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MARKET WATCH 15 MAY, 2019

NATIONAL

INTERNATIONAL

 

Trade war: India extends retaliatory tariff deadline on US products till June 16

As Washington delays GSP decision, New Delhi is looking at pushing back tariffs by a month. The government on Tuesday extended the deadline to impose retaliatory import tariffs on 29 US products till June 16. A Finance Ministry notification said the duties, which were to come into effect from May 16, have been postponed by a month. The move comes as New Delhi hopes to sort out trade issues with Washington after the general elections are over and a new government is in place. The duties, which were to come into effect from May 16, are now likely to be applicable from mid-June. “The Commerce Department is recommending to the Finance Ministry that the retaliatory duties against the US should be put off further by a month. This is being done taking into account the fact that the US has not yet withdrawn the Generalised System of Preferences schemes for India,” a government official told BusinessLine. The Finance Ministry had issued a notification earlier this month postponing the date of imposing retaliatory duties on the US from May 2 to May 16. India had announced retaliatory tariffs worth $230 million on about 29 American goods in June last year in response to imposition of penal tariffs of 25 per cent on steel and 10 per cent on aluminium from the country by the US. New Delhi has since been postponing implementation of these duties hoping to resolve trade concerns, including the proposed withdrawal of the Generalised System of Preferences (GSP) by the US. The GSP offered duty-free access to the American market for more than 3,000 items from India. “The US was supposed to withdraw the GSP in the beginning of May. Since it did not happen, India postponed the retaliatory duty till May 16 hoping that it would be clear by then what was playing on the US’ mind. During US Secretary for Commerce Wilbur Ross’ visit last week, it became clear that Washington did not want to withdraw the GSP scheme till it gave an opportunity to the new government formed after the general elections to sort out its concerns. That is why India is planning to postpone the retaliatory duties till the mid of next month,” the official explained. While the US seems to be dilly-dallying on GSP withdrawal, it has not given any indication yet on whether it was willing to take back the penal duties imposed on Indian steel and aluminium. The US wants India to address the price cap issue for medical devices, provide greater market access for dairy and agricultural products and also reduce high import tariffs for mobile phones. In 2018, bilateral trade in goods and services registered a growth of 12.6 per cent to $142 billion, from $126 billion in 2017.

Source: The Hindu Business Line

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India will soon have to decide on sharing daily US dollar-Rupee rate with overseas exchanges

Currently, only registered users can access reference rate on same day; SGX in talks with FBIL. India will soon have to take a call on whether to officially share the US dollarrupee reference rate with overseas exchanges, fund houses, corporates and banks. The benchmark rate is used to settle millions of trades and currency derivative contracts in India and abroad. Financial Benchmark India Pvt Ltd (FBIL), mandated by the Reserve Bank of India, is the independent benchmark administrator for interest and foreign exchange rates. The agency authorised to set the benchmark exchange rate has recently started announcing the rate with a day’s lag – allowing only registered users to access information on the same day. “Now, the question is whether FBIL would give foreign exchanges like DGCX (Dubai Gold & Commodities Exchange) and SGX (Singapore Exchange) access to the reference rate… It’s difficult to deny them but RBI has never approved betting on rupee outside the country,” a senior official with a bank told ET. An SGX spokesperson said the exchange “has been in communication with FBIL with regards to registering for the reference rate” while DGCX did not respond ET’s query. FBIL officials declined to comment on whether the agency would give overseas institutions access to the daily reference rate. “The reference rate which is freely available on the FBIL website is a day old. Though anyone can obtain the current rate from Reuters, using the rate without FBIL’s approval would be construed as an irregular practice. No exchange would like to do that,” said a senior official of a local bourse. SGX (at least till Tuesday) said the settlement price for INR-Dollar contracts is the “reciprocal of the RBI USD-INR exchange rate or such publicly available equivalent successor rate” determined by the exchange; DGCX, however, in describing its INR-Dollar derivatives contract refrains from making any mention of the Indian central bank. The UAE bourse simply says that the final cash settlement price is “based on the official USD-INR reference rate issued by relevant body on last trading day.” Earlier, the reference rate was announced by RBI. The job was handed over to FBIL after RBI decided to intervene in the exchange traded currency futures market in India. The reference rate is arrived at by taking the rates within a randomly chosen 15-minute window between 11:30 am and 12:30 pm every dayIn fact, some years ago, the methodology was changed so that FIIs, MNC banks and corporates – some of which are offshore arms of large Indian groups – are not in a position.

Source: Economic Times

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India and Africa: The way forward for two potential economic giants

What probably remains is the efficient packaging and execution for a lasting legacy since we believe in “share and care” and want to grow together. After seven decades, the fifty-five African states are trying to sincerely decide on their own future course through greater and definitive integration. Several regional organisations were conceived of whom some function more actively and comprehensively than the others especially in the domain of economy and trade. Several regional groups have overlapping entities and overarching approaches which tended to confuse the effort with the expected outcomes. Africans have made sincere efforts to unite and evolve multilateral institutions like the African Union (AU) or the African Development Bank (AfDB) and several effective regional organisations be they related to financial, banking, customs or developmental priorities. Despite the slow and occasionally wavering processes they have been working hard to create a pan-African economic space which could provide them the requisite levers for international negotiability and protection. They established an Agenda 2063 at the AU Summit in 2015 which seeks to achieve a more prosperous Africa through an inclusive growth and sustainable development embracing Pan-Africanism. Since they identified the basic problems afflicting the continent a Call for Action Plan sought to eradicate poverty, provide affordable housing, education and skill development, equitable industrialisation, modernising agriculture, creating infrastructure across the spectrum, mobilisation of domestic resources for development, and conflict prevention across Africa. These are the key issues that face any developing country. Trade and not Aid surely not the conditional aid has been the driving force for achieving these objectives. One of the key recommendations has been to establish a Continental Free Trade Area since the Agenda 2063 had set the target of enhancing intra-regional trade to 50 percent by 2050 from the current 18 percent. It estimated an eventual growth and share of 12 percent for Africa in the global trade from two percent to 12 percent in the same time frame. Despite road blocs and divergences the project is moving smoothly as it seeks to establish ‘a prosperous Africa, a peaceful Africa and a just Africa’. Earlier in 2008 an African Free Trade Zone had been created with the participation of sub regional groups like EAC, SADC and COMESA. However, in March 2018 at the Kigali Summit 44 countries signed up to the African Continental Free Trade Area (AfCFTA) encompassing 1.2 billion people with a combined GDP of $2.3 billion. This happens to be the largest trade agreement since WTO and seeks to establish “ a single continental market for goods and services with free movement of business persons and investments’. It would end up reducing the average export tariffs of 6.1 percent on over 90 % of the items. A closer integration continues even though the biggest economies like Nigeria are yet to come on board and scotch their apprehensions while South Africa did finally join in. President Buhari, in order to protect their industries and manufacturing does not want Nigeria to become a “dumping ground’. However only last month with the ratification by Gambia as the 22nd country adequate legal requirement is completed and the AfcFTA could kick start. For India it will be an immense opportunity if we sign an Comprehensive Economic Cooperation Agreement with them as on our own we already provide significant market access to dozens of LDC countries. But undoubtedly Africa is slated to be the next big thing in the later half of the 21st century as it would provide consumer market with 1.7 billion people of over $ 6.7 trillion consumer and business spending by 2030 and investment opportunity of over $100 billion a year after discounting for the domestically generated funds for the infrastructural needs across 55 countries. According to the AfDB economic outlook report 2018, Africa now collects $500 billion in tax revenues; $ 50 billion in foreign aid and $60 billion in remittances and almost the same in FDI. Yet the inherent sub-regional, administrative, bureaucratic logistical, connectivity as well as security challenges remain, that have stunted the integration and growth so far, and will have to be addressed in a more concerted manner. At the same time several African countries are on a high growth trajectory. Out of the 10 fastest growing economies at least five are in Africa which will have a multiplier effect on the regional requirements and output. Growth has been present throughout the continent, with over one-third of Sub-Saharan Africa countries posting 6% or higher growth rates, and another 40%growing between 4% to 6% per year. Several international business observers have also named Africa as the future economic growth engine of the world. Hence the global attention is normal. China has already taken a significant lead through decades of concerted engagement with the African countries, chequebook diplomacy and by fast delivery of projects.The western countries especially the US are trying to catch up by containing China and possibly Russia through a ‘containment of influence’ strategy. The results of this reactive policy are doubtful. Since December 2018, US and underlined their National Security Strategy, Defence and Africa Strategy being China centric and not necessarily pro-Africa in their execution. No wonder John Bolton said that activities of China and Russia “stunt economic growth in Africa; threaten the financial independence of African nations; inhibit opportunities for US investments; interfere with US military operations; and pose a significant threat to US national security interests.” Hence apart from direct engagement especially in sub-Saharan Africa they are looking to work closely with countries like India which have benign cooperation and benevolent relationship with the Continent for historic reasons. Japan, the biggest ODA provider, is also keen to expand and work with India both in private and public sector projects under the aegis of Asia Africa Growth Corridor (AAGC). Likewise, Gulf countries like UAE and Saudi Arabia are looking to collaborate in a trilateral format to ensure their food security. Although, India remains a partner of choice for Africa, what has lacked and been lamented by the African leadership is the frequency of high-level visits from India to Africa. South Africa may have been an exception where the ministerial preferences stopped. It was in fact Pt Jawaharlal Nehru who had visited many countries in Africa in 1960s and propagated for their independence and development. India also garnered tremendous goodwill as a result of its quest for their wellbeing. The toil of the Indian origin diaspora became the bridge of continuity in the post-independence period. Somehow while we received and hosted a large number of African leaders either bilaterally or through the multilateral meetings like the NAM or India- Africa Forum Summits in India, the agenda for our top leadership for visit to African countries in a focussed manner was missing. It became a real concern over time as many of the strong African leaders from big countries felt slighted. Fortunately, the trend has been reversed. We have seen a spate of interactions at different levels from both sides. Under PM Modi ,India developed an ambitious agenda of mutually beneficial cooperation fromtrade and economic collaboration to capacity building. During the last five years more than 30 outgoing visits by Indian President, Vice President and Prime Minister have taken place and dozens of incoming visits of Heads of State from Africa is a testament to the “Africa Focus”in the Indian foreign policy establishment. It is a fact that relations with the continent are at their best in over five decades with several institutional mechanisms like India Africa Forum Summits and an unprecedented capacity building assistance in place. Our trade at $ 62 bn witnessed 22% growth last year with over $ 55 bn in crucial investments. Prime Minister Modi, while speaking at the Parliament in Kampala in July 2018 outlined his Africa vision through the ten guiding principles which include: Africa is among top priorities for India and momentum of cooperation will be sustained through regular exchanges; development partnership as per African priorities; preferential access to Indian markets for African products; assist in harnessing digital revolution in Africa; improve Africa’s agriculture potential; fight climate change together; work together to keep oceans and maritime lanes free for all; Africa instead of becoming a theatre of competition should become nursery for its youth; and aspire and work together for a just, representative, democratic global order. These are ideal, achievable and collaborative policies that dictate a paradigm shift compared to other big powers who are trying to get into the ‘Gold Rush’ for exploitation by way of neo-colonialist approaches. India could collaborate with Africa to meet the challenges of technology gaps and incoherence of geopolitics. As such in the new paradigm of Indo-Pacific India considers western pacific to extend to eastern coast of Africa with Indian ocean at its centre which will dictate its strategic footprint. What can be done differently in specific terms by us so that policy objectives could be secured for mutual benefit. Firstly, India has a reservoir of soft power and good will in Africa that needs to be further cultivated through enhanced people to people exchanges and respecting the sensitivities and cultural diversity at the grass root level. This can be further cemented by focussed capacity building and skill development programmes, Secondly We need to understand and provide what the African nations want and consider desirable. Thirdly ,we should bite what we can chew. The gap between announcements of assistance like Lines of Credit and project grants and timely execution needs to be curtailed through more transparent and expeditious and empowered monitoring mechanisms with the involvement of respective Heads of Mission in India and the concerned country. Perhaps the budget management of the financial commitments made at the highest level should rest with the Finance Ministry so that MEA does not have to run from pillar to post to get the budgetary allocations while the Development Partnership Division carries out the execution part of it. Fourthly, we should not blindly compete with other partners of Africa but try to find a more efficient way where our expertise and execution is competitive and can yield better outcomes. In fact, it is better to examine in detail the kind of projects and funds required and how it will be executed before we officially announce it. Hence a SWOT analysis in each case is a must for which a dedicated team of generalists and experts be assigned so that we are absolved of the responsibility of putting the cart before the horse. It is avoidable to make announcements for creating short term media sound bites. Likewise, we should not find satisfaction in the fact that reportedly China or any other country’s projects are cancelled due to the threats of “debt traps”. No point grudging with what is probably neutral or complimentary. We need to work towards a balanced approach and if possible, collaborate where feasible and wanted by or acceptable to the respective African country. We should not necessarily believe what they say but what they actually do on the ground with regard to our core concerns. Fifthly we should revive closer defence and security, maritime and counter terrorism cooperation like that in 1960s and 70s when India set up several defence academies and training institutions and trained large number of African officers several of whom rose to become Heads of State and occupied important positions. We have begun joint exercises on counter terrorism and anti -piracy which should be continued with greater vigour. Sixthly, over 2 million successful Indian diaspora in Africa could provide that much needed bridge to overcome the occasional hiatus in cultural and commercial diplomacy. Finally, senior and aspiring foreign service officers should be posted as Heads of Mission with sufficient means and responsibilities, targets and subsequent rewards. India has an edge in Africa and currently a focussed plan too. What probably remains is the efficient packaging and execution for a lasting legacy since we believe in “share and care” and want to grow together.

Source: Financial Express

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US-China trade row can open up opportunities for Indian business: CII

Replying to a query on how the US-China row will have an impact on textiles sector, he said that Indian businesses hope to capitalise on China-US trade row. The trade row between China and the United States can result in an opportunity for Indian businesses to deal with the largest economy of the world and fill in the supply chain, according to Confederation of Indian Industry (CII) chairman, Southern Region, Sanjay Jayavarthanavelu. Replying to a query on how the US-China row will have an impact on textiles sector, he said that Indian businesses hope to capitalise on China-US trade row. “The trade war opens up opportunity to deal with the largest economy of the world. He said the trade row will result in disruption in supply chain and a lot of countries will have a chance to fill in the supply chain. Indian businesses see it as an opportunity,” he said. As per the World Economic Outlook Report, global growth is expected to ease further in 2019 with International Monetary fund lowering growth forecast for world output to 3.3 per cent from the earlier estimate of 3.5 per cent. The downgrade was underpinned mainly on account of US-China trade tensions, tight financial market conditions and normalisation of monetary policy in advanced economies. He said that the CII is working to spread the Model State Budget in select States to foster State-specific action and promote fiscal discipline. Outlining CII-Southern region’s priorities for 2019-20, Sanjay said the CII Southern Region has chosen ’Competitiveness of South India Inc. India@75: Forging Ahead’ as its theme. He said high employment and export-oriented sectors are critical for contributing to the growth of the State. On CII focus on Micro, Small and Medium Enterprises sector, Sathish Raman, regional director, CII southern region, said that CII is expanding its footprint for SMEs by asking them to ‘Go Global’ and asking them to forge partnership with global players in India. He said that SMEs need handholding. On Employment Generation and Livelihood Creation, Sanjay said the major engagement would be Skill Gap Study in the labour intensive areas and to facilitate industry centric skill policy in Southern States. The Model Career Centre (MCC) in Chennai provides career counselling, skill training, and assessment thereby facilitating employment for unemployed youth. Over 12000 candidates are to be placed through MCC, Job fair in Tier II cities in this year, he said.

Source: Indian Express

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India to decide on Iran oil imports after elections

Iran’s Foreign Minister Mohammad Javad Zarif met External Affairs Minister Sushma Swaraj on Tuesday in New Delhi to discuss bilateral issues, including the fallout of the US decision last month to discontinue the sanction waivers given to eight countries, including India, for continued purchase of oil from the country. Zarif, who reiterated that India was an important partner, was keen that it should continue to source at least a small part of its oil imports from Iran, an official close to the development told BusinessLine. India, however, does not want to take a decision on oil imports from Iran till the election process is over and a new government is formed, and this was indicated to the Iranian Minister, the official said. While India has not openly committed to reduce its import of oil from Iran to zero following the withdrawal of the US waiver, senior officials have earlier said it may not be possible to continue to buy from Iran as the banking, insurance and shipping systems would be under sanction. “There is a possibility that Iran may have something to propose on how payments could be made, but all this would be relevant only after the elections,” the official added. In May 2018, Trump withdrew from a nuclear deal that the US and five other major world powers had struck with Iran in 2015 to curtail its nuclear programme. In November that year, Washington re-imposed sanctions on exports of Iranian oil but granted waivers to eight economies that had reduced their purchases of Iranian oil.

Source: Business Line

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Rupee recovers 7 paise to 70.44 against dollar

Mumbai: The rupee Tuesday recovered 7 paise to close at 70.44 to the US dollar on the back of gains in equity markets while US-China trade-related concerns and rising crude oil prices continued to weigh on investor sentiment.Stock markets cut short their nine-day losing streak with the benchmark BSE Sensex closing 0.61 per cent higher and NSE Nifty regaining nearly 74 points on value buying in pharma and banking counters. At the interbank foreign exchange market, the rupee opened strong at 70.43 against the US currency. During the day, the local unit moved in a range of 70.51 to 70.30. The domestic currency finally ended at 70.44, up 7 paise against its previous close. The rupee had slid to a two-and-a-half-month-low of 70.51 Monday on heavy forex outflows. "Strong recovery in the domestic equity markets and US Futures helped the rupee maintain strength throughout the session," said V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities. Foreign fund outflows, rising crude prices and US-China trade-related concerns continued to weigh on the domestic currency, dealers said. "Rupee has nearly depreciated by 1.4 per cent in the last one week on account of the escalating trade dispute between US and China and sustained outflow from the Indian capital market. There has been a net outflow of around USD 200 million dollars from the Indian capital market in the last one week," said Vaqarjaved Khan (Research Analyst, Angel Broking). On the trade war front, US President Donald Trump remained adamant on his policy to impose a hefty import duty on Chinese products, which has resulted in a quick retaliation from China and a massive fall in the American stock markets fearing a US-China trade war. "There can be some retaliation, but it can't be very, very substantial, by comparison," Trump told reporters at the Oval Office of the White House. China announced a hike in retaliatory tariffs on the import of USD 60 billion of American products. Meanwhile, the Dollar Index which gauges the greenback's strength against a basket of six currencies gained 0.06 per cent to 97.38. Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 2,011.85 crore on a net basis Tuesday, provisional exchange data showed. Brent crude futures, the global oil benchmark, rose 1.28 per cent to trade at USD 71.13 per barrel amid simmering US-Iran tensions and supply-side disruptions. Meanwhile, Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.2576 and for rupee/euro at 78.9227. The reference rate for rupee/British pound was fixed at 91.4370 and for rupee/100 Japanese yen at 64.04.

Source: The Economic Times

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Adani Ports will invest $290 million in Myanmar to develop container terminal

Infrastructure conglomerate Adani Group has received in-principle approval from the Myanmar government to invest $290 million to build and run a container terminal along the Yangon river for 50-years. This is Adani group’s second overseas venture after the Abbot Point terminal in Queensland, Australia. Adani Yangon International Terminal Co Ltd (Adani), a unit of Adani Ports and Special Economic Zone Ltd (APSEZ), has been approved by MIC – Myanmar Investment Commission – a single-window approval authority under the civilian government headed by the Minister for Investment and Foreign Economic Relations U Thaung Tun, according to an official at Myanmar’s Directorate of Investment and Company Administration. The Ahlone International Port Terminal 2 (AIPT 2) will be developed over 54 acres in Myanmar’s commercial capital Yangon and will employ over 1,100 local people. As part of the deal, Adani will set-up a maritime university to upgrade skills and build infrastructure such as waterways and other transport facilities to drive economic development in the region. The terminal will be built under the auspices of the Myanmar Port Authority and the Myanmar Ministry of Transport and Communication. The Adani group confirmed the deal but declined to give details.

Taking on China, Pakistan

Adani’s investment in Myanmar gives India a geopolitical counter to Chinese investments in Sri Lanka’s Hambantota port and Pakistan’s Gwadar port as the Dragon encircles the region with its Belt and Road initiative. The first phase of the new terminal is expected to start operations by 2020-end with a capacity to handle 150,000 twenty-foot equivalent units (TEUs). In the second phase, the capacity of the terminal will be raised to 800,000 TEUs by June 2021. The AIPT 2 will be part of the Yangon Port Cluster, which currently includes Asia World Port Terminal and Myanmar Industrial Port. Along with Myanmar International Terminals Thilawa, located to the south of Yangon, the Yangon cluster handles 90 per cent of Myanmar’s exports and imports.

Revenue model

The day-to-day working of the new terminal will be with the civilian government and the revenue generated will be shared with the Myanmar Port Authority, the terms of which will be decided shortly. The expansion of Myanmar's river ports is part of the country’s strategy to rapidly increase exports over the next five years and position it as a regional trade hub. Adani’s proposed investment in the Myanmar port is held through Singapore-based entities and follows the regulations of the Singapore government. Singapore has a memorandum of understanding with Myanmar to boost partnerships in transport and logistics, including port planning. Adani’s entry will add to the growing list of multi-national corporations that are contributing to the growth of Myanmar’s economy including Total, Unilever, Mitsubishi, Posco, Daewoo, Samsung, Siemens and GE.

Source: Business Line

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Positive sentiments continue for manufacturing in Q4FY2019: FICCI Survey

Capacity Utilization rises first time in last many quarters from 75% to 80%, rising cost of production still a concern for Manufacturers FICCI's latest 'Quarterly Survey on Manufacturing' highlights a continued positive sentiment for manufacturing sector in Q4 of 2018-19. Overall sentiment in the manufacturing sector remains positive as the proportion of respondents reporting higher output growth (around 54%) during the January-March 2018-19 has remained same as compared to Q-3 of 2018-19, noted FICCI Survey. First time in last many quarters, the overall capacity utilization in manufacturing has witnessed an increase to 80% in Q-4 2018-19. It was hovering at 75% for last many quarters, as per the survey. On hiring front, the outlook for the sector seems to have slightly improved for near future. While in Q-4 of 2017-18, 70% respondents mentioned that they were not likely to hire additional workforce, this percentage has come down to 62.5% for Q-4 of 2018-19. Going forward it is expected that hiring scenario will improve further. 37.5% in Q-4 of 2018-19 as compared to 30% in Q-4 of 2017-18 are looking at hiring more people now, noted the Survey.FICCI's latest quarterly survey assessed the sentiments of manufacturers for Q-4 (January-March 2018-19) for twelve major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, metal & metal products, paper products, textiles, textile machinery, tyre and miscellaneous. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 3.56 lakh crore. In terms of order books, 44% of the respondents in January-March 2019 are expecting higher number of orders against 43% in October-December 2018-19.

Production Cost

The cost of production as a percentage of sales for manufacturers in the survey has risen for 72% respondents. This, of course, is significantly higher than the percentage of 62% for previous year. This is primarily due to increased cost of raw materials, wages, power cost, rising crude oil prices, increase in finance cost and rupee depreciation.

Capacity Addition & Utilization

The overall capacity utilization in manufacturing has witnessed a slight increase to 80% in Q-4 2018-19. The average capacity utilization for the manufacturing sector in the last few quarters has been around 75% only as per the survey. The future investment outlook, though moderate, is slightly better than that was perceived in Q-4 of 2017-18. 40% respondents reported plans for capacity additions for the next six months as compared to 47% in Q-3 of 2018-19. High raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labor, high imports, requirement of technology upgradation, low domestic and global demand, excess capacities, delay in disbursements of state and central subsidies and competing countries such as Bangladesh and Vietnam enjoying lower wage cost and export benefits resulting in erosion of competitiveness of Indian exporters are some of the major constraints which are affecting expansion plans of the respondents. In all the sectors covered in the survey namely Automotive, Capital Goods, Cement and Ceramics, Chemicals, Fertilizers and Pharmaceuticals, Electronics & Electricals, Leather and Footwear, Metals & Metal Products, Paper Products, Textiles and Textiles Machinery average capacity utilization has either increased or remained almost same in Q-4 of 2018-19 as compared to Q-3 2018-19.

Inventories

89% of the respondents maintained either more or same level of inventory, which is more as compared to 86% in the previous quarter and slightly less than 89.5% as was the case in Q-4 of 2017-18. This has been largely due to subdued domestic and export demand.

Exports

The outlook for exports is somewhat positive as 42% of the participants are expecting a rise in exports for Q-4 2018-19 and 33% are expecting exports to continue to be on same path as that of same quarter last year. However, rupee depreciation has not led to any significant increase in exports as 76% of the respondents reported that the exports were not affected much by rupee depreciation. Thereby, emphasizing that there were other global factors that are restricting the growth of our exports.

Interest Rate

Average interest rate paid by the manufacturers has slightly decreased to 10.3% against 10.6% p.a. during last quarter but the highest rate remain as high as 15%. The recent cut in repo rate by RBI shall come as a relief for the industry and it expects more reduction in the rates in coming months to drive investments.

Sectoral Growth

Based on expectations in different sectors, it is noted that sectors like textiles and cement are likely to have strong growth in Q-4, whereas most other sectors are likely to have either moderate or low growth.

Source: Business Standard

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DNA Edit: US, China face off - The trade war will impact the Indian economy

How does this trade confrontation between two economic superpowers affect India? When two trade giants come to blows, it is bound to take its toll on other lesser players. Days after the US announced steep tariff hikes on $300 billion worth of Chinese products, Beijing has hit back raising tariffs on over 5,000 US products worth $60 billion. The new rates, which will kick in from June 1, range from 5 per cent to 25 per cent. How does this trade confrontation between two economic superpowers affect India? It is certain to leave its imprimatur on the Indian economy. China’s imports, hit by the US levy, do create a void and opportunity for India in the soya bean, textiles, gems and jewellery exports market to the US, helping it expand its footprints. Being the largest consumer of base metals, China will be negatively impacted. Gold is safe and could benefit, while crude oil prices will fluctuate, resulting in a global slowdown. This, too, may help India. But the downside remains formidable as well. A trade war is bad news, leading to inflation and low growth in the economy. Its impact on the stock markets was already evident on Monday when the Sensex slid for the ninth session on the trot, reaching a two-month low. India’s capital flows could be affected and foreign direct investment may see a slowdown. Levy of high taxes raises the production cost of items meant for import. It may lead to related consequences like increased prices of raw material and jacking up interest rates. The most important impact could be India’s bad loans situation, which is likely to face more global and domestic challenges. The value of the rupee declining steadily to an all-time low will coincide with weakening of the US dollar, triggered by a fresh round of tariffs. None of this sounds good.

Source: Daily News & Analysis

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India’s KPR Mill opens new factory in Ethiopia

KPR Mill Ltd, an integrated textile manufacturing company from India, has opened its first overseas garment unit, in Ethiopia’s Mekelle Industrial Park. The garment factory will have a capacity of 10 million items each year. So far, employment has been created for 700 people and export shipments have commenced to Europe and the United States. The opening of the factory is the result of a collaborative partnership with the International Trade Centre’s (ITC) Supporting Indian Trade and Investment for Africa programme (SITA), which works to build trade and investment linkages between India and East Africa.

The official inauguration of the factory – KPR Export – was attended by ITC Executive Director Ms. Arancha González and Mr. K.P Ramasamy, Chairman of KPR Mill Ltd. Other dignitaries at the inauguration included Ethiopian State Minister for Trade and Industry Mr. Teka Gebreyesus, Mr. Debretsion Gebremichael, Vice-President of Tigray Regional State, Mr Mayur Kothari, Convenor, India Business Forum, Ethiopia and Mr. Anteneh Alemu, Deputy Commissioner of the Ethiopia Investment Commission. Funded by the United Kingdom’s Department of International Development (DFID), ITC’s SITA programme aims to improve the competitiveness of selected value chains, including textiles and apparel, in five East African countries – Ethiopia, Kenya, Rwanda, Uganda and the United Republic of Tanzania – through the provision of partnerships with institutions and businesses from India. Mr. C. R. Anandakrishnan, Executive Director of KPR Mill, said: ‘We are happy with the progress of KPR Export so far and thanks to trade schemes such as the United States’ Africa Growth and Opportunity Act and the European Union’s Everything but Arms initiative, we believe garments made in Ethiopia can better capitalize on opportunities in foreign markets. ‘With the support of ITC our speed of entry into Ethiopia, from planning to invest to starting operations has been good. ITC connected us with the right institutions and people in the country, and have provided us with key information about Ethiopia. This resulted in speeding up our decision making ability.’ Ms. González said that the setting up of KPR Export was a showcase example of Ethiopia’s attractiveness and investment potential, and a demonstration of the successful effort by ITC’s SITA programme in strengthening business linkages across the Indian Ocean. ‘With DFID’s support, at ITC we are pleased to have been part of KPR’s journey to invest in Ethiopia. We are particularly proud of the 1,500 news jobs that will be created at the Mekelle Industrial Park and the opportunities these provide, especially for women and youth,’ she said. The decision to by KPR Mill to open the production unit in Mekelle, followed a visit to Ethiopia by its Chairman Mr. K.P. Ramasamy and senior management team in April 2018. As a result of the trip, which was organized by ITC’s SITA programme, KPR Mill made an initial investment commitment of $20 million and decided to set up a first garment unit in Mekelle Industrial Park. By July 2018, KPR Export Plc was registered as a subsidiary in Ethiopia. The complete set-up of the first garment unit took about two months. Extensive training of the workforce took place in both Ethiopia and India. At the beginning of 2019, the first exports were undertaken to the US and Europe. So far, the investment and establishment of KPR Export has led to the creation of 700 jobs in Ethiopia. At full capacity, the company will employ 1,500 machine workers who will produce 50,000 garment pieces per day for the world market.

Source: News Ghana

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WPI inflation slips down to 3.07% in April

India’s wholesale inflation, as measured by the Wholesale Price Index (WPI), slipped down to 3.07 percent in April compared to 3.18 per cent in March led by fall in prices of manufacturing products. According to data published by Ministry of Commerce & Industry, wholesale inflation in food rose to 4.95 percent as against 3.89 percent in March. Vegetable inflation soared to 40.65 percent against 28.13 percent in March. The whole sale inflation in manufactured products fell from 2.16 percent to 1.72 percent in April. Besides this, no significant change has been seen in the wholesale inflation in manufacture of textiles. In March 2019, wholesale inflation in manufacture of textile stood at 3.94 percent and in April 2019, it stood at 3.92 percent. The core inflation data for the month of April was at 1.90 percent as compared to 2.50 percent in the previous month

Source: KNN India

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Global Textile Raw Material Price 14-05-2019

Item

Price

Unit

Fluctuation

Date

PSF

1231.52

USD/Ton

-0.24%

5/14/2019

VSF

1746.84

USD/Ton

-1.23%

5/14/2019

ASF

2512.54

USD/Ton

0%

5/14/2019

Polyester    POY

1190.76

USD/Ton

-0.85%

5/14/2019

Nylon    FDY

2663.93

USD/Ton

-0.54%

5/14/2019

40D    Spandex

4570.90

USD/Ton

-0.32%

5/14/2019

Nylon    POY

5502.55

USD/Ton

0%

5/14/2019

Acrylic    Top 3D

1433.86

USD/Ton

-1.01%

5/14/2019

Polyester    FDY

2576.59

USD/Ton

0%

5/14/2019

Nylon    DTY

2693.05

USD/Ton

0%

5/14/2019

Viscose    Long Filament

1331.97

USD/Ton

-0.54%

5/14/2019

Polyester    DTY

2984.19

USD/Ton

-0.49%

5/14/2019

30S    Spun Rayon Yarn

2481.97

USD/Ton

0%

5/14/2019

32S    Polyester Yarn

1943.36

USD/Ton

-0.74%

5/14/2019

45S T/C    Yarn

2824.06

USD/Ton

-0.26%

5/14/2019

40S    Rayon Yarn

2765.83

USD/Ton

0%

5/14/2019

T/R    Yarn 65/35 32S

2343.68

USD/Ton

-0.62%

5/14/2019

45S    Polyester Yarn

2096.21

USD/Ton

0%

5/14/2019

T/C    Yarn 65/35 32S

2489.25

USD/Ton

0%

5/14/2019

10S    Denim Fabric

1.34

USD/Meter

0%

5/14/2019

32S    Twill Fabric

0.79

USD/Meter

0%

5/14/2019

40S    Combed Poplin

1.06

USD/Meter

0%

5/14/2019

30S    Rayon Fabric

0.62

USD/Meter

0%

5/14/2019

45S    T/C Fabric

0.69

USD/Meter

0%

5/14/2019

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14557 USD dtd. 14/05/2019). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

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New China tariff list sweeps up home textiles

The Home Fashion Products Association (HFPA) this afternoon alerted members that the new list of Chinese imports proposed for a 25% tariff is now public. The US Trade Representative’s (USTR) notice is expected to be published in the Federal Register in the next several days, according to HFPA legal counsel Robert Leo. “Based on the USTR text, it appears that all HTS provisions not subject to a specific importer or HTS exclusion will be getting a 25% duty rate, including HFPA and ADFC [American Down and Feather Council] members’ products,” said Leo, a partner at Meeks, Sheppard, Leo & Pillsbury. Companies wanting to comment on the proposal – or argue why their product classification should be removed from the list – have until June 17 to do so. A public hearing on the proposed tariffs will take place the same day. This week also brings action concerning tariffs on EU imports – including some textiles. USTR will also hold public hearings tomorrow and the following day on the tariffs, which the Trump administration proposed in retaliation against subsidies on large civil aircraft by the European Union (EU) and certain EU member states. If enacted, the tariffs would fall on goods imported into the US from all EU member countries. Several US airline executives are scheduled to speak in favor of the proposal. Representatives of the National Retail Federation, Retail Industry Leaders Association and the American Apparel & Footwear Association are also on the hearing panel list. All three groups oppose the tariffs. The USTR is accepting public comments about the impact of the proposed EU tariffs through June 19. The Home Fashion Products Association alerted its members last month that the EU tariff list includes:

• Cotton yarn

• Certain cotton fabric

• High tenacity aramid yarn

• High tenacity polyester yarn

• Polyester staple fiber

• Metalized textile yarn

• Certain carpets, hand-knotted or hand-inserted of fine animal hair

• Carpets and other textile floor coverings of wool or fine animal hair

• Certain hand-loomed or and-hooked carpets and textile floor coverings

• Blankets and traveling rugs

• Bed linen, not knitted or crocheted, printed, of cotton

Source: Home Textiles Today

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Pakistan: Official calls for improving textile export industry

The National Bank of Pakistan (NBP) is ready to invest in the textile industry being the largest employment-providing and revenue-generating sector, said NBP President Arif Usmani. Addressing exporters at the Pakistan Textile Exporters Association (PTEA) on Tuesday, the NBP president termed textile exporters as invaluable asset of the country. He said NBP will keep playing its vital role in strengthening the economy by supporting trade and industry through comprehensive financing, as economic growth is the key to generating employment opportunities, counter inflation and bring economic prosperity. He was of the view that no meaningful economic development is possible without enterprise and co-operation of exporters. The president expressed hope that with support of the masses, Pakistan will overcome economic challenges and all resources will be mobilised for transforming the country according to the premier’s vision. Welcoming the NBP president, PTEA Chairman Khurram Mukhtar said that the war against terrorism and extremism has badly affected the textile industry. However, the situation has now become better, and trade and business activities are boosting, he added. He acknowledged the initiative of the present government to settle the long outstanding issues of textile export industry. Highlighting the key initiatives, Mukhtar said the government has released various refunds of Rs35 billion in the current financial year; whereas another Rs12 billion have also been released, and the disbursement will start by the State Bank of Pakistan (SBP) by the end of this month. In order to cut down the production cost of export items, special energy tariffs for zero-rated sectors have also been announced, he remarked. He urged continuing the same spirit and momentum as any disruption would damage all the efforts. He said, “We need to gain benefit from the emerging global opportunities.” The government would set a roadmap to generate robust economic activity, increase exports to $30 billion and fulfil the premier’s vision of economic prosperity through exports, the chairman said.

Source: The Tribune

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Apparel organizations call on EU policymakers to help fashion become circular

Five organizations have published a joint manifesto calling on EU policymakers to establish tools for a circular fashion system, namely Euratex (European Apparel and Textile Confederation), Federation of the European Sporting Goods Industry (FESI), Global Fashion Agenda (GFA), International Apparel Federation (IAF) and Sustainable Apparel Coalition (SAC). The document stresses the need for fashion companies to rethink their business model and for policymakers to think beyond existing policy tools, as well as the need for fashion companies and policymakers to work together to achieve a circular economy. “The linear model of 'take, make, dispose' will soon reach its physical limits. Circularity is therefore a necessary solution to minimise the use of finite resources, but it demands a unified approach”, said the five organizations in a statement, stressing that central EU institutions will have a new leadership this Autumn.

You can read the manifesto in full on

https://www.globalfashionagenda.com/download/6083.

Source: Fashion United

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Uganda appoints consulting firms to support with cotton industry transformation

After low relative earnings posted by its cotton and textiles sector, Msingi East Africa – a Nairobi-based industry transformation consultancy – has enlisted the services of Irish consultancy Bradan Consulting Services in order to help restructure the country’s cotton textile export strategy. Concern around the sector’s welfare developed after it came to light that the benefits being reaped from the African Growth Opportunity Act (AGOA) were significantly below potential. AGOA is a programme that allows the US access to a number of emerging markets across Africa since 2000. The programme has produced highly desirable results in the rapidly developing region of East Africa, given its position as a highly lucrative area for investment. Political stability and economic growth have driven economic development in the region, and Uganda is amongst the major economies in this scenario. Nevertheless, Uganda’s neighbouring countries of Ethiopia and Kenya have produced more favourbale benefits from AGOA than Uganda has managed. Ethiopia has garnered more than $220 million under the programme, while Kenya has garnered substantially more, at over $435 million. Uganda’s earnings have been relatively lower at just over $55 million, prompting the government to enlist the services of a number of industry experts. Msingi East Africa has been involved in ensuring that the cotton sector increases in productivity through the textiles and apparel market. The market is booming across the globe, although lack of an enabling policy environment and infrastructure have prevented the Ugandan economy from tapping into this potential. For instance, the exports from the country thus far have been comprised of handicrafts and interior decoration, which are traditionally of low volume. In order to help shift this focus, Msingi East Africa has been restructuring priorities and strategies in the sector, and has now enlisted the services of Irish consultancy Bradan Consulting Services for help with the same. Senior executives at Bradan have already begun their process of evaluating the sector.

Source: Consultancy Africa

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