National
Cushioning cotton: Measures to tap global potential
Amazon India launches Karigar store
Monetory Policy: RBI bats for growth with 35 bps cut in repo rate
‘Removal of MEIS may deepen crisis’
Exporters hail reduction of repo rate
24x7 fund transfers under NEFT from Dec 2019 to boost digital payments
International
Suspension of trade: Pakistan move to have negligible impact on India
Bangladesh: Govt sets export target at $54b
Russian textiles industry to receive growth boost
World economy edges closer to a recession as trade fears spread
China wants to double down on gold reserves as trade war runs hot
Amid concerns of end-stocks to fall to an alarmingly low level, there is an urgent need for remedial measures to be taken, to reclaim the coveted position of being the top producing nation A third of the global cotton growing area in India, hybridisation and increasing adoption of BT hybrid cotton varieties have turned India into a major exporter of cotton in the last decade. India was crowned the largest cotton producer in the world in the crop year (CY) 2015-16. In CY 2018-19, the cotton crop fared poorly due to a 20% rainfall deficit, with an estimated 14% reduction in production. Last years’ production was also lower by 11% over decadal average cotton production of 352 lakh bales. As the farmers contributed to ‘Cotton Revolution’ of the last decade, mill consumption also expanded by over 30%. Increasing quality awareness and widespread use of hybrid seeds, led to India’s cotton exports witnessing a growth until CY 2017-18, despite lower stocks. Lower crop estimates for 2018-19 pushed Indian cotton millers off the cliff to seek out their raw material requirements through imports. Though the production estimates of the significant trade body are being contested by the stakeholders, the proof of production numbers is already in the increasing trend of cotton imports estimated at 31 million bales—highest in the last decade on the back of lower exports. Added to the lower production, is also a low stock of 13 lakh bales, which is a third of the decadal closing stock of 38 lakh bales. Production numbers reveal that after reaching the peak of 398 lakh bales during CY 13- 14, production has been south-bound. Domestic consumption and augmented export demand had kept the mill consumption clock ticking annually in the last decade. Increasing exports and mill consumption led to stocks moving to a low of 5% of the consumption in CY18-19. Given that Indian productivity estimated as 502 Kg/hectare is lower than 1,751 and 944 of China and USA, respectively, one need’s to see as to what ails India’s production. Productivity levels seem to have hit a plateau and pulling the country and farmers out of the same would require multi-pronged efforts. First, and foremost issue, is ensuring the availability of adequate good quality seed with traits such as drought tolerance, pest resistance, etc. A major reason for the significant reduction in crop output witnessed during 2018-19 remain the drought conditions in major growing areas and attack of the pink bollworm. Second, the adoption of better agronomic practices such as high-density planting of short duration varieties. This has the potential to increase yields to about 29% via lower exposure to pest attack, efficient use of water and other inputs while also suppressing weeds. Also, management practices such as in-situ soil and water conservation with bunds, integrated pest management, soil fertility testing and management, drip irrigation, etc., can have a significant impact. Growing cotton varieties of high staple length is an important step towards augmenting the production and making available desired length of cotton fibre in the country. Adoption of better harvesting and post-harvest management practices will eliminate contamination, ensuring production and recovery of good quality of cotton that meets the requirements of domestic consumption as well as exports. Use of commodity derivatives platforms either directly or through aggregators will help the farmers lock their prices and create quality awareness. This will encourage the farmer to adopt better agronomic practices. Both the private and public sector agencies should work towards enhancing the availability of adequate quantities of desired quality seeds for the farmers at a subsidised rate. With the sowing of the new crop due in the next few weeks, the performance of monsoon will be a key factor for the output. Amid concerns of endstocks to fall to an alarmingly low level, there is an urgent need for remedial measures to be taken, to reclaim the coveted position of being the top producing nation.
Source: The Financial Express
Amazon India announced the launch of the Karigar store on Amazon.in on the eve of National Handloom Day, which is being celebrated today. Amazon Karigar is one of the largest stores to showcase over 55,000 products, including over 270 unique arts and crafts from 20 states. The products will also carry their interesting histories on the website. Amazon Karigar will exclusively promote handlooms and handicrafts from India, according to media reports. Its logo has been designed as a ‘thumbprint’ depicting coming together of lines symbolising the diversity, authenticity, rich culture and uniqueness of the products from all regions of India. By the end of the year, the online store will showcase crafts from all regions in India. Products showcased include Bengal handloom sarees by TJ Sarees, Pochampally ikat dress materials by GB Handlooms, Banarasi dupattas and dress materials by Kashi Fancy Sarees, Jaipur blue pottery decorative items by Aditya Blue Art Pottery and authentic tribal made handloom products by Tribes India. Through the Karigar program, Amazon is engaging with the government and handicraft bodies, training craftsmen to embrace online selling and enabling them to sell to a wide consumer base, said Gopal Pillai, vice president, seller services, Amazon India.
Source: Fibre2Fashion
Easier lending norms for NBFCs, relaxed risk weights for most consumer loans some of key measures announced
RBI governor Shaktikanta Das was hopeful of more transmission in the future than has taken place since the current rate cut cycle began in February. Till June, a cumulative 75 bps cut had yielded a cut of just 29 bps on fresh loans by banks.
At the same time, Das was clear that the central bank could not pressure banks to lend. “Lending activity by banks depends on their risk perception and we cannot tell banks which borrower they should or should not lend to. It is for banks to consider and examine individual loan applications for credit and give the loans,” the governor said.
Das assured the markets liquidity, which is currently in a surplus, would be available.”We are providing an enabling situation where the banks should be able to ensure better credit flow,” Das said.
Sonal Varma, chief economist at Nomura, observed that the commitment of the RBI to maintain surplus liquidity, albeit qualitative, bodes well for monetary policy transmission and should alleviate tight financial conditions at the margin. Economists expect further rate cuts given inflation is estimated to be benign — 3.6% in Q12020-21 — and because the economy is slowing sharply. Rising risks to growth,under-shooting inflation and the dovish stance of major central banksopens up the possibility of more rate cuts this year,” DK Joshi, chief economist at Crisil, observed.
Pranjul Bhandari, chief economist at HSBC, observed the slowdown this time around was somewhat different in that credit growth was weak as was the consumption demand. “We need to do more in the form of a long rate cut cycle and reforms, which are missing now,” Bhandari said. Saugata Bhattacharya, senior V-P and chief economist, Axis Bank, pointed out that globally a 50 bps cut is a response in crisis. “The reason RBI might have done a 35 bps cut, to my mind, is that 25 bps would be an insurance cut,” Bhattacharya said, adding even if inflation was to rise to 4%, there would be a clear 140 bps worth of elbow room.
Governor Das observed that in the central bank’s view the slowdown was cyclical rather than structural. “Our understanding is that at this point it is a cyclical slowdown and not really a deep structural slowdown,” he observed. He added: “Nonetheless, we have to recognise there is room for certain structural reforms that need to be undertaken. We are still working on it and this is our understanding at this point in time.”
Das also assured the markets no systemically important NBFC would be allowed to collapse. The central bank, he said, was monitoring 50 large NBFCs and house finance companies.
Source: The Financial Express
MEIS would provide duty credit scrip to compensate the duty paid by the exporters. It was challenged by the countries like the US at the World Trade Organization (WTO). Apparel industrialists are a worried lot as the central government has completely removed the Merchandise Exports from India Scheme (MEIS), an incentive scheme to promote exports, from this month. The incentives were almost halved since the implementation of GST. MEIS would provide duty credit scrip to compensate the duty paid by the exporters. It was challenged by the countries like the US at the World Trade Organization (WTO). “We were told that the WTO was pressuring the central government that there should not be industry-specified incentives like MEIS. So, they have removed it. Without such support, survival of the apparel industry will be in question,” A Sakthivel, vicechairman, Apparel Export Promotion Council, said. Before GST was implemented, the incentives were duty drawback, rebate on state levies, MEIS and concession on service tax.
Source: ET Retail
Tirupur Exporters' Association (TEA) on Wednesday hailed the reduction of policy Repo rate by 0.35 per cent from 5.75 per cent to 5.4 per cent announced by the Reserve Bank of India in the third bi-monthly monetary policy for 2019-20.
TEA president Raja M Shanmugham in a statement said overall the banks have reduced their Weighted Average Lending Rates (WALRs) on fresh rupee loans only by 0.29 per cent during the current easing phase so far (Feb-June 2019), when RBI reduced the Repo rates by 0.75 per cent during this period.
Despite the meetings the RBI Governor had with banks and asking them to transmit the reduction, one or two banks only reduced their rates, he pointed out.
He expressed hope that by taking into account requirement of industry, all banks will come forward to pass on the reduction of interest rate to the borrowing units, which is desperately required for the knitwear garment exporting units, particularly to MSME exporting units which are suffering further to macroeconomic changes.
Raja Shanugham thanked the Union Finance Minister and RBI Governor for this decision which will support for the growth of the industries.
Source: The Business Standard
With a view to boost digital payments, the Reserve Bank of India (RBI) will allow the National Electronic Funds Transfer (NEFT) payment system to operate on a 24x7 basis from December 2019. RBI Governor Shaktikanta Das said the move was expected to revolutionise the retail payments system of the country.
At present, the facility of NEFT — usually preferred for fund transfers of less than
Rs 2 lakh — is available between 8 am and 7 pm on all working days, except the second and fourth Saturdays of every month.
According to Mrutyunjay Mahapatra, managing director and chief executive of Syndicate Bank, the new process might require a standard operating procedure, which can be prescribed by the regulator, for seamless clearing and settlement of fund transfers among banks.
“Banks will need to tweak their back-end system. At present, they get a closure window between 11 pm and 4 am, for NEFT transactions. This process might involve a little higher operating cost,” said a senior banker, in-charge of digital banking in a public sector bank.
Last month, the RBI had scrapped the levy on online transactions such as NEFT and Real Time Gross Settlement (RTGS) to make fund transfers cheaper. Unlike RTGS, the NEFT process takes place in cycles, where transfers are done on a real-time basis. RTGS is mostly used for transactions above Rs 2 lakh. The RBI added it will facilitate the creation of a central payment fraud registry for tracking payment system frauds.
Participants will be provided access to this registry for near real-time fraud monitoring.
The aggregated fraud data will be published to disseminate information on emerging risks.
Further, all categories of billers (except prepaid recharges), who provide for recurring bill payments, will be permitted to participate in the Bharat Bill Payment System (BBPS), an interoperable platform for repetitive bill payments, on a voluntary basis, the RBI said.
At present, BBPS currently covers biller segments like direct-to-home, electricity, gas, telecom and water bills. The central bank said a detailed guideline in this regard will be issued by September-end.
“Apart from digitisation of cash-based bill payments, these segments will also benefit from the standardised bill payment experience for customers, centralised customer grievance redress mechanism, prescribed customer convenience fee and the like,” the RBI said.
Source: The Business Standard
India had granted the MFN status, a jargon for giving equal treatment to all trade partners under the WTO framework, to Pakistan unilaterally in 1996.
While our imports were expected to drop, given the massive duty, the fall in exports suggests Islamabad has quietly raised its non-tariff barriers for Indian products in response to New Delhi’s tariff war.
Pakistan’s decision to suspend trade in response to India’s move to revoke special status of Jammu & Kashmir is unlikely to have any meaningful impact on New Delhi, due to the low level of bilateral trade, official and trade sources said on Wednesday. India’s exports to Pakistan already dropped 20.5% year-on-year in the first quarter of this fiscal to $452.5 million, or only 0.6% of our outbound shipments during this period, showed the latest official data sourced from the DGCIS. Purchases from Pakistan, too, collapsed 93.3% year-on-year in the first quarter of this fiscal to $7.13 million, not even 0.01% of our imports from overseas, mainly due to New Delhi’s imposition of a 200% duty on purchases from the neighbour following the withdrawal of its most favoured nation (MFN) status to Islamabad in the wake of the Pulwama terror attacks in February.
For Pakistan, though, the impact will be greater, as the neighbour’s purchases from India stood at over 3% in FY18. Islamabad’s latest move is part of its overall response to trim ties, including diplomatic ones, with India. “We are least bothered by Pakistan’s move. It was sort of expected that Pakistan would do such a thing. Bilateral trade as such is very low,” a senior government official told FE.
While our imports were expected to drop, given the massive duty, the fall in exports suggests Islamabad has quietly raised its non-tariff barriers for Indian products in response to New Delhi’s tariff war. India had granted the MFN status, a jargon for giving equal treatment to all trade partners under the WTO framework, to Pakistan unilaterally in 1996.
Importantly, between April 2018 and January 2019 (before the duties were raised), India’s exports to the neighbour had risen 22.1% from a year earlier to $1,768.7 million, while imports from Pakistan had inched up by 12.6% to $473.5 million, according to the data. While India’s export of cotton, the biggest item in FY19, crashed 71.4% to just $48.3 million in the April-June period of this fiscal, that of plastics dropped 24.6%. Exports of organic chemicals, however, rose 8.2% in the first quarter to $127.9 million. Together these three items made up for close to a half of India’s exports to the Islamic neighbour.
Federation of India Export Organisations president Sharad Kumar Saraf said the suspension of trade will hit Pakistan more badly as it is more dependent on India. “India’s goods exported to Pakistan has limited profile as Pakistan has not given MFN status to India and such goods have ready market in South and West Asia,” he added. Biswajit Dhar, professor at the Centre for Economic Studies and Planning, JNU, said while the broader trade is unlikely to get affected due to low volume, supplies of some farm items like fruits and vegetables to Pakistan through Wagah border will be stopped now.
Despite limited bilateral trade, the withdrawal of the MFN status in February, symbolically, has been seen as the strongest retaliation in trade yet, given the status was not revoked even after the Kargil war and the 26/11 Mumbai attacks. For its part, Pakistan hasn’t granted the MFN status to India and continues to trade with New Delhi with a negative list of 1,209 products. This means barring those products on the list, India can ship out other items to the neighbour. However, New Delhi’s retaliation may offer Pakistan an excuse to raise its negative list of tradable items with India. In 2012, Pakistan had committed to granting India the MFN status but retracted later due to domestic opposition.’
A senior government official had earlier said: “The decision to withdraw the MFN status and impose the punitive duty on imports from Pakistan was taken, keeping in mind broader national interest, and not short-term commercial gains. Pakistan is known to impose non-tariff barriers against us and they have done it in the past as well. In any case, the trade levels are low, so it (the fall) doesn’t hurt us in any manner. Ultimately, national security has to be of paramount importance.”
India had last reviewed the MFN status after the 2016 Uri attacks — which were traced to militant outfits based in Pakistan·but refrained from revoking it. In 2012, Pakistan announced the negative list, departing from its decades-old practice of trading on the basis of a positive list that had severely restricted prospects of Indian exports to that country.
Source: The Financial Express
The government yesterday set the export target for the current fiscal year at $54 billion, up 15.20 percent than that a year ago. Of the amount, merchandise export target has been fixed at $45.50 billion, which is 12.25 percent higher than the achievement of last fiscal year. Meanwhile exports from services sector has been set at $8.50 billion, a 34.10 percent year-on-year rise from that attained last fiscal year. Md Mofizul Islam, senior secretary to the commerce ministry, announced the target after a meeting with businesspeople and leaders of trade bodies and business chambers at his secretariat office in Dhaka. The target for the new fiscal year has been fixed on the achievements of the immediate past fiscal year. World economic outlooks, government policy supports, changes in the dollar exchange rate, market and product diversification, supply side capacity, improvement of safety standards in garment factories and effects of the US-China trade war have been taken into consideration during fixing of the target, Islam said. Last fiscal year receipts from merchandise shipment amounted to $40.53 billion and services sector $6.33 billion. Overall exports had registered a 14.30 percent growth, 10.55 percent in goods shipments and 46.06 percent in services sector. As usually, the highest export target has been fixed for the garment sector in the current fiscal year. This year the garment export target has been fixed at $38.20 billion, which is 11.91 percent higher than the achievement of last fiscal year. Of the amount, $18.85 billion has been targeted from knitwear and $19.35 billion from the woven sector. Last year Bangladesh exported garment items worth $34.13 billion, registering a 11.49 percent year-on-year growth. With exports not diversifying at the expected pace, the contribution of garment items in national exports claimed a larger share last fiscal year. The contribution of garment sector (knitwear and woven) increased to over 84 percent from more than 82 percent last fiscal year. Diversification in exports is slow despite government initiatives on providing cash incentives to different sectors with potential. Last fiscal year the garment sector even exceeded the annual target by 4.42 percent. The target was set at $32.68 billion, according to data from the Ministry of Commerce. Apart from garment items, the leather and leather goods sector has been considered as one of the most important sectors having potential in the current fiscal year. The commerce ministry set the export target at $1.09 billion from receipts of $1.01 billion last fiscal year. Leather and leather goods was the second highest earning sector after garments. Only leather and leather goods sector could exceed the one billion US dollar-mark after garment items last fiscal year. Replying to queries of journalists, Islam said the government has been providing incentives to some sectors like leather, footwear, plastic goods and light engineering to encourage product diversification. The government has already taken a project to diversify the export basket, he said. While Mohammad Ali Khokon, president of Bangladesh Textile Mills Association, was talking about the problems and prospects of the primary textile sector, Islam said the ministry would hold a separate meeting with businesspeople to know of their comments for taking future course of action. If the current trend of export continues, it is very much possible to achieve the export target of $60 billion by the end of 2021, said Islam.
Source: The Daily Star
The Russian technical textiles industry may receive an additional impetus for growth this year, thanks to the recently announced government plans to ease the existing restrictions on global producers taking part in public tenders for the purchase of innovative textile products for state needs. These plans have been recently confirmed by Russia’s Deputy Prime Minister Dmitry Kozak, responsible for the development of the technical textiles sector. According to Mr Kozak, he has already instructed the national government to create conditions for the better access of foreign producers of innovative textile products on public procurements in Russia. The news has been welcomed by many producers, who consider the Russian market as one of the most promising for their further development. Opportunities for growth Federico Pallini, General Manager Global Division Building Materials at Freudenberg Performance Materials, said in an exclusive interview to Innovation in Textiles that the company’s biggest hopes in Russia are put in the further expansion in the highperformance technical textiles segment, designed for the use in construction and roofing industry. According to local analysts, participation in state tenders in the Russian market could be of interest to Freudenberg, as it may provide additional opportunities for growth. “We believe the forecast is positive overall, expecting a growth to a mid-term. The main drivers are to be identified in the many projects aimed at the modernization and expansion of the country's infrastructures,” commented Mr Pallini. Currently, the segment of public procurements remains the largest in the entire Russian textiles industry in value terms, with the annual value of purchases being estimated at around US$ 3 billion. It is anticipated that the ban on the purchases of imported technical textile products will only remain in place for a limited categories of technical textile products supplied for the defence sector. The majority of Russian technical textile manufacturers and industry’s analysts believe the more active expansion of foreign producers into the domestic market may contribute to a tougher competition, especially considering that in recent years the quality of domestic produce has improved significantly. Demand for geotextiles Alexey Chichkin, a senior analyst in the field of innovative textiles, of the Russian Union of Textile and Light Industry Producers (Soyzlegprom), told Innovation in Textiles that while the share of domestic producers in the local market has increased significantly in recent years, there is a possibility that the current balance in the market may change shortly, as many global textiles producers will try to restore their lost market positions. According to experts of Soyzlegprom, at present, the biggest opportunities for growth for foreigner manufacturers may be associated with the segment of geotextiles, composites and other related products, which are primarily used in road building. This is due to the implementation of the national road building project Safe and quality roads, which will run for the next several years, contributing to the growing demand for geotextiles. Lack of support for local producers As for domestic producers, one of the options for them may be increasing their exports into foreign markets, particularly Western. In the meantime, Alexey Chichkin believes, despite the existing stable demand for innovative textile products in Russia at present, many of local producers may face with tough times this year already, due to the lack of the much-needed state support. Instead of introducing new ways of support, the local government decided to extend the already existing support programme for the Russian smart textiles industry by adopting a state decree, which facilitates technical reequipment of enterprises of the industry. This involves the provision of certain subsidies, which are only provided to the companies deemed significant, which includes only a few leading domestic producers. In contrast, most of the other industry’s enterprises do not have access to any state support.
Source: Innovation in Textiles
US-China trade is nudging the world economy toward its first recession in a decade.
The escalating trade war between the U.S. and China is nudging the world economy toward its first recession in a decade with investors demanding politicians and central bankers act fast to change course.
In the U.S. alone, the recession risk is “much higher than it needs to be and much higher than it was two months ago,” Lawrence Summers, a former U.S. Treasury secretary and a White House economic adviser during the last downturn, told Bloomberg Television. “You can often play with fire and not have anything untoward happen, but if you do it too much you eventually get burned.”
Summers, who teaches at Harvard University, still sees a less than 50/50 chance that the U.S. enters a recession in the next 12 months. Investors are much more bearish: A closely watched segment of the yield curve, the difference between 10-year and three-month notes, inverted the most since 2007, indicating bets on protracted weakness.
Global Fallout
The worry is without a trade truce soon, markets will extend their recent slide and uncertainty-plagued companies would pull back further on investment, extending the pain of manufacturers to the services sector. Then, an otherwise tight job market would start to crack and consumers would retrench.
While central banks would likely cut interest rates and perhaps resume quantitative easing, that may no longer be enough to revive animal spirits this time and governments might not be fast enough to loosen fiscal policy.
“With no end in sight, there are significant downside risks to our forecasts for U.S. and global growth,” Bank of America Corp. economists warned clients this week. “If the trade war escalates -- this could include a more explicit currency war -- uncertainty would be considerably higher and financial conditions much tighter.”
Much depends on consumer and corporate confidence.
JPMorgan Chase & Co.’s global manufacturing purchasing managers index already shows contraction. June data on industrial production in Germany, Europe’s biggest economy, showed the biggest annual slump in a decade. The European Central Bank is poised to unleash a renewed round of stimulus as soon as September, potentially including a rate cut further into negative territory, to fight a deepening slowdown.
In the U.S., manufacturing growth has slowed for 4 straight months and Citigroup Inc. equity strategists have cut their earnings forecast for S&P 500 companies.
Source: The Economic Times
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The People’s Bank of China raised holdings to 62.26 million ounces from 61.94 million a month earlier, according to data on its website.
There’s a powerful constant amid the to-and-fro of the U.S.-China trade war as currency policy gets dragged into the standoff between the world’s two top economies: Beijing wants more gold in its reserves. China’s central bank expanded gold reserves again in July, pressing on with a run that stretches back to December. The People’s Bank of China raised holdings to 62.26 million ounces from 61.94 million a month earlier, according to data on its website. In tonnage terms, the inflow was close to 10 tons, following the addition of about 84 tons in the seven months to June.
Gold has rallied in 2019 to a hit a six-year high as global growth stutters, central banks including the Federal Reserve eased policy, and the festering trade war all combined to bolster demand. Increased central-bank buying from China to Russia and Poland has helped to buttress consumption at a time of rising prices. This week, the conflict between Washington and Beijing worsened as the yuan was allowed to breach a key level, reinforcing the case for havens.
“It is important for the country to diversify away from the U.S. dollar,” Philip Klapwijk, managing director at consultant Precious Metals Insights Ltd., said before the PBOC’s latest figure was released. “Over the long run, even relatively small-scale gold purchases add up and help to meet this objective.”
Gold futures rose as much as 1.3% to $1,503.30 an ounce on Wednesday, the highest since 2013, before trading at $1,500.70 at 11:26 a.m. in London.
“This fits with China’s well established pattern of increasing gold reserves month after month but not in a large enough volume to disrupt the gold market,” said Ross Strachan, a senior commodities economist at Capital Economics Ltd. “We expect them to continue this trend as part of their long-term strategy to diversify their foreign exchange reserves.”
Central banks continued to load up on gold this year, helping push total bullion demand to a three-year high in the first half, according to the World Gold Council. That trend is expected to continue, with a survey of central banks showing 54% of respondents expect holdings to climb in the next 12 months.
“Bear in mind that China is the largest mine producer of gold in the world,” Klapwijk added. “The state can always buy local mine production using” local currency, he said.
Source: The Financial Express
