Indian textiles industry is expecting the Union Budget 2020-21 to be more focused with new financial allocations to strengthen the sector, especially the MSME segment. Union finance minister Nirmala Sitharaman is scheduled to present Budget in Parliament on February 1 at a time when consumer demand is down and GDP growth rate has also fallen. Focus on cotton textile segment, brining all textile products under Remission of Duties or Taxes on Export Product (RoDTEP), new schemes to benefit local manufacturers, especially MSMEs, and giving a boost to greener production are among the wish list of textile industry for the upcoming Budget. The cotton sector is the second most developed sector in the textile industry, with cotton yarn and fabrics exports accounting for about 23 per cent of India’s total textiles and apparel exports. However, exports of cotton textiles are declining drastically according to Ujwal Lahoti, executive chairman of Lahoti Overseas Ltd. "Cotton yarn exports declined by over 30 per cent year-on-year. The situation on cotton textiles exports front is now gloomy, so we need support from the Government on this matter." "A new scheme RoDTEP was supposed to go into effect from January 1, 2020, but it is yet to be implemented. We urge the government to include all textile products across the board under this umbrella scheme, which will further restore India’s share in global markets,” Lahoti told Fibre2Fashion. Though the Government is promoting indigenous comprehensive capabilities, more needs to be done in the sector, feels Smarth Bansal, DGM-Product Management, ColorJet. “We expect the government to empower indigenous manufacturers by training them with all-inclusive skills. Although, there are schemes like Amended Technology Upgradation Fund Scheme (ATUFS) and Export Promotion Capital Goods (EPCG), more needs to be done for the local manufacturers to help them better compete with their international counterparts, especially in China.” The Indian textile industry is set to be valued at $250 billion by end of the year 2020 and with a unified trajectory the sector can propelled further to new heights. Simultaneously, the industry is marching towards greener production in terms of sustainable products manufactured with green energy. "Expectation of consumers is growing with the products they purchase. Manufacturing everything green with continuous upgraded fashion requirement needs capacities to produce multiple products under one roof, which is possible only with MSME units. Due to the current slowdown, MSME’s have reduced their production capacities and are struggling to survive. Hence, the government needs to focus not just only in-terms of offering incentives but making sure, they are being delivered in time to the right industry,” says Akhilesh Taparia, CEO, Go Green Textiles India. "Focus on MSMEs will generate immediate employment opportunities and will surely contribute in improving India’s economic condition,” adds Taparia.
Source: Fibre2Fashion
India plans to increase import duties on more than 50 items including electronics, electrical goods, chemicals and handicrafts, targeting about $56 billion worth of imports from China and elsewhere, officials and industry sources said. Finance Minister Nirmala Sitharaman could make the announcement when she presents her annual budget for 2020/21 on Feb. 1, along with other stimulus measures to revive sagging economic growth, one of the government officials said. Higher customs duties are likely to hit goods such as mobile phone chargers, industrial chemicals, lamps, wooden furniture, candles, jewellery and handicraft items, two government sources with direct knowledge of the matter said. The move could hit smartphone manufacturers that still import chargers or other components such as vibrator motors and ringers, along with retailers such as giant IKEA that is in the process of expanding its footprint in India. IKEA had previously flagged higher Indian customs duties as a challenge. The government had identified items and decided to increase import tariffs by 5%-10% as recommended by a panel of trade and finance ministry officials, among others, the second government official said. "Our aim is to curb imports of non-essential items," said the official, adding a hike in import duties would provide a level playing field for local manufacturers-hit by cheap imports from China, the Association of Southeast Asian Nations (ASEAN), and other countries that enjoy trade pacts with India. The sources asked not be identified as the discussions were private. A spokesman for the finance ministry and a spokeswoman for the commerce ministry declined to comment. Since taking charge in 2014, Prime Minister Narendra Modi has imposed several restrictions on imports while allowing more foreign investment in manufacturing, defence and other sectors. Modi's ruling Bharatiya Janata Party (BJP) has also asked the government to increase duties on non-essential items to boost local manufacturing. "We expect the budget will address the issue of ... cheap imports under free trade pacts," Gopal Krishan Agarwal, the head of BJP's Economic Affairs Cell, told Reuters. A committee of trade ministry officials in consultation with local industries had initially planned to target more than 130 items accounting for roughly $100 billion worth of imports, but it has since pruned the list, the first official said.
IMPORT QUALITY STANDARDS
The government is separately considering imposing "quality standards" on imports as less than 10% of India's tariff lines are regulated for safety, health and environmental standards, an industry official, who is participating in the pre-budget consultations, said. Ahead of the budget, the trade ministry has also asked the finance ministry to consider a Border Adjustment Tax (BAT) on imported goods to level the playing field for domestic players that also have to pay local taxes like electricity duties and levies on fuel, the second government official said. The official added this could be imposed on top of any tariffs further raising the costs of imported goods. Last July, the government raised import tax on more than 75 items, including gold and automobile parts, in its post-election budget. India's goods imports, which had been growing faster than exports in the last several years, fell some 8.90% during the April-December period from year-earlier levels, compared to a roughly 2% decline in exports. This has helped the Modi administration cut its trade deficit that stood at $118 billion during April-December, down from $148 billion a year earlier. The United States wants India to buy at least another $5-6 billion worth of American farm goods if New Delhi wants to win reinstatement of a key U.S. trade concession and seal a wider pact, four sources familiar with the talks told Reuters. U.S. President Donald Trump cited trade barriers last year when removing India from its Generalized System of Preferences programme that allowed zero tariffs on $5.6 billion of exports to the United States. In retaliation, India slapped higher tariffs on more than two dozens U.S. products.
Source: Reuters
In spinning segment, margins could be under pressure for the rest of FY20, owing to the impact of volatility in fibre prices despite a gradual improvement in export demand.
The margins of cotton textiles are expected to improve in the coming period, however, it will be volatile for man-made fibres, says a study by India Ratings and Research (Ind-Ra). Cotton prices had declined in November 2019, however, December 2019 marked the beginning of an upward movement in prices by 2-3% year-on-year. While the arrival of cotton during Q1 of the current season (October-September 2019) as expected by CCI would improve by 8.5% year-on-year, the impact on actual prices is not visible. The agency expects cotton prices to soften till March 2020 due to better yield, leading to higher productivity of cotton in the current season, the study said. The Cotton Corporation of India (CCI) has maintained its forecast for cotton production at 35.4 million bales during the current season. Further, the yield per hectare is expected to improve by more than 6% over the previous season due to a higher acreage and better monsoon. In November 2019, cotton yarn exports improved 15% month-on-month, but fell 5% year-on-year. Demand from China, Egypt and Bangladesh increased during the month. However, due to the US-China trade war, exports to China are still around 50% of the November 2018 levels. According to the study, cotton yarn production fell 10% year-on-year in November 2019. Meanwhile, the share of exports in the total production increased to 30% in November 2019 from 25% in October 2019, supported by increased demand from the top two importers (China and Bangladesh). The first phase of US-China trade negotiations concluded in December 2019 could underpin China import demand in 2020. Demand for fabric exports has contracted, owing to weak market sentiments and increased competition from South-East Asian countries. Fabric exports fell 12% year-on-year in November 2019 and improved 12% year-on-year. Crude oil prices could remain volatile in the short-run owing to geopolitical tensions and production cuts by Opec, which impacts the man-made textile margins. Man-made fibres saw the third consecutive month of low volatility, until November 2019, of raw material prices on the back of stable crude oil prices, which has helped the segment maintain stable Ebitda margins and improve credit metrics. In spinning segment, margins could be under pressure for the rest of FY20, owing to the impact of volatility in fibre prices despite a gradual improvement in export demand. While the margins for 2HFY20 may recover over 1HFY20, liquidity will be under pressure for mill owners, the Ind-Ra study said further. Home textiles continue to be better placed as compared to other textile sub-sectors. For FY20, the agency expects credit metrics to be maintained owing to margins stabilising at 18-20% with softness in cotton prices. The performance (credit metrics) of India Ratings peer set home textiles moderated in 2QFY20, with an overall improvement in 1HFY20 over 1HFY19.
Source: Financial Express
India’s growth will be driven by competitive federalism and increased competition between the states. A move towards increased expenditure flexibility in favour of the states presents an opportunity to align local development needs and priorities with the resources available. Will India become a $5-trillion economy in 2025? There are two contrasting outlooks: optimistic and pessimistic. Both views are grounded in reality. The optimistic view is that growth will be propelled higher by rise of the middle class, young demographics, and changes in globalisation. The pessimistic outlook is that poor physical and human infrastructure will transform India’s demographic dividend into a disaster.
The optimistic outlook
India will emerge with the largest middle class in the world by 2025, and much larger than in the US today. India has long been known as a country of poor people, with a handful of billionaires. This has changed dramatically due to the large bulge of the population that has emerged out of poverty. They are the ‘birds of gold’ that will propel growth. Growth, education, home ownership, and improved economic security are associated with an expanding middle class. The pace at which the middle class will increase will be staggering, and has the potential to increase at a much faster rate compared to China. The median age in India is 28 years, compared 37 in China and the US, 49 in Japan, and 45 in Western Europe. The middle class will expand through several channels in India: swelling of the labour force as the baby boomers reach working age; divert resources from spending on children to investing in skills technological progress; increased women’s workforce that naturally accompanies a decline in fertility; working age also happens to be the prime years for savings, which is key to the accumulation of physical capital; and the boost to savings that occurs as the incentive to save for longer periods of retirement increases with greater longevity. Thanks to young demographics, India is well positioned to benefit from a rising global talent race. More than 3% of all people live outside the country of their birth. But while the share of migrants in the world’s population has remained mostly stable for six decades, its composition has changed. The share of high-skilled migrants relative to low-skilled migrants has grown dramatically, owing to the globalisation of demand for talent. And this development has a clear geographic dimension. Nearly 75% of all high-skilled migrants reside in the US, the UK, Canada, and Australia; over 70% of software engineers in Silicon Valley are foreign-born, mostly India. A worldwide ‘war for talent’ is being waged, and enterprises that manage their global talent pool well are marching ahead. Most multinational corporations now insist that high-potential executives gain global experience by working in other countries, and they have made international mobility a prerequisite for senior leadership positions. Some of the global economy’s most familiar players—including Google, Microsoft, Alcoa, Clorox, Coca-Cola, McDonald’s, Pepsi and Pfizer—have immigrant CEOs. India will continue to benefit from a global talent race, thanks to declining transportation and communication costs (high-skilled migrants tend to travel farther to their destination countries than do less-skilled migrants), and the growing recognition that human capital will play a key role in today’s knowledge economy. Can India sustain high growth rate to become a $5-trillion economy if global growth becomes fragile? It is not growth in the rich countries that will drive India’s growth, but the room for ‘catch up’ that will drive India’s fast pace. This ‘convergence gap’ between India and the US is wider now than it has been at any time since the 1970s. So the growth potential is correspondingly larger. This can be seen in India’s digitisation process, which is much faster compared to the US’s. Unlike China, India is less exposed to rising global trade disputes. India has relied on twin engines of growth—export and domestic consumption. The resilience of India rests on the huge domestic market, as the share of household consumption in GDP in India is much higher than in China. India has also trades differently. While China is the global centre for manufacturing, India has acquired a global reputation as a hub for services export. The pace at which trade in services will grow will outpace trade in goods, given higher global cost differential in the production of services, and the ease with which modern services can be transported through the internet. Will a global financial crisis and capital volatility derail India’s growth? No. India has attracted remittances inflows than portfolio flows and bank loans. Remittance inflows are more stable and persistent than portfolio flows. The 2008 financial crisis showed that the ‘Washington Consensus’ was too complacent about changing market and macroeconomic conditions. A decade later, new concerns have emerged.
The pessimistic outlook
The 20th century has sent shocking waves of industrial destruction, with the shift of manufacturing base from developed to developing countries. The 21st century of cyber globalisation will not be immune to crack-ups and rising global trade disputes. India is very dependent on the monsoon, given its importance to agriculture, and the country still remains largely a rural economy. Monsoons have been adversely impacted by a changing global environment that has already reached a tipping point of no recovery. India is the most water-scarce country in the world. More than 20 Indian cities would be adversely impacted by zero groundwater levels soon. It is unfortunate that cities and mayors have no say in policymaking. A key challenge is to scale up investment in human and physical infrastructure to benefit from youth bulge and demographic dividend. India needs more fiscal federalism and less fiscal centralisation. States are not able to invest as they have a low base of economic activity to tax, and revenue constraints restrict investments needed to establish a level-playing field. Policymakers need to resolve coordination problems that are not easily or efficiently handled by administrative institutions, where institutions remain weak.
The challenges ahead
Both the optimistic and pessimistic outlooks are backed by equally strong arguments. Both views agree that growth is not automatic, and it should not be taken for granted. India’s demographic dividend and the rise of the middle class is a time-bound opportunity. In particular, it provides policymakers an incentive to redouble their efforts to tap into demographic dividend by improving physical infrastructure to promote entrepreneurship and job creation. Pluralism in development is of great value today. India’s growth will be driven by competitive federalism and increased competition between the states. A move towards increased expenditure flexibility in favour of the states presents an opportunity to align local development needs and priorities with the resources available. The challenge is to find out what works best, in what context, and in what setting. This is not just about structural transformation, and a shift from agriculture to industry, but the ‘ownership of process’. Where India ends up in 2025 will depend a lot on what choices are provided today, and what actions are taken to reshape tomorrow.
Source: Financial Express
Budget 2020 India: The GST refunds to MSMEs have been delayed for over six months. In spite of instructions from the Finance Minister, the refunds are not forthcoming. Union Budget 2020 India | Credit and Finance for MSMEs: Micro, Small and Medium Enterprises (MSMEs) were invited by the Commerce minister along with other six organisations heads pertaining to MSME to sort out their grievances on January 6, 2020. It was a marathon four and half-hour meeting with the minister and high-level officials of the Central Government including finance, industry, commerce, textiles, railways, corporate affairs, labour, and others who attended the meeting and deliberated on the points raised by the Industry representatives. A host of issues were discussed threadbare. Even the criticism was well handled and some issues were referred to the concerned departments for further action. Now we expect a lot of reforms and policy guidelines benefitting MSMEs to be introduced and put to use in the near future. The government was also requested to bring in a change in the attitudes of the grassroots officials who continued to create roadblocks and harass the entrepreneurs. It was pointed out that not only the ease of doing business was important but also there was a dire need of improving the system to have ease of running the business. It was pointed out during the discussion that the turnover based definition is the best definition to classify the MSME under the new GST regime. Turnover details of enterprises are being captured by GSTIN and therefore turnover based definition would be transparent, progressive and easier to implement. The main grievance of the sector was delayed payment from their principles which included the government and PSUs. The GST refunds have also been delayed for over six months. In spite of instructions from the Finance Minister, the refunds are not forthcoming. In most of the states, the VAT assessments were being unduly delayed, denying the refunds due to assesses. This has caused hardships to the running units because of the blocked funds. It was suggested that in lieu of government payments, which has the sovereign guarantee, the banks should lend need-based funds without further collateral. As the payments are blocked for more than six months at times and further the GST payments, which have to be made on accruals, MSMEs go in red and default on repayments and are classified defaulters for no fault of theirs, it calls for a relook at the default classification of MSME sector. Secondly, the Facilitation councils are restricted to the capital city in most of the states and are not accessible. This act related to the recovery of delayed payments lacks teeth as there are no punitive actions and the person responsible cannot be penalised. MSMEs in FY 15-16 had contributed Rs 39.36 Lakh crore to the gross value added (GVA) against Rs 124.58 lakh crore to total GVA of India comprising 31.6 per cent share in GVA. In total GDP of Rs 136.82 lakh crore, the Share of MSMEs is 28.77 per cent, according to the Annual Report Ministry of MSME 2017-18. In economics, GVA is the measure of the value of goods and services produced in an area, industry or sector of an economy. There are a total of 6.33 crore MSMEs out of which 1.97 crores are in manufacturing, 2.30 crore in trade and 2.06 crore in other services. MSMEs employ 11.29 crore people. MSMEs share of India’s total exports worth $303 billion for FY18 was 49 per cent at $147 billion, as per data from the RBI & Press information Bureau/DGCIS.
Source: Financial Express
Budget 2020-21: To incentivise “Make in India”, the government should increase the customs duty rates on finished products, and reduce rates on corresponding inputs, encouraging higher value addition. Union Budget 2020 India: With persistent domestic and external headwinds in the last year, there is an expectation of strong and robust measures being announced in the upcoming budget to support economic revival, and boost sagging growth. There are high hopes from the budget, with expectations of a personal tax rate cut and other measures to boost demand. While the government has the flexibility of considering budget proposals from a direct tax (mainly income tax) perspective, a major chunk of indirect taxes, i.e., Goods and Services Tax, remains outside its consideration; India’s federal structure requires amendments to GST to be evaluated and recommended by the GST Council. Hence, from an indirect tax perspective, proposals on customs duty are expected to be analysed and considered by the government—these have a direct impact on businesses in India, at an individual level. Businesses look forward to some of the following being considered and proposed: A legal dispute resolution scheme for customs-related disputes: Similar to the recently announced dispute settlement scheme for historical indirect tax levies like central excise and service tax, businesses have been hoping for an amnesty scheme under customs as well, essentially to ensure certainty on potential financial impacts on pending disputes, and to help business monetise the probable recoveries on impending litigations and bridge the fiscal deficit. A dispute resolution scheme under customs, similar to the recently introduced Sabka Vishwas Scheme, which elicited an overwhelming response from businesses, should garner appreciation, especially from global businesses that have set up operations in India by outsourcing their manufacturing processes, for promoting the “Make in India” campaign. Tweaks in customs duty rates: To incentivise the “Make in India” leitmotif, the government could consider increasing the customs duty rates on finished products, with reducing rates on corresponding inputs, thereby encouraging higher value addition. The Budget could also consider proposals for reduction of export duty on certain goods, like bauxite, lower-grade ore, etc, for enhanced foreign currency earnings and boost to businesses. A blueprint of the expected Foreign Trade Policy and incentives for foreign exchange earners: Recently, a decision of the World Trade Organization has outlawed various incentives given by India to exporters; these include Merchandise Exports from India Scheme (MEIS) incentives, Special Economic Zones Scheme, and Export Promotion Capital Goods. While an appeal against the verdict has been filed by India, the exporters are worried about the continuity of these schemes, especially at a time when these incentives are imperative for global trade by Indian businesses. While the decision on the contours of the export schemes/incentives remains a prerogative of the ministry of commerce, the broad outlook/plan of the government in the upcoming Budget, and assurance of long-term confirmed policies being considered should help boost the morale of exporters. Expected GST revenue collections and relatedly expected roadmap for the coming year: Another aspect which pulls in attention of businesses is the estimated revenue collection from each of the taxes in the forthcoming fiscal year. While the policy decisions on GST remain outside the purview of the budget, the estimates on collections are a part of the fiscal budget. An aggressive target, surmising a possible increase in the GST rates or implementation of tax evasion measures, including new returns, e-invoicing, etc, would be expected. While, as mentioned earlier, not much is expected to be proposed on indirect taxes in the upcoming budget, there is a general expectation that wider policy measures will be announced to reinstate the trust of businesses, bolster demand, and tackle the slowdown in the economy.
Source: Financial Express
The government may consider announcement of national logistics policy to promote seamless movement of goods across the country in the forthcoming Budget, sources said. The policy is being worked out by the logistics division under the commerce ministry, they added. The policy, which also aimed at reducing high transaction cost of traders, may proposed setting up of a central portal, which will provide end-to-end logistics solutions to companies. The portal will be a single window marketplace to link all stakeholders. The proposed policy will also focus on increasing the warehousing capacity, and identify gaps that could be bridged to bring down the cost of logistics for traders. Besides, there is proposal to create a national logistics e-marketplace as a one-stop marketplace for exporters and importers, set up a separate fund for start-ups in the logistics sector and to double employment in the sector. High logistics cost impacts competitiveness of domestic goods in the international markets. The sources said that effective implementation of the policy would help provide an impetus to trade, enhance export competitiveness, and improve India's ranking in the Logistics Performance Index. Finance Minister Nirmala Sitharaman will unveil the Budget for 2020-21 on February 1.
Source: Economic Times
Reaffirming a strategic partnership, India and Brazil on Saturday signed 15 agreements as Prime Minister Narendra Modi held talks with Brazilian President Jair Bolsonaro who will also be the chief guest at the Republic Day parade at Rajpath on Sunday. India wants to open up its relations with Latin American countries, and Brazil could become New Delhi’s gateway to the continent. The two sides signed a joint statement and an action plan to deepen cooperation in defence and security; trade and investment; agriculture and energy; civil aviation; energy; environment; and health and innovation. They promised to work together to conclude an agreement to deal with international terrorism. The major focus was on boosting bilateral trade and investment as both the large economies have been hit by economic slowdown. The 15 agreements cover a wide range of areas including oil and gas, mineral resources, traditional medicine, animal husbandry, bio-energy and trade and investment. India and Brazil drew up ambitious plan to boost their stuttering economies by expanding cooperation in oil, gas and minerals sectors, and set a target of USD 15 billion in bilateral trade by 2022. “Your visit to India has opened a new chapter in ties between India and Brazil,” Modi said. Tweeting later, Modi said, “Apart from bilateral cooperation, India and Brazil are working together at various multilateral forums. We see immense synergies on various issues including the need to uproot the menace of terrorism. India and Brazil will keep working together for a better planet.
Source: Times of India
When finance minister Nirmala Sitharaman presented her first budget on 5 July last year, one crucial word was missing from her 20,189-word speech: Exports. This led to talk of a probable turf war between the finance ministry and the commerce ministry. That was expected to change when Sitharaman announced a new scheme called Remission of Duties or Taxes On Export Product (RoDTEP) in September. The scheme, compliant with World Trade Organization (WTO) rules, was supposed to replace Merchandise Exports from India Scheme (MEIS) which the US had challenged in the WTO. However, exporters are receiving neither MEIS nor RoDTEP benefits for the last five months, at a time exports are contracting month after month beginning August. “It’s a tough time for exporters, particularly for the small ones who have faced a liquidity crunch. Trade and industry is not aware what transpired between the two agencies. I expect the notifications to come this week. Hopefully, now the things are likely to settle down and the pending dues need to be released as early as possible," Ajay Sahai, director general and chief executive officer of Federation of Indian Exports Organisation said. On paper, the MEIS is valid till 31 March except for apparel and made-ups sectors which has got its own interim scheme without incentives. RoDTEP has not been rolled out so far as the cabinet has not approved it even after five months of its announcement.
$300 billion conundrum
Once growing at over 20%, powering India’s robust economic growth, India’s exports have been stuck at around $300 billion for the last one decade, driven by loss of export competitiveness and volatility in global markets. Indian industry has often played safe, content with the domestic demand and unwilling to upgrade technology or standards to match global levels. In labour-intensive sectors like textiles where India had an edge due to cheap labour, Bangladesh has outsmarted India, thanks to the sticky labour laws of the latter. Steve Felder, managing director, Maersk, South Asia, said faster adoption of technology to digitize trade operations will need enough budget allocations in order to increase productivity and lower the cost of logistics by reducing or eliminating costs added by middlemen. “There is a need to further sharpen our focus on infrastructure that would pertain to port infrastructure, hinterland connectivity, warehousing to be really competitive as well as policies and regulations that would help boost infrastructure development in these areas," he added. Pushkar Mukewar, co-founder and co-CEO, Drip Capital said with the new Foreign Trade Policy (FTP) around the corner, expectations are that the budget will allocate appropriate funds and resources for its implementation and pave a way for boosting exports from the country. “We expect certain policy interventions to energize the export sector, overcome anticipated flat growth, ease liquidity problems, and resolve persistent problems faced by small and medium-sized enterprises (SMEs) in the sector," he added.
Do No Harm
Faced with the falling fortunes of Indian exporters and rising imports, especially from its northern neighbour China, India has increasingly turned to import substitution by curbing what it calls non-essential imports. The commerce ministry now wishes to expand its scope further. It has asked the finance ministry to impose a border adjustment tax in the budget on certain imported goods to make up for non-refundable internal taxes like electricity duty, duties on fuel, clean energy cess, etc for exporters. It has also proposed to put curbs on 200 non-essential items such as toys, furniture, plastic products and sports items. Trade minister Piyush Goyal has even threatened to restrict imports of around 3,000 uncategorized “others" items worth $140 billion in India’s import basket. A commerce ministry official on condition of anonymity said the move is foolish. “It’s not like we don’t know what we import through the ‘others’ category. Suppose, five varieties of biscuits have been identified. When a new variety of biscuit is imported, then it is put in ‘others’ category. We know it is a biscuit, we only don’t know the variety," he explained. Biswajit Dhar, professor of economics at the Jawaharlal Nehru University, said these are extremely wrong signals that India is sending to the international community. “What the US president Donald Trump is doing, whether one likes it or not, he is giving justifications. Here you are putting a tax without even consultations. And these measures will do nothing to promote exports nor will they help the Indian economy," he added
Source: Live Mint
Additionally, the Narendra Modi government has earmarked another Rs 25,000 crore since FY14 to implement a host of schemes across the states to develop electricity transmission networks. With state-owned electricity discoms’ financial performance worsening again after a brief spell of improvement witnessed under the Uday scheme in FY16-FY18 period, the government may impose stringent penalties on the non-compliant among these entities in the form of denial of Central funds under a revamped scheme to finance electricity infrastructure upgrade. However, the new scheme and policy, likely to be announced in the coming Budget, may fall short of instituting tripartite agreement amongst the RBI, PFC-REC and state governments to ensure discoms clear their dues to generators in time. “Discoms will have to work out a trajectory for loss reduction and funds under the (new) scheme would be released only if the trajectories are adhered to,” Union power minister RK Singh said on Monday. The scheme will subsume the existing Central government schemes for the electricity sector such as the Integrated Power Development Scheme (IPDS) and the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY). For both IPDS and DDUGJY, 78% of budget comes from the Centre and the remaining funding is done out of states’ budget. The cumulative outlay of these two schemes (launched in FY15) is Rs 1.1 lakh crore. Additionally, the Narendra Modi government has earmarked another Rs 25,000 crore since FY14 to implement a host of schemes across the states to develop electricity transmission networks. Sources said that the revamped scheme will have a special focus on digitisation of infrastructure. It is also expected to push discoms to increase private sector participation to achieve higher efficiency. As reported recently by FE, the Prime Mnister’s Office has recently directed the power ministry to “dismantle inefficient and burdensome monopolies and encourage investments and participation of the private sector” in power distribution. State-run discoms’ financial losses stood at nearly Rs 28,000 crore at the end of FY19, up 88% year-on-year, in what indicated an unraveling of the Uday scheme which was meant to salvage these debt-ridden entities. Discoms in 16 states had saved around Rs 35,000 crore till FY19 as Uday mandated the state governments to take over around Rs 2.32 lakh crore of discom debts, resulting in a lowering of the interest rates to 7-8.5% from around 11-12% previously. The Uday scheme also targeted to reduce the aggregate technical and commercial (AT&C) losses of discoms to 15% and eliminate the gap between the cost of power supply and revenue realised by FY19. Though some headway has been made, none of the targets has been met within the time lines (see chart). According to the minister, the government is also planning to discipline unyielding discoms by putting restrictions on funding from PFC and REC — the mainstay source of capital for discoms — by tightening the prudential lending norms of these Central government lending institutions. “If a discom is making heavy losses and it has not worked out a trajectory for loss reduction then it has significant credit risk and financing from PFC and REC to such entities would be predicated on discoms reducing the losses,” Singh said. Discoms’ over-dues to gencos stood at Rs 72,938 crore at the end of November 2019, up 75% on year. The trend of rising dues to power plants continues despite the Union power ministry implementing the letter of credit (LC) mechanism since August 2019 to compel discoms to become more disciplined in meeting payment obligations. To address the issue of irregular payments by discoms, a high-level empowered committee (HLEC) headed by then Cabinet secretary PK Sinha had proposed a model where REC and PFC would discount the receivables from discoms and make an upfront payment to power producers. If these lenders failed to recover the dues, the RBI could deduct the amount from the account of states and pay these public-sector financial institutions. “The HLEC, after deliberating the problem in depth and analysing the ground realities had found out that the tripartite agreement to be the most credible mechanism to tackle the situation of delayed payments of dues in case of default for more than six months and this is the most effective way to draw investment in the power sector and return the sector to sustainable growth path,” Ashok Kumar Khurana, director general, Association of Power Producers, said.
Source: Financial Express
Many of us increasingly believe these following five myths about China: 1) China’s authoritarian governance model is primarily responsible for its unprecedented economic rise; 2) China has made impressive gains by manipulating global trade and investment rules, stealing IPRs and resorting to unfair subsidies; 3) China promotes exports by all kinds of fair and foul means but remains unreceptive to imports; 4) Favourable global factors such as emergence of WTO and Information Technology Agreement (ITA) helped China to become the world’s factory; and 5) China’s been able to create its local tech biggies like Alibaba by restricting global tech giants such as Amazon. In this view, India should take the following lessons. We should be cautious about FTAs (that lead to more imports than exports), and shouldn’t be all-welcoming towards FDI and MNCs. We should promote desi companies over foreign ones. Most countries have now turned protectionist so we should focus on our large domestic market. We had a glorious past and unmatched scientific prowess. We’re destined to have a glorious future when we’d be mightier than China or the US like we once used to be. In this view, China doesn’t have to worry about political parties, interest groups and states pulling in different directions, which explains India’s slower economic progress. What we forget is that Iraq, North Korea, Russia and several African countries despite being authoritarian have done badly when it comes to bettering the material life of citizens. Several Western democracies have done far better. Back home, BJP has a clear majority in Lok Sabha and is now also strong in Rajya Sabha. It’s in office in most states. The prime minister is in full control of government and the party. Yet, his government is the most defensive when it comes to pushing tougher reforms barring a few exceptions such as the insolvency and bankruptcy code. The Congress government led by PV Narasimha Rao or NDA led by AB Vajpayee were far gutsier. UPA-1 with thinner majority did better economically than UPA-2 with stronger majority. Modi 2.0 with better majority has delivered us 4.5% amid worsening investment climate. Conclusion: strong governments don’t automatically lead to stronger economic growth. China has not been accused of manipulating trade and investment rules, stealing IPRs and subsidising its businesses without reason. However, thinking that China has become a $14 trillion economy by cheating and manipulating is too naive. This is part of American propaganda that we have fallen for, but shouldn’t. If it was that easy India doesn’t have an impressive record on respecting intellectual properties or trade rules. China accounted for 21% (similar to the US) of all patents filed globally compared to 1% for India in 2018. China doesn’t often play by the rule book but the US is now trying to close down WTO. The US remains the world’s top agriculture subsidising country, yet Australia, Brazil and New Zealand run the most efficient and profitable agriculture and allied industries. Thus, subsidies alone can’t be the differentiator. China is the world’s second largest importer. Its import of goods and services stood at $2.65 trillion against export of $2.75 trillion in 2018. Critics say it mostly imports raw material and industrial inputs that it doesn’t have or can’t competitively produce. That explains India’s substantial trade deficit with China. What critics forget is that India’s raw material protectionism is primarily responsible for increasing import of high-value finished goods and export of low-value raw material, and not necessarily Chinese trade manipulation. China has devised Made in China 2025 to promote futuristic industries. In contrast, India’s industrial policy is obsessed with protecting manufacturers of globally over-supplied commodities such as steel, aluminium and synthetic fibres that’s hurting the prospects of more dynamic downstream industries. Like China, India too joined WTO and ITA, but it couldn’t capitalise on global export opportunities. India’s tax terror drove out Nokia, and ruined its chance to push electronics exports. Our exports remain sluggish not because of external factors but internal mismanagement. GST was supposed to be a game changing reform but it’s actually causing a compliance nightmare for SMEs. China might have been able to create local imitations of Facebook and Google by banning them. But the US created the originals while being open. India too has created its much admired Unified Payment Interface (UPI) that Google wants the US Fed to replicate, without banning competing payment platforms. Thus, we shouldn’t fall prey to the idea of blocking competition. It’s a crony propaganda that higher corporate taxes and expensive capital is making Indian businesses inefficient and thus they need protection. Rather, it’s the lack of competition that is making them complacent leading to poor performance both domestically and globally. India Inc is scared by any mention of competition. Take any Indian industry except pharmaceutical or IT, oligopoly is a common feature. That needs to change if we’re serious about $5 trillion GDP by 2024-25. We don’t need to copy China to be an economic superpower except maybe its long-term focus. And yes, we had a glorious past and we should be proud of that. However, we’ll need to work harder to have a glorious future as competition to the top is intenser now. Even if India is a large economy, its per capita income at $2,000 is too low and income inequality too high. That will cap domestic demand, and in turn, its growth prospects. Thus, it doesn’t have a choice but to push exports to grow faster. That calls for urgent internal actions. And, an open market and double digit growth is the way to glory, not shutting our doors to the world.
Source: Economic Times
The government is estimating a hit of around Rs 1 lakh crore due to a reduction in corporation tax, against Rs 1.45 lakh crore calculated when the move was announced in September. Official said this estimate was based on an analysis of advance tax payments and will provide much-needed cushion to the Centre, which is battling an acute fiscal strain, with tax collections expected to be significantly lower than the budget estimate of Rs 24.6 lakh crore on gross basis. During the current year, corporation tax collections were estimated at a little under Rs 7.7 lakh crore. For existing companies, the base corporation tax rate has been reduced from 30% to 22%, while new manufacturing companies will only face a 15% levy if they are incorporated after October 1, 2019, and commence operations before March 31, 2023. The decision, however, came with the rider that companies will have to give up on exemptions if they want to opt for the lower rate. Tax consultants pointed out that several companies are yet to decide on whether to move to a 22% levy or continue with the existing mechanism as the effective rate works out to be much lower. “Profitable banks and FMCG companies will find it beneficial to move to the new rate as there is an immediate benefit but infrastructure or some of companies engaged in exports may continue because the effective rate is lower (currently),” said Sudhir Kapadia, who leads the tax practice at consulting firm EY. He said companies that pay minimum alternate tax (MAT) have credit lying on their books, which is holding them back from shifting to the new system as they stand to lose. For IT-enabled services and many other service companies, the gain may be significant, prompting them to shift to the new regime, added Rahul Garg, partner and tax technology leader at PricewaterhouseCoopers India. “Some of the taxpayers for whom the exemptions have expired or are expiring, may avail of this (the new structure),” he told TOI. While most consultants are unwilling to give out numbers, Neeru Ahuja, tax partner at Deloitte India said out of a sample of 100 companies, over half have shifted to the new regime, while around one-tenth are undecided. An important consideration for many has been the possibility of claiming higher dividends. “Many companies have opted for the new scheme of lower corporate tax on further accounting analysis and impact. Opting for a lower rate has also allowed some companies to write-back excess provisions of deferred taxes, which in turn helps the company in having a better bottomline and profits,” she said. EY’s Kapadia said that some of the companies will decide on a changeover in the coming months.
Source: Times of India
Mumbai: The rupee weakened by 10 paise to close at 71.43 against the US currency on Monday, extending losses for a third straight session, amid fast-spreading coronavirus outbreak in China stoking fears about more trouble for the global economy. The domestic currency has lost 24 paise in the last three trading sessions. At the interbank foreign exchange market on Monday, the rupee opened on a weak note at 71.51. During the day, the local unit reclaimed some lost ground and finally settled for the day at 71.43 against the US dollar, down 10 paise over its previous close. China continued to reel under deadly coronavirus epidemic on Monday with the death toll due to it sharply rising to 80 amid the country's National Health Commission reporting 2,744 confirmed cases of the fatal affliction till date. "Rupee expected to trade with negative bias following safe haven demand for dollar and central banks dollar buying as country's forex rose for the 17th straight week to hit an all-time high of USD 462.15 billion for the week ended January 17," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities. Sharma further said that fresh cues for the rupee will depend on the Union Budget, scheduled on February 1, and dollar demand from central banks. Moreover, high volatility is likely this week as two major central banks policy decision -- Bank of England (BoE) and US Federal Open Market Committee (FOMC) -- is scheduled. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.02 per cent to 97.87. Meanwhile, the 10-year Indian government bond yield was at 6.56 per cent. Forex dealers said the Indian rupee and bonds declined in line with other Asian peers after intensifying coronavirus spread from China to other countries. However, from India's perspective it was a respite that benchmark Brent crude oil prices moderated to USD 59.04 per barrel, down 2.51 per cent. The fall in crude prices was attributed to expected demand slump over rising Coronavirus cases in China. On the domestic equity market front, the 30-share BSE index settled 458.07 points, or 1.10 per cent, lower at 41,155.12. Likewise, the broader NSE Nifty closed 129.25 points, or 1.06 per cent, down at 12,119. Financial markets across the world are increasingly turning volatile on concerns over the global economic impact of the virus, analysts said. "The rupee weakened as the global markets witnessed sell-off on back of coronavirus getting spread widely in Central China. Foreign institutional investors pulled out money and rupee witnessed weakness," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities. Foreign institutional investors sold equities worth Rs 438.85 crore on a net basis on Monday, according to provisional exchange data. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.2404 and for rupee/euro at 78.6902. The reference rate for rupee/British pound was fixed at 93.5097 and for rupee/100 Japanese yen at 65.04.
Source: Economic Times
Nigeria has set out to ensure the growth of cotton, textile and garment sector, apart from grains and vegetables, for sustained economic growth, according to minister of state industry, trade and investment Mariam Katagum, who recently said the government has finalised plans to establish agro-allied industries in each Senatorial district in the country. Katagum told this during a meeting in Abuja with a delegation from the Amana Farmers and Grains Suppliers Association of Nigeria (AFGSAN) led by its chairman Haruna Ahmad Pambeguwa, according to newspaper reports in the country.
Source: Fibre2Fashion
The National Council of Textile Organizations (NCTO), representing the full spectrum of US textiles from fibre through finished sewn products, issued a statement today on the Trump administration’s announced action plan to increase enforcement and penalties against counterfeit goods sold online and imported to the U.S. “This is a very important and long overdue move on the part of the administration to increase enforcement activity and penalties against counterfeit goods sold online and imported into the United States,” said NCTO President and CEO Kim Glas. “We commend the administration for making a commitment to bolster efforts to crack down on counterfeits, particularly in the textile and apparel sector, which has been hit hard by fake imported products for decades.” According to the NCTO, nearly two million shipments of goods are exported to the United States duty free each day, often from countries with poor labour, human rights and environmental track records, under a provision known as Section 321 de minimis. This provision allows goods valued below an $800 threshold to enter the US duty free when imported directly to an individual on a single day. “This massive increase in de minimis shipment trade poses significant security risks and threats to public health and safety, while incentivizing customs fraud and creating a loophole to our entire tariff structure,” Glas said. “Our concerns regarding the de minimis loophole are exacerbated by the belief that the domestic textile industry and other US manufacturing interests are directly and negatively impacted, particularly since e-commerce sites like Amazon and others are using de minimis as a duty-free portal into the U.S. for products under $800.” “Furthermore, CBP’s own annual report on intellectual property seizures, including large volumes of counterfeits, revealed that U.S. authorities made seizures totaling $1.4 billion in fiscal 2018. Over 90 percent of all intellectual property (IPR) seizures occur in the international mail and express shipment environments, according to the report, which is a common method of shipping by e-commerce sites,” NCTO said. “Chinese products accounted for 46% of all IPR seizures with a total Manufacturers Suggested Retail Price (MSRP) value of $761.1 million in FY 2018. Apparel and accessories were the top counterfeit products seized by U.S. authorities, accounting for 18% of all seizures in FY 2018 with an MRSP value of $115.2 million.” “We think this is an important step forward by the administration to deepen the analysis on de minimis products, that are often not thoroughly examined and undercut our domestic manufacturing industries,” Glas said. “We don’t know what the products are, where they are coming from, whether they meet U.S. safety requirements, who is making them or the country of origin. We believe it is long past time for the administration to address the issue of de minimis shipments and counterfeiting head on.”
Source: Knitting Industry
Swissmem is the leading association for SMEs and large companies in Switzerland's mechanical and electrical engineering (MEM) industries and related technology-oriented sectors. Swissmem enhances the competitiveness of its 1100 or so member companies both at home and abroad by providing needs-based services. These services include professional advice on employment, commercial, contract and environmental law, energy efficiency and technology transfer. Swissmem operates a number of strong networks, including 27 specialist groups - the Swiss Textile Machinery Association is the oldest division, founded in 1940. It represents the interests of the Swiss textile machinery manufacturers. In this article Swissmem looks at the ways in which eco-responsible Swiss textile machinery manufacturers have innovated amidst environmental concerns on energy and water consumption and chemical toxicity in textiles. “Since antiquity, humans have been exploiting colour to enhance both our personal appearance and the world we live in. Dyed and printed textiles are a prime example, with a huge global colouration industry developing over the centuries. However, the massive consumption of water and energy required by many finishing processes, as well as the toxicity of some chemicals, has increasingly caused grave concern to environmentalists and the wider public. Conversely, responding to these worries has been the catalyst for innovation among eco-responsible companies in the Swiss Textile Machinery Association.
Green-tech denim dyeing
Washing processes, solvents and dyes in manufacturing account for one-fifth of industrial water pollution, according to the `State of Fashion 2020´ report by consulting firm McKinsey. This is the kind of evidence which sparks urgent calls to action addressed to politicians – as well as textile brands. But the Swiss finishing machinery companies need no such wake-up call. For years, many of them have been actively developing and launching innovations with environmental friendliness as a prime requisite. An example is research into dyeing process which work without hazardous chemicals. At ITMA 2019, green technology denim dyeing became a reality with Smart-Indigo, a Swiss innovation by Sedo Engineering, introduced at the show. The underlying breakthrough was the ability to industrialize the electrochemical process for reducing indigo, using only electricity. The dyestuff is produced by an electrochemical process, consuming considerably fewer resources than existing methods. The method uses only indigo pigments, caustic soda, water and electricity. In a fully automated system, clean dyestuff is produced, metered and fed directly to the dyebath. Smart-Indigo is the most sustainable way to dye denim for jeans.
Ecological profitability – no contradiction
The finishing industry today demands machinery which meets ecological requirements at the same time as enabling mills to operate profitably. That was the motivation behind the development of ESC (Energy-Saving Chamber) under the Santex brand of Santex Rimar Group. By re-using exhaust air from the Santashrink dryer, ESC increases production capacity by 15-17% from the same amount of heating energy. Maximum performance at low energy use, for low residual shrinkage, soft hand feel and surface lustre is the goal of Santex machines. The specialized open-width fabric surface treatment systems always offer energy-saving options for sustainable production and low CO2 values, along with the promise of a return on investment in 1.5 years.
Two approaches to water savings
At Jakob Muller, top-quality technical parameters go hand-in-hand with the necessity for environmentally friendly production in its innovative efforts. For example, its new washing module fulfils product and environmental needs, thanks to improved washing-off results with less energy and water consumption. It is important to the company that any dyeing processes use recycled water wherever possible. “Water is the most critical resource in dyeing. Advanced as well as less-developed markets are forced to face this challenge, which offers innovative suppliers new opportunities in markets that were previously closed,” says Christian Lerch, Head of Global Sales and Marketing, Jakob Muller AG Frick. Open width finishing equipment specialist Benninger tackles another important environmental issue in one of its latest developments by measuring pollution levels in the washing process. A sensor automatically gauges the level of pollutant, so that only the required amount of water is fed into the wash chamber, ensuring minimum use of both water and energy, and high reproducibility of the washing result. This is part of Benninger’s commitment to investing in resource-saving technology, offering recovery processes for heat, wastewater and chemical leaching.
Testing for sustainability
Producing laboratory and testing instruments, as well as customized production machinery, Mathis has a strong basis of expertise in the dyeing and coating sectors. The company understands the importance of quality assurance related to both performance and durability in applications such as sport and leisure. And equally vital is the role of effective testing of product sustainability, as a key element in customer satisfaction. Textile dyeing and finishing is one of the most chemically intensive industries, a fact acknowledged by Swiss machinery manufacturers. As Benninger Group CEO Beat Meienberger says: “We have invested a great deal in resource management and our equipment offers valuable features to make this industry more sustainable. Solutions are customized, based on sophisticated technologies and showing high quality for a long lifespan. Targeting sustainability can be more than just lip service – but it has its price.” Sustainable finishing processes are the only way to save the planet. Companies can make sustainability real with innovative solutions from members of the Swiss Textile Machinery Association. With developments which minimize water and energy consumption and tackle the challenge of hazardous solvents, Swiss technology is ready for change.”
Source: Innovation in Textiles
The Pakistan Economy Watch (PEW) lauded the stance of the government over China-Pakistan Economic Corridor (CPEC) after the US criticism terming it encouraging and according to the national interests. The US should understand that Pakistan cannot abandon this most important regional project which has potential to turnaround our troubled economy, it said. The American opposition to the CPEC will not remain confined to statements and she would do everything to reverse it for which Pakistan and China must be prepared, said Dr. Murtaza Mughal, President PEW. He said that the latest US statement against CPEC has come at a time when President Trump was claiming that his country and Pakistan had never been so close as now that exposes duplicity in policies. Dr. Murtaza Mughal said that Pakistan can never ditch China to please the US as both countries have a long history of helping each other in difficult times while handing over Gwadar Port to the US is out of question. He added that CPEC will benefit Pakistani economy while China’s international trade will be facilitated which will add to the global influence of Beijing which is not acceptable to the US. For the same reason handle like FATF is being used against Pakistan as it is an open secret that most of the dirty money finds refuge in the US and UK but FATF will never raise any objection about it, he observed. Most of the dollars received through the US in the shape of grants and loans find their way back to the US leaving Pakistan in debt but China has never resorted to such expliotation, he said, adding that Chinese support to infrastructure projects in Pakisan are visible to everyone. Pakistani and Chinese experts have agreed to develop a textile cooperation framework under China Pakistan Economic Cooperation (CPEC) by focusing on readymade garment exports and textile skill training. It was expressed in a one-day workshop organised by the Board of Investment (BOI) to deliberate on adiagnostic study on Pakistan’s textile sector, conducted by the National Development & Reform Commission (NDRC) of China and China International Engineering Consulting Corporation (CIECC). The Textile Diagnostic report provided the Chinese viewpoints on the potentials and barriers of large-scale Textile Mills in Pakistan. The report was also one of the deliverables of the 9th JCC held in 2019 and is a precursor to a more detailed work on the Textile Sector of Pakistan. The workshop was attended by Executive Director General (EDG) of BOI, Qasim Raza Khan, Project Director of the Project Management Unit (PMU) BoI, Asim Ayub, Director SEZs BOI, Abdul Samie, Executive Director APTMA, Sattar Shahid, Director Textile Industry Division, Kanwar Usman, Chairman PRAGMEA, Shaikh Mohammad Shafiq, Head of Pak-China Investment Company, Tariq Masood and representatives from line ministries, private sector and academia EDG BOI, Qasim Raza Khan informed the participants that CPEC has now entered into the pragmatic phase of Industrial cooperation, and it is the right time to take Pakistan forward on the path of industrialisation. It has been agreed that the Chinese side will continue to provide intellectual and technical support to accelerate Pakistan’s priority sectors especially through the 9 SEZs of Pakistan under CPEC wherein 03 SEZs have been prioritised and are now at an advanced stage of development, he added. “The government is focused on bringing improvement in the key sector growth through inclusive growth in agriculture, industrial and services sectors,” said a statement by the Finance Division in response to certain news reports carried in a section of the regarding downward revision of growth by the World Bank.
Source: Gulf Today
