India’s Finance Minister Nirmala Sitharaman said it was too early to say if the slowdown in the economy had bottomed out. Companies are planning new investments after $20 billion worth of corporate tax cuts announced in September, Sitharaman told reporters in New Delhi Friday. Actual investments may take some time to materialize, she said. Prime Minister Narendra Modi’s government has unveiled several steps since August to revive economic growth from the weakest pace since 2013. The surprise decision to lower taxes for companies raised concerns about India’s fiscal discipline, with Moody’s Investors Service cutting the country’s sovereign debt outlook to negative last week amid concerns over slowing growth and revenues. Sitharaman said it’s a bit too soon to say whether Asia’s third-largest economy would be able to stick to its fiscal deficit targets. However, the government’s asset sales program -- key to plugging a gaping hole in the budget -- is moving ahead comfortably, she said. India intends to bring the nation’s cooperative banks under the purview of the Reserve Bank of India, she said. Currently, state governments share regulatory functions with the central bank over cooperative banks, many of whom are failing because of fraudulent lending practices.
Source: Bloomberg
Mahathir has used the electoral mandate and the pro-Mahathir wave to keel predecessor Najib’s pro-China policy into a more centrist one, opening the doors to the possibility of dialogue and renegotiation with China At 94, and still going strong, Malaysian PM Mahathir Mohamed is somewhat the grand old man of Malaysian politics. Mahathir, has been in the news since his meteoric political comeback from political wilderness, leading the four party coalition Pakatan Harapan (Alliance of Hope) to victory in the May 2018 general election. Instantly, Mahathir became the poster-child not only of senior citizens in the region (Southeast Asia), but also of millennials, who have clamoured to know the secret of his wit and longevity. More recently though, Mahathir has been in the news for reinstating suspended China-backed mega projects in Malaysia—on better terms. China is Malaysia’s most important trade partner, and Malaysia is one of the biggest beneficiaries of China’s Belt and Road Initiative (BRI). Chinese investment in Malaysia (particularly Malaysian ports that will have countries bypass the notorious choke point, the Straits of Malacca) has also been viewed as a veiled Chinese ambition in ASEAN, no less “at the heart of China’s effort to gain global influence”. The China-factor has long been in play in Malaysian politics. This is not to be confused with the ethnic Chinese factor (or Malaysian Chinese), who constitute roughly 24% of the population. An academic in Singapore who preferred to remain anonymous said that the Malaysian Chinese (who boast of a political outfit, the Democratic Action Party, DAP) “are pragmatic…more Malaysian than Chinese, who look out more for their businesses than China”. Think tycoon Robert Kuok (Shangri-La chain of hotels), Quek Leng Chan (Hong Leong group) and Ten Hong Piow (Public Bank Berhad). In Malaysian politics, the Malaysian Chinese factor has been much less at play than corruption and scams, particularly of the outgoing government of Barisan Nasional helmed by Najib Razak (2009-2018). Mahathir (who served as the PM, 1981-2003) rode to power on the back of the unpopularity of former PM Najib. Najib’s markedly pro-China government stood embroiled in corruption and scams, at the last count embattled in “five court cases and 42 criminal charges for corruption and money laundering” as The Straits Times reported. Najib’s downfall has been linked to the $4.5 billion 1MDB state investment fund scam and personal excess. In fact, the Hong Kong based Wall Street Journal (WSJ) alleged that China was helping Najib tide over the 1MDB scam in lieu of China bagging other projects such as the Trans-Sabah Gas Pipeline, the Multi-Product Pipeline and the East Coast Railway Link (ECRL). During the campaign trail, Mahathir assailed Najib for “selling off” Malaysia (to China) in lieu of China’s help to tide over the 1MDB scam. Development projects were slammed as built for affluent “foreigners” (read, affluent Chinese). Mahathir promised to suspend/reassess “unfair” projects on a case by case basis. Mahthir also threw a spanner in the works of Chinese claims in the South China Sea by supporting “open passage for everybody”. Najib’s nine-year tenure was seen as pro-China because several heavy-weight China-backed investment projects were approved. This included the $100 billion mega development project Forest City in Iskander (region) in Johor Bahru (capital of Johor state) adjoining Singapore and another such development project, Bandar Malaysia in Kuala Lumpur. There was also the high-profile $13 billion East Coast Railway Link (ECRL), linking Port Klang on the Straits of Malacca to the city of Kota Bharu in the northeast. China also backed Malacca’s $4 billion upgradation of the Kuala Linggi International Port (KLIP) which serves the oil and gas industry and the $900 million expansion of Kuantan port. The $10 billion integrated development project Melaka Gateway was also backed by China. The Melaka Gateway project, the ECRL, the KLIP and the Kuantan port expansion will provide a shorter freight transportation route from the Straits of Malacca to the South China Sea, bypassing Singapore (a key transit point) and the Straits of Malacca (a choke point). While Singapore was jittery about the projects visibly undercutting its advantage, China-watchers in Malaysia were jittery about the footprint of China’s BRI. Common concerns in the China-backed projects in Malaysia were environmental concerns (land reclamation and land erosion, especially in the port projects), pricing and Chinese overcapacity, raw materials to labour force to contractors. When Mahathir came to power, several of the China-backed projects were suspended. The ECRL was first to be suspended, as was the agreement to have China construct a pipeline. Forest City development project appeared like a ghost-town and there was stasis in the construction and expansion of Malaysian ports. But never say never again. In 2019, Chinese companies were back in business. The China Communications Construction Company (CCCC) was on track with the ECRL project because the project was reinstated. So was the China Railway Engineering Corp with the revival of the Bandar Malaysia project. Shenzhen Yantian Port Group and the Rizhao Port group were back at work in the Melaka Gateway project as was Country Garden (Chinese property developer) which backed the Forest City project. What changed? Mahathir despatched Special Envoy Daim Zainuddin, an old hand in Malaysian politics to make government to government negotiations. G2G negotiations have helped. In the case of the ECRL, the cost was cut to nearly a third to $11 billion. Bandar Malaysia project saw a few changes such as the addition of a peoples park, affordable housing and a pro-bumiputera policy. Other projects factored in Malaysian raw materials, labour and contractors. Mahathir has said as much that he is not against China, but against lopsided, overpriced deals. Some of this has been partly addressed by the G2G negotiations, as well as China cost-cutting with some measures (the railway link, for instance, has been shortened by 40 kms) as also with China’s realisation that pricing and lopsided deals were sending Chinese companies out of business. While Mahathir has won praise for negotiating with China for better terms, he has not earned fans for keeping mum about China’s large-scale incarceration of a million Turkic Muslims (Uyghurs) in Xinjiang. Mahathir has openly cast himself as the defender of Muslims and has supported Muslim solidarity, criticising Israel-Palestine as the “origin of terrorism”, accusing Myanmar of “genocide” of the Rohingya Muslims and more recently, India of “invading and occupying” Kashmir. The latter led to a backlash in India with Indian traders boycotting Malaysian palm oil. In China’s case, Mahathir is known to have said “not to antagonise China too much, because China is beneficial to us”. Mahathir has softened his stance with India, offering a sweet deal to import more sugar to offset the trade imbalance. With his eternal fountain of youth and characteristic political flourish that comes from his long haul in politics, Mahathir has used the electoral mandate and the pro-Mahathir wave to keel predecessor Najib’s pro-China policy into a more centrist one, opening the doors to the possibility of dialogue and renegotiation with China. And Mahathir has done so, without upsetting the applecart of political and economic equations. Singapore-based Sinologist, and adjunct fellow, Institute of Chinese Studies, Delhi
Source: Financial Express
India and the US are understood to have resolved most of the important trade issues, thus paving the way for an 'initial trade package' wherein the two countries are looking for an equitable market access. The much-needed progress is believed to have been made during the meeting between the Union Commerce and Industry Minister Piyush Goyal and US Trade Representatives Robert Lighthizer in Washington DC on Wednesday. The two leaders spoke over phone again on Thursday. A high-powered US delegation is slated to travel to India next week to give a final shape to what is being described as an initial trade package which will eventually pave the way for a major trade pact between the two countries. Trade issues started cropping up between the countries when the US imposed high customs duties on certain steel and aluminium products, which are affecting India''s exports of these items to America. The US had also rolled back export incentives for Indian exporters, under its Generalized System of Preferences (GSP) programme. India exports goods worth about USD 6 billion to America under the scheme. In retaliation, India imposed high customs duties on 28 US products, including almonds. Goyal and Lighthizer are believed to have had a constructive meeting in Washington on Wednesday, during which they covered a very wide range of issues that are on the table on the trade side. A number of very important items that were on the table are understood to have been resolved and are reported to have been made part of the initial trade package that the two countries are working on. Goyal had a behind the scene engagements in Washington and left for New York on Wednesday evening. On Thursday afternoon, he and Lighthizer had another telephonic conversation as a follow up to their meeting a day earlier. Good progress has been achieved, according to those familiar with the trade talks. The two countries then will continue discussions on a more substantive India-US agreement on trade. While the final details of the initial trade package continue to be under wraps, the two countries are looking for an understanding based on equitable market access. Both India and the US have been working on this principle and there is some level of measure of success, it is understood. During the meeting, Indian officials from Ministry of Agriculture, Union Health Ministry and Indian Council of Medical Research are also believed to have participated in the deliberations. Last month, Finance Minister Nirmala Sitharaman, during a lecture at Columbia University's School of International and Public Affairs in the US, said trade negotiations between India and the US were going well and will conclude sooner than expected. "I think the trade talks would conclude sooner. The talks are going on very well. Yes, we couldn't conclude it before the Prime Minister's visit (to the US) happened. But both sides are engaged with all commitment," Sitharaman had said.
Source: Economic Times
Finance Commission Chairman N K Singh on Friday said the current economic slowdown is episodic and expressed hope that sluggishness will not continue for long. India's economic growth hit a six-year low of 5 per cent in the first quarter of the current fiscal. It is estimated that the growth may further slip to below 5 per cent in the second quarter and overall the economy is likely to register a less than 5 per cent expansion for the full fiscal. "I do not regard that the current economic sluggishness is something that the country is going to experience for too long. I remain optimistic that the current slowdown is as much as anecdotal, episodic as much as cyclical and structural," he said at an event here. Singh, however, stressed that India should continue with both structural and cyclical reforms. On Regional Comprehensive Economic Partnership (RCEP), he said global economic structure is changing, but India is not at a disadvantage. It is inherent that India was better off in a multilateral world than in a bilateral world, he said, adding that the country should continue to strengthen multilateral activity, but should also keep its own interests in mind. Earlier this month, India decided not to join the mega Regional Comprehensive Economic Partnership (RCEP) deal as negotiations failed to address New Delhi's concerns. Pointing out that India improved overall budgetary resources to the health sector, he said there is scope for further improvement especially on the financing side. The finance commission had constituted a group to study the health sector to holistically examine best international practices for the health sector and seek to benchmark framework to these practices for optimising benefits keeping in mind local issues. The panel is also evaluating the existing regulatory framework in the Health sector and examine its strength and weaknesses for enabling a balanced yet faster expansion of the health sector keeping in view India's Demographic profile.
Source: Economic Times
Banks on cautious ‘lending path’ with more focus on recoveries. Lack of timely and requisite credit availability is posing serious obstructions for the Tirupur garment manufacturers and impeding the otherwise possible growth of the cluster in tandem with the rise of competition from countries like Bangladesh, Vietnam and Cambodia. The situation has become more intense in the recent times with the banks giving increased focus on recoveries than on lending subsequent to the rises in non-performing assets (NPAs) in the country.
Credit limit expansion
One of the main complaints being aired by large section of manufacturers and industry consultants is that expansion of credit limits as and when required by the industrialists were not been facilitated on a need basis by banks. Due to this, the garment makers get entangled in cash crunch situation. “Unless the banks lend to meet the industrial demands, how can the manufacturing output improves especially in predominant small and medium enterprises clusters like Tirupur where working capital requirements are huge across the different stages of production,” asks S. Dhananjayan, a senior chartered accountant and industrial consultant to various industry bodies. The data released by National Statistical Office (NSO) a few days back concur the fact ‘manufacturing’ segment was one among the major reasons for the shrinkage of the Index of Industrial Production (IIP) in the country. The IIP contracted 4.3 per cent in September, the worst fall in eight years.
Banking view
A senior Scale-5 level manager of a public sector bank, on the condition of anonymity, admitted to this reporter that there was an impediment in lending at the grass root level due to ‘risk aversion’ factor which had come up. Banking officials cited multiple reasons for the ‘risk aversion’ attitude. Big decisions to sanction the credit against the needs raised by the manufacturers were not coming from ‘controlling offices’ (could be either zonal or regional offices) or respective head offices on various occasions as many officials fear the questioning of their decisions at later stage if the loan turned NPA. Why to take quick decisions to process all loan applications at expanded credit limits and then face inquiries from investigation agencies, pointed out an official.
Concept change
Many apparel manufacturers who spoke to navjeevanexpress.com have unanimously opined the view for a concept change in NPA norms. “NPA in its present context per se is a wrong connotation under Basel norms, which is a banking supervision accord. The Union government should take up the issue to either modify Basel norms to suit Indian industrial climate or at least alienate MSMEs from the Basel norms regulations,” said Tirupur Exporters Association president Raja Shanmugam. Shanmugam pointed out that lack of adequate credit availability had stunted the annual exports from Tirupur at around Rs 25,000 crore.
Source: Navjeevan Express
India’s exports contracted by 2.2 per cent in the seven months to October 2019. While India aimed at substituting China’s role in exporting to major destinations, the country’s merchandise exports, on the contrary, shrank in the first seven months of the current fiscal year. India’s exports contracted by 2.2 per cent in the seven months to October 2019, according to the Ministry of Commerce & Industry. Among the top destinations in H1 FY20, exports contracted for UAE, UK, Hong Kong, Germany, Bangladesh, and Nepal. Among the principal commodities, India’s largest export is petroleum, crude and its products, plunged more than 9 per cent in the half-year. Exports in October 2019 were USD 26.38 billion, as compared to USD26.67 billion in October 2018, showing a contraction of 1.1 per cent, while imports in October 2019 were USD 37.39 billion , which was 16.31 per cent lower over imports of USD 44.68billion. Low demand and investment in the country have kept the imports low since June 2019. Narendra Modi-led government’s flagship scheme ‘Make in India’ was introduced to boost manufacturing, employment and exports, however, all three are staggering from the current perspective. The recent industrial production fell to an 8-year low, unemployment rose to an over 45-year high, the exports have also started to take a toll. Along with the low exports, India’s dependence on imports is another reason why the trade deficit reaches to a discomforting level. Crude oil, being the largest item in the import basket, makes India’s trade account vulnerable to movements in international prices. India’s oil import bill rose by USD 32.3 billion during FY19. However, on the back of a major slowdown in the manufacturing sector, imports of petroleum, crude, and its products fell 31 per cent in October. Majorly driven by low petroleum imports, India’s overall imports have also shrunk by 8.4 per cent till October 2019.
Source: Financial Express
After negotiating for about seven years, India decided to opt out of the Regional Comprehensive Economic Partnership (RCEP) earlier this month. One argument used to justify the pull-out is that free trade agreements (FTAs) don’t amount to free trade. Unlike unilateral trade liberalisation that results only in trade creation, an FTA leads to both trade creation and trade diversion, the latter being diversion of imports from more efficient FTA non-members to its members that now face lower tariffs within this group. This latter element is the protectionist part of an FTA, while the former is the free trade component. Overall, an FTA will lead to freer trade if trade creation is greater than trade diversion. When initial tariffs are low, with the exception of a small number of industries, trade diversion should be relatively small.
RCEP, Biceps, Triceps
India already has bilateral trade agreements with Japan, Malaysia, Singapore, Thailand and South Korea, as well as an FTA with Asean. Thus, Malaysia, Singapore and Thailand have trade agreements with India individually as well as through Asean. Clearly, then nothing would have changed between India and 12 of the RCEP member countries after India’s inclusion in RCEP. As a result, for India, trade barriers would have been lower with only three countries: China, Australia and New Zealand. There was a fear that there would be a surge in imports of manufactures, primarily labour-intensive ones, from China. Such a surge, it was feared, could wipe out India’s manufactures. There is a problem with this argument. Any standard FTA has a safety valve, in the form of an escape clause, built into it. This means that any import surge that causes injury in the form of losses in output, profits and employment, immediately allows the triggering of temporary protection. During this period of protection, restructuring of the injured industry will take place, so that it is ready for international competition after some time. We don’t know the specifics of the RCEP agreement, as the negotiations were carried out behind closed doors. But if India was not able to get the standard escape clause into the agreement — which I really doubt — then this would show the failure of India’s trade negotiators. There was also the fear that Indian dairy farmers would be seriously hurt by competition from New Zealand’s dairy products. Given that we expect the average Indian citizen to be a net consumer (not a net producer) of dairy products, and that milk and milk products are important sources of many essential nutrients, a reduction in the prices of dairy products would have benefited hundreds of millions of Indians. In other words, the effects of RCEP on dairy farmers would have clearly been trumped by the effects on consumers, including those in poverty. But the dairy farmers’ interests seem to have prevailed. Reciprocity is considered to be an important principle in most FTAs. This means that reductions in trade barriers take place in a way that leads to equal exchanges of market access. Clearly, China, a major exporter of manufactures, has an advantage in such negotiations, as tariff reductions, especially all the way to zero, are easy to figure out. However, what the barriers are to trade in services, in which India has the comparative advantage, is much more difficult to determine.
Block the Barricade
Reductions in barriers to services trade involve granting of licences and permits, as well as allowing freer movement of professionals, in these tradeable service industries across member countries. But to what extent any such barriers need to be removed, and how such removal translates into market access and to what extent, can’t be determined by simple calculations. This can, therefore, be a source ofdisagreement between negotiating countries. However, if this liberalisation is agreed to be slowly done in phases until the desired market access is reached, the problem gets simplified considerably. An agreement like RCEP, with liberalisation (both in manufacturing and services) carried out in phases, has considerable potential for India’s services sector, especially for software and ICT. Since the beginning of India’s big trade reforms in 1991, economic growth has been 6% a year in 17 of the last 28 years. In 12 of those years, growth has been close to 8% or higher. This is impressive by any standards, but especially by the standards of the 1960s-70s when growth was in the range of1-3%. Not only has growth been high since the 1991reforms, but also the proportion of people below the poverty line has gone down from almost 50% to 20%, using the World Banks $1.90-aday poverty line. So, it does not make sense to retreat to protectionism, as seen in the RCEP pull-out or in the few tariff hikes India has seen over the last five years. Protectionism clearly failed in a big way during 1960-85. I sincerely hope that remembering these sharply contrasting experiences, India will soon decide to join RCEP at a future date, when it is also able to obtain better terms. Indeed, such a decision will provide an impetus to the next generation of reforms —those related to land and labour. The writer is professor of economics, Syracuse University, New York, US
Source: Economic Times
Deep down, perhaps the most important factor that concerned Indian negotiators of the Regional Comprehensive Economic Partnership (RCEP) was the threat of competition from China. India has a large existing bilateral trade deficit with China and it was feared that opening to it under RCEP would widen this deficit yet further. A related concern was that an avalanche of new Chinese goods would hit Indian markets, undermining its manufacturing sector and Make in India programme. Examine first the issue of bilateral trade deficit. Setting politics aside for the moment, as long as a country’s trade in goods and services is balanced in aggregate, economic logic tells us that bilateral deficits and surpluses should not be a matter of concern. There are nearly 200 countries in the world and each of them strives to buy its imports from countries that charge it the lowest prices and sell its exports to countries that offer it the highest prices. It will be a wonder if these myriad transactions result in mutually balanced trade for each pair of countries. To understand the benign nature of bilateral deficits, consider for a moment how households earn and spend their incomes. I sell (“export”) my services to Columbia University because it pays me the highest salary I can get. I then use that salary to buy (“import”) the goods and services I need from sellers who sell them to me at the lowest prices. In the process, I run a bilateral surplus with Columbia and bilateral deficits with all sellers from whom I buy the goods and services I need. But as long as the dollar value of all my purchases does not exceed my earnings from Columbia, I have no reason to worry. If my total purchases exceed my earnings, I incur debt and if this happens year after year, I have something to worry about, namely, the loss of my creditworthiness. The same essential analysis applies to nations. As long as a country holds its overall exports and imports in balance and does not borrow abroad to finance its imports, it has nothing to worry about. If it has to borrow large amounts in relation to its export earnings to finance its imports year after year, it runs the risk of losing its credit in international markets, as we indeed did in 1991. What about politics of deficits? For example, suppose that India runs a large bilateral trade deficit with China and covers it by running an equivalent trade surplus with the United States. If the US then reacts irrationally to its deficit with India and threatens it with trade barriers, it would seem that India would have to worry about its deficit with China. But even here, the beauty of economic logic is that as long as India does not resort to borrowing abroad, reduced export revenues from the US will force an equivalent reduction in its total imports, yielding an overall balance. Scarcity of dollars due to reduced export revenues from the US would make them more expensive and lead to a reduction in imports from all sources. Even the fears that China would flood Indian market with cheap imports are exaggerated. To be sure, cheap imports would come upon opening up since that is the precise point of trade liberalisation. If we do not want cheaper sources of what we need, we may as well prohibit all imports. But we tried that during the heyday of licence-permit raj and the results are there for everyone to see. Entry of cheap imports threatens local producers only if the latter remain inefficient and costly. Local producers that respond to competition by adopting new technologies, organising production activity better and cutting costs in other ways survive. Our manufacturing becomes stronger, as it did in the wake of post-1991 reforms. Moreover, imports cannot expand without the expansion of exports to pay for them. The sad politics of trade, however, is that what is imported is there for all to see. What is exported is invisible to all except exporters themselves and rare trade economists who examine data. A genuine concern in opening to trade is that it causes dislocation. Firms unable to compete with cheaper imports must find alternative employment. Gradually, expanding export firms absorb these resources, but transition can be painful. This is why trade liberalisation is implemented gradually and in a predictable way, as we did during 1991-2007. Free trade agreements similarly have implementation periods of 15 to 20 years with the bulk of liberalisation back loaded and sensitive sectors excluded altogether. Our own experience tells us that the gains from trade liberalisation are too large to be foregone on account of transition costs. Free trade agreements have the advantage of announcing the roadmap of liberalisation one to two decades in advance, which gives economic actors ample time to relocate. Accelerated growth during the past two decades owes much to trade liberalisation. If we are to realise our full potential in the forthcoming decade, further liberalisation either unilaterally or as a part of a set of free trade agreements is a necessity. We must drop our hesitations and act decisively, as we did during 1991-2007.
Source: Economic Times
Earlier this month, India pulled out of the Regional Comprehensive Economic Partnership (RCEP), and rightly so. Prime Minister Narendra Modi’s decision to stay out of the regional free trade agreement (FTA) is based on views expressed by a wide spectrum of stakeholders. Industry bodies, farmers and civil society organisations believe that unless India’s concerns are resolved, India shouldn’t join this grouping under any time pressure. India Inc was particularly keen that ‘Make in India’ doesn’t get affected by RCEP, where certain automatic triggers are not allowed to be in place to stop excessive imports. While there are strong views against RCEP, there is equally a large number in favour of access to the largest market of the world. The one common point was that India’s issues and concerns needed a fair hearing by the other 15 RCEP member countries. Eventually, it boiled down to the fact that India’s issues remain unresolved. Naturally, the only reasonable action was to not sign the deal. Of the 15 countries in RCEP, India has a trade deficit with 11 of them. The ‘China factor’, of course, dominated the discourse between GoI and India Inc. The latter’s concerns were core to India’s negotiating strategy in RCEP till the very end. But there are issues beyond China that also needed resolution. GoI has articulated India’s position and what led to the decision to pull out at the Bangkok Leaders’ Summit. One good thing is that India’s ‘exit’ was not acrimonious. It has been engaged with RCEP with the good intention to work out a mutually beneficial trade agreement, and to put forward its concerns on the negotiating table. RCEP’s door is not closed for India, as the joint statement states that all participating countries will work together to resolve outstanding issues in a mutually satisfactory way. But it is high time India needs to look beyond RCEP. During the last few years, important geographies like the EU and the US may not have been given due attention. So, it’s heartening to hear commerce and industry minister Piyush Goyal say that efforts are being made to renew negotiation efforts for the India-EU bilateral trade and investment agreement (BTIA). Also, efforts are reportedly on from both sides to come to an agreement on an India-US limited trade deal. The US and EU together constitute one-third of India’s total merchandise exports. India has to hold on to its existing share in these two large traditional markets, and could further increase share with the help of preferential trading arrangements (PTAs). What India needs now is an approach to FTAs based on the recognition of its core competencies. There has to be a renewed thrust on enhancing competitiveness of India and Indian industry. Any aspiration of accessing larger markets and being part of the global value chain would have to be backed by a strong and competitive industry. Government and industry need to work together to establish the benchmarks, and identify each line item of embedded costs that go into details of that. India should set itself aspirational targets of achieving a position in the top five in each of these cost elements. Till that time, accurate calculation should provide the basis for establishing appropriate refund mechanism for exporters and suitable countervailing duties (CVDs) in the case of imports. This would ensure that Indian industry is not at an unfair disadvantage when compared to imports, which come from competitive geographies. In India, industry cross-subsidises a lot of elements like power, rail tariff, etc. These need to be recognised, and mechanisms found to ensure that industry does not become a victim on the global arena. Costs that get embedded owing to these elements need to be separately calculated and taken into cognisance when refunds for exports are calculated. Staying out of RCEP for the time being also affords India time to pause and reflect on India’s competitiveness. For this, primacy has to be given to domestic competitiveness. India boasts of having some of the most competitive industries in the world when measured within the confines of its factories. It loses out the moment it ‘steps out’. This is the opportunity to correct this anomaly. The writer is president, Confederation of Indian Industry (CII)
Source: Economic Times
The government has shelved a plan to release the Consumer Expenditure Survey results of 2017-2018, a leaked draft of which showed a decline in consumer spending in rural India. A media report on Friday citing a National Statistical Office (NSO) survey titled, ‘Key Indicators: Household Consumer Expenditure in India,’ allegedly showed that the average amount spent by an Indian in a month fell 3.7% to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12. While consumer spending declined 8.8% in 2017-18 in India’s villages, it rose 2% over six years in cities, it said. “In view of the data quality issues, the ministry has decided not to release the Consumer Expenditure Survey results of 2017-2018,” the ministry of statistics and programme implementation said in a statement. The ministry said it “is separately examining the feasibility of conducting the next Consumer Expenditure Survey in 2020-2021 and 2021-22 after incorporating all data quality refinements in the survey process.” Usually conducted every five years, with the last one done from July 2011 to June 2012, the survey generates estimates of household Monthly Per Capita Consumer Expenditure (MPCE) and the distribution of households and people over the MPCE classes. It is designed to collect information about expenditure on consumption of goods and services (food and non-food) by households, which is also used to rebase gross domestic product (GDP) and other macro-economic indicators. The media report also said the survey report was withheld due to its ‘adverse’ findings. The ministry “emphatically” stated that there is a rigorous procedure for vetting of data and reports produced through surveys. “All such submissions which come to the ministry are draft in nature and cannot be deemed to be the final report,” it said.
Results examined:
Explaining that when the results of the survey were examined, the ministry found a significant increase in the divergence in consumption pattern levels and the direction of change when compared to other administrative data sources such as actual production of goods and services. Concerns were also raised over the ability/sensitivity of the survey instrument to capture consumption of social services by households, especially on health and education, due to which the matter was referred to a committee of experts. The committee noted the discrepancies and made its recommendations, including refinement of the survey methodology and improving data quality aspects on a concurrent basis. “The recommendations of the committee are being examined for implementation in future surveys,” the ministry said. Separately, the Advisory Committee on National Accounts Statistics has recommended that for rebasing of the GDP series, 2017-18 is not appropriate as the new base year. The ministry was contemplating making 2017-18 the new base year for GDP calculations, but economists cautioned against it as disruptions brought about by the introduction of the Goods and Services Tax and demonetisation did not make it a “normal year.”
Source: Economic Times
Falling rural demand seems to have finally done it. Consumer spending in India declined for the first time in more than four decades in 2017-18, Business Standard has reported citing a government survey that has yet not been released. As per the "Key Indicators: Household Consumer Expenditure in India" survey conducted by the National Statistical Office (NSO), the average monthly spending by an individual fell to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12, down 3.7 per cent. Here is a data comparison to put this slip in perspective: In 2011-12, monthly per capita consumption expenditure had gone up by a sizeable 13 per cent over a two-year span. It is worth mentioning here that these figures are in real terms, which means they have been adjusted for inflation with 2009-10 as the base. The survey in question was carried out during the period between July 2017 and June 2018. It found that spending in rural India went down by 8.8 per cent for the period, while the corresponding fall for urban India stood at 2 per cent over a 6-year span.
Source: Economic Times
The US department of commerce has announced affirmative final determinations in the antidumping duty (AD) and countervailing duty (CVD) investigations of imports of polyester textured yarn (PTY) from China and India, finding exporters from these nations have dumped yarn in the US at margins ranging from 76.07 to 77.15 per cent and 17.62 to 47.51 per cent, respectively. The department of commerce also determined that exporters from China and India received countervailable subsidies at rates ranging from 32.18 to 473.09 per cent and 4.29 to 21.83 per cent, respectively. In 2018, imports of polyester textured yarn from China and India were valued at an estimated $45.5 million and $21.6 million, respectively. The affirmative final determination has been made following a petition made by Unifi Manufacturing, Inc (Greensboro, NC) and Nan Ya Plastics Corp America (Lake City, SC). "The strict enforcement of US trade law is a primary focus of the Trump Administration. Since the beginning of the current Administration, the department of commerce has initiated 187 new antidumping and countervailing duty investigations – a 240 per cent increase from the comparable period in the previous administration," the department said in a statement. As a next step, the US International Trade Commission (ITC) is currently scheduled to make its final injury determinations on or about December 30, 2019. If the ITC makes affirmative final injury determinations, the department of commerce will issue AD and CVD orders. If the ITC makes negative final determinations of injury, the investigations will be terminated, and no orders will be issued. The US department of commerce currently maintains 498 antidumping and countervailing duty orders which provide relief to American companies and industries impacted by unfair trade.
Source: Fibre2Fashion
The textile industry has evolved to a great extent and has witnessed numerous transitions over the years. Expert manufacturers have started experimenting a lot to keep up with the current trends. In the present era, fabrics hold high value in development of various segments of apparel business, ranging from workwear to party wear and sportswear to trekking wear. Therefore, it has become extremely essential to choose the fabrics wisely. Technology and innovations have always been the core of every business, fabric industry being no exception. With the advent of new trends and technology in the textile industry, one can find a massive variety of fabrics available in the market. However, to opt for the best fabric as per the requirements, an understanding of the fabric is a must.
Fabric Characteristics
Fabrics are often intertwined with one or a group of yarns or interconnected loop of yarns which are composed of fibers and filaments. A fabric behaviour that plays a pivotal role in an apparel is affected by fibre blends and their fineness. Likewise, a yarn count is important to create a uniform texture for fine clothing, yarn quality parameters such as yarn twist, number of folds and yarn count affect the characteristics of a fabric. Amongst the diverse range of accessible fabrics, the one with extra comfort and added performance potential holds the highest value. Possessing all such qualities and synonymous to the term ‘performance’ are performance fabrics. Most of the times, the look and style of a fabric is given preference over its characteristics unlike in the case of performance fabrics. Such types of fabrics are engineered for multiple practices, where the performance of the fabric and not style is the major parameter. These fabrics have the capacity to perform extra other than their natural behaviour. Performance fabrics have a combination of fabrics made of woven and knitted to suit various applications. They are most commonly used for all active wear, sportswear, summer and winter wear, mountaineering and activities like trekking, work-wear purposes, military, urban wear and protective wear. They possess the ability to deliver extraordinarily more than their natural behaviour or the original qualities in their natural state. These added benefits of performance fabrics have enabled them to replace traditional materials and become popular among the end-users.
Qualities of Performance Fabrics
Performance apparels widely use an extensive range of synthetic filaments like nylon, polyester, elastane, acrylic and so forth. Qualities such as durability, strength, colourfastness, aesthetics and more are often observed in fashion apparels as these properties are quite essential for everyday purpose and maintenance. However, in case of performance fabrics, the requirements are functional and application specific such as moisture transmission, thermal resistance, wicking, waterproof, and flame resistant. The main reason following the requirement of these characteristics is because ‘performance fabrics’ or ‘value-added textiles’ are subjected to a wide range of end uses where the garment is affected by both internal factors including fibers, yarn fineness, warp/weft movement, fabric density, thickness, fabric count and external factors like exposure to sunlight, wind, rain and cold weather conditions. The fineness of a fibre and yarn quality majorly affect the comfort characteristics namely wicking and moisture vapour transmission of a garment. This parameter is very important in maintaining and retaining the comfort level of a garment. Apart from this, fabric density also affects the performance of a fabric. For instance, a high fabric count has good abrasion resistance, fabric cover, and dimensional stability. In addition, the fabric has excellent resistance to wind and reasonable strength, a property widely preferred in work-wear category. These facts clearly indicate that a number of internal factors including fibres, yarn and fabric structure affect the fabric characteristics. Therefore, the manufacturers should pay utmost attention in selection of appropriate fabric for different types of apparels. Since performance fabrics and apparels are exposed to a wide range of external conditions including sunlight, rain, wind, cold or warm weather conditions and physical activity interaction with the human body, it becomes extremely vital to pay more attention to the traits than the style of the fabric.
Technology & Innovation
The interaction between the human body and garment is also quite essential, thus leading to increased preference for performance fabrics. With such extensive use and traits, performance fabrics are gaining wide popularity in the textile world. Manufacturers are revolutionising at breakneck speed to present an exquisite range of fabrics with enhanced performance features for their patrons. This has further given rise to immense competition and widespread introduction of performance fabrics amongst the manufacturers to provide new levels of comfort and safety to the customers. These new or enhanced performance characteristics are typically achieved through a selection of specialised fibers, or the inclusion of such fibers along with natural or synthetic materials during spinning, weaving or knitting process, or by addition of coatings or other finishes to the finished fabric. For instance, a premium quality yarn made of fine denier filament possesses a supple and pliable fabric that has low drape co-efficient. While on the other hand, a coarse yarn produces a stiff fabric that has high drape. In other words, it can be said that fibre type, yarn quality and fabric attributes affect a fabric’s performance. Technology also plays a significant role in the processing of ‘performance fabrics’ by enhancing their features. Numerous techniques are devised by fabric manufacturers to enhance the quality of the fabric. Incorporation of technologies like nanotechnology has been a game-changer in the production of these types of fabrics. Usage of certain types of nano-particles in fabrics during production provides improved performance and characteristics such as increased stain or odour-resistance, without having any significant impact on a fabric’s weight and texture. Use of nanotechnology in the production of performance fabrics further leads to new paths for textile manufacturers to bring more innovative fabrics to the market in the future. Technology also comes to the forefront in improving the comfort factor of a garment. Smart fabrics which have intelligent approach to high body or ambient temperature are classified as performance fabrics and rely on the technology using micro-encapsulated phase change materials to absorb and release heat, thereby enhancing the comfort level.
Conclusion
The increased availability of advanced performance textiles and fabrics are leading to important innovations in the apparel industry. At the same time, unverified claims regarding the performance characteristics of these materials can also lead to confusion and incorrect decisions by the manufacturers. Hence, detailed knowledge of the fabric is essential in the selection, designing and developing of a garment. In other words, understanding the fabric and giving preference to its performance rather than the style quotient, that is, choosing ‘performance fabrics’is important to produce the finest garment and to have an advantage in this increasingly competitive market.
Source: India Retailing
Left, right and centre, brands are clambering to hop onboard the sustainability train, as people are increasingly demanding that their clothes are made in an ethical manner. But now Prada has made history as the first luxury brand to obtain a loan from French banking group Crédit Agricole with stringent sustainability-related conditions attached to it. The first condition of the £42.9 million loan relates to the brand's physical stores: there must be a certain amount of stores that are certified either gold or platinum by the green- building rating system Leadership in Energy and Environmental Design, which takes into account the construction of a building, its management, and the number of resources it consumes or waste it produces. Secondly, Prada will have to increase its training hours for its employees, and lastly, the third goal reinforces the luxury brand’s pledge to reduce and phase out the use of virgin nylon by 2021, instead moving to Econyl, a recyclable yarn made from upcycled plastic waste. Alberto Bezzi Senior Banker at Crédit Agricole said of the deal: “The luxury sector is being increasingly committed in developing a sustainable business. I am very proud of this collaboration, which confirms Prada’s ongoing efforts for engaging in and cultivating virtuous behaviours that contribute to its sustainable growth.” The move to phase out nylon is of paramount importance for the Italian fashion house, given the long-standing success of their cult Tessuto bags, which have traditionally been made with non-biodegradable nylon (Prada currently uses around 700,000 meters of the material annually.) Commenting on the deal, Prada’s Chief Financial Officer Alessandra Cozzani, said: “this transaction demonstrates that sustainability is a key element for the development of the Prada Group, increasingly integrated into our strategy.” Prada was founded in Italy in 1913 by Mario Prada - Prada's granddaughter, Miuccia, is now head designer of the brand.
Source: The Standard
Inditex executive chairman Pablo Isla and IndustriALL Global Union general secretary Valter Sanches recently inked an agreement at the International Labour Organisation (ILO) head office in Geneva to extend the ‘Global Framework Agreement’ signed between the two organisations in 2007. For this next phase, the parties have agreed to set up a Global Union Committee. The committee will have worker representatives from each of the Inditex Group's key areas of production and share and foster best practices across the industry. Inditex is the first fashion retailer in the world to set up a body of this kind, according to a press release from the company. The committee will be populated by union representatives from Inditex's six main production clusters and representatives from the leading Spanish trade unions, Comisiones Obreras and UGT. Inditex and the local and international unions have thus committed to continuing to reinforce the company's supply chain workers' labour rights, with a focus on the freedom of association and the right to collective bargaining. Inditex and IndustriALL, which represents over 50 million workers affiliated with nearly 600 unions around the world, have been working together to promote and protect human rights since they entered into this pioneering collaboration agreement. The signing ceremony was attended by the ILO's deputy director general for field operations and partnerships Moussa Oumarou. By renewing their agreement, Inditex and IndustriALL Global Union will continue to respect and foster labour rights in the clothing, textile and footwear industry in general and in the company's supply global chain, in particular. One of the key aspects of the agreement is the establishment of joint training policies and programmes that involve the workers at factories and suppliers that Inditex works with in order to make progress on the promotion of management-employee dialogue and workplace equality, among other aspects.
Source: Fibre2Fashion
