July prices of seed cotton have reported a dip, which trade sources attribute to sluggish exports and increase in cheap imports. As cheap imports and sluggish exports loom large over the domestic cotton market, Pasha Patel, head of Maharashtra government’s committee for agriculture cost and pricing, said an import duty on cotton could be explored to keep domestic prices steady. Patel, speaking to The Indian Express, said adequate steps would be taken to ensure cotton prices remain steady in the new season, set to start post-October. Domestic prices of kapas (seed cotton ) have been well above the government declared Minimum Support Price (MSP) of Rs 5,500 per quintal through out the 2018-19 season. However, July prices have reported a dip, which trade sources attribute to sluggish exports for both yarn and lint cotton. In Maharashtra’s wholesale markets, average July price of cotton was Rs 5,850 per quintal, compared with Rs 6,242.92 per quintal in June. The same trend has been observed in most of the major cotton producing states in the country. Traders claim that sluggish exports have dampened cotton sentiments in the markets. India’s 2018-19 export is expected to be around 46 lakh bales, compared with the 69 lakh bales it exported in the 2017-18 season. www.citiindia.com 13 CITI-NEWS LETTER On the other hand, imports have doubled, with the country recording 31 lakh bales of import as against the 15 lakh bales it imported in 2017-18 (one bale contains 170 kgs of cotton). The downturn in export is mainly due to availability of cheaper cotton in the international market. Patel said they are keeping a very close watch on the cotton scenario. “We are exploring options to boost sentiments, which would keep cotton prices above MSP,” he said. One of the measures, Patel said, was to stop the dumping of cheap import into the domestic market and that would be done by imposing higher import duty on raw cotton. Cotton sowing has been going on at a steady pace, with India reporting a 5 per cent yearon-year increase in sowing. As of August 2, India has reported 115.5 lakh hectares of cotton sowing, which last year was 109.79 lakh hectares. India on an average reports 120.93 lakh hectares of cotton sowing during kharif.

MSME loans: FM Nirmala Sitharaman to address delay in disbursal

The minister’s meeting was part of a series of such sessions lined up with representatives of various sectors till August 11 Lack of credit disbursal by banks even after sanctions and long delays in settlement of dues by the government departments and PSUs have undermined the MSMEs’ ability to sustain their business cycles, liquidity-starved micro, small and medium enterprises (MSMEs) told finance minister Nirmala Sitharaman on Tuesday. The minister’s meeting with MSME representatives was part of a series of such sessions lined up by her with important stakeholders up to August 11 to devise plans for critical sectors amid fears that the economy might be slipping into a protracted slowdown. The minister promised to study the issue of delay in release of dues by the government departments and promised remedial steps to alleviate the difficulties of MSMEs. “As against sanctioned, only 10% is being disbursed by banks under 59-minute scheme,” said Ashok Saigal, co-chair of CII MSME Committee. Under the scheme, MSMEs registered under the GST are eligible for loan up to `1 crore in just 59 minutes through ‘psbloansin59minutes.com’ portal. The MSMEs also complained that despite 70% guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the firms have not been able to secure loans from banks in many cases. Another demand was to revise the the turnover/investment-related definition of MSMEs upwards. The definitions were brought in 2006 and have since become dated due to inflation. “Currently a firm with `5 crore investment is classified as ‘small’ while investment over `5 crore are ‘medium’. But machine that cost `5 lakh in 2006 is not valued at `15 lakh,” said Rajive Chawla,Integrated Association of Micro, Small and Medium Enterprises of India (I am SME of India). Sitharaman was positive and she would look into the issue. The minister asked all the industry bodies to give in writing their suggestions for the sector in 3-4 days to prepare an action plan for the MSME sector. Other issues raised by MSMEs included a demand to exempt from capital gains tax for the sector if gains are reinvested in business. Among others, they sought rationalisation of penalty for late filing on MCA as it is same for large and small companies. They also raised the issue of VAT refunds not being transferred to GST regime by states. www.citiindia.com 4 CITI-NEWS LETTER MSMEs are the backbone of the Indian economy, contributing nearly 30% of the gross domestic product and 49% of country’s exports. MSMEs are also the largest employers, next only to agriculture. Over six crore such units provided employment to about 11 crore people (NSSO, 2016).

RBI policy: Experts hope another 25 bps rate cut

The MPC meeting began on Monday. Speculations are rife about another rate cut with inflation well under RBI's comfort zone, slowing automobile sales, muted growth in infrastructure industries, concerns over spread of monsoon and slump in stock market.

The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, is deliberating on the macro-economic situation, and is scheduled to announce its third bi-monthly policy of the ongoing fiscal on Wednesday.

With inflation under control, experts are expecting another 25 basis points rate cut by the RBIfor a fourth time in a row to boost economic activities. The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, is deliberating on the macro-economic situation, and is scheduled to announce its third bi-monthly policy of the ongoing fiscal on Wednesday.

The MPC meeting began on Monday. Speculations are rife about another rate cut with inflation well under RBI’s comfort zone, slowing automobile sales, muted growth in infrastructure industries, concerns over spread of monsoon and slump in stock market.

Finance Minister Nirmala Sitharaman held reviewed credit bursal by banks at a meeting on Monday and asked banks to pass on 75 basis points (bps) rate cut by RBI since February to borrowers. Talking to reporters after the meeting, SBI chairman Rajnish Kumar had said he was hopeful of another rate cut by MPC.

“I hope so, everybody is expecting a rate cut…everybody says 25 bps (would be the reduction),” Kumar said when asked about his expectations from MPC. The industry also expects the six-member MPC to take steps to improve liquidity situation and also ensure transmission of rate cuts to borrowers by the banks.

Industry body CII in a statement said the central bank started its interest rate easing cycle in February 2019, taking cognizance of the headwinds to growth and inflation reading remaining below the RBI’s target of 4 per cent. It also wants the RBI to slash cash reserve ratio (CRR) by 50 bps which will release around Rs 60,000 crore into the system.

The real estate sector too is expecting further easing in the monetary policy. In its June policy review the RBI had signalled more easing as it looked to support an economy growing at the slowest pace since the BJP-led NDA came to power in 2014. Experts are also of the opinion that slowdown in high frequency indicators, like automobile sale and core sector industries, will be a major factor before the MPC while reviewing the monetary policy.

India’s economic growth rate slowed to a five-year low of 5.8 per cent in January-March 2018-19, due to poor performance in agriculture and manufacturing sectors. As per the Central Statistics Office (CSO), GDP growth during 2018-19 stood at 6.8 per cent, lower than 7.2 per cent in the previous financial year.

GST on discounts puts retailers in a spot

Tax on discounts that manufacturers and wholesalers extend to retailers for passing on to consumers is becoming an area of confusion and possible litigation, say experts. The government’s recent decision to tax such discounts has put retailers in a difficult situation, they say. The Central Board of Indirect Taxes and Customs (CBIC) had in June clarified that discounts that dealers get from manufacturers and wholesalers help in boosting sales and therefore amount to a taxable consideration flowing from the supplier to the retailer. Such discounts are to be added to the transaction value between retailer and consumer for payment of Goods and Services Tax (GST). Industry watchers say this is leading to confusion at the time of sales and disputes between retailer and consumer as the former is unable to pass this additional burden to the latter who is often willing to pay tax only on the sale price after discount. It is hard for dealers to explain to consumers they have to pay GST on the amount of discount they receive, they said. The 28 June circular from CBIC was an effort to clarify the applicability of taxes on what is called secondary or post-sale discounts. It suggested that wherever suppliers give discounts to retailers without any obligation by the latter to render services like advertisement campaign or special sales drive, such discounts are not to be subject to GST. However, if discounts from the manufacturer or supplier are linked to such obligations by the retailer, it should be taxed. The tax authority sought to distinguish discounts in such cases as a separate transaction between the manufacturer and the retailer from the sale of goods made by the retailer to the end consumer. "The clarification on discounts with an obligation of passing it to the recipient, forming a part of the value on which GST is leviable (even while the said is not commercially payable by the recipient) opens a Pandora's box for most industry players; essentially because companies had always viewed these discounts as price reductions and not included them for payment of GST," said Abhishek Jain, tax partner, EY. Tax on discounts has been an area of dispute in the pre-GST era too. The Supreme Court had in 2012 ruled in a dispute between central excise commissioner, Mumbai, and Fiat India (P) Ltd. that the wholesale price declared by the company, which was lower than the cost of production, cannot be treated as a normal price for levy of excise duty as it would result in short payment of tax. The reasoning was that discounts given to consumers for gaining market penetration was also a taxable 'consideration'.

FY18 fiscal deficit is 'correct': Finmin

Ministry responds to ET story that was based on CAG calculations showing higher deficit.

NEW DELHI: Responding to an ET story (“How Government Relies on Off-budget Resources to Fund Deficit,” July 25), the finance ministry said on the matter of fiscal deficit for 2017-18 and as per the FRBM Act, 2003, “definition has been worked out in budget documents and is 3.5% of GDP’’. The ministry said legal reference for all definitions of fiscal performance and fiscal deficit disclosed in the budget documents is as per that definition.

ET’s story was based on a presentation made by the Comptroller and Auditor General (CAG) to the 15th Finance Commission (FFC) on July 8. CAG’s presentation had asked whether the government’s method of calculating extra-budgetary resources (EBR) in the budget reflected the correct picture of its finances and, by extension, the fiscal deficit. As per the auditor, fiscal deficit for FY18 worked out to 5.85% of GDP.

“…FRBM Act acknowledges fiscal legitimacy of EBR and provides a framework for treatment of the same. It includes EBR in the definition of debt but not of the fiscal deficit. Thus, there is no scope of subjective interpretation of fiscal deficit other than as provided for in the Act,’’ the finance ministry said in an email to ET.

The ministry said borrowing by PSEs (public sector enterprises) for their capital expenditure that is repaid from their own revenues can’t be considered EBR as they are not serviced by government budget.

It also said recapitalisation of PSBs with its accompanied netting represents the completeness of the transaction as infused equity is immediately invested in government securities and is included in the demand of the concerned department of the government and is, therefore, not an off-budget transaction. And that issued securities get included in the liabilities of the government.

“Therefore, GoI’s Budget Documents capture the entire Central Government debt including EBR issuances, all the Central Government disbursements and the fiscal deficit figure accurately,’’ the finance ministry said.

International

RCEP talks: New Zealand ready to ease work-visa rules for India

India may say no to RCEP pact if its demands on services, goods are not met

But wants market access for dairy, wine and apples; NZ’s special envoy bats for successful conclusion of mega trade pact

New Zealand wants to have greater market access for its dairy products, apples, kiwis and wine into India as part of the ongoing Regional Comprehensive Economic Partnership (RCEP) pact being negotiated by 16 countries, said the country’s special envoy for Commonwealth Trade Integration Jeremy Clarke-Watson.

India’s demand for easier movement of workers and professionals is being considered seriously by the country and could be met provided market barriers to New Zealand’s goods are eased, Watson said in an interview with BusinessLine.

“We are aware of India’s requests in the area (easier visas for workers and professionals). It is being given very serious consideration by our negotiators and by our government in Wellington. We are looking to respond to India’s request in a positive manner. But it comes down also to India providing New Zealand with commercially meaningful market access for our products as well,” said Clarke-Watson.

While the Agriculture Ministry is not in favour of liberalisation of the dairy sector for most RCEP members, it is considering New Zealand’s demand seriously as the country exports mostly premium products that are not produced in India.

“For skimmed milk powder and whole milk powder, which is produced in abundance in India, the Ministry is considering a tariff rate quota basis access to keep a check on the quantity of imports,” an Indian government official said.

Sensitive items

For items like apples and wine, though, India may have trouble offering greater market access as these items are considered sensitive for the economy and have been extended protection in all the FTAs signed so far.

Clarke-Watson is in India to meet government officials and explore ways for increased cooperation between the two countries, as both are members of the Commonwealth. Digital trade, bilateral business-to-business interaction, finance, infrastructure and SMEs are the areas of focus.

While India is not happy with what its RCEP member countries, which includes the 10-member ASEAN, China, Japan, South Korea, New Zealand and Australia have offered so far, especially in services, Clarke-Watson says that the best value is often derived in the last phase.

“In a negotiation you clear the easy issues first and then you reach the hard ones. This is where the trade-offs come. The final steps are always the one that take extra time. But they are also the one that provide most value for both sides. I think it is in the interest of both India and New Zealand to get to the conclusion of RCEP. I think this can be done,” he said.

Source: The Hindu Business Line

Vietnam: Garment, textile industry sees decline in orders

With plentiful orders right at the beginning of this year, garment and textile industry set export target of US$40 billion for this year. However, recently, orders have suddenly dropped drastically, concerning garment and textile enterprises. A drop in the number of orders spread from small enterprises to large-scale ones. Mr. Nguyen Van Nam, director of Thanh Binh Garment Company, said that his company has three production lines of spandex products with more than 100 workers. Lately, his partner – a local company - unexpectedly cut orders, urging him to seek for new sources with low prices or even without profits to get job for his workers. Other large garment enterprises, including May 10, Viet Tien and Nha Be also experienced the same situation. According to Mr. Truong Van Cam, general secretary of the Vietnam Textile and Apparel Association (Vitas), scarcity of orders is quite popular so export turnover will not be as optimistic as it was expected at the beginning of this year. The number of orders of several garment and textile enterprises merely accounted for 70 percent of that in the same period last year. This makes it impossible for garment and textile industry to achieve export target of this year. Representative of Vitas said that the main reason of the decline in orders is the ongoing trade war, showing most clearly via a sharp drop in export volume of fiber of Vietnam. Previously, Vietnam produced an average 2.2 million tons of fiber annually, of which 1.5 million tons was for export, accounting for 68 percent of total production. However, since the end of last year, export of fiber has seen uncertainties. This year, fiber consumption has encountered difficulties. In the first six months of this year, fiber export has merely grown 1.1 percent. Moreover, some countries devaluated their currencies so as to create advantages for export whereas the Vietnamese dong remained stable, causing export products of Vietnam to have higher cost prices, putting export of garment and textile industry at a disadvantage. The industry expected that recently-signed free trade agreements, such as the EU-Vietnam Free Trade Agreement, will strongly promote export. Nevertheless, up to now, although free trade agreements were signed, they are merely potential markets and have not showed actual effectiveness, leading to the situation that export products are still imposed import tariffs. This might be the reason that shifted orders to other countries, causing a shortage of orders for Vietnamese garment and textile firms. In addition, since the beginning of this year, both firms and experts in garment an textile industry expected that the trade war will help to increase orders for Vietnam. However, in reality, the difficult situation of global economy has caused purchasing power to decline while a shift of orders has not been clear so far. According to Mr. Pham Xuan Hong, chairman of the Ho Chi Minh City Textile and Garment - Embroidery Association, a shortage of orders has happened but only at some enterprises, especially in the northern region, instead of the whole industry. In Ho Chi Minh City, members of the association still have received orders as normal. ‘Although a decline of orders occurred at some enterprises, overall growth rate of the industry was still higher than the same period last year. Export turnover of the garment and textile industry still might reach $40 billion as although Vietnamese firms are unable to increase export, FDI enterprises are capable of increasing export and making up for the whole industry,’ Mr. Hong said optimistically. Vitas suggested that firms should put more efforts in order to achieve export target of this year. Especially, in the last half of this year, the industry must gain a growth rate from 11 percent upwards in order for export turnover of this year to reach the $40- billion mark. Of which, firms should try their best to look for orders and maintain production from now to the end of this year. As for large enterprises which are able to sign big contracts, they should share their orders with small enterprises. Domestic enterprises collaborate with customers to establish production chain, meeting rules of origin in accordance with commitments of free trade agreements. In long term, in order to stabilize orders, domestic enterprises must comply with requirements of brands for sustainable development, hereby they will be recognized by brands for transparency and will attract orders in the future. Besides, enterprises in the industry need to improve their competitiveness as well as apply solutions, such as reducing input costs, standardizing production procedure and management procedure in accordance with their actual situation. Only by managing production and human in the spirit of the fourth industrial revolution, aiming to turn regular factories into smart factories and not wasting any resource, enterprises are able to survive in the current inconsistent market, said Mr. Cao Huu Hieu, director of the Vietnam National Textile and Garment Group. According to Vitas, in the first half of this year, garment and textile exports reached $17.97 billion, up 8.61 percent over the same period last year. Of which, ready-made garments touched $14.02 billion, up 8.71 percent; fabric hit $1.02 billion, up 29.9 percent; fiber reached $2.01 billion, up 1.1 percent; and geotextile fabric rose 16.9 percent. The US remained the largest export market of the industry with turnover of $7.22 billion, up 12.84 percent over the same period last year, accounting for 46.9 percent. Exports to countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership hit $2.57 billion, up 11.13 percent, accounting for 16.71 percent. Exports to the EU reached $2.05 billion, up 10.46 percent, accounting for 13.36 percent.

Source: Saigon Online

Donald Trump wants trade pact with China but must be 'right deal': WH advisor

Since last year, the United States and China have exchanged punitive tariffs on more than USD 360 billion in two-way merchandise trade.

Should they take effect, the punitive import duties Donald Trump announced last week would mean all goods trade between the world's top two economies is subject to tariffs in the year-long trade war.

WASHINGTON: President Donald Trump wants a trade agreement with China but it must be "the right deal," White House economic advisor Larry Kudlow said Tuesday. Kudlow's remarks came as markets attempted a recovery from Monday's deep sell-off, prompted by a sudden escalation in the US-China trade since last week.

"The president was not happy with the progress" of talks in Beijing earlier this month, Kudlow told CNBC. "The president is defending the American economy" against "a lot of unfair trading practices." Trump on Thursday announced new tariffs on another USD 300 billion in Chinese imports and on Monday responded to a drop in value of the yuan by formally branding Beijing a currency manipulator. Beijing on Monday also said it was cutting off imports of US agricultural goods.

Kudlow said Trump "would like to continue negotiations, he would like to make a deal, it has to be the right deal for the United States." After face-to-face meetings in Shanghai last week, US and Chinese officials are due to meet in Washington next month. However, the deepening acrimony has convinced investors the chances of a near-term resolution to the battle are increasingly slim -- adding to worries the trade fight is exacerbating a global economic slowdown.

Since last year, the United States and China have exchanged punitive tariffs on more than USD 360 billion in two-way merchandise trade. Should they take effect, the punitive import duties Trump announced last week would mean all goods trade between the world's top two economies is subject to tariffs in the year-long trade war.

Source: The Economic Times

US-China trade war: American president Trump calls Beijing a currency manipulator

Trump and those around him have been frustrated by China’s response to his tariffs.

President Donald Trump has reacted to China’s move to let the yuan depreciate by branding Beijing a currency manipulator while also claiming China’s foreign-exchange strategy means it’s paying the cost of U.S. tariffs. Break those two positions down, however, and it’s easier to understand why the trade war is spooking markets. Clashing consequences are surfacing and a potentially ominous reinforcing cycle is forming. Trump and those around him have been frustrated by China’s response to his tariffs. By allowing its currency to depreciate through the symbolic 7-per-dollar mark on Monday, policymakers in China preemptively helped offset the cost of a 10% tariff he plans impose on some $300 billion in Chinese imports on Sept. 1.

Just as China’s currency swings limit the impact of Trump’s tariffs, they also feed into longstanding accusation that China guides its currency for an export advantage. “China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the U.S. with unfair trade practices and currency manipulation,” Trump tweeted on Monday.

Trump also argued that the slump in the yuan proved his point that China — not Americans — pays the real costs for his tariffs, an oft-discredited claim.

On Tuesday, markets stabilized as Beijing denied it’s cheapening its currency. But the latest twists revealed a policy vortex with no easy escape: If increasing tariffs leads to Chinese depreciation, which yields complaints about tariff evasion and currency manipulation, it leads you back to more tariffs.

That’s not a hypothetical. Trump’s frustration with China’s retaliation and past currency moves is what has led to every escalation so far in the trade war. A year ago, U.S. tariffs were in place on just $50 billion in goods from China. Now, some $250 billion in annual trade is covered by a 25% tariff.

Come Sept. 1, a 10% tariff will take effect on a further $300 billion in goods. Increasingly, though, that looks like it may not be the end of it.

Charting the Trade War

The U.S. Treasury is about five years too late with its currency manipulator designation for China, says Bloomberg Economics’ Tom Orlik. The days of a hyper-active People’s Bank of China intervening daily to prevent yuan appreciation are long gone. If anything, China’s central bank is now intervening to prevent sharper yuan depreciation.

Source: The Financial Express

Europe worries about climate change over economy: survey

Europeans are more worried about climate change than unemployment, the economy or terrorism, according to the latest Eurobarometer survey.

The data were gathered before the record-breaking temperatures across much of Europe last month and reports of the largest single-day loss of Greenlands ice sheet.

Ursula von der Leyen, the incoming President of the European Commission, has vowed to raise as much as 1 trillion euros ($1.12 trillion) in investment to fight climate change over the coming decade.

Source: The Hindu Business Line