National
As the demand for fabric has declined in the domestic as well as international market, the textile processing units are bearing a deserted look. Left with no choice, these units are forced to cut production by a significant 40%, according to industry estimates. Gujarat is home to more than 600 textile processing units. Nitin Thaker, president, Ahmedabad Textile Processors’ Association (ATPA) said, “This situation in the market is very bad because of lack of demand for fabric. Due to this, unsold inventory of goods be it garments or fabrics remains piled up with retailers and wholesalers. As a result, the demand for fabric has significantly dropped.”
Roughly 90% of textile process houses in Gujarat are jobwork-oriented units. “When the demand drops, it will have a cascading effect on all forms of textile industry be it spinners, weavers, processors or garment makers. The situation is worse for smaller process houses in Gujarat,” Thaker added. Since textile processing units are forced to cut production,
industry revenues are adversely hurt. “Processing units are capitalintensive owing to the cost of machines in addition to the cost of environment-compliance in the form of common effluent treatment plants (CETPs). The funds that the government was supposed to release under Textile Upgradation Funds (TUFs) have still not been released. At the same time, dwindling demand has made it further impossible to absorb overhead costs because our payment cycles have extended from 90 days to 180 days,” said Malav Shah, proprietor of an Ahmedabad-based textile processing unit.The production cut has also hit employment in the industry. “With revenues getting impacted, we do need to cut overhead costs. However, laying off labourers is not a solution. Owing to the monsoon season, many of our labourers have gone to their home-states for sowing and due to this, part of our production cost is reduced. Depending on the cashflow situation, some of the units have also reduced the number of working days to four or five days in a week and even reduced number of work shifts from three in a day to two,” said Naresh Sharma, owner of a textile process house in Narol area of the city.
“If the demand does not show further signs of improvement, units may stare at a shutdown,” Sharma added
Source: Times of India
Contract manufacturers get same status as manufacturers and can raise more foreign capital to grow their retail footprint.Home-grown brands and private labels such as Fabindia and UrbanLadder will now be able to easily raise foreign funds for their ventures with the government allowing 100% foreign direct investment (FDI) in contract manufacturing. These companies rely on third-party outsourcing and and the move comes as a breather for them.
Earlier, contract manufacturing was a debatable issue but the move to cover them under the overarching norms on manufacturing has brought them on a par with manufacturers. “While the fine print will be available in the press note when it comes out, the logical extension of the norms means that the move will benefit such private labels from being single-brand retailers to manufacturers,” said Ajay Bahl, founding partner of law firm AZB & Partners, who advises private equity investors and homegrown brands.
India allows up to 100% FDI under the automatic route in singlebrand retail. About 112 brands have obtained government approval for single brand retail trade activities from 2006 till March 29, 2018. The single-brand retail sector has received total FDI equity of $1.6 billion so far.
“With yesterday's (Wednesday’s) announcement, the government has scored a hat trick, which will be good for ‘Make in India’, employ in India, and invest in India,” said Willaim Bissell, vice chairman at Fabindia, adding that the move is a positive for all Indian brands. Ashish Goel, cofounder and CEO of Urban Ladder, termed it a positive move. “We do get a lot of stuff manufactured in India and this can be helpful for us. We are keen to support Indian manufacturing and plan to manufacture furniture ourselves as well,” he said. Akash Gupt, partner at PwC, said the much awaited clarity will help the growth of private labels. “Homegrown brands that rely significantly on third-party manufacturing will be treated akin to manufacturers and hence can raise more foreign capital to grow their retail footprint. Besides foreign investments, more tangible benefits to the country should come by way of increase in manufacturing activity,” he said.
While the broadening of FDI norms in single-brand retail will benefit global brands, experts said contract manufacturing will help Indian labels. “This will help create scale for such brands and they would be able to raise funds,” Bahl added. Reviving manufacturing and making the sector internationally competitive have been the twin goals of Make in India, underpinned by a strategy of reducing costs of doing business.
Source: Economic Times
As export credit continues to contract, commerce and industry minister Piyush Goyal on Thursday held a meeting with senior public-sector bankers to push for easier and greater flow of loans at cheaper rates. This comes amid expectations that the government would soon announce a slew of steps to boost faltering export growth.
Both the government and the Reserve Bank of India (RBI) are already in discussion to ease priority-sector lending norms for exports. Though the central bank is learnt to be reluctant to allocate a part of its foreign exchange reserves for export credit — as is being demanded by some — to boost flow of loans, it is amenable to changes in credit norms.
Currently, exporters with a turnover of up to Rs 100 crore each are eligible for credit under the priority-sector norms. Sources had earlier told FE that RBI was considering a proposal to either scrap or substantially double the limit to benefit more exporters. Similarly, the maximum sanctioned limit of loans is also likely to be raised to Rs 40 crore per borrower from the current Rs 25 crore. Even the cap on export credit at 2% of banks’ total loans could be relaxed soon.
Source: The Financial Express
The RBI report added that land, labour & marketing issues must be addressed to arrest broad-based downturn in some sectors.The slowdown is cyclical but deep-rooted and some structural reforms will be needed to ensure that growth gets back on track.
MUMBAI: The economy is undergoing a cyclical slowdown rather than a “deep structural” one, the Reserve Bank of India (RBI) said in its 2018-19 annual report. But it added that issues related to “land, labour and marketing” will need to be addressed as a broad-based downturn is underway in sectors such as manufacturing, trade, hotels, transport, communication and broadcasting, construction and agriculture.
“A decomposition of various seasonally adjusted indicators of economic activity, aggregate and sectoral, into trend and cyclical components suggests that the recent deceleration could be in the nature of a soft patch mutating into a cyclical downswing, rather than a deep structural slowdown,” the central bank said, highlighting the slump in both rural and urban areas.
In its monetary policy review earlier this month, the RBI cut its growth projection for FY20 to 6.9% from its June forecast of 7%, citing weak domestic economic activity and a global slowdown amid trade tensions.
Structural Reforms Needed: Experts
Independent evaluators have forecast a sharper slowdown. Last week, Moody’s Investors Service cut India’s GDP growth prediction for calendar 2019 to 6.2% from 6.8%. Moody’s also predicted that India’s growth rate will slow further to 6.7% in 2020. Moody’s cut its growth forecast for eight countries in Asia, including India.
Economists said the slowdown is cyclical but deep-rooted and some structural reforms will be needed to ensure that growth gets back on track.
“A large part of the slowdown seems to be cyclical, but there are also structural components,” said Axis Bank chief economist Saugata Bhattacharya. “Better liquidity and lower rates will help the recovery of the cyclical component, but the structural recovery will be moderate as the propensity to consume has to revive. We are already seeing policy responses, in terms of lower rates and selected fiscal measures, to initiate the recovery process.”
Axis Bank has reduced its FY20 growth prediction to 6.8% from 7.1% forecast earlier.
The government has embarked on a series of stimulus measures aimed at bolstering growth, including the rollback of a tax surcharge on overseas investors, improved credit flow, transmission of lower interest rates and relaxations in foreign direct investment (FDI) norms.
In its annual report, the RBI acknowledged that the trend growth in India has witnessed a slight moderation since FY17, mainly because of issues in the services sector, especially trade, hotels, transport, communication and broadcasting, and financial, real estate and professional services. “Issues and challenges in these sectors need to be addressed for achieving broad-based upturn,” the RBI said.
Challenges to rural economy
It said that aggregate demand and private final consumption expenditure appear to have moderated in the first quarter of the current fiscal year. It pointed to challenges facing the rural economy.
“The delayed onset and skewed distribution of the southwest monsoon rainfall may pose downside risks to crop production and to rural consumption demand,” the RBI said. “This is already evident in a sharp contraction in sales of motorcycles and tractors by 8.8% and 14.1%, respectively, during Q1:2019-20.”
The news isn’t much better in India’s cities.
“As regards urban demand, both passenger car sales and domestic air passenger traffic registered a contraction in recent months,” the RBI said. “Production of consumer durables contracted in June 2019 (-5.5%) due to a fall in output of TV sets, hand tools, passenger vehicles, electrical apparatus and two-wheelers.”
A slowdown in steel consumption and contraction of both imports and domestic production of capital goods also indicated a slowdown. India’s external sector is also vulnerable due to risks from global developments, especially the downturn deepening, uncertainty over international crude oil prices and the volatility of capital flows.
As a result, reviving consumption demand and private investment has assumed the highest priority in FY20, the RBI said.
“This may involve strengthening the banking and non-banking sectors, a big push for spending on infrastructure and implementation of much-needed structural reforms in the areas of labour laws, taxation, and other legal reforms, which will also enhance ease of doing business in pursuit of fulfilling the vision of India becoming a $5 trillion economy by 2024-25,” the central bank said.
Source: The Economic Times
RBI’s central board had approved the transfer of a record Rs 1.76 lakh crore dividend and surplus reserves to the government. Asian Development Bank (ADB) president Takehiko Nakao has said the transfer of Reserve Bank of India’s surplus of Rs 1.76 lakh crore to the government will help stimulate the economy. He termed the decision an “appropriate policy” but warned against depending on such surpluses. “If used correctly, this money can provide stimulus to the economy,” he said at a media briefing.
The RBI’s central board had on Monday approved the transfer of a record Rs 1.76 lakh crore dividend and surplus reserves to the government. Nakao said while such fund transfers from the RBI cannot happen frequently, this year “it can be used for the government expenditure”. This surplus, he said, should be used to stimulate the Indian economy without compromising on the fiscal deficit targets.
Nakao is on a four-day visit to India, which concludes on Friday. The ADB chief met Prime Minister Narendra Modi on Thursday. The Manila-based multilateral bank expects India’s gross domestic product (GDP) to grow at 7% in the current fiscal and 7.2% next year. Nakao said the government’s recent decision to further liberalise the foreign direct investment (FDI) norms will also help the economy and that he was “not really worried about the future of India (as) Modi’s administration reforms have strengthened momentum” and the growth rate can fluctuate.
Noting that the ongoing trade conflict between India and China may help some industries in India, he said the general impact on currency exchange rates, the markets and the global economy will move quickly. “What is necessary for sound economic growth is investment in infrastructure, education and human capital,” Nakao said.
INDIA PROJECTS
ADB proposes to lend India $4 billion, of which $1 billion will be utilised for the private sector. Currently, ADB’s biggest sovereign as well as non-sovereign borrower is India.
Nakao said the bank supports the government’s Jal Jeevan Mission, and indicated that it may commit $500 million towards it. Launched on August 15, the mission aims to bring piped water to every household in the country.
“ADB’s sovereign lending to India in 2018 reached a record $3 billion, in transport, urban, irrigation, skills development, and intermediary finance for public-private partnerships,” the bank said in a statement. Nakao said ADB stands ready to commit more than $12 billion in lending over the next three years, averaging annually over $3 billion for sovereign operations and $1 billion for non-sovereign.
Source: The Economic Times
India-US trade talks at the level of Trade Ministers is likely to re-start soon with US President Donald Trump and India’s Prime Minister Narendra Modi deciding to move things ahead as soon as possible following their bilateral meeting on the sidelines of the G-7 talks in France this week, a government official said.
“The Ministry of External Affairs has indicated to the Commerce Ministry the decision taken by PM Modi and US President Trump at their meeting in France. Now it has to prepare for the talks,” a government official told BusinessLine.
The two countries were negotiating a trade deal to address mutual concerns in areas of trade and investment when the talks got derailed following Washington’s decision to withdraw the Generalised System of Preferences Scheme for India in June depriving Indian exporters duty-free access to the US market for over 3,000 goods.
New Delhi, which had been putting off imposition of tit-for-tat tariffs on the US as a retaliation for unilateral tariffs imposed on its steel and aluminium by Washington last year, went ahead and notified additional import tariffs on 28 items from the US, including apples and walnuts.
“We hope that this time the trade talks do re-start in proper earnest and don’t fizzle out like the last attempt. It is important for US Trade Representative Robert Lighthizer and Commerce & Industry Minister Piyush Goyal to meet to put life back into the discussions,” another official said.
When Trump and Modi had met on the sidelines of the G20 summit in June, they had agreed to resume the trade talks. In fact Trump had said that a “very big trade deal’’ with India was on the cards.
However, a meeting between a team of officials from the USTR’s office and the Indian Commerce Ministry in July remained inconclusive.
Trump has been putting pressure on India to bring down the trade deficit between the two countries by importing more from the US.
Source: The Hindu Business Line
The Textiles Workers Union has raised concerns about the alleged importation of the new uniforms introduced by the Ghana Education Service stating that the move makes no sense. The new uniform, which was introduced in April this year, was met with criticism as some said it was a misplaced priority and an unnecessary economic burden on parents. According to reports by Daily Graphic, the fabrics, are already on the market; though the GES has not officially made them available.
General Secretary of the Textiles Workers Union, Abraham Koomson, in an interview said the posture of government on the issue defeats its message of creating jobs for the youth, especially when foreign firms are engaged in the production of the uniforms. “It is difficult to understand why the government will encourage the importation of school uniform. This has never happened before. Government has never sanctioned the
importation of school uniform. We are even fighting the piracy of African prints because that has been a problem which has virtually collapsed the local manufacturing industries.” “This is madness, we cannot understand. It’s madness. Is this the government who wants to encourage investors to create jobs to solve the unemployment in this country? We rather paid people in China to create jobs for their national. I can’t understand because it doesn’t make sense. I have seen videos of the material and it bears the trademark of Printex. What kind of criminality is this when the President has openly declared in Parliament that nobody should bring any fabric through any entry point except the Tema Port. These products are coming from Togo, Burkina Faso and we are sitting down and we are happy with it. They are not paying taxes and duties. What kind of country is this?” he quizzed.
Ahead of the September 10 reopening date, parents have begun buying the fabric of the uniform for their children even before the official sale.
A few cloth and fabric dealers are already taking advantage of the situation by stocking up to meet the expected high demand in the coming days, but the dealers would, however, not reveal to the Daily Graphic, where and how they are getting their supplies. The current situation of a few dealers selling the fabrics seems to suggest that there is restriction on their production and sale, but the management of the GES has said the production and sale of the materials is open to both local and foreign companies, just like any other uniform, but it seems this has not been well communicated, leaving only a few dealers to cashing in.
The new uniform
The new uniform, which faced some criticism when it was announced, will have a striped shirt with the Ghana flag, a graduation cap, a certificate and books printed in it to be worn over a khaki skirts’ for girls and over khaki shorts for boys.
The service has explained that the flag printed in the shirt symbolises patriotism, the graduation cup and certificate stood for intelligence and superiority while the book depicts knowledge for empowerment.
The cost of the uniforms will be borne by parents though the government will cater to students in deprived areas in line with existing arrangements.
Source: Ghana Web
Japan’s talks with African leaders this week aim to boost its presence on the continent and offer an alternative to investments by an increasingly assertive China. Japan wants the latest round of the Tokyo International Conference on African Development (TICAD) to help ‘launch impactful Japanese action’ in the continent, Prime Minister Shinzo Abe said. The meeting, scheduled this year on August 28-30, has been organised every five years since 1993 in Japan or in Africa. China announced $60 billion in development funding
for Africa last year—a figure twice as much as Japan pledged at the 2016 TICAD meeting, according to a global newswire.
Japan will seek to position itself as a quality partner, offering high-impact loans and other assistance without the strings attached to loans offered by China that have been controversial in the past, analysts say. Japan wants to drive Africa's growth "with its high-quality infrastructure development, science technology and innovation", Abe said recently. TICAD is a good opportunity for Japan to send a message about "its practical, well-planned lending", according to Sawaka Takazaki, deputy director of the Middle East and Africa division at the Japan External Trade Organization (JETRO), a government-backed trade-promotion body.
The Chinese Belt and Road Initiative, offering hundreds of billions of dollars in financing for infrastructure projects, has been eagerly embraced in many parts of Africa, but has attracted criticism for favouring Chinese companies and workers over local economies, saddling nations with debt, and ignoring rights and environmental issues. Japan says it will offer more favourable financing, without the exclusive rights agreements often baked into China's projects.
Among the loans Tokyo is expected to announce is 400 billion yen funding for developing renewable energy projects, a Japanese newspaper reported earlier this month. Tokyo and the African Development Bank are also expected to jointly announce plans to offer more than 300 billion yen in loans for quality and transparent infrastructure development, the newspaper reported.
While Japan's exports to Africa last year were down more than 27 per cent from 2008 figures, China has seen a nearly 50 per cent surge in exports to the continent in the past decade, the Japan External Trade Organisation said. More than 150 Japanese firms are taking part in an expo on the sidelines, hoping to drum up business.
Source: Fibre2Fashion
Bangladesh and Argentina recently agreed in principle to boost bilateral trade by taking necessary steps and identifying sectors for mutual cooperation. Several Argentine ministers in meetings with visiting Bangladesh commerce minister Tipu Munshi expressed their interest to strengthen the existing economic ties, according to the commerce ministry.
Argentine production and labour minister Dante Sica told Munshi a stakeholder meeting on import duty cut for readymade garments (RMG) would be held next month, according to Bangla media reports.
Argentina’s agriculture, livestock and fisheries ministry showed keenness to sign a memorandum of understanding to strengthen technical cooperation in agriculture, cattle rearing, fisheries and sports.
Munshi also met the Argentine foreign minister and mentioned about the November 2018 free trade agreement(FTA) proposal to the MERCOSUR, the southern common market comprising Brazil, Argentina, Paraguay and Uruguay.
The minister assured Munshi that the proposal would be discussed in the next MERCOSUR Conference.
Munshi also met leaders of trade bodies and sought their cooperation for importing more RMG, pharmaceuticals, jute, shoes and plastic items.
In the last fiscal, Bangladesh imported goods worth $622 million from Argentina against exports of $18 million.
Source: Fibre2Fashion
Following the United States Trade Organization’s confirmation this week that an additional duty of 5 percent on $300 billion in products from China—on top of an original figure of 10 percent—would be implemented starting Sept. 1, representatives from the Chinese and U.S. governments had started to cool on the heated situation. China had planned to implement 5 percent to 10 percent tariffs on $75 billion in goods imported
from the United States in two segments, one this weekend and another on Dec. 15, but, on Thursday, seemed to reconsider this action, according to Bloomberg News. The U.S. tariffs on goods from China remain scheduled to begin Sept. 1 and an additional round scheduled to be implemented Dec. 15.
Additionally, the Trump administration demanded that existing 25 percent tariffs on approximately $250 billion of imports from China be increased by 5 percent to 30 percent beginning Oct. 1.
For Steve Lamar, executive vice president of the American Apparel & Footwear Association, the impact on U.S. consumers for this holiday season could be negative. While the new tariffs will be administered in two groups, or tranches, most of the affected apparel and textile goods will be included on the first list. Lamar noted that the Sept. 1 list of goods includes 92 percent of the apparel, 53 percent of the footwear and 68 percent of the home textiles from China.
“This tax clearly hits the U.S. consumer, and it hits the U.S. consumer hard,” he said. “The administration is targeting the consumer with an enormous tax increase right before the holidays and another that will take effect in time for the holidays.”
As the vice president of customs and trade advisory at Flexport, Tom Gould reported that many of his clients were disappointed by the additional costs associated with the tariffs and were equally upset by the inadequate amount of time to prepare.
“While we are getting notice maybe 30 days in advance, the official notice isn’t coming out until days before the date,” Gould said.
Apparel suppliers in the United States that are locked into contracts could experience a loss on goods that are subject to additional tariffs once they reach the United States.
“A supplier to a big-box retailer might have already placed orders for a T-shirt, turned around and sold it to a big-box retailer with a profit margin of 5 percent,” he explained. “Now, they have to pay 10 or 15 percent on their cost and may have to sell at a loss right now.”
At the Los Angeles–based, made-in-the-USA brand Tianello by Steve Barraza, founder Steve Barraza creates finished apparel that relies on silks from China. While he was disappointed by the additional tariffs of 5 percent that he will pay upon the Oct. 1 increase to 30 percent, Barraza did see a silver lining when purchasing his silk from China.
“The good news is that the price of silk has fallen approximately $3 per meter since 2018,” he said. “There is no doubt that the tariffs have slowed consumption there.”
Disappointed with the first round of tariffs that affected this specialty fabric, which is not available in the United States, Barraza couldn’t understand the reason Chinese finished
goods weren’t taxed first and wished there had been more consideration for United States manufacturers that rely on China’s specialty textiles.
“The final goal should be creating more jobs here. Taxing items that we don’t create here doesn’t do anything for us,” he said. “I don’t mind paying tariffs on things I could do here. We don’t produce linen or silk in the United States, and I never had to pay a duty on either of those [until now].”
A similar sentiment has been expressed by members of the AAFA, with Lamar trying to offer advice to business owners. Among his suggestions, Lamar has recommended businesses work with members of Congress on legislation and diversifying sourcing outside of China. Still, many within the industry might consider options that would have a negative impact on workers and consumers in the United States.
“Does it mean that they have to lay off workers? Does it mean they have to try to push these price increases through to consumers, risking loss of sales? Does it mean they must withhold investment to grow their businesses?,” he said. “They are extraordinarily frustrated that the administration isn’t doing its job to negotiate a trade agreement rather than impose tariffs,” he added.
Source: Apparel News
Dip in exports of gems & jewellery from India to be compensated by increase in electronics, minerals
The intense protests in Hong Kong over the proposed extradition laws are unlikely to affect bilateral trade between India and the island nation which continues to be robust in items such as electronics, electrical appliances and food, the Hong Kong Trade Development Council has said.
“There has been a small decline in exports from India to Hong Kong in the first four months of the fiscal but it has more to do with global trade sentiments and India’s economic scenario rather than the protests. Due to strong performance of some sectors such as electronics, the numbers will improve,” said Rajesh Bhagat, South Asia Consultant, HKTDC.
Bhagat said Hong Kong continued to be a safe city and the financial markets were working normally indicating there was no cause for concern.
Hong Kong was India’s fifth largest export destination in the April-July 2019 period with exports dipping marginally by 5 per cent to $3.8 billion from $4 billion in the same period last year.
Imports from Hong Kong to India increased 2.2 per cent in the April-July 2019 period to $5.7 billion from $5.2 billion in the comparable months last year helping it maintain its position as the seventh largest import destination for India.
“Hong Kong will continue to be an important destination for India. That won’t ever be compromised in the long run or short run. India will always want to do more of exports. We will have to look at destinations that help us to reach out to international market. In Asia, Hong Kong is one such destination because it reaches out to buyers from all over the world,” Bhagat said.
Because of the importance of Hong Kong as a trading hub, all export promotion councils from India have trade pavilions in various events held in the city, Bhagat added.
Interestingly, two expos, one on tea and the other on food, organised in Hong Kong earlier this month, where many companies from India participated, went off well with thousands of business visitors despite the current political situation, Bhagat said.
Although in 2018-19 India’s exports to Hong Kong declined by 11 per cent to $13 billion, from $14.6 billion in the previous fiscal, it was mostly due to a decline in gems & jewellery trade, which was a global phenomenon, according to HKTDC.
“A decline in gems & jewellery is now being compensated with an increase in export of telecommunication equipment, electronics and non-metallic minerals. HKTDC is reaching out to various States such as those in the North-East, Odisha and Andhra Pradesh to spread awareness about the potential of exporting to Hong Kong,” Bhagat said.
As many as 40 Indian companies will be participating at the HKTDC Hong Kong Electronics Fair 2019 in October, he added.
Source: The Hindu Business Line
China indicated that it wouldn’t immediately retaliate against the latest U.S. tariff increase announced by President Donald Trump last week, emphasizing the need to discuss ways to deescalate the trade war between the world’s two largest economies.
“China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war,” Ministry of Commerce spokesman Gao Feng told reporters in Beijing on Thursday. “China is lodging solemn representations with the U.S. on the matter.”
When asked if that meant China wouldn’t retaliate at all for the latest escalation by the U.S., Gao didn’t elaborate but repeated the same comments. China has hit back against each previous tariff increase by the U.S., so not responding in kind this time may signal a change in strategy.
Stocks across Asia pared losses and European stocks turned higher with U.S. equity futures as investors interpreted the comments as an olive branch from Beijing aimed at getting talks back on track. Gao said that both sides are discussing the previously announced trip in September by Chinese negotiators to Washington.
Gao’s remarks came amid signs China’s economy slowed further in August as weak domestic conditions. The downshifting is evident in a Bloomberg Economics gauge aggregating the earliest available indicators from financial markets and businesses.
Source: The Financial Express
