PM Narendra Modi met a number of business leaders and entrepreneurs over the past week to seek feedback on various sectors as well as suggestions on policy measures to boost growth and accelerate the drive toward a $5-trillion economy. More such meetings are planned in the days ahead. “Each of these meetings lasted more than two hours and saw a candid exchange of ideas as to how the government and industry can work together to improve business sentiment, investment and boost creation of jobs,” said a person aware of the deliberations. Those who have attended these meetings so far include Uday Kotak, CEO, Kotak Mahindra Bank; Rajnish Kumar, chairman, SBI; Aditya Puri, MD, HDFC Bank; IT industry veteran TV Mohandas Pai; ex-finance secretary Hasmukh Adhia; Tech Mahindra MD CP Gurnani; Intel India general manager Nivruti Rai and TCS CEO Rajesh Gopinathan.
Sectoral Meetings
These were one-on-one sectoral meetings with the prime minister that enabled him to get information about the ground situation, said a person who attended one of them. “He wanted to listen, and encouraged us to come forward with recommendations for the economy,” said Gurnani of Tech Mahindra. “Some of the specific suggestions were around setting up an AI university, judicial reforms, etc.” Not many government officials were present at these meetings to facilitate a frank discussion. “He told us he had not invited us to praise him or the government but to hear our views and what’s missing, what could be done and how to unlock and accelerate growth and development,” said Saurabh Srivastava, chairman of the Indian Angel Network. “It was not a defensive meeting. He was not justifying anything and told us to feel free to be critical.” India’s economic growth slowed to a six-year low of 4.5% in the September quarter and is likely to end the current fiscal at around 5%. The government has announced a number of measures, including a sharp cut in corporate tax, to revive the economy. It’s looking to boost GDP to $5 trillion by 2025 from about $2.8 trillion now. “We made some suggestions about why the slowdown happened and what measures need to be undertaken and what is lacking... We felt that he is very focussed on getting the economy back on track and he surely will,” said Mohandas Pai. The PM has so far met over 60 entrepreneurs and business leaders from sectors such as fastmoving consumer goods (FMCG), banking and finance, renewable energy, diamond, retail, textiles, micro, small and medium enterprises (MSMEs) and startups and technology. Others who attended the meetings include Sangita Reddy, joint managing director, Apollo Hospitals Group; Jyotsna Suri, chairperson and managing director, Bharat Hotels; Sanjay Lalbhai, CMD, Arvind Ltd; Sandip Somany, vice chairman, Hindustan Sanitaryware & Industries Ltd; Balkrishan Goenka, chairman, Welspun Group; Pankaj Patel, CMD, Cadila Healthcare and former Sebi chief UK Sinha. ET had reported on Tuesday that representatives of Samsung, Apple, Bosch, domestic handset maker Lava and lobby group India Cellular & Electronics Association (ICEA) had sought incentives to make manufacturing in India as competitive as in China and Vietnam. “The PM understands that mobile design and manufacturing alone has the potential to add over $520 billion to our GDP by 2025, besides creating 20 million new jobs,” said Hari Om Rai, CMD, Lava International. “He is determined to make India the global hub for mobile design and manufacturing.”
Source: Economic Times
The finance ministry has cut the amount various ministries and department can spend in the last quarter to a maximum of 25% of their budget estimate for the entire financial year, citing fiscal situation. The earlier limit for the last quarter spending was 33%. Also, within the 25% cap on spending for January-March, only a maximum of 10% of the total budget can be spent in March against 15% earlier, the economic affairs department has said in an official memo. “Considering the fiscal position of the government in the current financial year, it has been decided to cap the expenditure in the last quarter/last month of the current financial year…,” it said. All ministries and departments have been asked to observe the guidelines “strictly & regulate the expenditure accordingly”. The revised limit means that departments that have not yet substantially utilised their funds will not be able to spend the full budget amount this fiscal. The government is struggling to meet the fiscal deficit target of 3.3% of the GDP following muted growth in tax revenues because of an economic slowdown. India’s growth fell to a six-year low of 4.5% in the July-September quarter. Also, the recent reduction in corporate tax to help revive the economy is likely to cost the government Rs 1.45 lakh crore. The government’s fiscal deficit for April-October period was 2.4% more than the full year estimate. Ratings agencies such as Moody’s Investor Services, Standard and Poor’s (S&P) Global Ratings, and Fitch Ratings have already raised concerns about possible fiscal slippage.
Source: Economic Times
Officials from India and EFTA countries recently interacted on crucial issues of IPR , rule of origin, services. India is making efforts to speed up free trade negotiations with the EFTA countries comprising Switzerland, Norway, Iceland and Leichtenstein in parallel with its discussions with the European Union on a similar pact. “Officials in the Commerce Ministry recently held discussions with their counterparts from the EFTA countries on the crucial issues of services, intellectual property rights and rules of origin. The outstanding issues in these areas were discussed as a way forward to re-start the negotiations,” an official told BusinessLine. India’s focus on putting the stalled free trade talks, officially called the broad-based trade and investment agreement (BTIA), with both the EFTA and the EU back on track assumes greater importance given the fact that the country walked out of the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) involving 16 countries in November 2019. “EFTA countries are significant trade partners for India. India exported goods worth about $2 billion to the bloc in 2018 and imports were around $1.7 billion. There is enormous opportunity for the amount to go up if there is a free trade pact. Moreover, India also hopes to gain significantly in services,” the official said.
IPR issues
Although talks on the India-EFTA BTIA were launched in 2008, shortly after the India-EU BTIA negotiations began, they were put on hold in 2013 due to disagreement over a number of issues. Talks resumed in 2016 but significant progress has not been made due to lingering differences in areas such as IPR, services and rules of origin. “IPR is an important area for both India and the EFTA countries, especially Switzerland, which is home to a large number of pharmaceutical giants. This is a sensitive area as while the EFTA wants India to make its IPR laws favourable to patent holding drug majors, India has to protect the interests of its generic producers. The current talks are therefore focussed on ironing out this contentious issue,” the official said. Rule of origin is another major issue that needs to be sorted out as it was one of the major reasons for collapse of talks with RCEP members. “India wants strict ROO so that third countries can’t take advantage of the free trade pact by supplying their items through the markets of the partner country,” the official said. Good offers in the services sector are also important for India as it has a booming service economy and is especially interested in greater access for its work force in other countries.
Source: The Hindu Business Line
Task force headed by economic affairs secy identifies projects across sectors
Finance Minister Nirmala Sitharaman on Tuesday launched a National Infrastructure Pipeline (NIP), unveiling projects worth Rs 102 trillion, to boost economic growth and help the economy reach the $5-trillion target by 2024-25. The NIP has identified projects across 23 sectors and 18 states and Union Territories, which will be funded over the next five years by the central and state governments as well as the private sector. Addressing a press conference while launching the NIP report, Sitharaman said that of the proposed projects, 39 per cent each would be implemented by the Centre and states, and the rest 22 per cent by private players. She said the government was expecting the private sector’s share to go up to 30 per cent by 2024-25, and added that some additional projects worth Rs 3 trillion would be identified in the coming weeks, taking the total commitment to Rs 105 trillion. The NIP follows a commitment by Prime Minister Narendra Modi in his Independence Day speech, that more than Rs 100 trillion would be invested in infrastructure over the next five years. A task force led by Economic Affairs Secretary Atanu Chakraborty identified the Rs 102 trillion worth of projects after conducting 70 stakeholder consultations in a short period of four months, Sitharaman said. The first meeting of the task force was held in September 2019. Subsequently, several meetings were held with various central and state departments and corporates engaged in infrastructure development. Chakraborty said the investment on infrastructure by the Centre, states and the private sector combined was 0.8 per cent of gross domestic product (GDP) currently, and the government expected to improve that to 1.1 per cent by 2024-25. The sectors identified include traditional power and renewable power, railways, roads, urban development, irrigation, aviation, education, and health. The lion’s share of the funding is expected to go to the energy sector. Nearly Rs 24 trillion in energy projects have been lined up, while projects worth Rs 20 trillion in roads and Rs 14 trillion in railways have been planned. These sectors will form the bulk of infrastructure investment under the NIP, Sitharaman said. The finance minister admitted concerns regarding financing of these projects, given the current economic slowdown. However, the government believes, and the NIP report states, that India’s GDP growth was expected to gradually swing upwards over the next five years, starting fiscal 2020, following on the clean-up of financial sector balance sheets, corporates starting to leverage for funding capital expenditure, and payoff from various government policies. Sitharaman said the government would look at deepening the debt market and alternative investment funds, which would provide the bulk of the debt financing necessary for this. She said the first edition of the Annual Global Investors' Meet on Infrastructure would be held in the second half of the coming year.
Source: Business Standard
The government is considering setting up an investment clearance cell and provide defined timelines for all kinds of state and central approvals to attract investments, an official said. In order to further ease the business climate of the country, it is also looking at developing a single application form for all kinds of clearances and provide deemed approvals, the official said. For onboarding central departments and states, the government is looking at two single point of contacts, one each from central department and state; list of licences and documents; detailed processes; timelines for each approval /deemed approvals; and support for IT systems integration from all departments, the official added. The Department for Promotion of Industry and Internal Trade (DPIIT) is working on the proposal, which could be implemented in four phases. According to the proposal, an investor would also be able to track the status of his/her application. Currently, an investor has to seek several approvals such as company incorporation, GST registration, import export code, environment clearance, and NOC for ground water extraction, at central and state government levels. Investors require single application, self certification, document submission at single place, time bound/deemed approvals, real time status update. The department is also considering framing a law for the proposed investment clearance cell and defined timelines for approvals for central departments.
Source: Economic Times
Coimbatore’s manufacturing sector took a beating in the last one year, leading to unutilised capacities, job losses, and financial stress. As a new year dawns, the industry hopes for measures from the government for demand to revive. For most of the sectors, the first six months went off relatively well. Things started getting worse from July, say industry association heads here. The general economic slowdown, unseasonal rain affecting crops, drop in market, and lack of stability in policies have all affected the industry, sources say. Since June-July, it was not just the automobile sector, but many other sectors that started seeing a slowdown. It has affected jobs and working capital availability for industries, especially the Micro, Small and Medium-scale Enterprises (MSMEs), says R. Ramamurthy, president of Coimbatore District Small Industries Association. “The MSMEs in Coimbatore are facing 30 % to 40 % slowdown and nearly 40 % capacities remain unutilised. We are unable to meet the overheads,” he says. Coimbatore supplies nearly 40 % of the country’s pumpsets, mainly in the agricultural and domestic sectors, and the pumpset industry usually sees good demand from States such as Rajasthan and Madhya Pradesh during November -December. This year, unseasonal and excess rain affected crops and demand dropped drastically in the third quarter, says V. Krishnakumar, president of Southern India Engineering Manufacturers’ Association. The market in the southern States picks up after Pongal. But the demand starts in the northern markets earlier. That has not happened this year, he says. Rain, hail storms, political disturbances, and slowdown in the construction sector have all affected the pumpset industry. In the case of textiles, “the year 2019 was a challenging one for the Indian textile and clothing industry, especially the spinning sector, due to steep fall in cotton yarn exports,” according to Southern India Mills’ Association (SIMA). Majority of the textile mills had to cut down production and face an unprecedented crisis, the Association said. Export of cotton yarn declined 37 % between April and October this year compared to the corresponding period last year. While the country used to export on an average 120 million kg of cotton yarn a month in 2013-14, it is just half that volume now. It is not just yarn, but export of cotton fabrics and made ups reduced 2 % and that of man made yarn, fabric and made ups, and ready-made garments all registered 5 % and 3 % negative growth respectively. The industry is concerned as imports of fabrics and MMF ready-made garments have increased during the same period. According to J. James, president of Tamil Nadu Association of Cottage and Tiny Enterprises, the year 2019 was one of the worst for the micro units as every bigger factory that gives job orders to these units insist that the unit should have GST registration. The micro units continue to demand total exemption from GST, he says. However, data available with the District Lead Bank shows that bank advances in the district registered growth in the first six months this year. Between April and December 2018, the banks lent ₹69,650 crore. This year, between April and September, the banks had lent ₹72, 387 crore. Bank credit flow to MSMEs between April and December last year was ₹17,317 crore and this year, from April to September, it was ₹17,579 crore. Higher advances could be because the industry is stressed and borrowed more, says Mr. Ramamurthy. Further, some industries would have invested in the first two quarters and the capacities are lying idle now, he says. Union Finance Minister Nirmala Sitharaman’s announcement on Tuesday related to ₹102 lakh crore national infrastructure funding should be implemented at the earliest. The government should start executing its projects so that the demand revives, he says. The SIMA says that any policy should remain stable for three to five years to enable ease of doing business. Further, all export-related refunds should be disbursed without delay so that the industry does not face financial crunch. Industry sources say unless there are immediate measures from the government in the next three months, the industry will face a tough situation next year too. The government should focus on reviving demand, implement the policies it has announced and help the industry grow, they say.
Source: The Hindu
Trade conflicts among large players involving China, the United States, the European Union and many others, including India, dominated the global economic narrative in 2019. The multilateral trading system of the WTO (World Trade Organisation) has already been under serious stress. Due to a number of preferential/regional trading agreements as well as various deadlocks, its relevance is already in decline. In these circumstances, every important economic player is devising different strategies to deal with the situation. With only about 2 per cent share in global exports, new dynamics in global trade architecture could be an opportunity for India to improve its performance. However, this can only happen with correct fundamentals and an appropriate liberal trade policy framework. As the recent World Development Report shows, trade growth since 2008 has been sluggish and expansion of global value chains has slowed. So, it is not very easy now for India to be part of those global value chains, which might be relocating from China. Still, a few countries such as Bangladesh, Vietnam, Cambodia, Thailand and the Philippines, among others, have shown that it is still possible to emerge as new centers of manufacturing -- at least in few specific products. These include clothing, footwear, food processing, electronic integrated circuits and More than half of global trade is through value chains. And China is at the center of this network. Chinese labour cost is rising. Its environmental regulations are becoming stricter. Now trade tensions with the US have added more trouble. Still, apart from very few sectors (mobile phones), India is not really emerging as an attractive alternative even when some of these companies are in the process of relocating units from China. The reasons are manifold. Despite all the talk of Make in India in the past five years, Indian manufacturing sector has still not taken off. In fact, some of the flagship sectors are in difficulty. As columnist Swaminathan Aiyar argued earlier during economic liberalisation in the 1990s, three sectors in the economy viz. information technology, pharmaceuticals and auto became international and produced world-class Indian multinationals. This trend has changed in 2010s and many of these companies are in trouble. Some new emerging companies (unicorns) like Ola Cabs, Flipkart are just cloning western techniques and lack new technological innovation, according to Aiyer. There is a clear lack of focus. Resources and reforms in the public higher education sector are crucial for any new high technology sector to take off. Instead of state nurturing, the higher education system is facing a crisis. New Delhi’s decision to opt out of the Regional Comprehensive Economic Partnership (RCEP) shows that Indian economy is still not ready to participate in Asia’s economic rise. Possible reasons cited by analysts are more than $100 billion trade deficit with RCEP countries as well as slowdown in growth and exports. Apart from political opposition from the Congress, the main reason perhaps is opposition coming from Swadeshi Jagran Manch and Bharatiya Kisan Sangh, the two affiliates of Rashtriya Swayamsevak Sangh (RSS). The Narendra Modi government has been very cautious about trade deals and investment agreements anyway. Hardly any new trade agreement has been signed by India in the past five years. A number of bilateral investment treaties have also been terminated. With such a cautious approach towards trade negotiations and investment treaties, it is hardly surprising that India has not become an important player in global value chains. Even in global apparel trade, India’s share has stagnated around 4 per cent. This, despite the advantage of large domestic market for scaling, domestic supply of cotton and other raw materials and a large labour pool. Bangladesh and Vietnam are already bigger players than India on this front. With the WTO deadlocked, can India become a global economic player without signing trade and investment agreements with the RCEP bloc, the EU and the US? That’s a serious question. Due to distortions in land and labour markets as well as weaknesses in infrastructure and the banking sector, Indian companies are already struggling in traditional areas. With protectionist mindset, increasing income inequality and lack of focus on public higher education, India is unlikely to emerge as an important player in emerging areas of high technology. India now will become more like Latin America than a miracle Asian economy. A large country like India has the capacity to change global value chain architecture. Despite the rhetoric, however, the last few years have shown that New Delhi is still a reluctant participant in globalisation and global value chains. So, India is somewhat insulated from the consequences as well as opportunities from global trade wars. Whatever happens between major global trade players will have limited impact on India. Gulshan Sachdeva is Jean Monnet Chair and Chairperson Centre for European Studies, School of International Studies, at Jawaharlal Nehru University.
Source: Money Control
GST glitches are crimping working capital supply and adding to the difficulties of competing against nimble, low-cost competitors in other countries. The hiring signs outside Tiruppur's garment factories, until recently a source of prosperity, have been replaced by ones saying “To let” and “Up for sale”, leaving no doubt about the distress in this once-thriving export hub of Tamil Nadu. Trouble in the state’s garment industry, brewing for years because of competition from Bangladesh and Vietnam, has worsened owing to technical and policy on refund problems with the goods and services tax (GST) and the inability of manufacturers to innovate. Exports have been on a steady decline in recent years. ...
Source: Business Standard
Enthused by a record foreign investment inflow, India is optimistic of continuing to be one of the world's favourite FDI destinations in 2020 on the back of the Modi government's liberalised norms and a significant jump in the ease of doing business ranking. Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Guruprasad Mohapatra said that despite a slowdown in the global economy, inflows of foreign investment into the country have not been impacted. India received a USD 27.2-billion foreign investment in the first half of 2019 and the pace is said to have sustained thereafter. The healthy growth in the overseas investments is proving that there is a lot of optimism and enthusiasm about India as a foreign investment destination, he said. He added that all the ministries, departments and states are working to address issues and providing stable policies to facilitate entry of foreign companies. "FDI growth has been very good this year and I am quite hopeful that with these policies and initiatives, India's FDI story will continue unabated and continue to grow at a healthy rate," Mohapatra told PTI. The secretary also said that there is a need to pursue this narrative strongly in 2020. "Ease of doing business is very critical for FDI. Foreign companies look into the World Bank's ranking and they have been very impressed with India's much-improved ranking so far. Our target is to go into the first 50th," he said. Mohapatra said that improvement in the business environment gives a pleasant experience to foreign investors as it helps in making processes easier. "Some of the states are also wooing investments. So we need to further work on the areas in which the investments ...are coming and see how quickly and seamlessly, we can give them approvals. These are the challenges and we are working on that," he added. When asked about the global companies which are looking to shift their bases from China to India, he said the government is focusing on those firms which are looking at India as a second investment destination. "We know which companies are keen to invest in India and we are looking at them to see what help we can provide in terms of handholding, and in terms of support," the DPIIT secretary said. In the World bank's doing business report, India's rank has improved to 63rd this year among 190 economies from 77th last year. The department is also holding a series of meetings to further relax foreign direct investment norms in the coming months in areas like AVGC (animation, visual effects, gaming and comics), and insurance. Although, the FDI is allowed through automatic route in most of the sectors, certain areas such as defence, telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors. Under the government route, the foreign investor has to take prior approval of the respective ministry/department. Through the automatic approval route, the investor just has to inform the RBI after the investment is made. There are nine sectors where FDI is prohibited and that includes lottery business, gambling and betting, chit funds, Nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco. This year, the government has relaxed FDI norms in several sectors like single-brand retail trading, contract manufacturing, coal mining, and digital media. Further, the DPIIT is working on two major policies - new industrial policy and national e-commerce policy - which are expected to be announced by March 2020. "We are working on both these policies very actively," Mohapatra said. The new industrial policy is aimed at promoting emerging sectors, reducing regulatory hurdles and making India a manufacturing hub. Experts too said that the government would continue with the FDI liberalisation this year to attract global players. "The government will continue with the FDI relaxations in more sectors," Rajat Wahi, Partner, Deloitte India, said. In 2019, the department has been renamed as the DPIIT from the Department of Industrial Policy and Promotion (DIPP) with a mandate to deal with matters related to the promotion of internal trade, including retail trade, the welfare of traders and their employees, facilitating ease of doing business and start-ups. The matters related to internal trade were earlier under the domain of the Ministry of Consumer Affairs. Regarding FDI in the e-commerce sector, allegations were levelled against global players like Amazon and Flipkart by the Confederation of All India Traders (CAIT). The domestic trader's body alleged that these companies follow unethical practices by indulging in predatory pricing and violating FDI rules. The ministry asked e-commerce companies to follow the FDI rules in letter and spirit as crores of small traders are engaged in the retail sector. In the April-June period of the current fiscal, overseas investments increased by 28 per cent to USD 16.3 billion. In 2018-19, total FDI into the country stood at USD 62 billion, an increase from USD 60.1 billion in 2017-18. India mainly attracts investments from countries like Mauritius, Singapore, Japan, the UK, the Netherlands, the US, Germany, Cyprus France, and the UAE. The sectors that received maximum FDI include services, computer hardware and software, construction development, trading, automobile, pharmaceuticals, chemicals, and power. The commerce and industry ministry has also started ranking of states on their ease of doing business. It has also decided to help the states undertake a similar exercise for their respective districts. FDI is important as India would require huge investments in the coming years to overhaul its infrastructure sector to boost growth. Healthy growth in foreign inflows helps maintain the balance of payments and the value of the rupee.
Source: Economic Times
India’s core sector contracted for the fourth consecutive month in November but the pace of contraction slowed to 1.5% from 5.8% in October led by growth in output of fertilizer, cement and refinery products, raising expectations of industrial production moving into the positive territory. However, for the first eight months of the year, the core sector growth was zero compared with 5.1% in the April-November period of 2018, data released by the commerce and industry ministry showed on Tuesday. “The core sector growth numbers for November, though disappointing at -1.5% has a silver lining in so far as there are certain sectors like cement and fertilizers that have registered positive growth,” said Madan Sabnavis, chief economist at CARE Ratings. The core sector has a 40.27% of the weight of items included in the Index of Industrial Production (IIP) Cement growth of 4.1% on a high base of 8.8% growth, indicates strong developments in the construction areas while a 13.6% growth in fertilizers reflects both demand for rabi sowing as well as build-up of inventory for the next season. A 3.1% growth in refinery products is an indicator of steady demand and exports. However, the output of coal, crude oil, electricity, steel and natural gas contracted in November. As per Sabnavis, decline is coal production which is linked to power is reflective of lower industrial demand as there is sluggishness in growth in manufacturing and contraction in steel output may be attributed to low performance of related industries like auto and capital goods which are large consumers of the metal. “Overall IIP growth for November could just move into the positive terrain for November as there is a very favourable base effect of growth of just 0.2% last year,” he said. Industrial production contracted for the third month running in October when it shrank 3.8%.
Source: Economic Times
The slowdown in the economy has helped in a better external sector balance sheet. India's current account deficit(CAD) excess of imports over exports contracted to 0.9 per cent of its GDP for the quarter ended September 2019, compared to a deficit of 2.9 per cent of GDP, in the same period of year ago as the trade deficit contracted due to slowdown in imports and lower oil prices. In absolute terms, CAD a was at $ 6.3 billion or 0.9 per cent of GDP during JulySeptember 2019, compared to $ 19.0 billion or 2.9 per cent of GDP during JulySeptember 2018 and $ 14.2 billion (2.0 per cent of GDP) in the preceding quarter ending June 2019, according to the preliminary numbers released by the Reserve Bank of India on Tuesday. “The contraction in the CAD was primarily on account of a lower trade deficit at $ 38.1 billion as compared with $ 50.0 billion a year ago” RBI said in a release. Also, private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $ 21.9 billion, increasing by 5.2 per cent from their level a year ago, besides software services income too rose to $21 billion during the quarter compared to $19 billion in the year ago period. “Reflecting the anticipated decline in the merchandise trade deficit, the current account deficit is forecast by ICRA to narrow sharply to $34-36 billion (1.2% of GDP) in FY2020 from US$57.2 billion in FY2019 (2.1% of GDP)” said Aditi Nayyar, principal economist at ratings firm Icra. For the first half of the current fiscal, CAD narrowed to 1.5 per cent of GDP from 2.6 per cent in the first half of FY’18-19 on the back of a reduction in the trade deficit which shrank to $ 84.3 billion in April-September 2019 from $ 95.8 billion in April-September 2018. In the capital account, the overall surplus declines to $12 billion during April-June 2019, compare to inflows worth $16.3 billion in the same period a year ago. This was largely due to a slowdown in net inflows through foreign investment and loans during the quarter. The overall balance of payments ended in a surplus of $5.1 billion compared to a deficit of $1.8 billion in the same period a year ago.
Source: Economic Times
From high growth to closing the gender gap, if there is any country which is swiftly beating the odds, it is Bangladesh. If you wanted to pick a swiftly growing economy in 2020 in Asia, which one would you instinctively select? Well, if you were on the ball, you would zero in on Bangladesh which has been forecast to grow at 8% in 2020 which would make it, in the coming year, most likely Asia’s fastest growing economy. It is now growing at a faster clip than India. One of its core strengths is working women. Bangladesh beats every other South Asian nation in gender equality. As 2019 comes to an end, it is therefore befitting to spend a little time understanding what has gone into the transition that Bangladesh is undergoing. The first thing to note is the country’s sustained, low-key but diligent investment in primary education. Even more importantly, a large proportion of this money went towards the primary education of girls. If there is one mantra for developmental success it might be this: Educate girls. The World Bank, which has given around $29 billion to Bangladesh in assistance and interest-free credit to help its development, has noted the country is that rare example among developing nations of a place where gender parity has been achieved in primary education. This means an approximately equal number of boys and girls receive the same quality of primary education in Bangladesh. This has led to more women entering the workforce in the manufacturing sector; 80% or more of the organised textile jobs are held by women. A 2014 National Bureau of Economic Research by Rachael Heath and Mushfiq Mobarak discovered that there was a distinct connection between the education of women and them getting factory jobs especially in textiles, and further growth in education. It was, in a sense, a virtuous cycle. They found that “the manufacturing sector growth in Bangladesh had sizeable effects on parents’ propensity to keep younger girls in school, older girls’ propensity to engage in wage work, and both of these factors allowed women to postpone marriage and childbirth”. The paper said that the garment manufacturing industry in Bangladesh had played a definitive role in the betterment of women’s lives for more than four decades. “Fertility has dropped from 5.9 children per woman in 1983 to 2.3 births per woman in 2009 (World Development Indicators), and woman’s average age at marriage has risen from 14.6 for marriages between 1980 and 1985 to 17.0 for marriages between 2005 and 2009 (Demographic and Health Survey). Moreover, Bangladesh attained gender parity in school enrolment fifteen years before the Millennium Development Goals deadline for achieving this outcome,” the paper said. It added that data showed that “villages within commuting distance to garment factories, exposure to these jobs led to a 38.6 percentage point increase in school enrolment rates”. Beginning in the 1970s, the Bangladeshi garment industry has now grown to around $30 billion size. The services sector is ballooning too—microfinance and computing bring in more than 50% of the country’s gross domestic product (GDP) these days. Getting good primary education, especially for girls, has had an additional benefit of starting to manage better, and bring down, Bangladesh’s large, and densely packed, population. Population growth has stopped exploding, in fact it has started to fall, and between 2010 and 2018, the number of employed workers living under the poverty line declined by around 60%.Once infamous for power cuts, Bangladesh has become a surplus power-generating country. It also exports around $1 billion worth of tech products and services every year. This is likely to jump by five times by 2021. In five years, according to many several estimates, Bangladesh will escape the Least Developed Country tag which, when it happens, will be a breakthrough moment for the country. One of the less discussed but vitally important ingredients of this growth has been Bangladesh’s Prime Minister Sheikh Hasina’s efforts to contain and, where possible dismantle, the network of Islamist radicals that continues to plague the country. Hasina’s commitment to keeping the most radical elements from gaining strength has kept alive the Bangladeshi dream to become a prosperous nation. The next five years might well be a Bangladeshi dream run.
Source: Fortune India
The textile industry of Pakistan had high hopes for the announcement of a handful of beneficial and favourable policies by the government of Prime Minister Imran Khan, which has now been in power for nearly one and a half year. Earlier in the final years of previous Pakistan Muslim League-Nawaz (PML-N) government, Imran Khan – then an opposition leader – had expressed solidarity with the textile sector, apparently a political step to win over voters in the upcoming general elections in mid-2018. He assured them of formulating sector-specific growth policies if the Pakistan Tehreek-e-Insaf (PTI) came to power. As soon as he was elected in July 2018, textile and other sectors of the economy turned highly optimistic. Now, the optimism has started to die down as real action to facilitate industries is yet to be taken. However, calendar year 2019 has brought some relief to the textile industry as it has managed to perform better than other sectors and has made exports of around $12.45 billion in 11 months (Jan-Nov). First five months of current fiscal year 2019-20 were more encouraging as textile shipments to overseas markets grew 4.68% to $5.76 billion compared to the same period of the preceding year. Textile and clothing exports in 11 months of 2019 rose a negligible 1% year-on-year. On the other hand, investment in the textile sector for replacing and installing new imported machinery increased 17% to $480 million in the period under review against $453 million in the same period of 2018. Although the industry was promised energy supplies at subsidised tariffs as part of the government’s incentive package, the decision, approved by the Economic Coordination Committee, could not be implemented in true letter and spirit. Some industrialists insist they are going to get energy subsidy through court orders as they are not receiving utility bills at the reduced tariffs notified by the government. Meanwhile, news reports have emerged that talk about withdrawal of the energy subsidy granted to the textile sector. The industry has also lost its zero-rated status, along with four other major export sectors, in the 2019-20 budget and is required to pay sales tax from the current fiscal year. Despite expressing reservations about the government policies, many industry players still believe that the political leadership is doing its homework to help enhance the share of textiles in the country’s global exports. According to official data, the exporters of readymade garments reported the highest growth of 32% in first 11 months of 2019. They exported around 53 million dozen units of garments compared with 40 million dozen units in the corresponding period of the preceding year. Readymade garments were followed by the knitwear segment, which posted 17% growth with exports of 118 million dozen units in Jan-Nov 2019. Alarmingly, cotton arrivals as of December 15, 2019 dropped to 7.86 million bales against 9.96 million bales at the same time last year. The drop in production of cotton – a key raw material for textile mills – is likely to cause its shortage and force the textile sector to increase cotton imports. The industry needs at least 15 million cotton bales in a year to meet its processing requirements. According to statistics provided by the All Pakistan Textile Mills Association (Aptma), the industry is eyeing an export target of $13.3 billion for FY20 with projected investment of $1 billion. The readymade garment sub-sector is again expected to take the lead in overseas shipments. For the first time in 2019, Pakistan hosted the 35th World Fashion Convention, organised annually by the International Apparel Federation, a European lobby of fashion brands. The event, attended by executives of many global brands and associations, has somewhat changed Pakistan’s perception abroad and exporters are gearing up to cash in on the advantage.
Rupee benefit
Some exporters claim that initially they were unable to reap benefits of rupee depreciation, citing that international buyers were smart enough who were keeping a close watch on the exporting country’s exchange rates and revised prices according to fluctuations in the currency value. Nevertheless, the exporters managed to lift shipments of art, silk and synthetic textile from 147.49 million square metres in first five months of 2018-19 to 190 million square metres in the same period of 2019-20. Similarly, exports of readymade garments rose to 26.2 million dozen units in July-November FY20 against 19.26 million dozen units in the corresponding period of fiscal year 2018-19. Industrialists term the increase in export volumes a smart move as it can enhance the share of Pakistan’s textile sector in global markets and its benefits will eventually reach the country in terms of dollar earnings. By FY24, the industry is anticipated to nearly double exports to $25 billion but many of the challenges dogging the sector for the past 10 years have not been addressed. However, some of the problems have been tackled like ending energy blackouts. Still, the scarcity of raw material is one of the biggest concerns for different textile sub-sectors because their targets are directly linked to the country’s cotton production. Earlier in 2020, the GSP Plus preferential trade status, granted to Pakistan by the European Union, will be reviewed – another area of worry for the stakeholders as they direly need an extension of the facility to boost exports. Internal and external challenges are likely to haunt the government as well as the industry, which are keen to meet the targets. Some of the internal challenges include energy affordability, inconsistent policies in the short term, infrastructure hurdles, skill development constraints, foreign exchange volatility and above all, the macroeconomic volatility. On the external front, improvement in the country’s image internationally is the biggest challenge as a damaged perception turns away global buying houses and brands. Getting greater market access to the Asean region, the US, Japan and Australia is also a potential challenge for the textile industry. Efforts of the industry to step up Pakistan’s textile and clothing share in global markets from the existing 1.6% to 3% over the next five years largely depend on facilitation from the government. The textile sector claims that things are moving in the right direction, although promises made by the premier before general elections have not yet been honoured to the satisfaction of the industry.
Source: The Express Tribune
Cambodia's economic growth is expected to slow down in 2020 if the European Union (EU) withdraws the Everything but Arm (EBA) trade scheme, the International Monetary Fund (IMF) said recently. Its economy is projected to grow by 6.8 per cent next year, slightly lower than 7 per cent this year, driven by continued export growth and strong construction activity, it said. "Cambodia's economic outlook is subject to significant downside risks," IMF said in a press release. "The on-going EBA review by the EU, Cambodia's primary export partner, could lead to a suspension of preferential trade access later next year, which could have a large negative impact on economic activity." The EU started in February an 18-month process that could lead to the temporary suspension of Cambodia's duty-free trading access to the EU market under the EBA scheme due to concerns over human rights and labour rights. A final decision on whether to withdraw the trade privilege from Cambodia or not will be made in February next year. The country's export to EU was valued at $5.86 billion in 2018, about 95 per cent of which entered the EU duty-free taking advantage of EBA preferences, EU data showed. Garment and footwear products accounted for around three quarters of EU imports from the country. The garment and footwear industry is Cambodia's biggest export sector, employing about 750,000 people in some 1,100 factories. If stripped, tariffs on garment, footwear, and bicycle products to the EU market will increase by 12 per cent, 16 per cent and 10 per cent respectively, according to a recent World Bank report.
Source: Fibre2Fashion
Factory activity held steady in December in the latest sign that China’s economy may be recovering from a protracted slowdown. An official survey of manufacturers released Tuesday showed factory activity held steady in December, with the official purchasing managers index at 50.2 on a scale where 50 marks the break between expansion and contraction. December’s reading matched November’s, which ended six previous months of contraction. The National Statistics Bureau said Tuesday that new orders were at 51.2, down slightly from the month before. Out of 21 industries surveyed, 15 showed activity picking up, including food and beverages, textiles and apparel making, auto manufacturing, medical-related production and appliances. China’s economy has been slowing due to both domestic and global factors, including a trade war with the U.S.
Source: Washington Post
Taiwantrade backed by Taiwan External Trade Development Council (TAITRA), will display Taiwan’s latest sports accessories manufacturing technology at ISPO Munich 2020 from January 26-29 at Messe Munchen, Germany. Through exhibition of more than 20 products such as sports towels & glasses, TAITRA hopes the products will attract a lot of business opportunities. Taiwantrade is Taiwan's most prominent B2B portal, organised by TAITRA and backed by BOFT. TAITRA assists Taiwanese businesses in strengthening their competitiveness in the international market. With advent of 2020 Tokyo Olympic Games, Taiwan's textile and optical enterprises have been in the peak season with intensive orders since the second half of 2019. Taiwan made accessories will be worn by athletes from all over the world celebrating achievements of Taiwan manufacturing industry. With its forward-looking mindset, Taiwan’s created the best stockings centre – Shetou, Changhua, Central Taiwan. This home of stockings industry supplies 90 per cent of stockings to the international market. In the past decade, manufacturers have cooperated with Taiwan's top sports organisations to develop exclusive sports socks. From materials used to product design, the industry players totally transformed the perception of sports socks by using cutting-edge technology. Unlike most of the products in the market that emphasise the material or fabric used, Changhua hosiery manufacturers took the game to the next level by adding functions of ‘sports injuries prevention’ and ‘sports performance enhancement’ to the products. Up to now, there are 200 sock factories in Changhua, the ‘hosiery kingdom’ of Taiwan. From cotton socks to sports pressure socks and sports functional socks, these high-quality products made with advanced technologies are recognised by consumers all over the world. Taiwan's eyewear industry has been producing fashionable and innovative products for decades, manufacturers put their focus on sports correction films, trying to explore the market which has long been undervalued. Wide coverage and large curvature of lenses are always the key of sport glasses, which largely increased the technology barriers to produce sport glasses with myopia and astigmatism lenses. By inventing the exclusive technology to minimise the ‘rhombic mirror effect’ in optics, Taiwan manufacturers with R&D capabilities successfully created the marketable sports corrections films by improving wearer’s comfort and broadening the vision. Although foreign manufacturers developed similar products by using different solutions, the customer satisfaction of Taiwan's world leading products is more than 95 per cent.
Source: Fibre2Fashion
