India is looking at the possibility of entering into individual free trade pacts with some member-countries that are negotiating the Regional Comprehensive Economic Partnership (RCEP) as getting back into talks with the entire bloc remains a difficult proposition given the presence of China, a government official said. “The idea of getting into RCEP-type agreements with some individual member countries is being considered by India but a final decision is yet to be taken. Discussions have been held with some countries like Japan and South Korea,” the official told BusinessLine.
India decided to exit the
RCEP negotiations in November 2019 at the Leaders’ Summit in Bangkok as it had several unresolved concerns in the areas of market access and rules of origin, especially in the context of China, while all other members including the 10-member ASEAN, China, South Korea, Japan, Australia and NewZealand were ready to conclude the text-based negotiations for the pact. The RCEP, scheduled to be ratified and implemented in 2020, covers goods, services, investments, e-commerce, competition, government procurement, standards, intellectual property and Customs procedures, economic and technical cooperation, and dispute settlement.
Risk of Chinese goods
“Since India decided to exit RCEP, a number of members including Japan, South Korea, New Zealand and Australia have had interactions with the government and Indian industry trying to persuade the country to come back to the negotiating table. But that seems difficult as the risk of India’s market being flooded with Chinese goods once tariffs become nil is very real. The only alternative seems to be individual pacts with interested countries,” the official said. Commerce Ministry officials discussed it with their Japanese counterparts when a team visited New Delhi last month. “The Japanese side listened to India’s proposal of getting into a bilateral agreement but it did not give any commitment,” a person aware of the details of the meeting said. As India already has free trade agreements with a number of RCEP members including Japan, South Korea and the ASEAN, the scope of the new pacts will have to go beyond the existing ones and include all aspects of the RCEP.
Source: Business Line
Growth-inflation mix in near term limits room for large policy stimulus… FY21 Budget has to explore ways to maximise impact of limited resources. The official First Advance Estimate of FY20 GDP growth is 5% (see graphic), and further shallow cuts, on balance, are likely in future revisions (to 4.7–4.8%), given the expected dynamics of growth drivers in Q3 and Q4. The current estimate is derived largely by extrapolating the available data for 7-8 months onto the full year. Some components of the GDP (e.g. IIP) are estimated using the ratio of (seasonally adjusted) prints of the seven months to the annual values “of past years”. Other extrapolations used are financial results of listed companies up to Q2, first advance estimates of crop output, accounts of the Centre and state governments, bank deposits and credit, commercial vehicle sales, volume indicators of freight, etc. The performance on most of these metrics had been quite poor in H1, but many high frequency indicators of economic activity have improved in November and December. However, constraints on central and state governments’ spending, continuing weak or only slightly improved credit offtake and likely financial markets volatility will probably keep the expected recovery in Q4 very modest. The two most striking aspects of the growth forecasts were the very sharp, almost precipitous, drop in fixed capital investment and the low nominal growth rate. The latter is both the cause and effect of shortfalls in government tax collections, slower corporate profit growth, and multiple other metrics that are linked more to nominal rather than real (i.e., inflation adjusted) activity. The fiscal arithmetic of the Centre will be impacted and limit a slippage from the budgeted fiscal deficit within the ambit of FRBM on additional spends. The worry is the former, which is the real cause and amplifier of the slowdown, particularly in the manufacturing segment. Capex (real) growth is forecast to have fallen to 1% in FY20, from an average of 9% in the previous three years, and 6% since the start of the current GDP series. The Centre’s recently released National Infrastructure Pipeline project needs to be expedited, amongst various other measures. Juxtaposed against this slowdown is the likely high CPI headline inflation print for December 2019, which we forecast at 6.9% with upside risk. Even WPI inflation in December is expected to rise sharply to 2.6% from 0.6% the previous month. Although the rise is due to onions and a couple of other vegetables, and is likely to correct in January, CPI inflation, even excluding onions, has moved up since September 2019. The proximate reason has been the “protein complex”—meat, fish, eggs and pulses (see graphic). Globally, too, food prices have moved up sharply, although this has been mostly due to pork prices in China. Despite the rise in vegetables prices, India’s core (excluding-food and energy) inflation had continued to remain muted, and had consistently fallen over the past year. However, there is a risk of even core inflation ticking up. Some part of this will be the base effect of last year’s fall, but there are fundamental price pressures building up as well. The proximate risk is, of course, crude oil prices, given the present geo-strategic situation, but over time, more broadly on expectations of a global recovery post the US-China trade deal and other factors. A global growth revival, however modest, particularly in China, could pull up industrial metals. Gold prices have gone up sharply.
FY20 is more or less done. The focus will now be on the recovery path for FY21, with the trade-offs noted above defining the mix of policy instruments which can be further deployed to revive growth. The scope for further cuts in the policy repo rate in the near future remain limited, although other monetary policy stimulus measures are still on the table to accelerate transmission (as RBI has demonstrated with its operations twist). The Monetary Policy Committee (MPC) made it clear that it will lean more towards its inflation targeting mandate, till there are signs of inflation stabilising close to the 4% target. As we have repeatedly emphasised, one of the key inputs in the MPC decision will be the refresh of RBI’s Household Inflation Expectations Survey. Since this survey is likely in progress now, the saliency of the persisting rise in vegetables prices and the recent hike in petrol and diesel prices is likely to keep inflation expectations elevated. While a reversion down in inflation in H1 FY21 might create some space for additional monetary policy easing, the heavy lifting will have to be done by the fiscal policy, supplemented by trade, ease of business and other policies. The first improvement is likely to be a nominal growth rate higher than the 7.5% estimated for FY20, probably around 10%, which will provide some extra room for manoeuvre. While fiscal policy is still likely to be circumscribed by relatively weak tax revenue growth, the government has shown an intent to use its limited resources more effectively, both through pragmatism in revenue augmentation (dispute resolution, non-tax revenues, access to foreign capital, etc) and expenditure rationalisation and management. These measures need to be taken forward to monetise as much of latent assets as possible, cut spending overlaps and increase coordination with states. Improving credit offtake and delivery will be central to a quick recovery, and using fiscal revenues to leverage private funds (as is already being tried for the Partial Credit Guarantee and Last mile funding corpuses) besides further recapitalisation of PSBs will be central to reducing risk aversion and enhancing bankability of projects. FY20 will certainly have been the trough, but growth revival will not be easy, given the multiple structural impediments. An innovative coordination of policy levers will need to be carefully thought out. Vikram Chhabra contributed to the article .Author is Senior vice president, Business and Economic Research, Axis Bank.
Source: Financial Express
Its projection that growth in second half will be led by improvement in consumption, manufacturing seems tough. The Central Statistics Office (CSO) may have pegged the nominal GDP growth (in its first advance estimate) for the current FY20 fiscal at a more believable 7.5 per cent, from the Centre’s tall 11 per cent growth estimate in the Budget. But the growth rate still appears optimistic, given that the CSO has projected a significant improvement in consumption and manufacturing growth in the second half of the fiscal. A strong government consumption in the second half also appears a tough task, given the Centre’s limited fiscal space.
Source: The Hindu Business Line
A turnover-based classification will allow MSMEs to investment more in tech. This will help improve their competitiveness Micro small and medium enterprises (MSMEs) have always been vital in the socio-economic development of India. Spread across both urban and rural areas, MSMEs produce a diverse range of products and services and provide large-scale employment at low capital cost. They not only support in industrialisation of rural and backward areas, but also help in reducing regional imbalances and assuring equitable distribution of national income and wealth. MSMEs are part of the larger industrial ecosystem and act as ancillary units for large enterprises. They cater to the needs of local markets as well as to national and international value chains. As per present estimates, the Indian MSME sector, including khadi, village and coir industries, consists of 51 million units and provides employment to over 117 million persons. The sector contributes 7 per cent to India’s GDP while accounting for 45 per cent of the total manufacturing output and 40 per cent of the exports from India. While the role of MSMEs is often highlighted in the context of their contribution to employment, economic growth and balanced regional development, it is important that these enterprises are sustainable and can deliver scale Even though contributing significantly to exports, Indian MSMEs are still not regarded as a force to reckon with in the international markets. Looking ahead, the challenges are in building the next generation of MSMEs that can function as the powerhouse of the economy. With intense competition at the global level and the demands arising from globalisation, it is now imperative for Indian MSMEs to demonstrate greater competitiveness, position themselves strategically and leverage their engagement in global value chains (GVCs).
A heterogeneous group
However, the MSMEs in India are heterogeneous and varied in nature in terms of the size and structure of the units, variety of products and services, scale of production, and application of technology. A considerable number of them are in the unorganised sector. In accordance with the provision of the MSMED Act, 2006, the classification of MSMEs is defined in terms of investment in plant and machinery for the manufacturing enterprises and equipment for the services enterprises. However, since 2006, there has been a major transition in the Indian economy. Increasing domestic and global competition, technological obsolescence, change in manufacturing strategies, lack of access to infrastructure and logistic facilities, fund shortages and inadequate linkages to domestic and international markets together with uncertainty are key challenges for MSMEs. This necessitates redefinition of the small enterprise in a way that will foster their global competitiveness. The MSMED Act provides the first-ever legal framework for recognition of the concept of “enterprise” which comprises both manufacturing and service entities and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium. Establishment of specific funds for the promotion, development and enhancing competitiveness of these enterprises, progressive credit policies and practices, preference in government procurements to products and services of the micro and small enterprises, and assurance of a scheme for easing the closure of business by these enterprises are some of the other features of the Act. It is essential for India’s entrepreneurial talent to be global in outlook and adopt innovation, develop world-class technologies and build new skills on a continual basis. The new definition needs to consider domestic imperatives, examine evolution of key business sectors of the economy and evaluate global MSME policies across developing and developed economies. It also needs to consider the global context and benchmarks and the emerging opportunities in the top industry sectors, together with India’s socio-economic imperatives by rewarding growth, innovation, productivity and participation in global markets. Based on wide-ranging discussions with relevant stakeholders, CII recommends a turnover-based criterion to define an MSME. The turnover for the last year as on March 31 can be a deciding factor for the size of the enterprise. The benefits of turnover-based classification are many. This is a transparent, objective and non-discretionary criterion. It will not restrict investments in technology, encouraging MSMEs to invest in improving their competitiveness. Reducing transaction costs of unnecessary inspections to determine the classification of the enterprise would be another positive in this definition. While CII has also studied whether the number of employees hired by an enterprise can be included as an additional criterion to make the definition robust, discussions with MSME members and government authorities have suggested that this might pose a threat to employment creation. Enterprises, in order to utilise the benefit provided to MSMEs, may engage in shedding employees or resort to engaging in temporary and seasonal employment. Such a turnover-based definition of Indian enterprises will best encourage available incentives to flow in the right direction, thereby enabling the sector to effectively boost its contribution to growth, employment and exports. The writer is Director General, Confederation of Indian Industry
Source: The Hindu Business Line
Take a walk around Bhiwandi. Much of what you will see are shuttered powerloom units gathering dust and rust. During its heyday, Bhiwandi, in Thane district, had the highest cluster of powerlooms in the country, and was a huge employment hub with workers hailing from other states like Madhya Pradesh, Uttar Pradesh and Bihar. Today this once-thriving business is facing extinction, thanks to GST, demonetisation and cheaper competition, rendering thousands of workers jobless. “More than half the karigars (workers) have returned to their native place as major textile units have shut down,” said Dilshad Sayyed Ahmed Ansari, who has been working as labourer in the powerloom sector for the past 15 years. Dilshad, who hails from Bhiwandi, had to find work in a gas supply company for a while, when the textile firm he was working for shut down. Now, Dilshad has again found employment in a powerloom unit, but is unsure this will last as more powerloom units are shutting down due to a variety of reasons. Like that of Rufi Hijimiyan, whose father had set up a powerloom unit before independence, with Rufi taking over in 1982 but having to shut it down in 2016. “In 2016, the market was flooded with ordinary cloth,” Rufi explained. “The production of cloth was thrice its usual demand as automatic loom owners who used to make fancy cloth switched to producing plain cloth. Electricity was expensive and there were labour problems. Yarn price fluctuation used to affect the business as the selling price was below production cost. My company incurred huge losses. I bore the losses for one and half years, but in the end, I had no choice but to shut the business down.” More than twenty families depended directly, and five families indirectly, on Hajimiyan’s unit for their livelihood. Arshad Ansari, who operates his business through rented looms, however, is starting to make a profit as rental cost for powerlooms has declined because of the steep fall in demand. “Rental for loom was 15,000-16000 in 2013” said Arshad. “Now looms are available for rent at Rs 10000-11000”. But even the few looms that are still operating are working at 40-45 per cent capacity, according to local activist Punit Khimasia. Ancillary businesses that thrived on the earnings of the powerloom sector too have taken a big hit. For instance, the thousands of migrant workers used to depend on labour kitchens/mess for food. Bhiwandi is estimated to have 300 such kitchens catering to these labourers. The mass shut down of powerlooms is killing this business as well. “In the last few years, our business has come down by over 20 per cent,” said Naushad Usmani, owner of one such kitchen named Bagh-e-Firdaus Darbar. Other related service businesses too are facing lean times.
Impact of GST
The 18 per cent GST on textile products, and huge delays in getting GST refund due to them, are a prime reason for the woes of the powerloom units. “I haven’t seen any profit since 2014-15,” said Ansari Abdul Malik, owner of 78 looms of different varieties. “Taxes are high and penalties are very heavy. Also, the GST refund is inordinately delayed. We have not got any refund over the last four months. The E-way bill is another harassment. If due to any reason the goods are not transported, we have to immediately cancel it and there are time constraints in generating the E-way bill.” “Suppliers install machinery with 18 per cent GST but this was not considered for a refund,” said chartered accountant Ramakant R Lahoti. “So this tax has to be paid by the manufacturer which reduces their cash flow drastically. The government should consider a refund of GST on machinery so that their cash flow will improve.” Ansari also said the reduction in loan subsidy for new powerloom units from 30 per cent to 10 per cent has made the business unviable. “Moreover, people who bought looms when subsidy was 30 per cent have not received this subsidy even after five years. This has forced some of them to sell their looms to ensure they have adequate capital”. Another problem is high export duty on their products. “I met Textile commissioner Kavita Gupta and explained in detail how export duty of 25 percent is killing our business and how we are losing out to China, Pakistan, Bangladesh and Vietnam, which support export friendly policies,” said Abdul Manan Siddiqui president of Shanti Nagar Weavers Welfare Association and an active member of Bhiwandi Powerloom Association. Abdul Siddiqui even met union textile minister Smriti Irani to press the case for lower export duty. “I was assured that soon there will be a positive change in export duty but nothing has changed yet. The government is focusing on big players like Reliance, not us. Not a single new powerloom has been installed in Bhiwandi since 2015.” Based on information provided by Torrent power, a private company supplying electricity in Bhiwandi, Siddique said out of 13,80,000 looms operating back then, over 4 lakhs looms have shut down out of which 2 lakh units have been sold as scrap. Some other figures are telling on the plight of the textile industry, not just in Bhiwandi but all over. For instance, India’s cotton textiles export declined by 24.4 per cent during April-July 2019. Data for the first three weeks of August 2019 also show a 25 per cent decline in export continuing on a month on month basis (according to Pg. no.4, TEXPROCIL E-NEWSLETTER Sept 14, 2019). At the same time, the proposed budget for the textile sector (which employed 51 million people directly and 68 million people indirectly according to a 2015-2016 Assocham report) for fiscal year 2019-20 is 5831.48 crore,16.01 percent lower than the previous year’s budget of 6943.26 crore
High cost of electricity
Another cost escalator is electricity, which in Maharashtra is among the most expensive in comparison to other states. In a petition filed before the Maharashtra Electricity Regulatory Commission, Mumbai, Hiren Jayendra Nagda, a power loom owner, pointed out that “basic electricity cost to run a powerloom per month is Rs1500 to Rs1600 compared to just Rs75 per loom per month in UP.” Not surprising then that their electricity bills, among other factors, saw so many powerlooms shut shop in 2015-16. One of them was owned by Yaseen Abdul Majeed Ansari, whose ancestors migrated from Allahabad to first set up powerlooms in Bhiwandi in 1912. In June 2016, Yaseen, who owned 120 looms, was forced to shut down his unit. “Government policies were not in our favour,” said Yaseen. “Demonetisation, high power rates and high labour charges in the past 5-7 years forced my hand. Specially, electricity bills caused irreparable damage to my business in 2015-16.” Now he has switched to goat farming. Unfortunately, Yaseen’s is not an isolated instance, but one among thousands of similar sad tales of powerloom owners falling victims of misguided government policy. That too of a government, which shouts from the roof tops that they are all for small industry. Bhiwandi’s small industries, especially the powerlooms, tell a completely different tale.
Source: Citizen Matters
Chief Minister Naveen Patnaik on Wednesday inaugurated the Odisha MSME International Trade Fair 2020 at the IDCO Exhibition Ground here on Wednesday. “Odisha has been the cradle of entrepreneurship since times immemorial. The brands today known as Kalinga and Utkal have a glorious ancient past. The people from Odisha are known for their enterprising nature and have made name for themselves in handicrafts, textiles, food processing and information technology,” said the Chief Minister. He urged upon young and talented entrepreneurs to take advantage of the upcoming opportunities in Odisha and set up new enterprises. More than 350 MSMEs, including 20 entrepreneurs from Iran and 12 entrepreneurs from Bangladesh, are participating in this event.
Source: The Pioneer
Ananth Narayan, associate professor, finance, SP Jain Institute of Management and Research, said a gentle depreciation of the rupee is expected in the coming months, even as geopolitical risks seems to have subsided following messages from both countries that there would be no further escalation. US Iran tension, Rupee, dollar, market news, GDP, GDP growth, CPI inflation After launching the missile attack, Iran had said that it did not ‘seek escalation or war’, but would defend against any aggression. Following the Iranian attack on US bases and subsequent spike in oil prices, the rupee once again breached the 72-mark against the dollar, but recouped to close at Rs 71.7063. It has remained volatile over the past few days over expectation of an inflated import bill due to rising oil prices. Meanwhile, Brent crude price rose as high as $71.75 per barrel intraday, and was trading at $68.78 per barrel around 5.15 pm on Wednesday. On Tuesday, it had come down to $68.27. Since Thursday, the rupee had depreciated 0.467%, while Brent prices shot up 3.7% during the period. Ananth Narayan, associate professor, finance, SP Jain Institute of Management and Research, said a gentle depreciation of the rupee is expected in the coming months, even as geopolitical risks seems to have subsided following messages from both countries that there would be no further escalation. After launching the missile attack, Iran had said that it did not ‘seek escalation or war’, but would defend against any aggression. “The RBI has been buying dollars quite consistently over the past few weeks and months and has not let the dollar-rupee fall too much. In fact, data indicates that it has bought $35 billion between April and December last year,” he said. In addition, the current account deficit (CAD) had fallen quite sharply as the imports had come down due to a slowing economy. “We have had some decent inflows both from portfolio as well as FDI,” he added. Going forward, as the economy recovers, he said, the imports and trade deficit may rise, leading to a depreciation of the rupee. “The rupee should head towards Rs 73-74,” he said. In the short run, the rupee would stay around Rs 72-72.5 assuming no adverse geopolitical events, he added. “Thus far, the rise in oil prices has been secular but not extraordinarily sharp unlike the spike seen following the Iranian strike on a Saudi oil facility in September,” Edelweiss said in a report. It further expected dollar/rupee to range 71.5-72.75, assuming Brent secular increase continues but does not surge exponentially. “Brent is going to be the sole trump card of rupee and other domestic asset class movement in the near term. We note that every $10/bbl increase in crude oil prices could effectively dent GDP growth by 15-20bps, CPI inflation by 30-35bps and CAD by ~0.5% of GDP. We expect India’s net external accounts to remain comfortable in FY21, assuming Brent average $65-68/bbl, with BoP surplus of $32 bn,” it said.
Source: Financial Express
Our mindset lets large enterprises have a disproportionate influence in policy making, with no place for the informal sector at the table. But India’s urban future, job creation, and growth revival may be with the small entrepreneurs. For developing countries as a group, more than half of all jobs still remain in the informal sector. Early views of industrialisation leading to an inexorable pull of the rural population into urban areas saw urbanisation and formalisation as being the same thing. Later views of rural-urban migration, as leading to a translation of rural poverty into urban poverty, coincided with caution on urbanisation, and greater support for rural development. We now find ourselves at a conjuncture where urbanisation is being promoted as an integral part of our growth strategy, but concerns about the informal sector have been folded with the black economy, congestion costs, and a threat to law and order and social cohesion. The “undermining of social cohesion and law and order” bears a familiar resemblance to concerns of colonial regulators about activities that were “on the other side” of the dual economy divide. These concerns run counter to our understanding that the informal sector remains an integral part of India’s structural transformation and young demographics (bit.ly/36CwEiu). The growth dynamics of the formal and informal sectors are very different. These differences can be seen in their spatial location, the pace at which they create jobs, their contribution to traded and non-tradable activities, and their impact on networking and gender equality. These differences are enormous. But informal and formal sectors remain friends, not foes. India’s urban transformation is taking place at a 100-times faster pace than what developed countries have experienced. India is also the youngest country in the world, riding a wave of youth bulge that will continue to add 10 million additional workers to the labor force every year for decades to come. Urbanisation and informal sectors have the potential to complement each other, and absorb this youth bulge and promote shared prosperity. Policy makers should not worry about slow pace of formalisation.
Trends in urbanisation and formalization
India’s informal manufacturing sector is large, no matter which definition we use, enterprise or employment. While India’s overall manufacturing sector has become more urbanised, the differences in the spatial development of the formal and informal sectors are striking. The formal sector is de-urbanising rapidly and moving from urban to rural locations to remain cost competitive. India is one of the most densely populated countries in the world, and the high population density of a city makes large-scale manufacturing less competitive, and forces them to move to a rural setting. On the other hand, the informal sector is urbanising rapidly to benefit from a better physical infrastructure. The urbanisation of the informal sector and the de-urbanisation of the formal sector can’t be explained by changing definition of urbanisation, as the definition of an urban setting in India has been mostly stable since the 1961 census. India uses a more demanding set of criteria than most countries to define what is ‘urban’. For example, substantial parts of the US metropolitan areas like Atlanta or Phoenix would be classified as rural in Indian statistical analyses because their population densities fall below 1,000 persons per square mile. India’s employment growth in the manufacturing sector during the last two decades has occurred largely in the urban areas. Job growth has been concentrated in the informal sector. Informal sector jobs have expanded in the traded sector and contracted in the non-tradable sector. So, growth in traded industries is not due to plants achieving larger economies of scale, as was expected from reforms implemented in the early 1990s. The rapid urbanisation of the informal sector appears to be the most important factor. Informal sectors conform much more closely to the overall contours of India’s economic geography than formal sectors. Not all jobs in the informal economy yield paltry incomes. Many self-employed earn more than unskilled or low-skilled workers in the formal economy. A diverse and large number of entrepreneurs in garment industry in New York have made it much more competitive compared to Pittsburgh with one large and vertically integrated steel factory, which has now become a ghost town. It is unlikely that rapid urbanisation and technological changes will lead to the demise of the informal sector. Remaining small is a rational response to high urban density. Technological changes have enabled entrepreneurs to operate at a smaller scale, and benefit much more from networking and agglomeration economies associated with urbanisation. The growth benefits of urbanisation come from agglomeration economies, which are much stronger in India compared to the US. It is even stronger in the informal sectors.
Tax reforms, demonetisation and financial stress
While the goal of Goods and Service Tax reform is commendable, its hasty implementation has adversely impacted small entrepreneurs in the informal sector. It has broken the link between formal and informal sectors. Large enterprises that outsource a lot of tasks to small enterprises are now less inclined to outsource it to the informal sector that barely come under the GST net. The informal sector has been badly affected by the economic slowdown and much of this may not be captured in official statistics. Insolvency and bankruptcy reforms are important and needed for more efficient resource allocation. But it is not of a great consequence to the informal sector. There is mounting evidence that economic shocks that worsen infrastructure affect informal sectors by reducing their access to markets and basic services. There is rising concern that demonetisation has also adversely impacted the informal sector more than the formal sector. Hundreds of millions of small enterprises that operate in the informal sector, and which are cash dependent, have suffered losses and lost their jobs. India may have experienced a potential reversal in structural transformation, as more than 2 million people have migrated back to villages from cities. But the backbone of the informal sector is not broken, as India’s urbanisation will continue to expand the informal sector.
Policy agenda
India’s favorable structural trends and young demographics will revive growth, with urbanisation and informal sector playing a key role in job creation. First, the FM could explicitly recognise the role of informal sector as an important driver of growth and job creation in the next Budget. Second, while the agenda on smart cities has caught the attention of policy makers, it needs to be made more inclusionary by integrating the informal sector into city planning, budgeting and financing. Third, technological revolution has made the informal sector as partners in development. Smartphones have become the key tool for women entrepreneurs, putting instant information about safety alerts, traffic, tourism, health services, and community news into millions of hands. India’s urban future is in the informal sector.
Source: Financial Express
Rising exports from India could put pressure on global prices for cotton, which are trading near their highest in eight months, and hurt shipments from rivals such as the United States and Brazil to key Asian buyers. Cotton exports from India have gained momentum due to a depreciation in the rupee and as prices have rallied in overseas markets, prompting Asian buyers such as China, Bangladesh and Vietnam to raise Indian purchases, dealers said. Rising exports from India could put pressure on global prices for cotton, which are trading near their highest in eight months, and hurt shipments from rivals such as the United States and Brazil to key Asian buyers. "In the last fortnight very good business happened. China was making purchases for prompt shipment," Arun Sekhsaria, managing director of exporter D.D. Cotton, said. India has shipped 1 million cotton bales since the 2019/20 marketing year started on Oct. 1 and another 700,000 bales have been contracted for shipment in January and February, five exporters told Reuters. Until few weeks ago, Indian traders had been struggling to sign export contracts as local prices exceeded global prices after New Delhi raised the minimum buying price to support farmers. India has raised the minimum raw cotton buying price by 38% in two years, to 5,550 Indian rupees per 100 kg. But a rebound in global prices and a fall in the rupee has made Indian cotton competitive in the world market, Sekhsaria said. Bangladesh and China were active buyers, while Vietnam and Indonesia are making small purchases, said a Mumbai-based dealer with a global trading firm. Indian cotton was sold at around 75 cents per pound on a cost and freight basis (C&F) to China and 76 cents to Bangladesh for shipments in January, dealers said. India's cotton production in 2019/20 is likely to jump 13.6% to 35.5 million bales due to a bigger cultivated area and a boost to yields from above-average monsoon rains, a leading trade body has forecast. New Delhi's exports in 2019/20 could rise 19% from a year ago to 5 million bales if global prices remain firm in the rest of the season, said a New Delhi-based dealer whose firm trades globally. "Right now, Indian cotton is 3 to 4 cents cheaper than the supplies from Brazil and the United States. There is good demand," the dealer said. But Pakistan, usually a leading buyer of Indian cotton, has not been making purchases due to tensions between the nuclear-armed nations over disputed the Kashmir region, exporters said. Indian cotton is cheaper for Pakistani buyers, but they cannot purchase due to restrictions imposed by Islamabad, a New Delhi-based dealer said.
Source: Money Control
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
1015.64 |
USD/Ton |
0.71% |
1/9/2020 |
|
VSF |
1364.74 |
USD/Ton |
0.32% |
1/9/2020 |
|
ASF |
2015.44 |
USD/Ton |
0% |
1/9/2020 |
|
Polyester POY |
1039.39 |
USD/Ton |
0% |
1/9/2020 |
|
Nylon FDY |
2202.59 |
USD/Ton |
0.66% |
1/9/2020 |
|
40D Spandex |
4131.65 |
USD/Ton |
0% |
1/9/2020 |
|
Nylon POY |
2418.53 |
USD/Ton |
0.60% |
1/9/2020 |
|
Acrylic Top 3D |
5398.50 |
USD/Ton |
0% |
1/9/2020 |
|
Polyester FDY |
1288.44 |
USD/Ton |
0% |
1/9/2020 |
|
Nylon DTY |
2029.84 |
USD/Ton |
0% |
1/9/2020 |
|
Viscose Long Filament |
2202.59 |
USD/Ton |
0% |
1/9/2020 |
|
Polyester DTY |
1187.67 |
USD/Ton |
0% |
1/9/2020 |
|
30S Spun Rayon Yarn |
2008.24 |
USD/Ton |
0% |
1/9/2020 |
|
32S Polyester Yarn |
1633.95 |
USD/Ton |
0% |
1/9/2020 |
|
45S T/C Yarn |
2418.53 |
USD/Ton |
0% |
1/9/2020 |
|
40S Rayon Yarn |
1770.71 |
USD/Ton |
0% |
1/9/2020 |
|
T/R Yarn 65/35 32S |
2216.98 |
USD/Ton |
0% |
1/9/2020 |
|
45S Polyester Yarn |
2173.80 |
USD/Ton |
0% |
1/9/2020 |
|
T/C Yarn 65/35 32S |
1943.46 |
USD/Ton |
0% |
1/9/2020 |
|
10S Denim Fabric |
1.27 |
USD/Meter |
0% |
1/9/2020 |
|
32S Twill Fabric |
0.69 |
USD/Meter |
0% |
1/9/2020 |
|
40S Combed Poplin |
0.97 |
USD/Meter |
0% |
1/9/2020 |
|
30S Rayon Fabric |
0.54 |
USD/Meter |
0% |
1/9/2020 |
|
45S T/C Fabric |
0.68 |
USD/Meter |
0% |
1/9/2020 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14396 USD dtd. 09/01/2020). The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
Man-made fiber (MMF) is the future of Bangladesh’s apparel business as the demand for those goods are growing all over the world. Because the conscious consumers of the world are trying to make the world greener by consuming less nature damaging items. A sustainable and green world is the target of the people. It does not mean only to build green factory buildings to save the costs of light, energy and less consumption of water. On a broader scale, greening means turning wastages, especially the plastic products into assets through the recycling process as the whole world environment, especially the oceans and aquatic environments are under threat due to massive dumping of plastic goods by consumers. The natural eco-system is under threat due to plastic goods, as it takes a couple of hundreds of years to decay. So, turning the waste into assets means greening the world. Less consumption of nature damaging products is also a major part of it. Bangladesh will have to grab more market share in the global garment business for the sustainability of the apparel business. The local garment manufacturers are also going for manmade fiber, although the pace is still slow. The product basket of Bangladesh is narrow compared to China or Vietnam as the country is still limited to cotton-based products. So, Bangladesh has an immense scope of product diversification in manmade fiber, which is unexplored in Bangladesh. A Matin Chowdhury, Managing Director of Malek Spinning Mills, a leading spinner, said setting up of MMF based mill is very expensive. “I tried to set up an MMF based mill 10 years ago when the project cost was estimated at $100million and now it takes between $400million and $500million. So, very few investors are interested in up those expensive mills,” Matin Chowdhury said. However, he also agreed that the demand for the MMF based garment items has been increasing worldwide and Bangladesh’s spinning mills will also have to set up those mills. Otherwise, the country’s $8billion worth primary textile sector would be in big trouble soon, he added. Syed M. Tanvir, Director, Pacific Jeans Ltd, opined, “Like cotton man-made fiber price does fluctuate based on petroleum price. As we do not produce cotton but we are heavily dependent on cotton, the same as, we can expand our market horizon by start producing manmade fiber. And regarding its technology, it’s not an issue because technology is a commercial product. So, if we can bring out the right product, technology, and raw materials, it is not an issue.” “We must have to realize; we are taking the same risk with cotton. So, why not manmade fiber? In this, I think Bangladeshi textile millers’ lack of experience is barring us divulge in manmade fiber. Someone needs to be the pioneer and others will follow,” M. Tanvir emphasized. The good thing is some of the leading companies are already doing it, like DBL Group, Habitus Fashion Ltd, Fakir Apparels Ltd, Debonair Group, etc. The Debonair Group is set to establish a recycling facility to turn discarded plastic into yarn and fibers for manufacturing jackets, paddings and quilts, keeping in tune with rising global demand for manmade fibers and growing environmental awareness. “Like cotton manmade fiber price does fluctuate based on petroleum price. As we do not produce cotton but we are heavily dependent on cotton, the same as, we can expand our market horizon by start producing manmade fiber. And regarding its technology, it’s not an issue because technology is a commercial product. So, if we can bring out the right product, technology, and raw materials, it is not an issue.” The new facility will be established on 45 bighas of land in Bhaluka at a cost of Tk 240 crore and production will start from October this year, said Mohammed Ayub Khan, Managing Director of Debonair Group. The company will no longer need to depend on imports, mainly from China, worth some $55 million annually. “We will collect discarded plastic bottles of edible oil and water from different corners of the country to make flakes and then to make yarn and fabrics and finally the paddings and quilts.” The company currently exports jackets and padding worth $140 million a year. Its major buyers are H&M, Colombia, VF Corporation, Benetton Group, according to a report published on The Daily Star.
Import of MMF is on the rise
With the rise of high-end smart fashion markets worldwide, the demand for man-made fibers is increasing. Due to changes in lifestyle, consumers are looking for products, which are easy to care. As a result, the import of man-made fibers such as polyester staple, viscose, and Tencel is on the rise in Bangladesh.
Bangladesh import of manmade fiber in 2016
Bangladesh imported 78,208 tons of polyester staple fiber in 2016, up 11.39 percent from 70,209 tons in 2015 and 35.72 percent from 51,729 tons in 2014, according to data from Bangladesh Textile Mills Association (BTMA). The import of viscose staple fiber was recorded at 29,146 tons in 2016, slightly down from 29,538 tons in 2015. From January to June of 2017, the volume was 16,063 tons, the data showed. In 2014, Bangladesh imported 18,115 tons of viscose staple fiber. Imports of Tencel, a fiber made of trees and leaves, stood at 5,034 tons in 2016 and 6,199 tons the previous year. “The import of man-made fiber is increasing every year,” said Monsoor Ahmed, Secretary of the BTMA. According to the spinner, the durability and the longevity of artificial fibers are higher than cotton-made yarn and fabrics. That’s why the demand for man-made items is going up. If garments made from man-made fibers are not washed for many days their quality will not deteriorate or over-wash will not compromise the quality.
Production of the MMF is also rising
The number of factories producing artificial fibers also went up. Alone the polyester fiber production units rose to 52 from 10 to 12 seven years ago. There are 45 viscose staple fiber mills and 10 Tencel factories. Globally, the ratio of man-made fiber has gone up compared to the cotton fiber, although the latter is still the main item for spinners. The ratio of the cotton-made yarn and the artificial one rose to nearly 80:20, whereas it was 90:10 even five years ago. The local manufacturers’ export of MMF apparel items remained stuck at 20 percent over the last many years, although, worldwide the MMF made garment items production has already crossed more 40 percent worldwide, according to a recent study by Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Whilst, the worldwide production of MMF garment production and consumption has been increasing, Bangladesh’s cotton-based yarn and garment products are rising every year. As a result, the exporters have been receiving low prices from the buyers from the sales of cotton fiber garment items.
Cotton fiber is still dominating in Bangladesh
For instance, of the total garment export from Bangladesh in fiscal 2018-19, 74.14 percent was made from the cotton fiber and the percentage of the country in this segment was 68.67 percent in fiscal 2008-09, the study also said. Not only, over-concentration on cotton fiber, but also Bangladesh’s export is over-concentrated on five particular garment items like a t-shirt, trousers, jackets, sweaters and formal shirts. And, these five top exported items cover 73 percent of the total garment items last fiscal year. For instance, Bangladesh exported t-shirts worth $7.01billion, trousers $6.93billion, jackets $4.38billion, sweaters $4.25 billion and formal shirts worth $2.32billion, the BGMEA study said. Ziaur Rahman, Head of H&M for Bangladesh, Pakistan and Ethiopia said the trend of garment export from Bangladesh shows that the higher concentration of cotton made garment items, whereas, global consumption has been diverting to MMF. Rubana Huq, BGMEA President agreed that the MMF based garment production. However, Bangladesh needs foreign direct investment and the government’s assistance for going to the MMF based garment production. The government should also ease the rules for attracting foreign direct investment in MMF textile production as the country has still very low capacity in MMF textile production, Huq said in a recent discussion. Out of 20,52,000 tons of imported fiber in Bangladesh in 2018, the share of cotton was 93.57 percent, the BGMEA study also said. The share of MMF based apparel is around 45 percent of global trade, which is growing at 5 percent Compound Annual Growth Rate (CAGR) in the same period. In 2017, the global trade of MMF based apparel was $150 billion, where Bangladesh had a 5 percent share of it whereas Vietnam had a 10 percent share. On the other hand, the share of global trade of cotton-based apparel is around 35 percent which is shrinking at 0.5 percent CAGR between 2007–2017.
Source: Textile Today
Bangladesh has set a target of $50 billion for its readymade garment (RMG) exports in 2020-21 in line with its commitment to enhance earnings from the sector in the election manifesto of the ruling Awami League. Secretary of textiles and jute ministry Lokman Hossain Mia said this recently ahead of the ‘National Textile Day 2020 and Multipurpose Textile Fair’. Prime Minister Sheikh Hasina is expected to inaugurate the three-day event on January 9 at in Dhaka. The government has prepared an elaborate action plan to make the sector stronger and competent in the business market. Forty two vocational institutes, seven textile institutes and seven textile engineering colleges have been established to develop highly skilled textile technicians for the sector, Mia said. A total of nine organisations and business enterprises will be awarded in different categories to enhance the RMG export and speed up the development, Bangla media reports quoted him as saying.
Source: Fibre2Fashion
China’s decline as a source of denim apparel manufacturing expanded in November, as companies look elsewhere to save costs and reduce risks. For the third straight month since 15 percent tariffs on denim jeans and associated products imported into the U.S. from China took effect, shipments dropped significantly. At the same time, a diverse array of suppliers, from Vietnam, Pakistan and Cambodia to Egypt, Jordan and Nicaragua, have consistently posted gains in the year through November, according to the Commerce Department’s Office of Textiles & Apparel (OTEXA). U.S. jeans imports from China fell 24.35 percent to a value of $659.51 million for the year to date through November, according to OTEXA. This was an expansion of the erosion of sourcing from China for the category, after a 21.97 percent year-to-date decline was posted in October. China’s U.S. import market share tumbled 22.51 percent for the year through November to 19.33 percent. China had lost its top supplier spot to Mexico earlier this year, as the U.S.-China trade war cut into its U.S.-destined production. Morris Goldfarb, chairman and CEO of G-III, told analysts last month that the company is accelerating “the efficient and effective diversification of our manufacturing base.” “We estimate our China-based production will be approximately 50 percent by the end of this fiscal year from over 80 percent four years ago,” Goldfarb said. “We are also reallocating some of our experienced personnel in China to other parts of the world.” Mexico’s year-to-date shipments dipped 0.62 percent to $753.08 million. The country’s market share slipped 0.37 percent for the 12-month period to 21.69 percent. No. 3 supplier Bangladesh saw its imports to the U.S. rise 1.5 percent in the period to $544.3 million. The country’s market share was up the same amount to 15.32 percent. Fourth-place supplier Vietnam saw its shipments climb 22.61 percent to $339.91 million. Amid concerns of the country’s production reaching capacity, its market share grew 22.73 percent to 9.58 percent. The Top 10 supplier countries posting significant gains incl Nicaragua, with shipments increasing 19.84 percent to $120.95 million; Egypt, with imports up 15.37 percent to $161.85 million; and Cambodia, with an increase of 7.7 percent to $115.17 million. In addition to China and Mexico, Indonesia also lost ground, with shipments declining 15.59 to $65.30 million in the period. Overall imports from the world were down 3.05 percent year-to-date to $3.48 billion.
Source: Sourcing Journal
The Bangladesh Bank (BB) has relaxed one per cent cash incentive provision for apparel and textile export. The bank issued a circular to its authorised dealers that made current beneficiaries of duty draw-back facility or bonded warehouse facility eligible for the incentive. The bank earlier excluded the beneficiaries from the 1 per cent incentive scheme. The fall in export earnings in the first half of the current fiscal prompted the central bank to come up with the fresh relaxation, Bangla media reports quoted the bank as saying. The country’s export earnings in the first half of this fiscal fell by 5.84 per cent to $19.30 billion from $20.50 billion in the same period of the previous fiscal.
Source: Fibre2Fashion
Turkmenistan is taking part in the Heimtextil international trade fair for home and contract textiles, which will end on January 10, 2020, in Frankfurt am Main, Germany, Trend reports. The event, to which the representatives of 3,500 international companies and various organizations from 65 countries have been invited, is being held in the Messe Frankfurt exhibition hall. The Turkmen delegation meets with representatives of enterprises from various countries producing textile products. More than one million tons of cotton are grown in Turkmenistan annually, which serves as a raw material base for the development of the textile industry. A significant part of Turkmenistan’s exported products are home textiles, sports and jeans wear, produced under the world-famous brands Puma, Wal-Mart, Bershka, Pool & Bear, River Island and Cosco. It is planned to allocate more than $300 million till 2025 for the implementation of more than 30 projects in the Turkmen textile industry. Eighteen out of 29 textile enterprises planned for transfer to private ownership, have already been privatized in Turkmenistan. The assortment of textile products in the near future will be expanded thanks to the establishment of the production of corduroy fabric and various types of non-woven materials like spunbond, spunlace, hollow fiber, curtains, as well as padding polyester and carpet.
Source: Aki Press
South Korea faced more trade barriers last year amid growing protectionism around the globe spearheaded by the U.S.-China trade war, with steel and chemical industries being primary victims, data showed Thursday. The number of newly added import regulations targeting South Korean goods reached 41 cases in 2019, doubling from just 20 cases a year earlier, according to the data compiled by the Korea International Trade Association. The trade barrier includes anti-dumping tariff, countervailing duty and safeguard measures. As of this month, 29 countries implemented a total of 211 cases of import regulations against South Korean products, with 41 of them being currently under investigation, the data showed. Washington imposed the highest number of trade regulations targeting South Korea at 40 cases, trailed by India, China and Turkey with 32, 17 and 15 cases, respectively. By segment, the steel and metal industry accounted for nearly half at 98 cases, while other major products included chemicals, plastics and textiles. In November, the U.S. Department of Commerce launched probes to determine whether forged steel fittings from South Korea are being dumped in the world's top economy. Last month, Pakistan also launched an anti-dumping probe against South Korean phthalic anhydride, a chemical product. South Korea's overall exports, meanwhile, nose-dived 10.3 percent in 2019 from a year earlier.
Source: Yonhap News
LinenMe, a producer of home textiles made in Lithuania, is headed into the 2020 market season with a variety of new bed, bath, home and table linen offerings. The company crafts its bedding from 100% European stonewashed linen, which prevents shrinkage after washing. The Silver Stonewashed Rhomb Bed, which works with contemporary or traditional décor, features a single duvet and pillowcase or a double duvet with two cases. The bedding is also available separately as sheets, pillowcases and duvet covers in twin, queen and king sizes. Silver also makes its debut in the LinenMe’s luxury linen tablecloth line, Lara. The soft, prewashed linen features a subtle chevron pattern and is finished with a plain seam. Available in a variety of sizes, with napkins and placemats as well, Lara comes in more than 25 colors. Also for tabletop, LinenMe’s Rustic Table Runner is a classic design made from prewashed 100% linen with a fringed detail to add texture and softness. The machine-washable linens are woven in various colors, including spa green, and come in three sizes. For the bath, LinenMe presents the Washed Waffle Bath Towel. The honeycomb woven, lightweight towels look stylish in any bathroom, and feature a loop for hanging. Along with spa green, the towels, which measure 39” by 63” are offered in a simple color palette. Rounding out the collection is the new Rustico Throw, crafted from pure linen and finished with a contrasting fringe. The soft throws are meant to be draped over the sofa or bed. A generous 53” by 79”, the throw is available in three colors.
Source: Home Textiles Today
