering trade and investment flows were supporting the improving economic outlook, Gurria said barriers in the form of protectionism and regulations needed to be lifted to ensure stronger growth.
The improvement would also not be enough to satisfy people's expectations for better standards of living and reduce growing income inequality, he said.
The OECD saw an improved global outlook even though it downgraded its estimates for the United States, despite a weaker dollar boosting exports and tax cuts supporting household spending and business investment.
The OECD forecast U.S. growth of 2.1 percent this year and 2.4 percent next year, down from estimates in March of 2.4 percent and 2.8 percent, respectively. OECD chief economist Catherine Mann attributed the downgraded outlook to delays in the Trump administration pushing ahead with planned tax cuts and infrastructure spending.The weaker U.S. outlook was offset by slightly improved perspectives for the euro zone, Japan and China.
EURO ZONE LOOKING BETTER
Boosted by firmer German growth, the euro zone economy was seen growing 1.8 percent both this and next year, up from 1.6 percent for both years.
Lifted by improving international trade in Asia and fiscal stimulus, Japanese growth was seen at 1.4 percent this year before slowing to 1.0 percent next year, both slightly raised from the OECD's March estimates of 1.2 percent and 0.8 percent respectively.
The OECD also marginally nudged up its estimates for growth in China to 6.6 percent this year and 6.4 percent in 2018, boosted by stimulus spending.
That in turn was supporting strong imports and helping to fuel a revival in Asian trade. As a result, global trade volumes were seen growing 4.6 percent this year, nearly double the rate seen in 2016. Among the risks to the OECD's outlook, it warned that the growing divergence between monetary policy rates among the major central banks raised the chances for financial market volatility.
The OECD also saw a potential for "swift snap-back" in U.S. long-term interest rates when the Federal Reserve decides to reduce the size of its balance sheet, especially if it comes at a time of rising policy rates.
Source: Reuters
