Cut in import duties on sustainable fibres will ensure an array of eco-friendly textiles that will attract environmentally-conscious consumers. The road to $5-trillion economy needs efforts at promoting ease of doing business to attract more investments. The upcoming Budget is an opportunity to undertake industry-specific initiatives rather than announcing a single big-bang reform and expecting a positive cascading effect on all sectors. New areas have to be identified and targeted changes instituted to boost GDP from $3 trillion at present to the targeted $5 trillion. Chemicals and textiles are two industries where a positive budgetary intervention will deliver considerable dividends to the economy. FM Nirmala Sitharaman should take initiatives to make India the global hub for chemicals and textiles manufacturing sector. India’s share in the global chemicals industry is 2%, and there are opportunities for companies to grow, given the right support. Cheap imports from Turkey, the US and China for products such as soda ash stress the industry and the government may raise import duty from 7.5% to 15% to restrict imports and boost Make in India. FTAs need to be done with care and deter dumping of cheap goods into India. Chemicals is a heavy capital-expenditure industry and would welcome some capital expenditure-based incentives to facilitate fresh investments for capacity enhancement. Likewise, textiles is one of the oldest sectors, which adds much economic value, both in the form of a 2% contribution to GDP as well as generating employment. It accounts for 7% of the total industry output in the country and adds much stimulus to imports. Thus, it works well for the government to ensure stable growth of the sector. Cut in import duties on sustainable fibres will ensure an array of eco-friendly textiles that will attract environmentally-conscious consumers. Investments are needed towards developing skills of the existing workforce and updating curricula of textile institutes so that the skill sets of the employable youth stay relevant. Given that both short-term and long-term measures are needed, it is essential that in addressing short-term challenges the larger goals are not compromised. The Union Budget is a capable instrument that can sustain long-term goals while effectively addressing short-term challenges.
Source: Financial Express
The Central Board of Indirect Taxes and Customs (CBIC) has frozen tax credits of around Rs 40,000 crore as the returns did not match, exposing alleged fraud by close to 2,000 entities, apart from cases where returns were not filed. Last week, the indirect tax wing of the revenue department blocked the credits within four hours, CBIC chairman John Joseph said at an event on Monday. Companies are entitled to credits on tax paid on inputs in the production chain so that there is no cascading effect of taxes. But major discrepancies in returns and instances of a large number of frauds prompted the government to crack the whip. There have been multiple ways in which frauds have been taken place. Sources said, the department had collected data on mismatch of over 20% in the initial GSTR-1 filing for the month and the final GSTR-3B returns. Subsequently, the bar was lowered to a difference of 10% and the government used various red flags to then identify companies, while completely relying on data instead of sending tax inspectors to premises to check for books. The standard operating procedure developed by the revenue department is to share the data with the state governments, which then move in, first asking them to make the corrections or pay up. But the scrutiny of the data has revealed that several flyby-night operators were misusing the benefit. There were entities which were set up just for the sake of showing bogus turnover and relied on a web of shell companies. These companies, many of which used forged documents, then vanished from the scene, prompting the government to tighten norms for GST registration. “In many cases it has been found that traders purchased iron and steel scrap but raised GST bills for garments to exporters, who in turn claimed refund of IGST (integrated GST) paid on export,” said a tax lawyer.
Source: Times of India
The Union Budget 2020 has to be presented this week. Textile industry is expecting positive announcements in general budget. The textile industry is going through crisis since past 4 years. The textile industry demands to come out with technology mission on cotton. For full Video: https://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/requested-govt-to-allocate-adequate-funds-sima-secretary-on-union-budget-2020/videoshow/73695287.cms
Source: Economic Times
To boost exports, India must accept its challenge is internal, even though it keeps raising fingers at unfavourable external factors like trade protectionism. Amid India’s worsening economic slowdown caused primarily by sluggish domestic demand for goods and services, exports could support economic growth. However, India’s exports in US dollar value terms have declined in six out of nine months in the current financial year, with December 2019 being the fifth straight month of contraction. Yet, sluggish exports are not getting the attention they deserve, neither in mainstream media nor among the policymakers despite an ambitious target of US $1 trillion in goods and services export by 2024-25. Contrary to widespread belief, a series of bad regulations and internal mismanagement – and not really exogenous factors – have worsened India’s exports crisis. The upcoming Union Budget 2020-21, therefore, provides the Narendra Modi government the right opportunity to junk its raw material protectionism, end inverted duties, and ensure tax neutrality in textile fibres that have been hampering manufacturing exports – something that the government didn’t do in its previous Budgets despite the demand from several quarters of India Inc. Instead, the Modi government raised import duties on major industrial inputs such as ferrous and non-ferrous metals (steel and aluminium), parts and components for automobiles, camera, television and smartphones. To make matters worse, it has pulled out from the Regional Comprehensive Economic Partnership (RCEP) – whose 15 countries account for 20 per cent of India’s merchandise exports, according to official data – and has been dragging its feet on a free trade deal with the European Union (which accounts for another 17 per cent) that could provide new opportunities to push exports. The sluggishness in India’s exports is not a recent phenomenon. Our merchandise exports have been hovering around US $300 billion. It was US $305 billion in FY 2011-12 and US $330 billion in FY 2018-19, even though the country’s GDP has gone up by over 60% from US $1.8 trillion to US $2.9 trillion during this period. The goods export has grown at a CAGR of 1.13 per cent between 2011-12 and 2018-19, and the prospects remain bleak in the current financial year, which is expected to post negative growth.
Not all on external forces
The Modi government has been hinting that global headwinds are behind sluggish exports, and not without reason. The EU is struggling with Brexit-related uncertainties and slowing growth in its larger economies such as Germany and France. The Middle East, another major exports destination for Indian merchandise, is troubled by its over-reliance on oil and gas, and regional political disturbances. Supply chains are now sourcing more locally than before. That is bound to affect India’s exports. Increasing trade protectionism, especially in the US, is creating further complications for India. However, it seems we are giving too much credit to unfavourable external factors for our exports mess. India’s share in global merchandise export is so low (1.7 per cent) that it should be able to increase its share irrespective of external conditions. Given this backdrop, it would be interesting to analyse what’s been holding up India’s exports for long.
Narrow basket
The most important factor responsible for India’s exports stagnation is a narrow export basket. Not more than 20 product groups out of 99 account for 80 per cent of the total exports. We are targeting a smaller global exports pie (20 per cent, even as the balance remains largely untapped) and a narrow set of time-tested low-risk markets in Europe, North America, South East and West Asia. Even within Europe, the EU accounts for 90 per cent of India’s total exports to the region – something similar to the US in North America. However, the whole of Latin America, Commonwealth of Independent States (CIS) and Baltic states together account for less than 5 per cent of India’s total merchandise exports. That’s why the country’s total exports remains so low compared to the GDP. To make matters worse, barring automobiles and a few other items, most of India’s exports are a commodity in nature, that is, undifferentiated products with no brand or pricing power. Thus, a woollen suit that retails for US $2,000-2,500 in New York or Tokyo doesn’t fetch more than US $200-250 for its Indian exporter. Just like IT and BPO services, most of India’s goods exports such as apparels or leather goods survive on exploiting labour cost arbitrage. No wonder India is losing to countries such as Bangladesh and Ethiopia, which not only have a competitive edge over labour cost but also have preferential access to top consuming markets such as Europe and North America.
That is not all
India’s excessive raw material protectionism, which often results in inverted duties – lower import duties on finished goods and higher duties on raw material – discourages manufacturing, and, in turn, the export of value-added products. In fact, it induces imports of high-value merchandise. That’s not difficult to understand. If the raw material is expensive, the finished products are most likely to be expensive. Thus, higher import duty on polyester and synthetic fibres, compared to those on apparels, is incentivising import of apparels into India rather than their export out of India. As there is more demand for synthetic fibres-based clothing in international markets, India’s fibre import policy is actually pushing export of low-value raw material such as cotton fibre and yarn to China rather than apparels to the EU and the US. Shrinking domestic demand for apparels aggravates the misery of Indian apparel manufacturers. Why produce apparels in India when you can import them cheap and duty-free from countries like Myanmar or Ethiopia?
Cost on dynamic goods, GDP
Similarly, being a common industrial input, expensive steel (due to India’s excessive steel protectionism that has increased under the Modi government) is imposing cost inefficiencies on much more dynamic downstream products such as automobile and auto components, engineering goods, electrical equipment and machinery, and in turn, dampens their export prospects. It makes the import of steel-intensive capital goods such as earthmovers, bulldozers and cranes more economical and attractive for users. Logistics inefficiencies, especially those related to ports and customs, further put India’s merchandise exports at a disadvantage. Concerns on quality and safety remain a key deterrent for importers of Indian food and pharmaceutical products. Moreover, India has failed to take advantage of free trade agreements (FTAs) and regional trade agreements (RTAs) to push exports, mainly because of lack of domestic reforms – for instance, those related to land and labour markets as well as increasing raw material protectionism. One FTA that could give a big boost to India’s exports is with the EU, but the Modi government has not been able to break the deadlock on negotiation by being extremely unreasonable on investment protection. Relatively poor exports performance adds to India’s current account woes and chops off a few hundred basis points of GDP growth. Given this backdrop, an over-valued exchange rate is bound to hurt India’s exports price competitiveness, but a weaker currency may not help much in pushing exports. That remains India’s major exchange rate policy dilemma.
The way forward
To give a real boost to exports, it is important to realise that India’s bigger challenge is internal, even though it keeps raising fingers towards unfavourable external factors such as increasing trade protectionism. Moreover, too much focus on demand for incentives and tax sops to compensate for many of the disabilities, such as logistical inefficiencies, prevents India from analysing the contributory role of poor regulations that have been hampering the country’s exports for long. What Indian exporters, potential or actual, need on priority are prudent actions that effectively deal with the country’s bad regulation pile-up, which has proven disadvantageous for Indian merchandise vis-a-vis competing countries. This calls for putting an end to raw material protectionism and inverted duties to start with. Sops on exports, in any case, will have to be phased out as they violate World Trade Organization (WTO) rules. India needs to think beyond subsidies. It must also broaden the product and market mix. It can’t excessively rely upon a few product groups, such as refined petroleum products, chemicals and pharmaceuticals, and textiles, or a few low-risk markets such as Europe and North America to achieve its US $1 trillion exports target by 2024-25 without effectively dealing with internal impediments. The question is: will Finance Minister Nirmala Sitharaman’s upcoming Budget on 1 February deliver on this? The author is a business economist and currently the CEO of Indonomics Consulting Private Limited.
Source: The Print
Prime Minister Narendra Modi's government is expected to raise spending on infrastructure and cut some personal tax in its 2020-2021 budget, to spur consumer demand and investment, government sources and economists said. India is facing its worst economic slowdown in a decade. Growth slipped to 4.5% in the July-September quarter, worsening the job prospects for millions of youth entering the workforce each year. Despite cuts in the corporate taxes and monetary easing by the central bank, investments have failed to pick up, adding to Modi's worries as he tries to quell public protests over a new citizenship law. Economists and investors say fiscal stimulus in the budget for the year beginning April 1 and an increase in spending on roads, railways and rural welfare could revive growth. The budget will be delivered to parliament on Saturday. A weak economy and the wave of anti-government protests have increased the chances of a fiscal stimulus in the budget, said Shilan Shah, an economist at Capital Economics in Singapore. "That would provide a small boost to growth over the coming quarters, at the cost of putting upward pressure on bond yields," he said in a note. The International Monetary Fund this month cut its forecast for India's growth to 4.8% for the fiscal year ending in March and lowered its forecast for growth in the coming financial year to 5.8%. The federal government looks set to miss its deficit estimates for a third straight year after estimates revenue will fall short by nearly 3 trillion rupees. Finance Minister Nirmala Sitharaman, who will present her second full-year annual budget to parliament, could defer the earlier target of cutting fiscal deficit to 3% of gross domestic product in 2020/21 by at least two years, government sources told Reuters. This will be on top of roughly $28 billion of expenditure outlay from off-budget borrowings, as she seeks to keep the deficit in check. Economists in a Reuters poll predicted the government would set a fiscal deficit target of 3.6% of GDP for 2020/21, up from 3.3% targeted for the current year. INFRASTRUCTURE BOOST Sitharaman is expected to announce a plan in the budget to invest 105 trillion rupees ($1.48 trillion) in infrastructure over the next five years. By then it hopes to make India a $5 trillion economy, compared with $2.8 trillion now, government sources have said. Since taking charge in 2014, Modi has increased state spending on roads, railways, airports and ports, and has pruned state subsidies. The budget could push privatisation and set a target of 1.5 trillion rupees, after missing the target by a wide margin this year, the sources said. The government has already announced plans to sell the loss- making national carrier Air India and oil retailer Bharat Petroleum Corp. Ltd, along with a few others. To boost domestic manufacturing, the budget is also expected 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. Domestic investors expect some relief on income tax rates after a cut in corporate tax rates in last September. Economists have warned the government against any "window dressing" of the budget and said it must come clean on estimates of revenue and growth and borrowing outside the budget. "We will closely monitor the revenue assumptions to assess the credibility of the fiscal deficit target," Sonal Varma, chief economist India and Asia, at Nomura said in note.
Source: Economic Times
NEW DELHI: India and the US are likely to finalise a mega trade deal pegged above $10 billion (more than Rs 71,000 crore) next month when United States Trade Representative (USTR) Robert Lighthizer visits New Delhi. The deal, whose legal vetting is underway, will be signed during US President Donald Trump’s visit to India, and is a precursor to a free trade agreement between the two nations, officials in the know of the plans said. Lighthizer and commerce and industry minister Piyush Goyal are likely to meet in the second week of February to finalise the terms of the deal. Trump is expected to be in India during February 24-25, his first visit here as head of state. There were meetings on the planned deal in Davos during the World Economic Forum. A six-member team from the US administration was in Delhi over the weekend, meeting Goyal and the relevant line ministries to discuss the contours of the proposed pact.
Goyal had met Lighthizer in the US last year.
‘Medical Devices Issue Resolved’
“It is a fairly large deal,” said an official aware of the details. The issue of medical devices, which was a key obstacle in the trade talks between the two countries, is resolved, the official added. India and the US have been entangled in a series of trade spats across various sectors. The deal could touch upon Washington’s demand of doing away with duty on American information and communication technology goods along with market access for its dairy products and duty cuts on Harley-Davidson motorcycles. The US is also keen to sell more almonds to India. New Delhi, on the other hand, had sought market access to its fruits including grapes. “We expect the full deal to be signed this time and the longer-term idea is an FTA,” the official added. India also wants restoration of benefits under the Generalized System of Preferences (GSP). Under the GSP, certain products can enter the American market duty-free if the beneficiary developing country meets the eligibility criteria established by US Congress. The benefits to India were withdrawn from June 5, 2019, after the US dairy and medical devices industries alleged that Indian trade barriers affected their exports. In 2018, India exported goods worth $6.3 billion (as per USTR figures) to the US under the GSP, accounting for around 12.1% of India’s total export to the US. The average duty concession accruing on account of GSP was almost $240 million in 2018. “We want GSP as it spreads across sectors, from textiles to agriculture, and we want access for our goods in the American market,” the official said. Goyal had earlier told ET that any imported product which had got animal feed into the food chain was a redline for India if it was not properly marketed as a non-vegetarian, because of the religious sensitivities around it. Opening up access to certain agricultural products where India is self-sufficient and wants to protect the farming community is another such issue, the minister had said. “There are always certain issues where one takes extra precautions and ensures that it doesn’t affect the Indian ecosystem, but usually in a trade deal, there are no complete no-nos. One can always work around and find sustainable solutions which can be acceptable to all parties,” he had said. Lighthizer is coming first to close the deal and he will come again with Trump to announce it, officials said. The two sides have been engaged in talks to iron out the differences which began in 2018, when the US levied global additional tariffs of 25% and 10% on the import of steel and aluminium products, respectively. India responded by levying retaliatory tariffs on 28 products originating or exported from the US with effect from June 16, 2019, for which Washington dragged it to the World Trade Organization. India’s exports to the US in the April-November period of fiscal 2020 totalled $35.6 billion, compared with imports of $25.1 billion. In the whole of fiscal 2018-19, exports were $52.4 billion and imports, $35.5 billion.
Source: The Economic Times
As P. Murugan walked towards his factory one last time, the mood was distinctly sombre and he wouldn’t utter a single word. The factory, Priya Precision Tools, lay nestled in the industrial heart of the southern Indian city of Coimbatore. On either side of the small approach lane that led towards the factory, machines squeaked and metal clanked from within a handful of micro industries. An unusually high number of them, however, were silent—just like Murugan. As the rest of India awaits an important Union budget, Murugan was busy shutting down a factory that he had run for 22 years. On his final visit to the factory floor, he helped lift one of the last big machines that was lying around—a heavy-duty lathe that costs ₹10 lakh, but was getting sold off for ₹4 lakh in a distress sale. “Better than selling it at scrap value," said Murugan. He then pulled down the shutters and walked to his car, which he is considering selling next, he said. Coimbatore is one of the few geographies in the country that can vie for the “manufacturing heartland" tag. It is the second-largest economy, after Chennai, in a state which is one of India’s most industrialized—Tamil Nadu. While many of the big factories are housed in and around Chennai, the erstwhile textile town (roughly 500km to the west) had always been the hub of the smaller player—the valve maker and the wet-grinder manufacturer. Many of the smaller factories also supplied essential components and parts that kept Chennai’s auto cluster buzzing. Coimbatore is the sort of place where one takes pride in running a factory, or working in one. And it has been like that as long as the locals can remember. In many ways, it was an ideal location for the “Make in India" dream to take root. But the economic downturn of the past few months has left an acute impact on cities like Coimbatore, which revolve around small and medium-sized manufacturing units. Even if there is a mild economic recovery in the coming months, the scars will take a long time to heal. Stories of job losses are rife. The impact on small factory owners who are trying to grapple with their first near bankruptcy may be a bit harder to quantify. When Murugan’s factory, which manufactured valves for the auto industry, finally shut its doors, four people lost their job. And that was after the workforce had already been heavily trimmed in an effort to stay afloat.
City of small industries
Coimbatore is an interesting case study as to how broad-based the economic slowdown is. The city’s local economy is diverse enough—it supplies a bulk of the spare parts used by automobile manufacturers hosted in cities like Chennai; has one of the highest densities of textile units in the world; meets over 90% of the country’s wet grinder demand. Many companies which may necessarily not have a global or national name are crucial to the city’s survival, such as pump-set maker GV Industries, which has been around for decades. The crippling consumption slowdown has left a broad footprint: customers are forgoing not just the purchase of new cars, but also clothes, wet grinders, and pump sets. For people like Murugan, the fallout has been devastating. A nascent prosperity had taken root over the last two decades, largely as a result of the town’s manufacturing capability. Many of the small and mid-sized factory owners had begun to get used to nice homes, cars, dining at expensive restaurants, and going on vacations. “For six months, I had no business. I was simply paying salaries and rent. That itself was around ₹60,000," he said. “The orders were coming down every year. But in the last year, the business was very bad. It was a total loss all of a sudden. One year ago, we had a business of at least ₹2-4 lakh (a month). Now, I can’t even pay salary." The announcements in the budget speech later this week will be keenly awaited by people like Murugan. They will be looking for at least some signs to feel hopeful, because there has been just a string of bad news off late. Auto sales, for example, fell again in December. India’s overall industrial output rose for the first time in four months in November, but the index of eight core infrastructure industries fell 1.5% from a year ago—the fourth straight month of contraction. The key thing will be to build capabilities, said M. Vijayabaskar, a professor at the Madras Institute of Development Studies. “It’s not just about Coimbatore, but overall, in manufacturing, India does not have a specific vision which identifies a clear calibrated growth trajectory." “Right now, what’s happening—and this is true for industry bodies as well as government planning—by and large, it is all about getting concession and infrastructure. But the government is yet to establish any kind of useful linkage between, say, the auto and the IT industry. That’s a policy failure. We need to identify sectoral linkages and clear road maps for building capabilities," he added.
The GST effect
Localities such as Avarampalayam and Ganapathy that house a large number of foundries, and motor and pump shops, are now lined with shuttered units. At least 10,000 units in the broader region have shut down, and some 25,000 workers have lost their jobs in just a year, according to C. Sivakumar, president of Coimbatore Tirupur District Micro and Cottage Entrepreneurs Association (COTMA). Micro and small-scale industries have traditionally fuelled Coimbatore’s reputation as a mechanical powerhouse, as they needed relatively small investments and yet provided employment to a sizeable number. Effectively, a small room with six tables and six vises could provide jobs for six people at a minimum wage of ₹600 per month—all of which would require less than ₹1 lakh as investment. The work typically involves cutting or cleaning mechanical components using machines. “The microenterprises here used to get a monthly business of about ₹120 crore. Now, it has dropped to just about ₹50 crore. There is almost a 60% drop in orders," said Sivakumar. When this reporter visited, he and his colleagues were drafting a letter to Prime Minister Narendra Modi detailing their hardships. Apart from the decline in orders, the letter, as well as other shop owners, pointed to the hurdles that have come up in the last couple of years as a result of the new goods and services tax (GST) regime. The issues with GST go beyond the tax rate, and is more about the system’s inadequacy in understanding the ground realities of a small enterprise, explained J. Maheswaran, owner of pump-set manufacturer GV Industries . The small and medium businesses in Coimbatore are almost completely running on credit, said Maheswaran. A local vendor usually supplies some spare parts on credit to a company, with the assurance of payment when the final product gets sold. In a slowdown, as products pile with sales drying, the vendor naturally suffers payment delays. But in the meanwhile, he has to pay his GST by the 20th of each month. “If I have made a turnover of about ₹5 lakh, I have to pay about ₹90,000 per month as GST. I get the payment from the customer after a minimum of 90 days, that too, sometimes, partially. This has been the procedure in the market for years. But now, after you have made the bill, you have to pay the GST within 20 days... even before the full amount comes to you," explained Maheswaran. “If you fail to pay the GST, you will get fined. If you continue to fail for three months, the GST will be blocked. Your bank account also will get blocked. So, now, we are borrowing money from wherever we can to pay the GST until we get the payment," he added.
Profusion of pink slips
At least a dozen factories this reporter visited with said they have fired at least 5-10 workers in the last six months. Nachi Engineering, which produces computer numerical control machines used for precision and control in auto and other industries, has fired 30 workers, mostly migrants from north India who have packed their bags and left. The locals who got retrenched have pinned their bets on the services economy—becoming Swiggy delivery executives and Uber driver partners. “I personally know some 125 people who have switched to these jobs because of the slowdown," said J. Puviarasu, head of Nachi Engineering. It is an equally distressing story in the textile sector, the town’s other major job provider, where at least one leading firm has shut down two units and others have cut down on shifts to reduce manpower, said K. Selvaraju, secretary general of the Southern India Mills’ Association. Coimbatore has roughly 1,000 textile units, employing about 300,000 workers, according to data provided by the textile commissioner’s office. A big job provider and head of a top textile company in the Coimbatore-Tirupur textile belt, who requested anonymity, said that 70% of his exports have fallen, hitting his turnover by 20% and costing him ₹100 crore last year. “(In my company), all overtime is cut. Earlier three person’s job is now run by two people. One extra has been removed, or they are attached to another internal department. We stopped hiring. The last year has been a learning for us in lean management techniques," he said. The textile industry had already been dealing with difficulties, particularly due to intense global competition. And now, a domestic slowdown has only pushed things even more to the brink. Debt levels of many small units, for example, have reached unmanageable levels. Everybody is probably in debt to everybody else now, said Tamil Arasu of VMC Engineering, a small factory that deals with textile machinery and other tools. He usually keeps some additional stock expecting orders to peak during festivals, such as the Tamil New Year Pongal in early January. All that stock, worth ₹20 lakh, remains piled in a corner of his factory—a scene now common in most Coimbatore factories. “During Pongal season, usually everything will fly off the shelves: pump sets, clothes, wet grinders, and so on. But not this time," said Arasu. To some extent, he added, it is not a surprise, since he himself has cut down on expenses. Even a traditional trip back to his village in Dindigul on Pongal was cancelled, in order to cut down expenses, he said. “I have cut all non-essential expenses within the family. Only house rent is mandatory, everywhere else we are tightening," he added. VMC Engineering is down from 15 workers to just three. The prospect of unemployment has made workers insecure. Karthik, one of Arasu’s workers, for instance says he is feeling a lot of pressure as he is effectively doing a two-person job in two shifts. “I tried searching for jobs in other places, but there are no jobs. So, my friends advised me to stay put in this company," he said. Balamurugan, a worker who lost his job when Murugan’s precision tools factory downed shutters, said: “We thought there will be (more) jobs after Deepavali, but nothing happened. Then, we thought there will be jobs after Pongal. It’s a week after Pongal now and I don’t know if anything will come or not. I am thinking of going back to my village to rear cattle. I think that’s better."
Source: Live Mint
Crude oil market has come under considerable pressure as demand concerns have come to the fore following the outbreak of Wuhan coronavirus in the world’s largest import market, China. Notwithstanding output cuts, the world market is already seen adequately supplied in the first half of the year as a result of which prices have been slipping from their recent highs. And, now with parts of China being shut down and travel activity substantially reduced because of halting public life, demand for energy is coming down. Worse, the disease is reportedly spreading to other countries as well. On Monday, Brent crude declined below the psychological $60 a barrel towards $58.50, a multi-month low. WTI followed suit at $52 a barrel. Falling crude prices are seen putting huge pressure on the oil producers’ cartel OPEC+ which is reportedly considering an extension of the production cut agreement till the end of the year in order to neutralise the current price softness. The next OPEC meeting is scheduled in early-March where even additional output cuts could be considered. Although the market is reacting, as of now, the economic effects, especially the energy demand effects of coronavirus, are unclear. How long the outbreak will last and how much of economic activity will be affected is still a matter of conjecture. If the epidemic is contained soon – say over next three months or so – there is strong likelihood of the market bouncing back. The macro picture suggests that though subdued, global growth in 2020 will show an uptick which should augur well for many commodities including the energy market. Higher growth will support oil demand. Reducing trade war tensions between the US and China following the Phase One agreement is also a positive factor. There is expectation a second agreement – a more significant one – may be struck in the second quarter. Geopolitical stresses – USA-Iran stand-off, for instance – also have the potential to rear their head in the course of the year. Market participants should watch out for early signals and take appropriate steps. Simply put, on current reckoning, although the world crude oil market reasonably well supplied this quarter and the next, any rise in geopolitical tensions can lead to a spike in oil prices. At the same time, if growth concerns continue to haunt, the market will face a downside risk. It is precisely in such uncertain times that a major importer of crude oil such as India should exercise utmost caution. We cannot get carried away by short-term price movements; but have a view for at least two quarters ahead for strategically planning the import programme. The current price fall should be seen as fortuitous for India. It should make commercial sense to buy at every dip. If crude prices were to rise, it will put additional pressure on the already weak rupee and stoke inflation which is already beyond the RBI’s tolerance limits.
Source: Financial Express
Brazil is pushing India to expand its footprint in the country's mining, power and agri business sectors . Brazilian President Jair Bolsonaro on Monday called for greater investment by Indian conglomerates in the Latin American country's infrastructure, railways, mining and energy sectors. Addressing senior captains of industry, Bolsonaro, along with senior minister's from the Brazilian government pitched for more investments from India. Brazil's economy is broadly expected to slowly regain health in 2020, with gross domestic product growth estimated at 2.3 per cent by the country's central bank. Winning on a populist plank to eradicate poverty and clean up corruption, Bolsanaro has pushed for large scale foreign investment to tap the country's vast natural resources, especially in the Amazon rainforest in the scarcely populated hinterland. Indian companies have invested about $ 6 billion in the country, and has significant footprint in multiple sectors sectors. This includes Information Technology giants such as Tech Mahindra and Tata Consultancy Services which has about 1400 employees. In the mining sector, Sterlite Power has won 10 power transmission projects across 11 Brazilian states totalling 29 transmission lines and 34 substations while Birla Carbon, the world's largest carbon black producer, completed 60 years of operations in Brazil in October 2018. Pharmaceutical, Energy, engineering and automobile production were also sectors central to Indian business interests, sources said. Policymakers said that among that bilateral pacts to boost cooperation in oil and natural gas and bio-energy, that were signed over the weekend is expected to see significant Indian businesses entering Brazil. Bolsanaro met with 23 Indian business leaders from companies including those from Sterlite Power, Apollo Hospital, Oyo Rooms, Tech Mahindra, Tata Consultancy Services, Zydus Cadila, and Transport Corporation of India Limited, among others.
Export boost
New Delhi however expects to use the country as a springboard to spread its export to difficult to access Latin American markets. At the same event, Commerce and Industry Minister Piyush Goyal on Monday suggested bilateral trade can reach up to $ 15 billion by 2022. Both nations are working to expand the India-MERCOSUR Preferential Trade Agreement (PTA), of which both nations are part. Exports to the country have risen for the 3rd-straight year till 2018-19, hitting $ 3.8 billion. Imports however, reduced to $5.4 billion, decreasing by a Billion dollars in the same year. Back in mid-July, India had asked Brazil to fast track negotiations on New Delhi's PTA with the Latin American economic bloc which also includes Argentina, Uruguay and Paraguay. Signed in 2004, the PTA is the only major way India accesses the continents vast consumer market. Goyal also urged that the India – Brazil Business Leader’s Forum may be activated and reconstituted to make it more relevant and contemporary to businesses in both countries. He also pushed for the opening of the Brazilian market to Indian services in wellness sector like Yoga and Ayurveda. Brazil has an association of Ayurveda (ABRA), with offices in 9 states and in 2018, held the third International Congress on Ayurveda which saw the participation of 4000 delegates.
Goyal also pitched for creation of value chains between India and Brazil where goods may be semi assembled in one country and finished in another. Business relations between India and LAC are mainly by way of investments, as conventional trade in goods has challenges on account of distance, time zone difference and business culture.
Source: Business Standard
“Global textile and apparel industry is going through disruptive times. Buyers are looking to diversify beyond China and opening opportunities for other countries. However, China is still disrupting the global value chain and investing in emerging manufacturing destinations like Vietnam, Bangladesh, Ethiopia etc. on a large scale and also building smart factories that will give them a competitive advantage. In order to compete globally and win in the disruptive times, India needs to adopt manufacturing excellence and service orientation,” as per a FICCI – Wazir Advisors Textile industry report on ‘Winning in Disruptive Times’ released at FICCI TAG 2020 annual seminar in Mumbai. “India comprises a large fragmented industry and hence it is important for large anchor players to engage with smaller players and integrate the supply chain for bringing efficiencies. Further Indian companies need to adopt latest technologies and build smart factories that are digitally enabled with the value chain. Skilling of middle and top management is also important so that they are geared to follow best practices and build efficient and service oriented business. Indian domestic market is also growing and needs to be serviced with agility,” said Prashant Agarwal, Co-Founder and Joint MD, Wazir Advisors while giving a presentation on the report. Report also stressed upon Government’s policy intervention to help in neutralizing cost disadvantage with global competitors and also help build infrastructure to produce large scale manufacturing zones with focus on manufacturing excellence and sustainability. Indian industry has become cautious in investing due to global disruptions. We need to have better risk taking capabilities and ability to speedily align with emerging mega trends to remain in the business opined a panel of CEOs during the conference. RD Udeshi, President – Polyester Chain, Reliance Industries Ltd stressed upon the product delivery time and quality and finishing of product as per the international standard to remain competitive in the global market and companies should focus on value addition and skill development. He also said that Indian textile industry can have advantage over its competitors like China, Bangladesh, and Vietnam etc with the manufacturing excellence and scale of the factories. Rahul Mehta, Managing Director, Creative Garments Pvt Ltd was of the opinion that Indian companies should stop being scared of scaling up and start manufacturing clothes closer to the place of raw material and cheaper labour instead of being close to the place of market. Agility, speed and transparency is the key to win in disruptive times said Rajendra K. Rewari, Executive Director and CEO, Morarjee Textiles Ltd. He also said that we should bring young talent in the business in this disruptive time and to attract this talent we have to change the system of our business and make our industry more remunerative. Earlier in the opening session, Sanjay Katkar, Deputy CEO, MIDC shared opportunities for Textile Industry in Maharashtra and SP Verma, Joint Textile Commissioner, Ministry of Textile; Govt. of India said that Indian companies should integrate market intelligence and IT in their processes more efficiently and utilize Textile Centre of Excellence to its full capacity. The theme of the TAG 2020 conference is very contemporary. In these disruptive times it’s important that the industry experts discuss the issues and challenges and seek possible solutions to overcome those. TAG conference offered an excellent platform for giving a clear roadmap in that perspective said GV Aras, Director, ATE Enterprises Ltd during a panel discussion. With innovation, technology, versatile fibre availability and ample manpower resources, India should aim to be superior quality producer in the world said Anil Nair, President, Shubhalakshmi Polyester Ltd during a panel discussion. Vikas Sharan, Director, India Operations, Saurer Textile Solutions Pvt Ltd applauded the TAG 2020 conference and said that relevant topics on surviving through disruptive times, sustainability, size and scale of business, investments and interventions for winning the global race, were deliberated by industry’s stakeholders with active participation by the audience.
Source: Indian Retailing
Nobel laureate and economist Abhijit Banerjee on Monday said the country could be passing through a phase of recession, and there is "nothing in the data" that suggests otherwise. Banerjee, during an address at the Kolkata Literary Meet, also said the priority of the government should be on refinancing the banking sector, which is in "doldrums". "What I can say is that we could be in a recession. But, I don't know by how much. There is nothing in the data that suggests we could not be in a recession," the author of 'Good Economics for Hard Times' said. He also advocated imposition of wealth tax and more redistribution. "Given the current state of inequality in India, a wealth tax is completely sensible. In such a case, more redistribution is required, and I expect this not to happen soon," Banerjee said. The 58-year-old Indian-American economist said the banking and infrastructure sectors were in need of funding from the government. "The banking sector is in doldrums. It needs huge funding by the government. The Centre should also look at infrastructure sector funding," he said. Talking about the informal sector, the Nobel laureate said there is no reliable data on it. "The statistical apparatus is incapable of capturing short-term data on the informal sector." Banerjee also favoured the central government's move to privatise PSUs like Air India. On the recent cut in corporate taxes by the government, he said, "It seems the corporate sector is sitting on huge cash".
Source: Economic Times
Mumbai: The rupee clocked its first gain after three days of losses on Tuesday, recovering by 12 paise to close at 71.31 against the US dollar, even as concerns remained over fast-spreading coronavirus from China to other regions. The domestic unit's rise was restricted by a host of factors like subdued equities, stronger dollar against key currencies and sustained foreign fund outflows, according to analysts. At the interbank foreign exchange market, the local currency opened at 71.37. During the day, the local unit saw a high of 71.26 and a low of 71.41. The domestic unit finally settled at 71.31, up 12 paise from its previous close. The rupee had settled at 71.43 against the American currency on Monday. Meanwhile, the global crude benchmark Brent Futures rose 0.39 per cent to trade at USD 58.81 per barrel. While, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.05 per cent to 98.00. The 10-year Indian government bond yield was at 6.58 per cent. Broadly, crude prices have seen some moderation in the past few sessions over demand slump amid rising coronavirus cases in China and other regions. The death toll from a coronavirus outbreak in China has soared to 106, while nearly 1,300 new cases have been confirmed, according to reports. By the end of Monday, a total of 4,515 cumulative confirmed cases of the new pneumonia had been reported in Hubei, while 2,567 patients are hospitalised, with 563 in severe conditions and 127 in critical conditions, the Hubei Provincial Health Commission said on Tuesday. On the domestic equity market front, the 30-share BSE index settled 188.26 points, or 0.46 per cent, down at 40,966.86. Likewise, the broader NSE Nifty closed 63.20 points, or 0.52 per cent, down at 12,055.80. Foreign institutional investors sold equities worth Rs 1,357.56 crore on a net basis on Tuesday, according to provisional exchange data. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.3948 and for rupee/euro at 78.7290. The reference rate for rupee/British pound was fixed at 93.2473 and for rupee/100 Japanese yen at 65.46.
Source: Financial Express
The government is pinning high expectations on Indonesia’s textile and garmet industry in 2020 following positive growth booked in 2019. However, a week after the signing of the phase one trade deal between the United States and China, skepticism continues to increase and affect this industry. Such an external challenge serves as one of the main issues for the textile and garment industry. Internal improvements such as those achieved by addressing the industry’s competitiveness and efficiency are expected to enhance trade and investment, thereby helping tackle external threats. Indonesia’s domestic garment and textile industry recorded remarkable growth in the third quarter of 2019, having enjoyed 15.08 percent year-on-year (yoy) rate. That is higher than the national economic growth of 5.02 percent during the same period and compared with the 10.08 percent growth booked by the textile industry in the third quarter of 2018 yoy. The textile industry’s growth was driven by the rise of domestic demand. In terms of exports, shipment of Indonesian garment products to the world from January to October 2019 decreased by 3.6 percent yoy to US$7.15 billion. That compares with $7.42 billion from January to October 2018. According to estimates by Bank Mandiri’s Office of Chief Economist research team, total garment exports by the end of 2019 will be worth $9.9 billion. The garment industry contributes more to exports than the textile industry. In 2018, the top three destinations for Indonesian garment exports were the US, Japan and Germany with total export values reaching $4.5 billion, $950 million, $470 million, respectively. For textile exports, the top three destinations for Indonesia in 2018 were China, Japan and Turkey, with export values respectively at $520 million, $480 million and $470 million. From January to October 2019, the worth of Indonesian garment exports to the US dropped to $3.99 billion from $4.05 billion in the same period of 2018, although US garment imports from around the world increased by 2.59 percent to $90.8 billion in January to October 2019 from $88.5 billion in the same period a year earlier. In the 10-month period that ended October 2019, the market share of Indonesian garments in the US fell to 4.4 percent from 4.6 percent in the same period of 2018. By October, the US’ top five garment importers were China, Vietnam, India, Bangladesh and Indonesia with market share respectively at 35 percent, 13.3 percent, 6.7 percent, 5.8 percent and 4.4 percent. The decline in Indonesian garment shipments to the US was due to trade diversion to Vietnam, as reflected by the Southeast Asian country’s increasing market share to 13.3 percent in October 2019 from 12.4 percent in the same period a year earlier. Although exports of Indonesian garment products to the world showed negative growth, domestic demand continues to grow, especially during simultaneous elections and the Idul Fitri holiday season. As for textile imports, their value decreased to $6.2 million in January to September 2019 from $6.6 million in the same period of 2018. The declining imports in the textile and garment industry were backed by domestic players’ investments in rayon fiber production, which positively affected production costs in the upstream industry, making them more efficient. More positive developments in 2019 were the signing of the Indonesia-Australia Comprehensive Economic Partnership Agreement and the European Free Trade Association. The deals could expand export markets for Indonesian manufactured products as they would waive import duties on a number of Indonesian products, including garments and textiles. The government is also engaging in trade negotiations with the US and the European Union to make Indonesian textile products more competitive. Indonesia’s garment and textile industry is still hindered by external and domestic problems. On the internal side, the same old problems have not been fully solved by the government. Gas and electricity prices in Indonesia, for instance, are still among the highest among textile producing countries. This has scaled down the industry's competitiveness. Furthermore, labor cost issues have exacerbated the business environment for the industry. Indonesian wages, especially in West Java and Jakarta, have considerably increased in the last several years. This has prompted global and regional investors to increase automation in order to reduce the number of workers or relocate their factories to cheaper provinces and, in some cases, other countries. Moreover, aging machinery and equipment has diminished production efficiency, particularly for traditional and small-scale players in the sector. Currently, 30 percent of textile factories in Indonesia use machinery that is more than 25 years old. Since 2007, the government has provided incentives for revitalizing machinery. However, the allocated funds are inadequate for replacing machinery in the entire industry. Furthermore, a recent incentive by government was an income tax cut of 30 percent for six years through the issuance of the Industry Ministerial Regulation No. 1/2018. On the external front, the impact of a trade war has shocked the domestic textile market with a flood of Chinese products that has put a big constraint on Indonesian textile manufacturers. The rupiah exchange rate has significantly determined the industry’s production costs. This is due to a significant portion of the Indonesian textile sector’s raw materials, such as cotton, being imported and priced in US dollars. According to the Indonesian Textile Association, raw material prices have increased by 5 to 6 percent in 2019. Small and medium textile companies are the ones affected the most as they import raw materials and pay in US dollars but sell in rupiah. On the other hand, bigger companies export their products and they earn the stronger US dollar as it enhances their revenues. If the current currency situation persists, many small and medium textile companies will close down their factories. Indonesia’s competitiveness in the global textile and garment industry has been beaten by its competitors, particularly Vietnam, Bangladesh and Cambodia. In the last few years, these three countries have achieved higher export growth than Indonesia. Vietnam gains the most from Europe and the US, as Vietnam has a trade agreement and close relations with the US. The EU and the US enjoy zero percent import duty on textile products, while Indonesia is liable to 5 to 20 percent import duties. The ongoing regional competition pressure in the textile and garment industry would continue to persist because of the prolonged trade war between China and the US, driven by US President Donald Trump’s protectionist policies. This has taken its toll on emerging economies, including Indonesia’s. Despite all the challenges, the government remains optimistic that the textile and garment sector will continue to show high growth in 2020. The Industry Ministry expects textile exports to scale up to $15 billion and help create new jobs. Production capacity is estimated to increase to 1.64 million tons annually with an investment value of Rp 81.45 trillion. In order to achieve this, the Indonesian government should enhance its support for the industry. This includes improving law enforcement in the handling of potential illegal textile imports, accelerating industrial area development outside of Java to reduce logistics costs and establishing vocational schools to prepare skilled human resources who are able to tap into the latest technology.
Source: The Jakarta Post
Bangladesh began 2019 with a renewed hope that its newly elected government would bring in political and economic changes as promised in its election manifesto. Although the economy has maintained high GDP growth, electoral promises remain unfulfilled in several critical areas. Many old woes continue to hamper the economy: a weak fiscal balance, a fragile banking sector and a shaky external sector. Apart from high economic growth, the other silver lining of the Bangladesh economy is robust growth in remittance income. This helps maintain Bangladesh’s low current account deficit. But exports and imports performed poorly last year, with export growth negative from June to November. The textile sector — the main driver of exports in Bangladesh — experienced a larger decline than non-textile products, causing an overall dip in total exports. Amid the US–China trade war, Bangladesh’s textile sector could not capitalise on the opportunity to increase exports to the United States, mainly due to a lack of supply side capacity and product diversification. Currency devaluation in competing countries such as India and Vietnam also contributed to Bangladesh’s poor export performance. But as an importing country, Bangladesh’s policymakers are cautious about devaluing the Bangladeshi taka against the US dollar because they want to avoid imports becoming too expensive. Imports declined in 2019 and capital machinery imports were negative, indicating low investment. Private investment has been stagnant at around 23 per cent of GDP for the past few years. As a result, new job creation is limited and youth unemployment is 10.6 per cent. High economic growth also failed to reduce inequality, instead consumption and wealth inequality have widened. Bangladesh has the lowest tax-to-GDP ratio among South Asian countries at 9.2 per cent in the 2018–2019 fiscal year. The high target of resource mobilisation set for the National Board of Revenue (NBR) remains unfulfilled. Not only is the tax net narrow, but tax avoidance is high. NBR automation, human resource development and above all, institutional autonomy and transparency are crucial for high revenue mobilisation efforts. The tax system has shifted towards indirect tax instead of a direct, progressive tax system. Due to limited resource mobilisation, the government depends on bank borrowing to finance its development programs. Several mega infrastructure projects are underway, including the Padma multi-purpose bridge, a mass rapid transit system, an LNG terminal and several power plants and deep sea ports. But delays in the implementation of these high value projects have hugely increased their cost. By December 2019 — only halfway through the fiscal year — the government had almost reached its planned bank borrowing. So, the government will face major fiscal challenges in managing expenditures and continuing development initiatives. The most significant challenge for the economy is the weakening of the banking sector. Presently, banks are facing a liquidity crunch. This is mostly due to banks holding large amounts of non-performing loans (NPLs). NPLs accounted for 11.69 per cent of total outstanding loans last June and many of these are due to wilful defaulters. Making things worse, policymakers have granted leeway to defaulters. The central bank has lost its independence, and now functioning under the direction of external political forces, provided perverse incentives to loan defaulters. One example is the rescheduling facility. Last May, the central bank announced it would allow loan defaulters to pay only a 2 per cent down payment to reschedule their loans, extending the repayment period to 10 years, with a one year grace period. Such undue benefits, granted to incentivise defaulters, also discriminate against good borrowers. The government tried to rescue state-owned banks by recapitalising them every year for the last decade. But this has not improved the performance of state-owned commercial banks, where NPLs account for over 30 per cent of their total loans. Private commercial banks have also been afflicted by a loan default culture and experienced various scams. But instead of letting poorly performing banks die a natural death, the government provides them with funding. The internal governance of banks is also sometimes weak and needs to be strengthened through monitoring and technological adaptation. Bangladesh’s 2020 economic outlook will largely be determined by its performance in 2019 and the policies that its government pursues. A short-lived drive against corruption last year created a ray of hope for citizens. Such clampdowns on corruption must be continued and encouraged. Until now, policymakers have largely been averse to structural and institutional reforms needed to improve the economy. What has been ignored and denied is that Bangladesh’s growth story cannot take the country far unless it is translated into sustainable development. Cracks in the economy became prominent in 2019 and will remain unless they are addressed. This year Bangladesh will celebrate the centennial birthday of its founding father, Bangabandhu Sheikh Mujibur Rahman. The greatest respect can be paid to him through fulfilling his dream of establishing a just and equitable society.
Source: East Asia Forum
Turkmenistan will hold an International Investment Forum in Ashgabat on March 17-18, 2020, Trend reports referring to the Union of Industrialists and Entrepreneurs of Turkmenistan (UIET) on Jan. 28. A co-organizer of the forum will be TMT Consulting Group. During the forum sessions, public-private partnerships and prospects for the development of industry, agriculture, transport, logistics and tourism in the country will be discussed. On the sidelines, business negotiations with interested parties are scheduled. Within the framework of the forum, an exhibition-fair of achievements of local entrepreneurs will be organized. The UIET unites more than 20,000 businessmen. According to local regulations, businessmen are allowed to create joint ventures with foreign partners by attracting their investments. There are about 600 private enterprises in the Turkmen industry, including those producing building materials, textiles and carpets, chemicals, metal products, furniture, faience, glass products, as well as polyethylene and plastic products that are in demand in the domestic and foreign markets. According to the British Petroleum (BP) report, Turkmenistan ranks fourth in terms of natural gas reserves in the world and sells this type of fuel to China and Russia. Official Ashgabat has embarked on the diversification of the local economy; the textile and oil products industries have advanced; the oil and gas chemical industries; the building materials industry are actively developing.
Source: Azer News
Dive Brief:
Dive Insight:
Blockchain is widely recognized as an attractive and effective way to bring traceability to complex, multi-tiered supply chains, but privacy concerns — along with the fickle nature of technology trends — have slowed industry adoption. Participating in a blockchain platform requires trust since participants must share more data than they traditionally have. Although most platforms can still keep proprietary transaction data private, the issue of data ownership and competitive advantage, among other factors, has slowed adoption. Maersk's TradeLens platform had a slow start in 2019, reportedly due in part to Maersk's founding role and the need for competitors to share information. After pivoting to "joint venture" language, carriers eventually came on board. Architects of the WEF initiative aim to allay similar concerns with a neutral platform and therefore speed adoption across industries. "We hope this will accelerate adoption and encourage more companies to join and co-design the technical scope as well as how we tackle tough questions around privacy and how we connect the physical and digital worlds," said Francisco Betti, head of the platform for shaping the future of advanced manufacturing and production at WEF. Once the structural concerns and barriers to adoption are allayed, the next step is to prove and derive value from participation. WEF, along with several participants, argues that proving sustainability efforts to consumers is essential to competition today and that such a platform is essential to capitalizing on efforts to produce goods more sustainably. "Circularity in the world’s supply chains of consumer goods, the path to sustainability, cannot be achieved without new networks to exchange data," said Niall Murphy, CEO and co-founder of Evrythng. Phase two of development will require more data to prove the true value of verifiable traceability, according to a WEF press release, which is why the WEF is seeking more participants. APR, a textile supplier already signed on to phase two, offers an ideal example of how a supply chain could reap benefits in the marketplace from the platform. The supplier makes rayon (also known as viscose), a very common textile in apparel supply chains and one with an increasingly complicated reputation among consumers. The pulp used to produce the textile either comes from wood or bamboo — the former more worrying for environmentally-concerned consumers than the latter since timber trees take years to regenerate and bamboo only a few months. The FTC also fined four retailers in 2015 for selling viscose products labeled as made from "bamboo," since the manufacturing of viscose involves a chemical process that liquefies the pulp and extracts fiber like a synthetic fabric. Since sourcing and processing for the material can vary greatly in terms of sustainability, viscose suppliers and the retailers selling finished products that contain it may seek to verify and advertise their sustainability bonafides. APR has started tracing its supply chain using blockchain on its own, but Ben Poon, APR's business head, said in a statement that joining with other suppliers will bring more value to that work. "The more data is shared, the more we can join the dots to harness efficiencies as a business as well as provide sustainability assurance to consumers,” said Poon.
Source: Supply Chain Dive
Fashion is technology, one of the oldest examples of it. In an anthropological sense, making textiles by weaving materials together is a prehistoric technology, which we have since built upon over thousands over years, as fashion innovators continually future-gaze. To enlighten us on what’s currently up ahead, Texworld assembled a panel of experts to discuss technology's influence on the changing nature of ideation and design: Natasha Franck, CEO of Eon, Tia Nicolae, Marketing Manager of Lectra; Andrew Wyatt, CEO of Cala, and Melissa Rusinek, Consultant, Diverse Recycling Solutions.
New data of recycling
To give every product an identity, which she likens to a birth certificate, was Franck's mission when she created the CircularID Protocol to manage the growing demands of a circular economy. Traditionally data is attached to a product only up to the point of sale then the product is lost. Information on origin, price, fabric composition evaporates. “Resale currently operates quite ad hoc without the digital infrastructure to adequately support it,” says Franck who has collaborated with H&M, Target, PVH Corp, among others, to remedy this and support the life cycle extension of products. “We specialize in getting that data on the product after sale and beyond, and facilitate how it’s accessed or exchanged between parties.”
The designer of the future
What will the field of design look like when today’s 15-year-olds, the Snapchat, TikTok generation, are entering it? This is the type of question which motivates Wyatt daily. He believes the technology to meet their expectations for turning their creative vision into reality is very different from what’s available right now. He founded Cala “to make it as easy to set up a fashion brand infrastructure as it is to start an Instagram account.” With this service which he calls “the world’s first fashion house technology” he claims that anyone can start up a brand scaled to their needs from their parent’s basement or a college dorm. Working with over 60 different manufactures in 10 countries, 25 development and financial partners, he promises to turn the digital into reality “whether you’re a classically trained designer from Parsons or if you’ve never designed before your life.” Wyatt's vision of the future looks not unlike Tinder: “Basically you’re flipping back and forth between designs, powered by machine learning to get closest to your vision, connected with a network of fully automated local facilities or production centers––like Amazon’s fulfillment centers––you post it on the gram, and if people start buying, it gets made close to them. We’re not too far from that.”
Opportunities and limitations of 3D design
Despite the hype and rush to digitizing technology, Nicolae, says, “You cannot design in 3D today. No tool exists to actually build a pattern in a 3D way. You have to have the 2D pattern built in order to render the 3D version and to see how the fabric drapes and stretches.” Fit is of prime importance, indeed even more than ever when addressing the need to cut down on material waste and eliminate irresponsible sampling, both practices associated with our industry’s past excesses. Lectra provides 2D patternmaking technology for brands from Balenciaga and Louis Vuitton to denim leaders such as Seven For All Mankind, focused on the idea of not producing a product until it is ordered by the customer. Aside from fit, 3D printing has also failed to take into consideration the importance of the flow of fabric. The company Clo is currently leading the market in their development of exceptional technology for rendering 3D fabric.
New technology must meet old craftsmanship
Says Nicolae, “The skill and labor behind how a garment is put together and how patterns are developed creates the built-in quality of a garment and is why it is not a disposable product. That has a lot of implications for waste. Fast fashion does not have that quality built in.” The absence of patternmaking skills in our industry which died off due to overseas outsourcing is now being lamented by those at the forefront of the technology field who see the future as a marriage of traditional design and patterning with 3D innovations. Adds Wyatt, “Even on Clo you can download the free trial, but you have to know how to create a pattern for it to be be user-friendly and not a lot of designers know that anymore. Maybe it’s to come in AR, maybe VR, but that full on-the-dress form experience in a digital context is farther away than we would like.” Designers want to design in 3D, says Wyatt, "because it’s sexy.” But while the new generation leave school expecting the technology to be in place, the reality is quite different. “There is no magic button that you can press to go from an idea to pattern to a product that’s ready to go,” says Nicolae who fears the disappearance of skills, quality, and fit associated with such a reality. “I’m not sure that we want that.” Self-taught fashion designer Virgil Abloh reportedly shares initial ideas on Whatsapp for his collaborators to add to, and we can’t help wondering if this mash-up process is indicative of how future designers will work. Wyatt caters to creatives with just such an anyone-can-do-it, build-your-own-playlist attitude. “I want this shoe but instead of this motif, I want that one” is a curation approach to design, but he explains that Cala helps to clarify the vision with measurements, industry standard comments and instructions. The inevitable downside of these scenarios will likely include intellectual property rights violations and legal concerns, as Insta-creatives are tempted to post their memes right onto T-shirts.
Mass manufacturing and the future
The fashion industry has revolved 180 degrees. Where once there was the grand designer who imparted his unique vision from on high and customers clamored for a piece of it, now we have a wealth of data coming from the consumer which informs which products are created. Says Nicolae, “The traditional model of a fashion business which mass manufactures, investing hundreds of thousands of dollars, if not millions, to produce hundreds of thousands of dollars of the same product, hoping that the demand would be there once the product drops, that model is canceled.” Mass production only makes sense for certain product lines nowadays, and experts agree that when offsetting demand volatility best practice is to shrink your supply chain. The Tesla model where you design your own car and it arrives to your specifications is where fashion needs to be. “On-demand is not only for small brands, start ups, or those who need to produce small batches,” says Nicolae. “Companies which McKinsey hails as “super winners” are doing it too.” Adds Franck, “Instead of selling a product once but to the masses, now we need to understand how that same product can sell four, five times. The cheapest way to make money is to resell a product you’ve already made.” Brands which resist investing in automation technology because they think they don’t have enough volume, or those waiting for the volume to return from China, are missing the point, believes Nicolae. “Volume isn’t coming back. It’s not about competing with China on a mass level. It’s about nimble production, quick replenishment, customized personalized product. That’s the opportunity for manufacturing in North America. That’s where the conversation needs to be. We’re not setting up mass production facilities to compete with China.” Fashion editor Jackie Mallon is also an educator and author of Silk for the Feed Dogs, a novel set in the international fashion industry.
Source: Fashion United
