The move may cut prices of PTA by as much as $30 per metric tonne of the product, according to RK Vij, general secretary of the PTA Users Association. The government’s decision to abolish anti-dumping duties on a raw material for synthetic fibre-based clothing and certain plastic-based products will bring down their manufacturing cost and potentially boost exports, say manufacturers. The move, announced “in public interest” in the Budget Saturday, does away with a previous NDA government decision to block countries like China, Taiwan, Malaysia, Indonesia, Iran, Korea and Thailand from substantially exporting the material — purified terephthalic acid (PTA) — to India. It also follows “persistent” demand “for quite some time” from several industries to allow them to source the product at a more affordable rate. “That particular product (PTA) is a raw material for many industries. There has been persistent demand that they should be allowed to source that particular product at an affordable rate, even if it means importing it,” said Sitharaman. “We had a look at it, many had been waiting for it (to be removed). We thought at this time that when many industries are dependent on imported raw materials that we are allowing so many others to come in, why not allow this,” she said. The minister had said in her Budget speech that easy availability of this “critical input” at “competitive” prices was desirable to unlock “immense” potential in the textile sector, seen as a “significant” employment generator. The move may cut prices of PTA by as much as $30 per metric tonne of the product, according to RK Vij, general secretary of the PTA Users Association. “We have been fighting for the last four-and-a-half years (to abolish the anti-dumping duty),” he told The Indian Express. The duties had led to downstream manufacturers of synthetic fabrics operating at only 70 per cent of their actual capacity, he said. While India has a few domestic PTA producers like Reliance Industries and the Indian Oil Corporation, synthetic fabric makers have faced shortages of PTA on several occasions, Vij argued. “Exports of these downstream products have dropped and, in some cases, their imports have risen as it is cheaper to procure them from outside India,” he said. The anti-dumping duties, first imposed around July 2014, levied additional charges between $27 to $160 per metric tonne for those wishing to import PTA, according to the Southern India Mills’ Association. Data from the Commerce Ministry shows exports of some products made with PTA like polyester staple fibres (used to make synthetic yarn) dropped over 35 per cent to $197 million in 2015-16 from $309 million in 2013-14. In 2018-19, India exported $320 million worth of this product. Exports of textured yarn of polyesters dropped 19 per cent to around $680 million in 2015-16 from around $842 million 2013-14, before growing to around $832 million last financial year. “This (removal of the anti-dumpting duty) would greatly help the country to enhance global competitiveness, boost exports and enable domestic manufacturers to compete with cheaper imports,” said Ashwin Chandran, chairman of SIMA, Coimbatore.
Source: Indian Express
The association, which represents 21 end users claiming to account for two million metric tonnes per year of MEG consumption, also submitted that India’s current MEG production capacity fell short of the demand of the product by around 36 per cent. A group of textile companies on Monday approached the Directorate General of Trade Remedies (DGTR) against a move by Reliance Industries Ltd and India Glycols Ltd seeking imposition of anti-dumping duties on a raw material used to make polyester. In a letter to DGTR Director General BS Bhalla, an association representing companies like Indo Rama Synthetics India, Filatex India, Garden Silk Mills and Bombay Dyeing had argued that imposing such a duty on the material — mono ethylene glycol (MEG) — would lead to a “significant” loss to India’s textile units. “there exists a huge demand supply gap in India because of which imports are essential to meet the requirements of our members,” stated the PTA Users Association (PTAUA) in the letter dated February 3, a copy of which The Indian Express has viewed. “The imposition of anti-dumping duty would increase the cost of textiles and as you are aware, the ability of textile units to increase the prices commensurate with the increase in costs is very limited,” it said, adding that, under these circumstances, levying anti-dumping duty on MEG would not be in public interest. “While the levy may help the petitioner company in a limited way, it will cause irreparable damage to our members,” said PTAUA. The association, which represents 21 end users claiming to account for two million metric tonnes per year of MEG consumption, also submitted that India’s current MEG production capacity fell short of the demand of the product by around 36 per cent. India imported around $532 million worth of ethylene glycol from countries in 2018-19, and around $320.18 million between April and November 2019, according to data from the Commerce Ministry. Kuwait, Saudi Arabia, Singapore and United Arab Emirates were the top exporters of this product to India last fiscal. Last year, Reliance Industries — in a petition supported by India Glycols — had alleged that there was dumping of MEG from the abovementioned countries as well as Oman. “The petitioners have claimed that domestic industry has suffered material injury by way of adverse price effects as evidenced by price undercutting and price depression leading to accumulation of inventories, deterioration in profits, decline in return on capital employed and cash profits,” stated the DGTR’s December 9 initiation notification on the matter. “The petitioners have claimed that the material injury has been caused due to the dumped imports from the subject countries,” it stated, adding that the authority considered that there is “sufficient” prima facie evidence of material injury to justify initiation of an anti-dumping investigation.
Source: Indian Express
Indian customs authorities will now be able to question the valuation of imports under free trade agreements (FTA) for up to five years with the country proposing a significant shift in the domestic framework of rules of origin to tackle largescale imports. The rules of origin are criteria to determine the source country of a product, based on which they either get tariff concessions or are subjected to duties. “Retrospective verification of costing data, value-addition compliance and certificate of origin can be conducted by the customs authorities over a period of five years from the date of import, unless there is a specific time limit prescribed in the FTA... Customs officers will be empowered to check for violations in claims by importers,” said an official aware of the details. “They can enquire and question the claims made in the last five-year period.” Further, a certificate of origin submitted by an importer will no longer be the threshold for availing concessional benefits. Customs authorities can ask importers to substantiate and satisfy scrutiny undertaken on the question of origin. The February 1 budget proposed to amend the customs law by introducing stringent provisions related to rules or origin to strengthen the hands of customs officers to check abuse of FTA provisions. There have been several cases of abuse of rules or origin provisions over the past few years. The Directorate of Revenue Intelligence (DRI) had also come across the use of fake documents purporting to show that the goods came from a country with which India has a trade pact. However, industry executives said it could lead to harassment of importers, given the five-year period. The government has been trying to curb imports through tighter origin norms in trade pacts. A new chapter in the Customs Act on administration of rules of origin under trade agreements gives the government the power to suspend or refuse preferential tariff treatment in case of incomplete information or verification and noncompliance, respectively. A number of these provisions were only enumerated via notifications. “Unless otherwise specified in the trade agreement, any request for verification shall be sent within a period of five years from the date of claim of preferential rate of duty by an importer,” according to the proposed change in the finance bill. The government has been trying to curb imports through tighter origin norms in trade pacts. India’s trade deficit was $118.1 billion in the April-December period, down from $148.2 billion in the year earlier. As per the chapter, importers now have to declare that the items qualify as originating goods, or meet rules of origin norms. They must possess sufficient information about their origin criteria and regional value content. It also states that a submission of a certificate of origin “shall not absolve the importer of the responsibility to exercise reasonable care”
GIVING MORE TEETH
Former Central Board of Indirect Taxes and Customs (CBIC) chairman Najib Shah said, “The proposed changes in the Customs Act with the introduction of Sec 25 DA should strengthen the hands of the Customs Authorities and ensure misuse is curbed. Importers will need to respond satisfactorily to questions over the source of goods. “Going forward, trade needs to show more diligence vis-a-vis compliance with rules of origin as mere submission of certificate of origin may not suffice and there is likelihood of closer scrutiny by customs,” said Rahul Shukla, executive director, PwC. In certain instances, certificates of origin may be deemed inapplicable. “Interestingly, similar validation process is prescribed in rules of origin notified for FTAs,” said Shukla. “Hence, how the proposed amendment is operationalised vis-a-vis existing regulations notified under a bilateral or multilateral agreement will be interesting to see.”
PROTECTIONIST MOVE
The move is protectionist, said some industry representatives. “The government has given absolute power to customs officers and, with the power to question retrospectively, it has created more scope for harassment,” said an expert. “The utilisation of FTAs is anyway low and such harassment will further discourage people from using the preferential routes,” said a Delhi-based exporter. A total of 11.9 million preferential certificates of origin were issued between FY06 and FY19 amounting to total trade of $307.04 billion.
Source: Economic Times
Nirmala Sitaraman has proposed the National Technical Textiles Mission, with an outlay of ₹1,480-crore, for a four-year period to cut down imports. What is common to tarpaulin, fishing net and sanitary napkin? Well, they all come under the head ‘technical textiles’, a fast-growing industry segment that is now in the news because Finance Minister Nirmala Sitaraman spoke about it in her Budget speech. The announcement that the Finance Ministry has formally launched the next edition of the National Technical Textiles Mission by allocating ₹1,480 crore ($205 million) for a four-year period beginning this year, has not come a day sooner. The earlier National Technical Textiles Mission, which was launched for a period of five years (2010-11 to 2014-15), with an allocation of $1 million, was extended till March 2017.
Import-dependent
‘Technical textiles’ is a common name for 12 distinct product categories — the names reveal their applications. For example, ‘mobiltech’ refers to products in vehicles such as seat belts and airbags, airplane seats; ‘indutech’ for flame-resistant clothes used in the manufacturing industry; meditech are for diapers, napkins, sterlisation packs, bandages and sutures; agrotech products go into the manufacture of poly houses and nets; and geotech, which is incidentally the fastest growing sub-segment, used to hold back soil. The market for this is dependent on imports, which was ₹1.16-lakh crore in 2017-18, is set to cross the ₹2-lakh crore this year. The market for these products grew 11 per cent between 2012 and 2017 and is estimated to be growing at 20 per cent annually now, according to Government of India’s press releases. Despite 2,100 technical textile manufacturing units in the country, spread over Gujarat, Maharashtra and Tamil Nadu, India still depends on imports. As the Finance Minister noted in her speech, products worth $16 billion are imported into the country, when most of them can be manufactured locally.
Job creation
Every crore of rupees invested in technical textiles creates 70 jobs, as stated by Textiles Minister Smriti Irani in a seminar last year. Importantly, it can have an impact in the North-East, an area crying for development. “The topography of the north-eastern region (NER) makes application of geo-technical textiles particularly suitable for the region in infrastructure projects relating to road construction, river bank erosion control and slope erosion control,” said a March 2015 Government of India press release. Geotextiles can be used here in road construction — it has been noted in this contest that the North-East has a road network of 81,960 km, which needs protection all the time. “Road infrastructure represents the most obvious area of opportunity for geotechnical textiles,” the release said. Sufficient groundwork has been done for the National Technical Textiles Mission and it is the right time to focus on the second round of mission. For example, 92 application areas have been identified for mandatory use across ten central ministries and departments. The Bureau of Indian Standards has developed standards for 348 technical textile products; the Ministry of Textiles offers technical textiles courses under its skill development programme called Samarth.
Research initiative
The research institutions have been developing technologies for technical textiles. For example, Bhabha Atomic Reseach Centre has developed a liquid based on ‘phosphorous functionalised graphene quantum dot’ technology (pf-GOQ). You take a fabric and dip it into this liquid, the fabric acquires flame-retardant properties. The space agency, ISRO, has developed a high silica cloth, which it calls ISROSIL, which can withstand temperatures up to 1,650 degrees Centigrade. “With growing awareness and consumption of technical textiles, greater innovation in the field and demand from end-use industries, the country is a promising destination with an increasing demographic dividend and consumption scenario,” says the Government’s ‘Make in India’ website.
Source: The Hindu Business Line
The Confederation of All India Traders (CAIT) has lauded the Union Budget 2020 and said that it will promote exports. Commenting upon the budget, the Union Budget presented by the Finance Minister Nirmala Sitharaman on Saturday, CAIT said that it's a comprehensive document which will not only boost the income but will also enhance the purchasing power of the citizens which in turn will bring much awaited cash liquidity in the market. ''The announcements made in the budget if put to implementation in a strategic manner with a defined time frame will certainly lead India to a 5 trillion economy. The budget will promote more exports which will gain more share in global market space and consolidate country's position at global level,'' said CAIT National President B C Bhartia & Secretary General Praveen Khandelwal. The duo further asserted that the government has taken very vital steps to streamline he trade and commerce in the country. ''Providing support to domestic manufacturing and internal trade, affordable housing, promotion of digital payments, streamlining labor laws, vision to create each District as a Export hub is a unique concept which will certainly not only boost the exports but will also give bigger exposure to our artisans and small industries,'' they added. The trade leaders said that strengthening the Non-Banking Finance Companies (NBFCs) are one of the important announcements of the budget which will prove to be a game changer for national economy since NBFCs are major lending agencies to small businesses. Increase in tax audit limit from 1 crore to Rs 5 crore is a much progressive step and the commitment of the government to curb tax harassment is highly appreciated. ''The announcement to curb imports in textile sector and enhancing duties on footwear, furniture etc will give a boost to domestic trade and small industries. Gatiman QR code for generating invoices is also a welcome step which will curb informal business,'' they avowed. Later, they also said that CAIT stands in solidarity with government for its efforts in streamlining the trade and commerce in the country, widening the tax base and yielding more revenue to the government.
Source: KNN India
The Centre will release all due GST compensation to states in two instalments, Union Minister Anurag Thakur said in Lok Sabha on Monday. The reply came after MPs from Telangana and Odisha complained during Question Hour that their states were not getting the share of the Goods and Services Tax (GST) and Integrated Goods and Service Tax (IGST). "All due GST compensation will be given to states in two instalments," Thakur, union minister of state for finance, said. The minister said GST (Compensation to States) Act, 2017 provides for compensation to States/UTs (UT with legislature only) on account of revenue loss due to implementation of GST on a bi-monthly basis. Accordingly, he said, the states have been paid GST compensation on a bi-monthly basis with effect from July, 2017. Thakur said the GST Compensation has been released till September, 2019 and the next bi-monthly GST Compensation is due for October-November, 2019. The minister said a total of Rs 2,10,969.49 crore has been released as GST compensation to states so far including UTs of Delhi and Puducherry after implementation of GST with effect from July 1, 2017. Period for which compensation has been released: July, 2017March 2018 - Rs 48,785.35 crore; April 2018 March 2019 - Rs 81,141.14 crore; AprilMay 2019 - Rs 17,789 crore; June July 2019 - Rs 27,956 crore; Aug Sept 2019 - Rs 35,298 crore.
Source: Economic Times
Some bright patches are beginning to show up in the economy after all. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI), compiled by IHS Markit, rose from 52.7 in December to 55.3 in January, the highest in nearly eight years. While the pace of improvement is a surprise, companies attribute the rise to the underlying pent-up demand. A PMI above 50 indicates expansion. The consumer goods sub-sector again shines bright, while intermediate goods maintained its growth pace. Capital goods are back in an expansion mode, suggesting a potential renewal in investments in the economy. The PMI indicators also support the upturn in new business from external markets. Fresh export orders have risen the fastest since November 2018, with manufacturers notching higher sales to Asia, Europe and North America. Further, input costs are softening, and this could help improve margins. PMI data shows support came in the softer rises in input costs and output charges. While some companies reported higher prices for metals, textiles and food, others noted lower charges for copper, packaging materials and rubber. Following the pickup in demand, Indian goods producers increased production in January. The PMI data shows that the rise was the strongest in over seven-and-a-half years, with the rate of expansion much higher than its long-term average. Firms have started to use inventory to cover obligations, resulting in a decline in finished goods inventory. Commenting on the latest survey results, Pollyanna de Lima, principal economist at IHS Markit, said: “The PMI results show that a notable rebound in demand boosted growth in sales, input buying, production and employment as firms focused on rebuilding inventories and expanding capacities, anticipating further increases in new business." So far, hiring is also gaining momentum, which further bolsters economic expansion. Firms increased employment at the quickest rate in nearly seven-and-a-half years, the chief reasons cited being new business growth and projects in the pipeline. So, what next for the domestic economy? The Index of Industrial Production for November also showed expansion of 1.8% year-on-year. While all this spells good news, the virtual shutdown in China following the coronavirus outbreak will weigh on sentiment.
Source: Live Mint
For the textile and apparel sector, Finance Minister Nirmala Sitharaman has proposed National Technical Textile Mission in the Budget with an outlay of Rs 1,480 crore over four years to cut down imports. The proposed move can position India as a global leader in technical textiles such as development of rainwear, sportswear, retarded apparel and fire-resistant garments. There is also a tremendous potential for technical textiles in defence and agriculture sectors. Technical textiles are the fastest growing and the most promising areas that fall under the larger textile industry. According to the industry, the sector has demonstrated encouraging growth trends in India with a compounded annual growth rate (CAGR) of 8% for the past few years wherein it has reached a size of $13 billion. This is the most promising time for the sector as the government is currently engaged in devising policies for boosting it further. “India imports a significant quantity of technical textiles worth $16 billion every year. To reverse this trend and to position India as a global leader in technical textiles, a National Technical Textiles Mission is proposed," Sitharaman said in her Budget speech. “Outdoor explorers need good quality, comfortable wear which can best be offered with technical fabrics that we currently source from the best of the suppliers. These fabrics include innovative features like being breathable, light-weight, UV-resistant, wicking, organic and recycleable fabric. With this announcement, we are hopeful of being able to source such raw materials domestically at much competitive prices,” said Harkirat Singh, managing director, Aero Club (makers and retailers of Woodland & WOODS brand of clothes and shoes). “The project, once executed, will further strengthen our Make-in-India mission through domestic sourcing without compromising on the quality of the rough and tough yet comfortable product line offered by Woodland,” he said. The Finance Minister also announced the abolition of anti-dumping duty on purified terephthalic acid (PTA) — a key raw material for synthetic textiles. PTA is a critical input for textile fibres and yarns, she said, adding “Its easy availability at competitive prices is desirable to unlock the immense potential in textile sector which is a significant employment generator. Therefore, in the larger public interest, anti-dumping duty on PTA is being abolished." The removal of the anti-dumping duty on PTA would make import of PTA cheaper for the man-made fabric industry.
Source: Tribune
Praising the government for abolishing anti-dumping duty on purified terephthalic acid (PTA) in the budget, the Apparel Export Promotion Council (AEPC) appreciated the proposed review of the rules of origin criteria for free trade agreement (FTA) countries. However, a complimentary step in this direction would be expediting FTAs with the European Union, Australia, Canada and initiating an FTA with the United Kingdom, it said. It also appreciated the proposals for a dedicated investment clearance cell, economic corridors covering 9,000 km, a National Logistics Policy with a single window e-logistics market for making micro, small and medium enterprises (MSMEs) competitive, financing for MSMEs, 5-year exemption from audit for MSMEs and easing of tax filing for start-ups. The new NIRVIK scheme for higher export credit disbursements with greater coverage, reduced premium and simplified procedures for claiming settlements is a welcome step given the increased uncertainties in the global market, AEPC chairman A Sakthivel said in a press release. The proposed National Technical Textiles Mission can position India as a global leader in technical textiles, he said. The council is studying the proposed scheme for revision of duties and taxes on exported products in which Exporters to be digitally refunded duties and taxes levied at the central, state and local levels, which are otherwise not exempted or refunded, it added.
Source: Fibre2Fashion
With the finance minister delivering the much awaited budget 2020-21, the focus is now on its impact in reviving economic growth. First, the biggest focus before and after the budget was on changes in the personal income taxes. The government has sought to increase spending capacity by delivering a personal income tax cut but only with removal of exemptions. The overall impact on tax liability is unclear, but the government has estimated the value of the tax cuts at ₹40,000 crore. This will have a moderate boost to consumption demand in the short run but the impact on other sectors will have to be further looked into. Second, the big bet of the government to boost growth is push for investments in its industrial sector and push for India’s participation in the global value chains. This is borne by further changes announced in the dividend distribution tax (DDT), moving its incidence from the company to the recipient. This follows the corporate tax cuts announced in September 2019, and will boost India’s attractiveness to investments, especially by foreign companies. This seems similar to government’s reform method adopted in IBC and GST reforms where the government continues to tweak the reforms as it receives the feedback and learns from the implementation. Further, government has announced an investment cell which will handhold investors for all clearances. This scheme is based on global best case practices and depending on its implementation, it can significantly help in ease of doing business. Another set of measures announced aim at further simplifying the tax administration and boost investor trust. The government has also rightly focused on co-opting states in this regard. Besides these overall measures, the government has announced measures in specific manufacturing sectors. On textiles, it has announced a package of ₹1,480 crore and has waived anti-dumping duties on a key component namely PTA (ranging to about 3%-23% of the prevailing international price). This will help boost the competitiveness of the key sub segments of the textiles industry, technical textiles and synthetics. Across a range of sectors from toys, footwear, furniture, electronics, machinery, and other items, custom duties have been raised along with greater scrutiny of imports from free trade agreements. The government seems to be betting that greater protection from imports will help domestic industry; however, there is a risk that higher custom duties dilute India’s efforts to integrate with global value chains. Further analysis of specific goods will be required, for example on whether the import duties imposed are on intermediate goods or final goods to determine the overall impact of these measures. Third, another focus area of the government is to increase investments in infrastructure. Despite challenges in meeting fiscal math, the government has budgeted in 2020-21 for an increase in capital spending by about 20% over the last year. However to meet the goals of the national infrastructure pipeline, there is also a need to attract private investment. In this regard, there are a host of announcements of encouraging PPP by the provision of value gap funding by the government in areas such as hospitals, medical schools, warehouses and cold chains in agriculture, freight trains, etc. These are areas where investment is much needed but depending on how this is taken up this year, there could be a boost in infrastructure spending. Overall, the budget provides a set of measures to help progress across various areas of the economy. The government is hoping that this will improve the trust within the industry to get their animal spirits going. Chinmaya Goyal and Navneeraj Sharma are senior professionals in EY Tax and Economic Policy Group.
Source: Live Mint
Credit growth in the textiles industry fell from 6.9% in March 2018 to 1.3% in September 2018, -3.0% in March 2019 and -5.7% in September 2019. After Union Budget 2020 and ahead of RBI’s MPC meet starting tomorrow, speculations are being drawn if the interest rate will be cut for the sixth time in one year. However, the effect of previous cuts is yet to be seen on the ground. Despite a frequent cut in the repo rate, credit growth in 10 major industries further slowed in September 2019, compared to March 2019, according to the Economic Survey 2020. These industries include textiles, infrastructure, petroleum, etc. Apart from them, there are also a few industries where the contraction continues, though narrow. It was earlier believed that India could be a potential gainer amid the gap generated by the US-China trade war. The textile industry was especially one of the areas which were expected to rise significantly due to a window created by low-demand in the Chinese market. On the contrary, the credit growth in the textiles industry fell from 6.9 per cent in March 2018 to 1.3 per cent in September 2018, -3.0 per cent in March 2019 and -5.7 per cent in September 2019. While the market was expecting a sixth straight cut in the Monetary Policy Committee of December 2019, the RBI did not go for it saying there is merit in a wait-and-watch approach to see how the government’s fiscal measures pan out and impact real economic activity, including investment. Now, when the rate cut benefit is still invisible on the ground, the Reserve Bank of India may have many factors to consider in the upcoming MPC meeting. Meanwhile, the RBI’s first monetary policy announcement in 2020 is slated on 6 February 2020. With rising inflation and lingering growth concerns, the RBI is expected to keep the status quo maintained as in December, however, the market would be keenly watching the RBI’s commentary on growth slowdown and inflation.
Source: Financial Express
Fitch Ratings on Monday said India is expected to clock a GDP growth of 5.6 per cent in the next financial year, lower than the projection made by the government''s Economic Survey, as Budget 2020 has not "materially altered" its view on the country''s growth outlook. The Economic Survey, released a day before Finance Minister Nirmala Sitharaman presented Union Budget for 2020-21 on February 1, had projected a GDP growth of 6-6.5 per cent, up from 5 per cent estimate for 2019-20. "The fiscal slippage announced in the government''s new FY21 budget is modest relative to its previous targets, and is consistent with our expectations when we affirmed India''s ''BBB-'' rating with a stable outlook last December, given slowing growth momentum," said Thomas Rookmaaker, Director and Primary Sovereign Analyst for India, Fitch Ratings. Sitharaman''s Budget missed deficit target for the third year in a row, pushing shortfall to 3.8 per cent of GDP in the current fiscal as compared to 3.3 per cent previously planned. The fiscal deficit target for the coming fiscal year starting April 1, has been fixed at 3.5 per cent. "The new budget targets imply some further postponement of fiscal consolidation, in line with the government''s ambivalent approach to consolidation of the past few years when deficit outturns have typically exceeded budget targets," Fitch said projecting general government debt to remain close to 70 per cent of GDP through FY22. India''s high public debt relative to peers is a rating weakness, it said. "The budget does not materially alter our view on India''s economic growth outlook, which we forecast to pick up to 5.6 per cent in FY21 from 4.6 per cent in FY20," it said. The report further noted that Budget contains some measures which may support GDP growth in the medium-term, including reduced individual income tax rates, some easing of restrictions on foreign portfolio inflows, continued focus on public infrastructure spending, and schemes of which the details remain to be announced to encourage manufacturing in the electronics and textiles sectors. The rating agency said the assumptions in the budget, including nominal growth of 10 per cent and a rise in revenues by 9.2 per cent were "broadly credible" although there were risks to the downside. "In particular, reductions in the corporate tax rate, as previously announced, and new cuts in income tax rates are likely, in our view, to cause tax revenues to fall in the short run, before any potential medium-term benefits materialise; the divestment target appears optimistic, at over three times the estimated realisation in FY20," it said. The government had in September last year cut the corporate tax rate to 22 per cent from current 30 per cent and in the budget for 2020-21 announced reduction in personal income tax rates for those who were willing to give away present exemptions and rebates. Indian economic growth plunged to 11-year low in the July-September quarter when it clocked 4.5 per cent expansion. "Greater fiscal transparency around off-budget financing is welcome, as the new budget now explicitly recognises borrowing from the National Small Savings Fund of 0.8 per cent of GDP in both FY20 and FY21, e g to finance food subsidies, although this is not incorporated in the headline figure (which would be 4.6 per cent of GDP in FY20 instead of 3.8 per cent)," Fitch said.
Source: Outlook India
The Union Budget decision to review ‘rules of origin’ of the clause under the Customs Act to check misuse of FTA route and strengthening provisions relating to safeguard duty; may check rising flow of textile (readymade garments) imports from Bangladesh. India offers Bangladesh duty-free, quota-free import advantage under SAARC FTA or SAFTA, entered in 2011. Textiles played a crucial role in pushing Bangladeshi exports to India from $672 million in 2016-17 to $1.04 billion during April-November period of 2018-19. During April-November this fiscal, total imports from Bangladesh stood at $781 million (annualized $1.17 billion) Bangladesh is world’s second-largest exporter of readymade garments (RMG). However, its exports to India got a significant boost following the implementation of GST – which subsumed 12 per cent countervailing duty (CVD) - in July 2017. Countries like Sri Lanka, Vietnam also enjoyed the benefits of the introduction of GST. But, Bangladesh made the most of it. During the first eight months of 2019-20, India imported $801 million worth of textile items under HS codes 61 and 62. Of India’s total garments import one-third (34 per cent) came from Bangladesh. The share is as high as 44 per cent in imports under HS-Code 62 (articles of apparel and clothing not knitted or crocheted). What particularly drew the attention of the Indian textile industry was the absence of the minimum value addition criteria in SAFTA. Confederation of Indian Textile Industry (CITI) was apprehensive that the loophole might be used for diversion of Chinese man-made fibre-based garments through Bangladesh. With India-Pakistan relations at its lowest ebb, amending SAFTA may not be possible at this juncture, Sanjay Jain Managing Director of TT Ltd felt India might consider imposing safeguard duty as per Budget provisions.
Source: The Hindu Business Line
The rupee pared early losses to settle 3 paise down at 71.35 against the US dollar on Monday, tracking recovery in domestic equities and easing crude oil prices. Besides, the domestic unit weakened amid concerns of fiscal slippage and rising coronavirus outbreak fears, forex traders said. The next trigger for the currency will be the Reserve Bank of India's monetary policy meeting, as its commentary on inflation as well as growth forecast would be keenly watched. At the interbank foreign exchange market, the local currency opened at 71.62. During the day, it saw a high of 71.32 and a low of 71.66. The domestic unit finally settled at 71.35, up 3 paise over its previous close. The Sensex rose by 136.78 points or 0.34 per cent to settle at 39,872.31 as 18 of its components ended with gains. The 50-share NSE Nifty gained 46.05 points or 0.39 per cent to close at 11,707.90. The global crude benchmark Brent Futures fell 0.37 per cent down to trade at USD 56.41 per barrel."this week we have RBI policy, we expect the central bank to stand pat at 5.15 per cent with accommodative stance, the commentary on inflation and growth forecast would be keenly watched. "Meanwhile, the global concern that fast- spreading coronavirus may hamper global growth led to a gap-up open in USD/INR spot," said Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services. The Reserve Bank of India is scheduled to hold its Monetary Policy Committee (MPC) during February 4-6, 2020.Vietnam didn't see growth in exports to all CPTPP nations.
Source: Money Control
Three British textile firms are the latest to adopt industrial digital technologies designed to boost growth and productivity. Panaz based in Burnley, Edward Taylor Textiles in Blackburn and Dukinfield-based Tibard are the latest small and medium enterprises (SMEs) that have secured funding through the government’s ‘Made Smarter’ programme. They are among 62 businesses now investing in a range of industrial digital technologies, including data analytics, artificial intelligence (AI), augmented reality (AR), industrial Internet of Things (IIoT), 3D-printing and robotics, to solve business challenges across a range of manufacturing functions and deliver an additional £52 million in gross value added (GVA) for the North West economy over the next three years, according to a press release. Three hundred North West SMES have secured support, including specialised advice and £1.6 million in funding, in the first year of the Made Smarter programme. This support includes expert impartial advice and one-to-one support, digital roadmapping workshops to help manufacturers take their first steps to transform their business, eight-month leadership and management training programmes offered in partnership with Lancaster University, as well as funded three-month student placements. By adopting these cutting-edge technologies, businesses benefit from improved productivity and revenue, increased exports and job creation, providing new skills to workforces, enhanced integration with supply chains and reduced environmental impact. The £20-million pilot programme was launched in November 2018, becoming operational in January 2019, and runs until March 2021. The pilot will inform how best to support SME manufacturers in the adoption of new industrial digital technologies. The North West pilot is being overseen by the Made Smarter Commission – a partnership between the Department for Business, Energy & Industrial Strategy (BEIS) and industry leaders.
Source: Fibre2Fashion
Vietnam has been the beneficiary of a Free Trade Agreement (FTA) with the Eurasian Economic Union since 2016, as a result of which bilateral trade with Russia has boomed. With three years of experience and investment in increasing trade infrastructure, Vietnamese importers, distributors and retailers considering expanding this trade should be conducting market research activities into the opportunities in this market. Vietnam is a good choice as a developing trade partner for Russia, it has a large and increasingly prosperous consumer base of 96 million, spending US$0.6 trillion in 2018, and a GDP per capita of about US$2,750. (Russia’s per capita GDP is about US$11,500). National GDP growth in 2020 is expected to be about 6.5%. Consumer confidence is also high. Recent reports here by ourselves and here by Societe Generale point to a booming, domestic economy. Hanoi, Ho Chi Minh City, and Da Nang are all high-value consumer hotspots with consumer values far above the Vietnamese average. Current Russian trade trends with Vietnam are also on an upward path, as we can see in these statistics courtesy of Trading Economics (figures in millions of US dollars) and grew steadily during the course of 2019. Both the Russian and Vietnamese Governments have stated that bilateral trade should reach US$10 billion in 2020. Key imports from Russia, are petrol, oil, steel, fertilizers, and machinery. Major Vietnamese exports include phone components, electronic devices, computers, apparel, and footwear. Food exports include fruits, vegetables, coffee, cashew nut, and seafood. The Vietnam-EAEU Free Trade Agreement covers more than 90 percent of all traded goods and has significantly benefited the EAEU’s exports of agricultural and industrial products. In turn, it has also increased Vietnamese exports of garments, textile products, farm products, and electrical devices. An additional 5,535 tariff lines were reduced to zero percent in 2019. These focused-on items are input materials for the textiles, footwear, electronics, plastic, fertilizers, and farming sector. Another 3,270 tariff lines were reduced to zero percent for goods such as milk and dairy products, chemicals, automobiles, and spare parts, steel products, rubber products, and electrical appliances at the end of 2019. However, the FTA also provides some protective measures. According to Article 2.1 in the FTA, the EAEU may apply a trigger safeguard measure for Vietnamese goods in case the import volumes during a calendar year exceeds the trigger level as established in Annex 2 of the agreement. Currently, under this measure, certain products in the textile and garment sector in Vietnam face safeguard duties from the EAEU, which aims to limit the increasing volume of imports to the Union. Since March 14, 2018, duties were imposed on Vietnamese underwear and children’s wear products for nine and six months, respectively. Traders have to ensure that they do not exceed the trigger levels as defined under the agreement; else, they may face most favored nation rates and not the preferential tax rates as prescribed under the free trade agreement. To reduce trade violations, the Vietnamese government has to ensure that traders are well informed and aware of such measures. In addition, individual governments have to promote the FTA and investments to increase the participation of private firms. In the last few years, the EAEU has also started to work with other ASEAN member states on trade and investment, and this puts Vietnam in a unique position, as it can act as a supply chain gateway for Russian and other EAEU businesses in the region. Going forward, to achieve their target of US$10-12 billion bilateral trade by 2020 and US$30 billion by 2030, trade between Vietnam and the EAEU can be expected to grow exponentially. There are numerous opportunities for foreign distributors and manufacturers to compete in the Vietnamese market. Russian truck manufacturer Gaz has recently established operations in the country. In terms of Russian exports to Vietnam, it should be noted that there are Quality Control standard differences between Russia and ASEAN nations, and Russian exporters should be aware of these. We covered this in the article Quality Control Challenges For Russian Exporters To ASEAN.
Source: Vietnam Briefing
Vietnam has been unable to see growth in exports to all member nations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), according to the country’s ministry of industry and trade. In 2019, export value surged by 28.2 per cent year on year to $3.86 billion to Canada and by 26.8 per cent to $2.84 billion to Mexico. It rose by 20.5 per cent to $1 billion to Chile and by 40 per cent to $350 million to Peru. The country witnessed a slight increase of 1.1 per cent in its export value to Singapore and faced export value reduction to some other CPTPP countries like Australia (down 12 per cent to $3.5 billion) and Malaysia (down 3 per cent to $3.3 billion)m according to a report in a Vietnamese newspaper. Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said the first impact of the CPTPP for Vietnam was to accelerate reform in institutions, meeting requirements of the global economy and trade. However, in a VCCI survey of 8,600 local enterprises, up to 70 per cent of those had little knowledge of CPTPP. This survey has also pointed out that 84 per cent of the enterprises lacked information regarding the commitments in the free trade agreement. Meanwhile, textile, footwear, fisheries and wooden products were considered commodities that would have a lot of opportunities to boost exports thanks to tariff rules in the agreement, but it has not turned out that way. Le Tien Truong, general director of the Vietnam National Textile and Garment Group (Vinatex), said the textile and garment industry has not taken full advantages from the CPTPP to increase exports because of issues meeting rules of origin in the agreement. This agreement requires certification on local origin from yarn onward to enjoy preferential tariffs, while the domestic textile and garment industry annually imports about 99 per cent of cotton and 80 per cent of fabric for its production, he said. According to the Import-Export Department, in 2019, the textile and garment industry spent $13.3 billion on fabric imports, up 4 per cent year on year, $2.4 billion on yarn imports and $2.6 billion on cotton imports. The industry achieved a total export value of $39 billion in 2019, lower than expected. Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS) admitted importing input materials has made local producers struggle to take advantage of free trade agreements like CPTPP.
Source: Fibre2Fashion
Ministry of Commerce and Textile was not taken on board by the Power Division in revoking the government's decision of providing electricity at concessionary rate of US cents 7.5/kwh to the five zero-rated exports-oriented sectors. This was revealed by a senior official of the ministry while talking to Business Recorder after attending the sub-committee meeting of the National Assembly Standing Committee on Commerce. The committee met with Mohammad Yaqoob Sheikh in the chair “to consider the issue of concessions given to the textile sector and their sudden withdrawal by various government departments." The committee members said that industry is going on strike from February 10 against the Power Division's decision of revoking the concessionary rate for electricity and it is feared that many people would be rendered jobless, besides the closure of industry in the country. Shaza Fatima Khawaja, member of the committee termed the Power Division notification of revoking the concessionary rate illegal while saying that the facility was given by the ECC but it was revoked by Power Division without the ECC approval. The parliamentary panel repeatedly asked the Joint Secretary Power Division (Admin) for thought-processing behind the revoking of concessionary electricity to the export sectors. However, the official failed to satisfy the committee while saying that concerned official (joint secretary Power Finance) is not present. The committee sought explanation from the official concerned for not attending the meeting. The committee was informed that the government provided electricity at concessionary rate of US cent 7.5 /KwH to the five zero-rated sectors. The ECC of the cabinet considered the summary on October 24, 2018 and the tariff rationalization for power sector was approved. The Power Division issued separate notification for zero-rated industrial consumers vide SRO No. 2019, January 2019, at a rate of Cents 7.5/KwH. The Finance Division instructed the Power Division to seek clarification from competent authority whether or not taxes and surcharges are exempted from recovery. It is submitted that as the summary has been moved by the Power Division; therefore, the decision and relevant details would be available with the Power Division, said officials of Commerce and Textile Ministry. The textile sector is of the view that (i) US Cent 7.5/kwh was given to provide regionally competitive electricity rates; (ii) the SRO 12(1)2019 interprets US Cent 7.5/kwh is an all inclusive tariff; (iii) US Cent 7.6/kwh if loaded with fuel price adjustment, quarterly surcharge financial surcharge and Neelum-Jhelum surcharge then the price of electricity would increase by following – base price US Cents 7.5/kwh (Rs 11.65), quarterly surcharge 3rd & 4th quarterly 2018-19 (Rs 0.63), quarterly surcharge 1st quarter (Rs 0.26), annual tariff distribution margin (Rs 0.20), financial surcharge (Rs 0.43), fuel adjustment (Rs 1.57), and Neelum-Jhelum (Rs 0.01). The textile sector is of the view that they should be charged with US Cents 7.5/kwh i.e. Rs 11.65/kwh and additional Rs 3.19 should not be charged. The Power Division clarified vide letter date January 13, 2020 that the matter was considered by the federal government and it was decided and clarified that the concessionary rate of 7.5/kwh for zero-rated industrial consumers notified through SRO 12(1(2019) was only limited to the extent of schedule of tariff notified through SRO No. 1-10 dated January 1st, 2019 and SRO (1)2010 dated January 1, 2010. The industry filed petition in courts and decision was in favor of Power Division. MNA Shaista Pervaiz said all taxes were included in the tariff but now the Power Division is saying that the taxes were not included. The five zero-rated sectors are going on protest against these measures from February 10. She further said that the government's decision will make electricity and gas more expensive for textile sector especially in Punjab and millions of people will be rendered jobless. Shiza Fatima Khawaja said that this decision of the government will shut down people's small factories. “Our production costs are already higher compared to other regional countries," she added. “What are the details of any study done by the concerned ministries before withdrawing the concessionary tariff?" said Shiza Fatima Khawaj, adding how an industry can pay three and a half rupees pr unit of electricity for a year. Convener of the committee also said how Power Division can refuse the approved rate of ECC. The Power Division official said that they are trying to reduce the cost of electricity production and more attention is being given to increasing power generation through alternative sources.
Source: Business Recorder
