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Fashion and lifestyle retailers are cutting production ahead of the crucial Diwali festive season as they moderate their sales targets due to poor consumer sentiment and sluggish demand. Most retailers have already placed their orders for Diwali with suppliers, but they are using whatever curtailment leeway of 5-10% available to them for the months until December, industry insiders said.
Large retailers such as Future Group, Reliance Retail and Aditya Birla would generally place their orders for Diwali by March-April but now production companies fear they might cancel some of the orders due to the overall economic slowdown.
“Whatever sales we had projected for the season, now we have decided to cut it by 10%,” said Rahul Mehta, managing director at Creative Casuals that supplies garments to Reliance Retail, Aditya Birla and Shoppers Stop among others.
A top executive of one of the largest retailers in the country said growth of same-store sales – a retail yardstick to gauge the performance of outlets that existed for a year or more – for organised brick-and-mortar retailers have dropped this year to below 5% from the usual high single digit growth over the years.
“Confidence is so lacking that everybody is becoming cautious,” said the executive. “If the current growth rate is 5%, can I produce at 20% (expected growth) and pay my vendors?”
Kumar Rajagopalan, CEO of Retailers Association of India, said organised retailers are still showing somewhat growth but the unorganised sector is bearing the real brunt at present.
“Hardly any small retailer is saying they have done well in the last two months,” he said. “They have been hit the hardest.”
Garment suppliers are particularly nervous about small retailers, who generally place orders in July-August. “Smaller retailers could cancel orders,” said Mehta, who is also the president of Clothing Manufacturers Association of India.
“None (of our members) will share their individual details, but from our general talks and discussions, I get the feeling that most of us will (have to) cut production.”
The trend is already visible. A listed retailer has decided to cut production by 10% at its textile manufacturing unit to deal with accumulating inventory, according to a large supplier who preferred not to be named. In June, the company also halted production for a week.
“There inventories weren’t moving at the required rate so they had to halt production. Payments to some of the vendors is also due,” he said.
Chief executive officer of a global apparel retailer that has been in operating in India for more than two decades said, “Consumption is on an all-time low, sentiments are down and inventory is piling. The sector is under stress. Sale is happening only when it is led by heavy discounts.”
Source: The Economic Times
Telangana, a top cotton producing state, is to start mapping its entire supply chain as part of a unique collaboration with the International Labour Organisation (ILO) to weed out child labour and slavery from its fields and factories.
Senior labour officials said that the state will begin a three-year project with the UN labour agency to map its cotton growing farms and spinning mills to ensure its main industry is ethical this month.
“This is for the first time in India, that an integrated approach to identify both child and bonded labour is being undertaken,” said Eslavath Gangadhar, director of Telangana's agency that tackles child and bonded labour. “This issue is very relevant for us because recent surveys have shown that more than 80 per cent of child labour cases are being reported in agriculture. And even globally, the focus is on sustainable cotton.”
Known problem
Industry experts say the cotton supply chain is the hardest to track as the journey from field to retailers involves many stages — such as seed production, cotton growing, gins to separate seeds and fibre, spinning mills and garment factories.
India, the world's second largest cotton producer after China, is the only country named by the US Department of Labour report in 2016 for having child and forced laboir in both cotton seed production as well as cotton growing. “It is not a hidden problem,” said Davuluri Venkateswarlu, director of Glocal Research, whose 2014 study found that 2,00,000 children under 14 were working on cotton seed farms, double the number since 2010.
“There was a brief decline in the numbers later but the problem is emerging again, particularly in the seed production sector, which sees children permanently drop out of school.”
“Children are hired for seed production as their small hands are useful in cross pollination to produce hybrid seeds,” Venkateswarlu said, adding that farmers calculated that two children could do the work of three adults but be paid less.
Empowering workers
Six of the 10 cotton growing districts of Telangana will initially be mapped for labour violations under the project. It will also look at gender discrimination in salaries for agriculture workers and whether they have collective bargaining rights, Gangadhar told the Thomson Reuters Foundation.
The state will also train officials from various government departments, including labour and education, to identify and stop any form of forced labour in cotton fields.
The first focus will be to gather evidence and map the status of child labour, forced labour and gender discrimination, said Ranjit Prakash, ILO's project coordinator for India. “In the long run, the aim is to promote social dialogue and empower workers in keeping with the fundamental principles and rights of the workplace,” he said.
Source: The Business Line
India's central bank is poised to deliver its fourth successive quarter-point interest rate cut on Wednesday, amid calls from investors and the government for further easing as a slowdown gripping the economy becomes more pervasive.
The Reserve Bank of India will lower the benchmark repurchase rate by 25 basis points to 5.5 per cent, according to almost all of the 36 economists surveyed by Bloomberg. Swap markets are pricing in at least another 50 basis points of reductions before the end of 2019.
Finance Minister Nirmala Sitharaman has ratcheted up pressure on the six-member monetary policy committee for a "significant cut" to lift economic growth from a five-year low. Inflation that's stayed below the central bank's 4 per cent medium-term target for 11 months in a row and the Federal Reserve's first rate cut since the financial crisis allows room to retain the policy makers' easing bias.
ALSO READ: Monetary policy review: RBI may cut rate, but commentary will be cautious
A quarter-point cut will take the benchmark rate to the lowest since April 2010. With price pressures anchored, the central bank may have the leeway to keep rates lower for longer.
"We expect 75 basis points of additional rate cuts spread over August, the fourth quarter of 2019 and the first quarter of 2020, taking the repo rate to 5 per cent by March 2020," said Pranjul Bhandari, chief India economist at HSBC Holdings Plc in Mumbai. The headline inflation will stay below the RBI's medium-term target for the "foreseeable future" due to a lack of underlying price pressures across sectors, she said.
Data dependent
Policy action will be data-dependent, RBI Governor Shaktikanta Das said in an interview last month, while suggesting that the MPC has already delivered 100 basis points worth of easing as he equated a switch to an accommodative stance to a 25 basis-point cut. Incoming data also doesn't show any momentum in the economy.
A slew of high-frequency indicators -- from sliding car sales to a contraction in exports and imports of goods -- suggest the economy is yet to recover from a dismal performance in the first three months of this year, when growth slumped to a five-year low of 5.8 per cent.
An uncertain monsoon is adding to worries about rural consumption and wages, while rising unemployment and the aftermath of a shadow bank crisis is weighing on consumer sentiment in urban India. That's pulling down capital expenditure by companies too.
Source: The Business Standard
Most industrial sectors, farmers rightly fear an import deluge. The Centre seems to have realised this; it needs to decide fast
India at last seems to have found its lost voice at the on-going Regional Comprehensive Economic Partnership negotiations. After months of indecisiveness, the Indian negotiating team finally went to attend the RCEP Ministerial meet in Beijing last week with a clear mandate. It was instructed to say no to any pact which did not fulfil its wish list.
With the support of the political bosses, Commerce Secretary Anup Wadhawan and his team adopted an aggressive posture and listed out India’s demands individually to the partner countries of the RCEP in the bilateral meetings on the sidelines of the event. The
message to each of the partners — be it the ten-member ASEAN, China, South Korea, Japan, Australia or New Zealand — seemed to be common: if you don’t humour us, we may quit the game.
It is heartening that after years of gradual softening of its position, which resulted in doubling of its initial market access offer to its biggest competitor China despite protests from the domestic industry, India is now preparing to change tack.
But the more important question is whether India, will show the spine to exit the RCEP if it must. If India realises that like in the case of most free trade pacts it has signed so far, it will end up paying a much higher price compared to what it stands to gain in the RCEP, will it dare to say no?
Can it face the diplomatic pressure from its friends in the ASEAN? Anyway, it doesn’t have very long to decide as the year-end deadline for implementing the pact, that was reinforced at the Beijing meeting, is looming near. While from the looks of it, the proposed RCEP — with a third of world’s GDP, almost half its population and 40 per cent of exports — seems to be too big a market for India to ignore, if one thinks lucidly enough the country may not lose out on much if it decides to keep out of the pact.
For one, the average import tariff levels in the region are just 6.8 per cent, much lower than India’s 13.8 per cent (industrial and agriculture). Moreover, most of the RCEP countries, including Japan and South Korea, have very high tariffs on certain products sensitive to them, such as rice, footwear, dairy products and honey, which they can continue to shield through the sensitive lists.
Even if a country like China, which has average tariffs almost as high as India’s, offers to eliminate tariffs on all its goods, it may not really result in a substantial increase in market access given the non-tariff barriers that the country specialises in imposing. Eliminating tariffs for even a modest 70 per cent of the items coming from China could totally disrupt the Indian industry, irrespective of the market access offered by China to India.
Although in the bilateral with the ASEAN, India has demanded that the 10 countries improve their offers in the services sector so that Indian professionals and workers can have easier entry into their market, it is doubtful whether much would come from it. The very reason the ASEAN had not offered anything to India in services in the FTA they have already in place is that most of its members are very sensitive about protecting the sector and have not offered much liberalisation even within the bloc to each-other. So, in terms of enhanced market access, India would get relatively much less from its RCEP partners than it would be giving to them
In fact, tariff elimination could worsen the trade deficit with RCEP, at $105.2 billion in 2018-19. Since import duties are also a source of revenue for India, it could experience a disproportional loss of customs revenue if it gets into the pact.
Change in stance
The fact that Commerce Minister Piyush Goyal stayed away from the Ministerial meeting and sent the Commerce Secretary to take his place was the first indication of the change in India’s defensive stance adopted so far.
While the official reason for the Minister skipping the meeting was the extended Parliament session, many in the Ministry say that it was the industry consultations on RCEP that Goyal held just a few days prior to the Ministerial meet that left him confused and unsure.
The marathon sessions that Goyal had with the Indian industry pointed towards the total disaster that the pact could end up being for the country. Of the over 500 representatives that the Minister met from numerous sectors ranging from steel, engineering goods and plastics to dairy and sea-food, most were completely against dismantling of tariffs for the RCEP countries, especially China.
Almost every sector registered its apprehension that once the RCEP agreement was in place, China would wreak havoc in the domestic market with its cheap exports and would also dump its products.
The Indian industry also feared that Japan and South Korea, which were already reaping huge benefits for items like steel and electronics from the bilateral free trade agreements signed with India, would penetrate the local markets further.
A large number of farmer organisations also came together to appeal jointly to the government not to sign the RCEP as they said that it would threaten farm livelihoods, autonomy over seeds and also endanger the country’s self-sufficient dairy sector. Thus, when Wadhawan left for Beijing with his team for the RCEP meeting where all countries were expected to move towards final outcomes, the instruction was to be offensive rather than defensive.
However, it is important to ensure that this offensive posture does not dissipate after the Beijing meeting. India already has had an unhappy experience with many of the RCEP members it had earlier signed FTAs with.
While there are a number of research papers that point out how the Indian industry has suffered after signing FTAs with its regional partners, one done by the NITI Aayog explicitly says that India’s trade deficit with the ASEAN, Korea and Japan has widened post-FTAs.
Source: The Hindu Business Line
As the trade war between the US and China has heavily hit Indian yarn exports to China and as there is a global slump in the textile sector, about 20% of facility in mills across India remain idle, representatives of the Southern India Mills Association (Sima) said here on Monday.
Briefing reporters about the upcoming Sima’s ‘Texfair 2019’, an international textile machinery, accessories and spares exhibition in the city, its chairman Nataraj said the US had laid import sanctions on Chinese garments, which led to a slump in exports in China. “This in turn has led to the fall in yarn export to China from India. In the last quarter, almost 50% of the exports to China had come down. Domestic market has also been suffering because of this as domestic prices have come down,” he said.
Sima representatives also quoted data from markets and other associations and said there was a general recession in the textile sector all over the country and mills had been cutting down on operation time. “In the past two months, 20% of spindles had remained idle in mills across the country,” said Nataraj
In such a situation, Sima representatives said they felt it was the right time to conduct a textile machinery fair, as it would benefit all stakeholders. As it was not feasible for mills to invest in new machinery in this situation and as mills were looking to improve quality and productivity, there would be more demand for spares for maintenance and auxiliary equipment to improve quality.
The 12th edition of Texfair would be held from August 9 to 12 at the Codissia Trade Fair Complex in the city. As many as 250 exhibitors from across India and also from Europe, Japan and China would attend the event, which would have 320 stalls. “About 70% of the exhibitors would be from Coimbatore as the region had the most number of textiles.
Source: Times of India
Following Ghana Government’s commitment last month to revive Akosombo Textiles Limited (ATL), now the management of the firm too has come out with a comprehensive transformation strategy to walk the path of growth by 2022. And, what does this transformation strategy focus on? It involves buying advanced machines, building workers’ capacity and ensuring production is cost-effective, not to mention the plans to expand to new markets.
While interacting with the media, the management of ATL wanted to assure the public that through the transformation plan, it is all set to bring back the good glorious days for the firm.
Kofi Boateng, Chief Executive Officer, ATL, said that the firm has already invested part of GH¢17 million in capital expenditure, which has resulted in the replacement of old machines with new machines.
Going forward, the firm focuses on growth and it hopes to produce 5 million yards of textiles by the end of this year, and reportedly the firm has already received orders worth 3 million yards.
Boateng also added that ATL is also keen to diversify its business operations by the end of next year.
Despite challenges like cost of power, increasing cost of electricity and smuggling, ATL is confident of getting back to its old days of glory in next 3 years.
Source: Apparel Resources
Formally declaring China a currency manipulator may scratch a long-term itch for U.S. President Donald Trump, but the move provides few new tools that have not already been employed in two years of trade negotiations with Beijing.
U.S. Treasury Secretary Steven Mnuchin issued the declaration late on Monday, after China’s central bank let the yuan slip below the psychologically important level of seven yuan to the dollar.
The move marks the first manipulator designation since 1994, when China was declared a manipulator.
The main purpose of such designations under a 1988 U.S. currency law was to force negotiations with the offending country over their foreign exchange practices, but the United States and China have been locked in comprehensive trade negotiations — including on currency issues — for more than two years without result.
It is difficult to see how a designation will change the situation other than fanning trade and currency war flames, said Mark Sobel, a former senior U.S. Treasury and IMF official who worked on monetary issues.
“There’s not much here. The remedies are very weak and the IMF already said what it thinks about the yuan,” said Sobel, who now works with the Official Monetary and Financial Institutions Forum, a London-based think tank.
The IMF said last month that the yuan’s valuation was in line with China’s softer economic fundamentals, though the dollar was overvalued by 6% to 12%.
WHAT HAPPENS NEXT
If a country is found to be manipulating its currency for a trade advantage, Treasury is required by law to enter bilateral negotiations with that country or work through the International Monetary Fund to correct the situation. The aim is to eliminate any unfair advantage brought on by the unfairly devalued currency.
If no solution can be found, the president can impose various penalties such as banning Overseas Private Investment Corp financing in that country or excluding it from U.S. government procurement contracts.
China is neither a major recipient of government contracts nor financing from OPIC, which is positioning itself with $60 billion in new funding to better compete with China’s own Belt and Road infrastructure development initiative.
Trump promised during his 2016 election campaign that he would declare China a currency manipulator on “day one” of his presidency. But for over two years, Mnuchin declined to do so in the Treasury’s semi-annual currency reports, relying on criteria that showed China’s global current account surplus was shrinking and that the yuan level was largely stable after a major drop in 2015.
In May, China was again spared a manipulator designation, even with tighter new criteria specifying that global current account surpluses should not exceed 2% of gross domestic product as trade talks continued.
TALKING WITH CHINA
Even during the mid-2000s, when China’s yuan was widely viewed to be significantly undervalued and its current account surplus approached 10% of GDP, the United States refrained from a currency manipulator designation.
At the time, China and the George W. Bush administration were already engaged in bilateral talks on currency and other broad trade and economic reform issues called the Strategic Economic Dialogue. The dialogue was continued and renamed under President Barack Obama and has since been derided by Trump as ineffective.
When the U.S. Congress first enacted a currency review law in 1988, there were few international forums for resolving such disputes, well before the launch of the World Trade Organization. The Treasury declared Taiwan and South Korea manipulators that year, and slapped China with such a declaration in 1994. A report by the U.S. congressional Government Accountability office found that all three countries in subsequent negotiations with the United States made substantial reforms to their foreign exchange regimes and saw the manipulator designation lifted.
China unified its dual exchange rate system in 1994 after the last designation, and has since pegged the value of its currency to the U.S. dollar.
Source: The Financial Express
Chinese cotton prices closed limit down at their lowest in more than 10 years on Monday, pressured by weak U.S. prices for the fibre and escalating trade tensions.
The most active cotton contract on the Zhengzhou Commodity Exchange, for September delivery, fell the maximum 4% to end on 12,225 yuan ($1,738.95) a tonne, its lowest since March 20, 2009.
The contract, which has been festering at decade-lows in recent weeks, has lost 18.5% so far this year and is down almost 40% from over 20,000 yuan a tonne in May 2018.
Traders cited high cotton stocks in China and plunging U.S. prices for the decline, as well as signs the trade war between the world’s top two economies is unlikely to end any time soon.
China is a major exporter of cotton-based textiles to the United States and there are fears Washington will levy extra duties on Chinese textile products in fresh tariffs on around $300 billion of goods.
ICE cotton futures in New York were down as much as 4.2% on Monday to 56.49 cents a pound, the lowest since March 2016.
Source: Reuters
