India should refrain from setting a budget deficit target for the year ending March because the coronavirus outbreak is forcing the government to undertake unscheduled spending, an adviser to Prime Minister Narendra Modi said. The South Asian nation pledged 21 trillion rupees ($278 billion) spending to help the economy battle the fallout of the pandemic along with higher borrowings to bridge the steep fall in revenue collections. The government had planned to rein in the deficit at 3.5% of gross domestic product in February’s budget. “Fixing any fiscal deficit target is not possible this year because there are so many unknowns,” Rajiv Kumar, vice chairman of the government think tank, Niti Aayog, said in an interview last week. “Therefore we now have to take a dynamic view of the fiscal deficit rather than get bogged down by any specific number.” Asia’s third-largest economy is on the brink of its first contraction in four decades as consumer demand collapsed after Prime Minister Modi enforced the world’s most stringent stay-at-home rules locking up 1.3 billion people in their homes since March 25. Goldman Sachs Group Inc. expects the economy to shrink by 5% in the year ending March, deeper than any other recession India has ever experienced since independence in 1947. Reforms announced in the past few days to accelerate growth are likely to have an impact over the medium-term but may not revive growth in the short term, Goldman economists Prachi Mishra and Andrew Tilton wrote in a note dated May 17. While restrictions have been eased, millions have lost their jobs prompting the administration to announce a spending plan of nearly 10% of GDP. Meanwhile, the spread of the infection has been relentless and there could be a need to spend more to contain its fallout. The country has seen over 95,000 infections and 3,000 deaths so far. Nomura Holdings Inc. estimates India’s budget deficit will widen to 7% of gross domestic product, with output shrinking by 5.2%. “If we constraint policy in a straitjacket on some fixed fiscal deficit numbers, we lose our degree of freedom for necessary and appropriate action,” Kumar said in an interview conducted via video conference. A downgrade of country’s sovereign ratings was unlikely as the situation was unprecedented crisis and no country had been spared, Kumar said. Moody’s Investors Service currently rates India at Baa2, in line with Colombia, Indonesia and the Philippines. S&P Global Ratings and Fitch Ratings have a BBB- assessment, the lowest investment-grade level. “To use old norms for judging is neither rational nor called for,” Kumar said.
Source: Economic Times
Days after changing the definition of MSMEs, the government has decided to further revise the criteria for medium units by enhancing the investment and turnover limits to up to Rs 50 crore and Rs 200 crore respectively, Union Minister Nitin Gadkari said on Tuesday. Unveiling the contours of the Rs 20-trillion stimulus package, Finance Minister Nirmala Sitharaman had last last week announced a change in the definition of micro, small and medium enterprises (MSMEs). According to the revised definition, any firm with investment up to Rs 1 crore and turnover under Rs 5 crore will be classified as “micro”. A company with investment up to Rs 10 crore and turnover up to Rs 50 crore will be classified as “small” and a firm with investment up to Rs 20 crore and turnover under Rs 100 crore will be classified as “medium”. The previous criteria for classifying enterprises in the “medium” category was investment up to Rs 10 crore and turnover of up to Rs 5 crore. “We have taken a decision to raise the up to Rs 20 crore investment (criteria) to up to 50 crore and turnover (limit) to up to Rs 200 crore. So we will issue an order for that,” Gadkari said. The minister for MSME and road transport and highways, Gadkari said he feels the criteria should be based on investment “or” turnover instead of investment and turnover both as announced, adding that the government “will rectify the same”. The minister said he was also open to considering suggestions regarding enhancing the turnover limit to up to Rs 250 crore for medium enterprises, and will take up the matter with the MSME secretary. Gadkari said the government plans to raise MSMEs contribution to India’s exports to 60 per cent from 48 per cent at present and also boost the sector’s contribution to the country’s GDP from 29 per cent currently to 50 per cent. “We are planning to create 50 million new jobs. Until now, we have created 11 crore jobs,” said the minister, adding that he was keen on developing Indian MSMEs of international standards. Interacting with representatives from an exporters' body, he urged exporters to take advantage of the “blessing in disguise” posed by the global "hatred against China” through cost reduction and encouraging import substitution. Besides, Gadkari said the government wants to make bus ports and is also planning to build logistics parks.
Source: Business Standard
India recently turned down a proposal by some World Trade Organisation (WTO) members, mostly rich, for permanent tariff concessions on health and farm products as an answer to trade disruptions caused by COVID-19, arguing that the proposal may be a ploy to gain additional market access and developing countries need to continue protecting their nascent industries. “The narrative-push by some WTO members to seek permanent tariff liberalisation on a range of products in response to a temporary crisis appears to be a thinly veiled bid to use the crisis as an opportunity to gain market access for their exporters,” Indian media reported quoting the country’s statement at a recent meeting of the WTO’s General Council to exchange views on the economic and trade impact of the pandemic. Australia, New Zealand, Singapore, Canada, Chile and Brunei had come up with a joint statement a few weeks earlier against the imposition of export controls, or tariff and non-tariff barriers. They also opposed the removing of any existing trade restrictive measures on essential goods, especially medical supplies, amid the battle against COVID-19. “Developing countries seeking to shore up manufacturing capacity in medical products will require tariff protection for their nascent domestic industry. Further, job losses in many service sectors have to be compensated elsewhere. Therefore, India, like many other developing countries, cannot agree to permanent tariff concessions, and a dilution of the tariff bindings that we have paid for in the Uruguay Round,” said India’s statement. Members are free to reduce customs duties on import of certain medical or agricultural products to zero if it serves their health and food security objectives, but it has to be on a voluntary basis, it said. In formulating a response to the COVID-19 disruptions, it is critical to bear in mind that the impact of the pandemic will be felt unevenly, though widely, the statement pointed out. “The strain on economic, food and livelihood security will disproportionately impact developing countries and LDCs (least developed countries) with large populations and limited resources. Therefore, they need special treatment,” India said. However, India also acknowledges the importance of coordinating the global response to avoid disruptions in the flow of vital medical supplies, food and other goods and services across borders, and has been playing a proactive role in ensuring the availability of vital drugs such as hydroxychloroquine and paracetamol across the globe, the statement added.
Source: Fibre2fashion
Virtual hearing of all demand notices relating to indirect taxes including goods and services tax (GST) can be done through Whatsapp, authorities in Thane tax zone said a notice while issuing standard procedure for conducting the hearings. The decision has been taken due to situation arising from Covid 19, and the mandatory guidelines from government on maintaining social distancing norms. “Keeping in view the situation arising due to Covid 19, it has been decided to conduct personal hearing in respect of all demand notices through video conferencing,” the notice dated May 18, said. “Whatsapp video conferencing has been considered as on such suitable mode for video conferencing because it also has ‘end to end encryption’ and has a huge reach amongst common people,” the notice added. The facility will remain in place till any other more secure or easier mode is established, the authority said in the letter issued for general information. Whatsapp has more than 400 million users in India, far ahead of any other messaging app in the country, including Telegram which has increased its share in the Indian market over last couple of years. The directions follow instructions from Central Board of Indirect Taxes and Customs (CBIC) issued in April, allowing field offices to conduct hearings in customs, excise and service tax appeal cases via video conference with the consent of the appellant or respondent. Issuing standard measures, the state GST authority has said that all the parties must agree for virtual hearing via Whatsapp Video Conferencing and provide Whatsapp number for the same. The authority will notify the date and time of the hearing, which will have to be confirmed by the notices a day in advance, while a notice will have to confirm his or her presence for the hearing 15 minutes prior to the given date and time, via text by the given Whatsapp Number. Whatsapp communication will also be used by the authorities to send out personal hearing memos in PDF form after the hearings conclude. These will have to be signed by the notice or notices concerned and sent back to the authority on the same Whatsapp number, within 15 minutes of receipt.
Source: Economic Times
Mumbai: Rating agency CrisilNSE 1.46 % on Tuesday joined analysts sceptical about the near-term benefits of the Rs 20 lakh crore stimulus package on growth and also flagged the absence of any dedicated steps for the most troubled sectors "while most steps from government are steps in the right direction, it is unlikely to stimulate demand/consumption given that the package is more focussed on supply-side reforms," its research wing said in a note. Finance Minister Nirmala Sitharaman on Sunday finished a series of announcements which detailed the stimulus package, but almost all the analysts doubted their efficacy from a growth driving perspective and said that the economy is bound to contract in FY21. In the note, the analysts at Crisil also voiced some concerns over there being no announcements for highly vulnerable sectors such as airlines, tourism and hotels. "Further, while the government has not added much to its current year fiscal outgo - and thereby deficit - it will weigh on public debt next fiscal unless the economy revives," it warned. With the government making it possible for states to borrow more as a percentage of its finances, and accounting for Rs 1.50 lakh crore or additional headroom created in the package, the states' strategies will now be a key monitorable, the agency said. The agency also said that the actual fiscal impact of the announcements is far lower than the headline amount of the stimulus because a lot of the measures are through aspects like guarantees. At Rs 1 lakh crore, the actual fiscal outgo is just 9 per cent of the Rs 11 lakh crore worth of measures announced by Sitharaman, it said. "Given the fiscal constraints, the government has undertaken measures that can magnify the impact of every rupee of stimulus. Hence the liberal use of guarantees and tiered funding structures," it said.
Source: Economic Times
Weaving the gossamer fine fabric which made his hometown Chanderi famous the world over, Mohammed Dilshad says his life is in tatters with no money, no food and no work. Till a little before the lockdown started on March 25, he would be out for days at a stretch, participating in craft fairs like the Dastkar bazaar in big cities and coming back to his Madhya Pradesh home only to produce the rolls of ‘chanderi’ fashioned into saris, dupattas and dresses. Life had settled into a routine – not an affluent existence but a comfortable one -- but that all seems in the distant past. Help has been negligible in these difficult times and even managing two meals a day is becoming a challenge, said the fourth generation Chanderi craftsperson based out of the small town, famous for its light and comfortable weaves in silk and cotton. “We didn’t understand the lockdown would mean no movement, no work and no money. The MP government gave rations but only rice. How can one just have rice?” Dilshad told PTI over the phone. Dilshad, a National Award winning weaver, is one of the 68 lakh artisans employed by the textile handicrafts sector, bringing in Rs.36,798.20 crore through exports, according to the Ministry of Textiles’ annual report for 2018-19. His crisis finds resonance in distant corners of India. Buying a curio, a sari or a folk painting has slipped right down in the list of priorities, leaving artisans like him counting each rupee and scrambling to feed their families. Part of an over Rs 24,000 crore industry, the weavers, potters, block printers, painters and a host of others represent the best of traditional craft from the length and breadth of India. Many of them, working from their villages, would sell their craft at the various bazaars and fairs in cities and to big time retailers. But the coronavirus forced lockdown, which entered its fourth phase on Monday, has ended it all The raw material in stock at their homes finished first, then the orders dried up and now, with no idea of when markets will open fully or who will buy their wares, India’s artisans are counting each rupee and scrambling to feed their families. “The first week was not very difficult. We had some raw material in stock and continued to work. The seriousness of the situation only hit us when we ran out of work to do, and there was no money coming in,” Dilshad said. The 34-year-old -- a father of two, lives with his brother, also a Chanderi weaver, and his family -- said he received some money towards the beginning of the lockdown from a not-for-profit NGO but the money is drying up fast. The artisan community in the region, he said, had also appealed to the Weavers Service Centre in Indore for some relief. “We were told our request has been forwarded to higher authorities, but we haven’t heard back. Our major problem is that we don’t have any rations. “The nature of our work is such that we would not stay in Chanderi for more than 10 days at a stretch — we make the product, and then go out to make the sales, and this circle would continue,” he said. Jaya Jaitly of the Dastkaari Haat Samiti, a not for profit organisation that works with craftspersons, is worried about the future of the sector. Besides being able to return to work at the earliest, the artisans also need to make up for lost time in terms of sales, and that will be a challenge in a world with social distancing, she said. “One of the most worrying things for them is what kind of marketing they will be able to do when the lockdown is lifted. What will the nature of the market be… we won’t have crowded bazaars, e-commerce hasn’t picked up as of now,” Jaitly told PTI. The handicrafts sector in the country also comprises craftspeople who practice other art forms — pottery, bamboo and dokra art, and painting that might not fall under a government ministry but contribute to the country’s earnings through both domestic and international sales. In the Rajasthan village of Kot Jewar, renowned for its blue pottery, an art form recognisable for its use of cobalt blue dye, Ram Narayan Prajapati, his son Vimal Kumar and their 250 odd employees face a dire tomorrow. All their orders have been cancelled and there are no takers for the products in their inventory. Prajapati and his son have collaborated with the India Craft project to make some sales and raise funds in order to help out their artisans. “We have at least 50 families (over 250 individuals) of potters. All our orders have been cancelled, and we have plenty of stock, but we won’t be able to sell all of it even in two years. “Our artisans are finding it difficult to continue with their daily lives,” Kumar said in a Facebook video directed at potential buyers. According to the India Craft project, a sum of Rs 3,000 can help an artisan household of four members with rations for up to a month. “Through this campaign we hope to support 50-60 families in the Kot Jewar region,” the group said in an online post. Purnima Rai, a former president of the Delhi Crafts Council, said the situation is getting worse as the lockdown progresses. “When the lockdown started, there was no immediate distress… they (artisans) were okay, they were at their homes, some of them had farmlands. They did not face the hardships that were being faced by, say, the migrant labourers, but now there is a lot of anxiety over whether they will be able to work again,” she said. “This sector not only has a huge contribution to the economy, but also provides good, sustainable livelihoods in the rural sector. It is a huge employer of people,” Rai said. “I have not seen them do anything at all from the ministry of textiles or others, nobody has mentioned the word craftsperson,” agreed Jaitly.
Source: Hindustan Times
Surat: Even as the state government has relaxed Covid-19 norms for the commencement of industrial activity across the state, the two most important sectors — textile and diamond — are still languishing in the dark. Reason: Both the sectors are impacted by rules meant for ‘red zones’. In a meeting with the trade associations and leaders of the textile and diamond sectors on Tuesday, municipal commissioner Banchhanidhi Pani clarified that no business activity will be allowed in the containment zones. This will impact about 55,000 textile shops in about 140 textile markets located in the city’s red zones. However, diamond and textile units operating in non-containment or green zones will be allowed to function with 50% workforce and strict adherence to standard operating procedure (SOP) guidelines to contain spread of coronavirus. On the other hand, the worst-hit under the restrictions is the diamond industry with most of its cutting and polishing units being located in the red zones of Varachha, Katargam and Central zone including the Mahidharpura and Varachha diamond markets. Not only that its lifeline, the Mumbai market, too is still under lockdown. Regional chairman of Gems and Jewellery Export Promotion Council (GJEPC), Dinesh Navadiya said, “It is a confusing situation for the diamantaires whether to resume operation or not as not only are our own diamond markets besides many diamond units in the containment zones, the other bigger problem is that the Mumbai market is yet to reopen. Again, a majority of the diamond workers too have moved out of the city.” Talking with TOI, municipal commissioner Banchhanidhi Pani said, “The textile and diamond stakeholders were given detailed information on the containment zones. Textile markets located in containment zones will not be allowed to open. There are 42 containment zones covering 16 lakh population in 24 sq km area. However, we have permitted textile markets in non-containment zones to open on odd-even formula.” Pani further said that the industries will have to follow SOP guidelines. If positive cases get spiked in industrial areas, the units will be sealed once again. Guidelines issued to contain spread of coronavirus including sanitisation, compulsory wearing of face mask, social distancing among others will have to be followed strictly, he added. Manoj Agarwal, president of Federation of Surat Textile Traders Association (FOSTTA) said, “About 90% of the textile markets are in the red zone and they are not allowed to commence operation. Textile markets are the key component of the textile chain and that it will impact the normal functioning of the textile sector in the coming days.” Jitu Vakharia, president of South Gujarat Textile Processors’ Association (SGTPA) said, “Baring 15 textile mills, majority are in the non-containment zones. Our members have started preparations to re-start the mills in the next couple of days. Since the textile markets will remain shut, we will directly source fabric from the powerloom units.” Ashish Gujarati, president of Pandesara Weavers association said, “About 40% of the weaving units in the city will start operation from Wednesday. Disinfecting activities are going on in the industrial areas in the non-containment zones.”
Source: Times of India
The Japanese government has expressed concern over the fate of its companies in India, especially in the automobile sector, due to disruptions caused by the lockdown. It has asked New Delhi to make labour laws “less stringent’’, improve logistics and lower customs duties on specific products. Representatives from Japan’s Ministry of Economy, Trade and Investment (METI) met representatives from the Department for Promotion of Investments and Internal Trade (DPIIT) and the Ministry of External Affairs in a video conference recently to discuss problems being faced by Japanese companies in India and how it could be mitigated. “The Japanese government is not only concerned about the restrictions in place due to the on-going lockdown, but is also worried about the falling demand, especially for automobiles, and wanted to discuss measures for supporting its companies,” a person familiar with the meeting told BusinessLine. One big problem, according to Japanese companies in India, is the strict labour law that makes it difficult to lay off workers, even when production is low. “The Japanese pointed out that the difficulty in reducing workforce when the COVID-19 situation had hit business and also the necessity to maintain wages was making operations unsustainable,” the official said. As several States such as Maharashtra, Gujarat, Uttar Pradesh and Madhya Pradesh, have decided to offer some concessions in existing labour laws, and some others are working on it, DPIIT assured the Japanese delegation that it would continue engaging with it on the matter. The restrictions in movement of workers, especially the inter-State movement of employees, were posing another challenge, the delegation pointed out. With companies such as Maruti-Suzuki starting operations in more than one plant, such movements are essential. “The Japanese officials were assured that with the easing in movement of people and goods in the latest phase of opening-up of the economy, things would get smoother,” the official said. Lowering of customs duties on products of interest to Japan, including inputs for its plants in India, is another demand made by the country. “India has to be very careful in its decision to lower customs duties as the domestic producers also need to be protected with their profits in doldrums due to the lockdown,” the official said.
Japanese investments
In the last two decades, cumulative Japanese investments in India have been at $30.746 billion making it the third major investor in the country. Japanese FDI into India has mainly been in automobile, electrical equipment, telecommunications, chemical, financial (insurance) and pharmaceutical sectors. There are as many as 1,441 Japanese companies registered here. As India tries to totter back to normalcy with the gradual opening of restrictions, Japan was assured that the government will continue to hold meetings and ensure that most problems are sorted out, the official said. Japan is India’s 12th largest trade partner accounting for $12.77 billion of imports and $4.86 billion of exports in 2018-19.
Source: The Hindu Business Line
The impact of the Atmanirbhar Bharat package on fiscal deficit is unlikely to be over 1-2% of gross domestic products (GDP), say experts. FM Nirmala Sitharaman Sunday announced the fifth and final tranche of the Rs 20 lakh crore relief package. Experts agreed that most of the expenditure was contingent and the measures were largely regulatory and the government’s immediate additional expenditure would be minimal. State Bank of India chief economist Soumyakanti Ghosh and EY’s chief policy advisor DK Srivastava pegged it at 1.01% of GDP or Rs 2.02 lakh crore. A Nomura report pegged the dent at 0.8% of GDP. “We expect the overall fiscal deficit for FY21 to be 7% of GDP,” the report said. Accounting for certain ambiguities on where certain expenditures would come from, like the Rs 1.5 lakh crore package for the farm sector and other outlays that were not mentioned in the final presentation, Madan Sabnavis, chief economist at Care Ratings put Centre’s additional expenditure at Rs 80,000 crore. Adding this to the Rs 1.93 lakh crore expenditure announcement in March and April, it would come to 1.2-1.3% of GDP, Sabnavis said. On whether this would be enough, Nomura said: “The package may fall short of mitigating the near-term existential crisis for businesses and workers, but is better designed to improve India’s medium-term growth potential and attract long-term risk capital.” Barclays said it expects the government to end FY21 with a fiscal deficit of close to 6% of GDP. “We estimate that the actual fiscal impact on the budget will be only Rs 1.5 trillion (0.75% of GDP),” said a report by Rahul Bajoria, chief India economist at Barclays.
Source: Economic Times
Economists are slashing their forecasts to factor in at least five percent shrinkage in the economy after the fiscal stimulus that is unlikely to boost demand to offset for lost growth as well as give a fresh impetus. While Nomura has forecast recession-three consecutive quarters of recession, Goldman Sachs, Bank of America, UBS and HSBC have been less harsh with economy contraction forecast ranging from 0.1 per cent and 3.5 per cent. Ever since COVID-19 assumed pandemic proportion and the lockdown in the economy since end March, economists have had several rounds of revisions in their growth forecast with every successive forecast projecting lower growth than the previous one. The latest revision is after the last tranche of the Rs 20 lakh crore stimulus package announced by the finance minister on Sunday. " The government has aimed for maximum bang for minimum buck, with most of the relief either regulatory in nature or reflected in its contingent liabilities rather than explicit budgetary support" said Sonal Varma, chief India economist, Noura Securities, in a report "the package may fall short of mitigating the nearterm challenges for some businesses, but it is better designed to improve India’s mediumterm growth potential and attract long-term risk capital. As a consequence, we maintain our GDP growth projection for 2020 at -5% y-o-y" Nomura cut its projection for real GDP growth in 2020 to -5.0% y-o-y from -0.5% just before the finance minister's stimulus package. "We now expect year-on-year growth to remain negative for three consecutive quarters, with growth faltering to 1.5% y-o-y in JanuaryMarch'20 before plunging to -14.5% in April-June'20 and then weakly recovering to -6.0% in July-September'20 and -1.5% in OctoberDecember'20. Goldman Sachs which forecast a steep 45 per cent contraction in the April-June quarter, expects the economy to contract by 5 per cent on FY'21 " The deeper trough in our Q2 forecasts reflects extremely poor economic data so far for March, April and the continued lockdown measures, which are amongst the most stringent across the world" said the American investment bank in a report. "The overall 10%-of-GDP package focused more on medium-term supply-side measures, and funding via future public-sector liabilities" said Pranjul Bhandari, India economist at HSBC . "We forecast the general government fiscal deficit at 10%-of-GDP; and growth to contract 3% y-o-y in 2020" UBS expects its downside risks to its growth forecast of -0.4per cent , in a report released after the final tranche of government's stimulus package. Even the country's largest lender State Bank of India has that its GDP numbers forecast could now have a downward bias from current stress estimate of–4.7% in FY21. Bank of America Securities expects the economy to contract by 0.1 per cent in FY'21, assuming the lockdown is extended till end June.
Source: Economic Times
While the package has something for everyone belonging to various sectors, there is nothing specific for the textile and apparel industry. Strong reactions were bound to happen! Finally, after five press conferences by the Union Finance Minister Nirmala Sitharaman and the Minister of State for Finance Anurag Thakur, on Sunday (18 May), things were clear about the historic package of Rs. 20 lakh crore. The package has something for everyone belonging to various sectors like infrastructure, defence, mining, education, DISCOMs (electricity distribution companies), agriculture, and health amongst many others. Apart from the monetary relief, changes at policy level were also the attraction of these announcements. However, there was nothing specific for textile and apparel sector, and major associations of the industry – who had many brainstorming sessions with the Government regarding the package – shared in their press release on the very first day of the FM’s press conference, “We felt that the Government would soon announce a special package for boosting exports for all the textiles & clothing products including cotton yarn and fabric to grab the emerging opportunities and also consuming the surplus cotton that might significantly affect the cotton farmers in the country.” Raja M. Shanmugam, President, TEA shares with Apparel Resources, “The real issues still pertaining to the industries, and particularly to our textile industry, are looming large threatening its existence. Because of the sudden closure of operations across the globe, the circular economic chain got crippled. In this situation, liquidity got thoroughly damaged for which our Government has declared a supportive gesture for MSMEs by granting 20 per cent additional working capital, but the RBI declared the moratorium of 3-month period is going to get over by 31 May, and then by 1 June, the industries would need to pay the compounded interest. Here the point is whatever liquidity support given for the MSMEs is again going to be drained systematically by the banks as the collection of pending dues without helping it out to use it for the business revival aspects.” He further adds, “Moreover, the closedown period has been extended till 31 May. Imagine industries have not been allowed to run for the last 2 months fully (3 months if we take the global market closure date)! Hence, our request is the moratorium period be extended for at least the next 9 months to ensure the intended revival of industries, particularly MSMEs.” “Even for the large industries, the economic package support is much required to get back to the previous normal. But this was missing in the announced economic package. Moreover, the moratorium for them must be extended for at least next 3 months. The banks need to be advised or allowed to restructure the stressed accounts, if needed, without downgrading that account as NPA. I hope our Government would pay attention to these realities and take up a positive step to ensure the real intended revival to happen after this COVID-19 debacle,” Raja M. further asserts. Rajeev Bansal, MD, Celestial Knits & Fabs, Noida and Secretary, Indian Industries Association (IIA), has an interesting point to make, “This is not a relief or support package; it is just a liquidity package as MSME can get the loan, but have to return it with interest, as usual. And getting a loan in the current condition is a very difficult as well as time-taking task.” Celestial Knits & Fabs is one of the well-known apparel export companies of Noida. Many other apparel manufacturers too raised the issue of loan process, including Vivek Saxena, Director, Moissanite Apparels, Noida, who says, “The process regarding loan is very cumbersome. Though the Government has said that the loans will be given without collateral, there are too many ifs and buts in every announcement. Even for PF relaxation, there are so many terms and conditions that anyone can barely get any advantage,” Running a medium-size apparel factory and working with good buyers of domestic and the Middle East markets, Murtaza Lokhandwala, Director, Bubble Bee Export House, Ahmedabad, believes, “The need of the hour is to provide direct cash benefits for at least 3 months to the bottom 60 per cent of the society in order to spin the wheel of the economy. Giving loans to the industry will not create demand in the market. Even if a factory owner gets a loan, he may not pay previous wages and salaries, and even going forward, he will be able to do so only after a month of receiving an order, in case he manages to receive one that is. In the domestic market, there will be orders only if customers will have money in their pockets to purchase things. What will one do of the loan when there is no business?” Many apparel manufacturers shared that they were expecting direct help, as that, and not loans, is the need of the hour. “Relief packages by the Government may be music to ears, but the fact is it is thin dust. Top-level export houses may benefit, but the bottom of the pyramid industry (MSME) will not get any immediate support. We need straight help, as in 2+2 = 4,” says a medium level apparel manufacturer on the request of anonymity. Several other apparel manufacturers across India also maintained the same spirit regarding this issue. Apparel Resources has also approached major associations like AEPC, CITI, SIMA to share their opinion on this issue. As responses from these are awaited, we request you to stay tuned to the website to know the same.
Source: Apparel Resources
Reeling under the impact of COVID-19 pandemic, apparel exporters on Monday urged the government to treat the labour-intensive sector at par with MSMEs. In a letter to Prime Minister Narendra Modi, Apparel Export Promotion Council of India (AEPC) Chairman A Sakthivel said the sector is facing huge losses due to nonpayment of export bills and cancellation of orders. "We would request that the apparel exporting industry may be treated at par with the MSME sector as we work on wafer-thin margins of 4-5 per cent," Sakthivel said. Domestic exporters have a huge pile-up of inventories because of lockdown in several countries, he said adding the industry is one of the largest employers of the country employing 12.9 million people directly. He also said the benefits related with Employees' Provident Fund (EPF) should be extended to the sector, irrespective of the number of workers employed and more specifically to cover all the apparel exporting units, since they are highly labour intensive with a huge women workforce. "A large number of our exporters lost huge money by booking forward contracts and we feel that the loss can be converted into a working capital-term loan with repayment in three years with a 6 per cent interest rate," he added. Sakthivel further suggested that the facility of granting additional working capital to all MSMEs without collateral may also be granted to all apparel exporting industries irrespective of their size. "The benefit of interest equalisation scheme extended earlier this week by one year may kindly be extended by at least two years and the benefit of 5 per cent may kindly be extended to all units at par with the MSME sector," he said. Further, he said that to encourage AEPC members to export man-made fibre garments, the government should consider sanctioning 6 per cent of the COVID-19 fund as it would help in significantly increasing outbound shipments. Citing a study, he said China, Cambodia, Vietnam and Indonesia are exporting 80 per cent man-made fibre garments globally, whereas India exports 90 per cent cotton garments only. He added that permitting exports of all types of non-medical and non-surgical masks will boost the production and exports of masks. "There is a huge opportunity for export of such masks. There is a huge demand for the export of these products and AEPC has already identified the international markets for these masks. The council assures the government that it will ensure exports of these items to the tune of USD 1 billion within the next three months," Sakthivel said.
Source: Economic Times
The Bank Nifty crashed 1260.80 points on heightened concerns about rising defaults as more units become insolvent in a weakening economy. India’s stock markets capitulated on Monday despite strong global cues reflecting India Inc’s deep disappointment with the Rs 20-lakh-crore economic package rolled out by the government. The extension of the lockdown across several states till May-end, albeit with relaxations, also dampened the sentiment. The Sensex lost 1,068.75 points to close at 30,028.98, the lowest levels since early April. The Bank Nifty crashed 1260.80 points on heightened concerns about rising defaults as more units become insolvent in a weakening economy; bank stocks lost anywhere between 5 and 10%.Corporate earnings for the March quarter, so far, have been lacklustre despite tempered expectations. There is apprehension corporate India’s performance could deteriorate sharply in 2020-21 as demand for both goods and services remains muted; so far barely five of the 18Nifty stocks have beaten analysts expectations. Foreign portfolio investors (FPIs) continue to sell Indian equities and offloaded stocks worth $331.02 million on Monday. They have remained sellers of stocks since March this year; in March they sold $8.4 billion while in April they were marginal sellers. In May so far, they have been buyers but primarily because of a large block deal in shares of Hindustan Unilever. Foreign investors have also sold $2 billion worth of bonds in May so far, following sales of $10.1 billion between January and April. The sales by FPIs of bonds and stocks have pressured the rupee which depreciated to 75.9150 on Monday, losing 0.4% to the dollar, the most in two weeks. Investors have been concerned with experts expecting a deeper recession in the Indian economy. Goldman Sachs said on Monday India’s GDP would contract 45% in the June quarter. Economists have pointed out the fiscal impulse from the package is relatively small at around 0.8% of GDP and that the measures largely address structural and supply-side issues. Industry has been asking for measures that can boost demand meaningfully. The prolonged slowdown also dampened the sentiment as it implies many big consumer catchments would remain closed. The stock markets saw thin volumes in the F&O segment on the NSE on Monday with a turnover worth Rs 9.03 lakh crore against the six month average of Rs 14.21 lakh crore. The cash market saw volumes worth Rs 52,063.71 crore against the six month average of Rs 40,898 crore.
Source: Financial Express
At least three Opposition-ruled state governments - Tamil Nadu, West Bengal and Kerala - have come up against the Centre’s decision to link 75% of the extra borrowing space accorded to them, to how they work on and achieve specified reforms. At least three Opposition-ruled state governments – Tamil Nadu, West Bengal and Kerala – have come up against the Centre’s decision to link 75% of the extra borrowing space accorded to them, to how they work on and achieve specified reforms. In a scathing letter to Prime Minister Narendra Modi, Tamil Nadu chief Edappadi K. Palaniswami said the state is opposed to the Centre’s move, which inter alia asked for stopping free power supply to farmers. Calling the conditions put forth by the Centre for the states to fully use the higher borrowing limit as ‘needlessly onerous’, Palaniswami said: “While in some of the four major areas of reform required by the government of India to avail of the additional borrowing, the state government has already undertaken the reforms without expecting any financial assistance, there are some areas, most specifically in the area of power distribution reforms, which are politically sensitive.” Protest making of additional loans conditional. Most of these conditions can easily be implemented through dialogue. Centre has set a bad precedent. In future severe conditions may be imposed on even normal loans,” Kerala finance minister Thomas Isaac tweeted. “This is crushing federalist polity of India in steady and strategic manner where the diktat of the Centre will be the order of the day and the elective representatives of the people in the states will have no choices,” Telegraph quoted West Bengal finance minister Amit Mitra, as saying. Union expenditure secretary TV Somanathan defended the conditions citing constitutional provisions in this regard. “In order to borrow, states need the Centre’s nod under Article 293,” Somanathan told CNBC TV18. Union finance minister Nirmala Sitharaman on Sunday raised the net borrowing limit for state governments from 3% of G-SDP to 5% to make available an additional Rs 4.28 lakh crore to all the states combined. While 0.5 percentage point of the extra borrowing window will be available to all states unconditionally, 1 pps will be made available in four equal tranches with each to clearly “specified, measurable and feasible reform actions”. The balance 0.5 pps can be accessed if milestones are ‘completely achieved’ in at least three out of four reform areas. The reform linkage will be in four areas -universalisation of ‘One Nation One Ration Card’, ease of doing business, power distribution and augmentation of urban local body revenues. The raising of the borrowing limit would mean the states could borrow an additional Rs 4.28 lakh crore from the market on a net basis if all the conditions are adhered to. States have been demanding the hike in borrowing limit given that there revenues have been squeezed and Covid-19 pandemic has dramatically increased their short-term expenditure on healthcare and welfare schemes. The Finance Commission had already recommended the implementation of direct cash transfers by states to provide subsidy to eligible power consumers. The release of the Rs 90,000 crore loan through PFC-REC to discoms will also be contingent on the respective state government undertaking to put in place a credible mechanism to release the subsidies – meant for the consumers but routed through the discoms – in advance. Aggressively pushing a reform agenda on which a consensus is yet to be developed at a time when states have approached the Centre for additional borrowing out of sheer desperation, is not in keeping with the spirit of co-operative federalism, Palaniswami said. “Ideally, the proposed reforms ought to have been discussed in detail with the states, a consensus developed depending on the specific conditions in each state and the reforms linked to special Central Covid grants, and not to additional borrowing by the state. Linking the Central government’s power under Article 293(3) of the Constitution to permit additional borrowing by the states to conditionalities is unprecedented,” he added. However, BJP-ruled states and some non-BJP states like Odisha (ruled by the BJD) were not so critical of the Centre’s move to put conditions. Bihar (BJP is part of the state government) deputy chief minister Sushil Kumar Modi in fact welcomed the higher borrowing limit, which could give an additional Rs 12,922 crore debt window for the state. Officials from over half a dozen states told FE that their states’ own tax revenues in April were less than a fourth of the usual (estimated) level, with some putting the figure at even 10%. This had prompted several state chief ministers to demand that the FRBM- mandated fiscal deficit ceiling be raised from 3% of GSDP to 5% for FY21 to enable them to borrow more funds.
Source: Financial Express
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
793.72 |
USD/Ton |
0% |
20-05-2020 |
|
VSF |
1252.50 |
USD/Ton |
0% |
20-05-2020 |
|
ASF |
1579.69 |
USD/Ton |
0% |
20-05-2020 |
|
Polyester POY |
750.79 |
USD/Ton |
1.52% |
20-05-2020 |
|
Nylon FDY |
1942.07 |
USD/Ton |
0% |
20-05-2020 |
|
40D Spandex |
4010.81 |
USD/Ton |
0% |
20-05-2020 |
|
Nylon POY |
956.96 |
USD/Ton |
2.26% |
20-05-2020 |
|
Acrylic Top 3D |
2251.68 |
USD/Ton |
-0.62% |
20-05-2020 |
|
Polyester FDY |
5178.86 |
USD/Ton |
0% |
20-05-2020 |
|
Nylon DTY |
985.11 |
USD/Ton |
1.45% |
20-05-2020 |
|
Viscose Long Filament |
1829.49 |
USD/Ton |
0% |
20-05-2020 |
|
Polyester DTY |
1745.05 |
USD/Ton |
0% |
20-05-2020 |
|
30S Spun Rayon Yarn |
1730.98 |
USD/Ton |
0% |
20-05-2020 |
|
32S Polyester Yarn |
1379.15 |
USD/Ton |
1.55% |
20-05-2020 |
|
45S T/C Yarn |
2110.95 |
USD/Ton |
0% |
20-05-2020 |
|
40S Rayon Yarn |
1548.03 |
USD/Ton |
0% |
20-05-2020 |
|
T/R Yarn 65/35 32S |
2012.44 |
USD/Ton |
0% |
20-05-2020 |
|
45S Polyester Yarn |
1899.86 |
USD/Ton |
0% |
20-05-2020 |
|
T/C Yarn 65/35 32S |
1646.54 |
USD/Ton |
0% |
20-05-2020 |
|
10S Denim Fabric |
1.12 |
USD/Meter |
0% |
20-05-2020 |
|
32S Twill Fabric |
0.64 |
USD/Meter |
0% |
20-05-2020 |
|
40S Combed Poplin |
0.93 |
USD/Meter |
0% |
20-05-2020 |
|
30S Rayon Fabric |
0.48 |
USD/Meter |
0% |
20-05-2020 |
|
45S T/C Fabric |
0.64 |
USD/Meter |
0% |
20-05-2020 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14073 USD dtd. 20/05/2020). The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
Citing severe liquidity crunch following the COVD-19 outbreak-led lockdown, due in part to different refunds worth Rs120 billion stuck with authorities, textile sector needed immediate government help to regain export markets, stakeholders said on Monday. A request to this effect was made my Shahid Sattar, executive director All Pakistan Textile Mills Association (APTMA) has said, in a letter to Abdul Razzak Dawood, Advisor for Commerce, Textile Industry and Production, and Investment. “Textile exports fell 64 percent in April 2020 as compared to the same month of last year. This means the textile industry was able to export 36 percent of its capacity even during the lockdown, when supplies to markets and inter-provincial transport services were shut,” Sattar wrote in the letter. The APTMA official said it was their target and objective to rapidly increase export-oriented industrial activity to achieve 45 percent exports in May and 55 percent in June. “These are difficult targets as demand in USA and Europe has been limited to online sales with a very slow opening of the retail stores,” he said and added, “The market dynamics are changing rapidly and we as Pakistanis need to be fleet footed to capture an increasing share of the developing market niches”. Despite serious cash flow problems and in the light of industry's commitment to the government and its workers the great majority of APTMA members paid April wages and salaries without layoffs. “Other than demand, another serious hurdle in the path of exports recovery is the complete lack of liquidity in the market,” he wrote in the letter. Federal Board of Revenue (FBR) had collected Sales Tax on all inputs but had refunded Sales Tax on goods that were exported and those also only till January 2020, he said adding that the FASTER system had failed to account for the full amount of the claim in the Sales Tax return. Sattar said a very reasonable estimate of refundable amount stuck as sales tax paid and awaiting refund in the form of amounts deferred, amounts disappeared, goods not yet exported, or exported but funds not received, was at least Rs120 billion.
Source: The News
China's swift and powerful reaction reflects its fear of a second wave after it curbed the virus's spread at great economic and social cost. Some 108 million people in China's northeast region are being plunged back under lockdown conditions as a new and growing cluster of infections causes a backslide in the nation's return to normal. In an abrupt reversal of the re-opening taking place across the nation, cities in Jilin province have cut off trains and buses, shut schools and quarantined tens of thousands of people. The strict measures have dismayed many residents who had thought the worst of the nation's epidemic was over. People "are feeling more cautious again," said Fan Pai, who works at a trading company in Shenyang, a city in nearby Liaoning province that's also facing renewed restrictions. "Children playing outside are wearing masks again" and health care workers are walking around in protective gear, she said. "It's frustrating because you don't know when it will end." While the cluster of 34 infections isn't growing as quickly the outbreak in Wuhan which started the global pandemic last December, China's swift and powerful reaction reflects its fear of a second wave after it curbed the virus's spread at great economic and social cost. It's also a sign of how fragile the re-opening process will be in China and elsewhere as even the slightest hint of a resurgence of infections could prompt a return to strict lockdown. The government of Shulan, a city in Jilin, said on WeChat Monday it would put in place its strictest measures yet to contain the virus. Residential compounds with confirmed or suspected cases will be closed off, with only one person from each family allowed to leave to purchase essentials for two hours every two days. Shen Jia, a Shenyang-based salesman at a life sciences company, canceled a three-day business trip to Jilin city last week because he would have been quarantined for as long as 21 days on his return. A state-owned restaurant he visited last week separated his party of three because only two people are allowed at each table, a restriction that had been eased weeks ago before being re-instated. "You can feel that control is stricter," he said. People "have been more careful and reduced outdoor activities." A sense of deja vu is permeating Jilin city, which underwent the same strict lockdown implemented in most of China in February and March despite only reporting daily cases in the single digits then. Overall, Jilin province's total cases stand at 127; Hubei province had 68,000. Still, delivery services have been mostly halted and anti-fever medication is banned at drugstores to prevent people from hiding their symptoms. The tension has spread to nearby areas, even if no cases have been reported officially in those places yet. "Everyone is jittery," said Wang Yuemei, a pharmaceutical factory worker in neighboring Tonghua. "I never ever expected Jilin province to be a hard-hit area when the whole country is getting back to normal now." After facing global criticism for its delayed response to Wuhan's outbreak, President Xi Jinping's administration is taking visible steps to stop the spread of the virus in the northeast. Vice Premier Sun Chunlan, who led the central government's virus task force in Wuhan, arrived in Jilin city on May 13. The highest-ranking Communist Party official of Shulan, where the new cluster's first infection emerged, was removed on Saturday along with five other cadres. Pressure to contain the infections is even greater with China's annual political meetings scheduled to commence this week in Beijing after being delayed from their usual March date. Thousands of political delegates will gather in the capital to endorse the government's agenda from Friday and the central leadership is determined to project stability and calm during this period. Health officials do not yet know how the new cluster started, but suspect that the patients may have come into contact with infected returnees from Russia, which has one of the worst outbreaks in Europe. Those in charge of transporting potentially infected arrivals from abroad to centralized quarantine centers need to do a better job, said Wang Bin, a National Health Commission official, during a briefing on Sunday. "Imported cases from overseas and clustered infections domestically have created dual pressure on us in containing the virus," she said. The new cluster is also a reminder that much of China still remains vulnerable to the virus because its first wave of infection was largely confined to Hubei province, where Wuhan is located, thanks to a lockdown that sealed the region off from the rest of the country in January. "The majority of Chinese at the moment are still susceptible to the Covid-19 infection" because of a lack of herd immunity, top Chinese epidemiologist Zhong Nanshan told CNN over the weekend. The nation is facing a "big challenge," he said, adding that the situation in China is "not better than foreign countries." Videos circulating on Chinese social media showed some senior high school students in tears when they were told to leave their campus because they'd lose precious time to prepare for their college entrance exams due in two months. "It's really unfortunate for us to encounter the epidemic at this point of time," said Zhou Han, an 18-year-old student in Jilin. "I'm anxious because I can't prepare for the exam well without last-minute instruction and supervision by my teachers."
Source: NDTV
The global economy will take much longer to recover fully from the shock caused by the new coronavirus than initially expected, the head of the International Monetary Fund said, and she stressed the danger of protectionism. Managing Director Kristalina Georgieva said the Fund was likely to revise downward its forecast for a 3% contraction in GDP in 2020, but gave no details. That would likely also trigger changes in the Fund's forecast of a partial recovery of 5.8% in 2021. In an interview with Reuters, she said data from around the world was worse than expected. "Obviously that means it will take us much longer to have a full recovery from this crisis," Georgieva said in an interview. She gave no specific target date for the rebound. In April, the global lender forecast that business closures and lockdowns to slow the spread of the virus would throw the world into the deepest recession since the 1930s Great Depression. But data reported since then points to "more bad news," Georgieva said earlier this month. The IMF is due to release new global projections in June. The global outlook remains a huge focus for finance ministers from the Group of Seven advanced economies, who will meet remotely on Tuesday, according to the U.S. Treasury. Georgieva told Reuters the Fund was focused on risks such as high debt levels, increased deficits, unemployment, bankruptcies, increased poverty and inequality during the recovery period. But she said the crisis was also boosting the digital economy, offering a chance to boost transparency and e-learning, and give even small firms access to markets. Asked about renewed tensions between the United States and China - the world's two largest economies, Georgieva said she was urging member countries to maintain open communication and trade flows that had underpinned global growth for decades. "We do need to keep trade flows open, especially for medical supplies, food, and longer-term to find a pathway to overcome what is happening now with this crisis," Georgieva said. "We want to continue to build this more prosperous future for all by overcoming the scarring that may come from this crisis." Tensions between the United States and China have spiked in recent weeks, with officials on both sides suggesting a hard-won deal that defused a bitter 18-month trade war could be abandoned months after it was signed. Georgieva warned against retreating into protectionism as a result of the crisis. "We should not turn away from what has worked for people everywhere: a division of labor and collaboration and trade, which allows the costs of goods and services to go down, allows incomes to go up, and allows poverty within countries and across countries to retreat," she told Reuters. The IMF was created after World War Two to foster financial stability, facilitate trade and reduce poverty around the world. It has provided emergency financing to 56 countries since the crisis began and will decide on 47 additional requests as quickly as possible, Georgieva said. An IMF spokesman said some $21 billion in emergency financing, which carries very low interest rates, had been disbursed thus far. Georgieva said the Fund could also provide grants to help the poorest countries cover their debt service payments to the IMF through the end of the year, after raising new lending commitments from its members.
Source: Reuters/ Economic Times
Ten of the UK fashion industry’s innovative and sustainable small to medium enterprises, including Ananas Anam, the company that has created an innovative natural textile made from pineapple leaf fibre, and accessories brand Elvis and Kresse, have been awarded more than 1.2 million pounds by the Business of Fashion, Textiles and Technology (BFTT). The funding initiative is led by University of the Arts London, including London College of Fashion, Central Saint Martins, and Chelsea College of Arts, alongside Queen Mary University and Loughborough University as part of the AHRC Creative Industries Clusters Programme (CICP), funded by the UK Industrial Strategy Challenge Fund and offers a comprehensive support package that enables SMEs to drive forward sustainability-driven innovation and represents a new model of investment for the sector. The aim of the Creative Industries Clusters Programme is to boost productivity via creative research and development, backing businesses to “create good jobs and increase the earning power of people throughout the UK with investment in skills, industries and infrastructure” and the latest round of funding worth 1.2 million pounds was specifically to help fashion SMEs support sustainable growth and innovation. Funding will be given to 10 businesses: Ananas Anam, Anna Glover, AwayToMars, Blackhorse Lane Ateliers, Chip[S] Board, Doppelhaus, Elvis and Kresse, Segura, Tengri, and Tibor. The 10 were selected from more than 80 applications, with 13 making the shortlist and provided with one-to-one mentoring, business workshops and training to help develop their initial concepts into fully-fledged business plans. The shortlisted businesses then had to pitch their idea to a panel of industry and academic experts, who then selected the final with ten businesses. In addition to funding, each fashion SME will receive a comprehensive package of support, including mentoring from leading academics across the partnership, hands-on specialist creative and technical support as well as ongoing project management and strategic business support from across the Business of Fashion, Textiles and Technology team. Fashion brands including AwayToMars, Elvis and Kresse and Ananas Anam awarded crucial funding to explore sustainable innovationsThe awarded projects cover a range of sub-sectors and research and development areas: bio-material development to non-woven textiles; a global design crowdsourcing platform; sustainable surface finishing processes; on-shoring of state-of-the-art sustainable manufacturing; novel digital solutions to increase transparency and improve sustainability in the sector. The projects, which all focus on specific research and development challenges, with each running for 12 - 18 months depending on the complexity of the proposition. The funding will allow Ananas Anam, the company behind Piñatex, an innovative natural textile made from pineapple leaf fibre to work with the Centre for Circular Design at Chelsea College of Arts (UAL) to expand potential applications for the bio-based non-woven material by developing new sustainable embellishments and other value-added processes to improve its functionality and aesthetic qualities, while AwayToMars, the innovative collaboration platform that utilises crowdsource creativity and helps designers introduce their work to the world and lets them hear what the world has to say will work with the Digital Anthropology Lab at London College of Fashion (UAL) to explore new technologies to enhance the experience and brand value delivered by AwayToMar’s co-creation platform to its growing global community of over 15,000 members. Other projects will include Blackhorse Lane Ateliers, the innovative community-based manufacturer producing high end crafted denim garments in East London, working on setting up a state-of-the-art research and development facility to develop sustainable laundering and finishing techniques and enable the emergence of a new and unique ‘London’ denim-washing aesthetic inspired by the principles of the circular economy. While Elvis and Kresse, which utilises materials that would otherwise go to landfill into luxury accessories, will work with the Materials Engineering Department at Queen Mary University of London to develop a circular business model for metal hardware in the luxury sector by hacking the industrial aluminium recycling process through the design and open-sourcing of a small scale and environmentally sound alternative, and London-based design house Tengri, which specialising in rare cloths, clothing and home interiors will work with the London College of Fashion to explore and codify existing UK heritage manufacturing techniques and new technologies that could be applicable to the creation of non-wovens out of yarn bio-waste. Professor Jane Harris, Business of Fashion, Textiles and Technology programme director said in a statement: “Small to Medium Enterprises (SMEs) are critical to the economy and critical to the creative sector in particular, making up over 95 percent of creative businesses in the UK. The Business of Fashion, Textiles and Technology SME Research and Development Programme seeks to highlight the value and impact SMEs can have in our sector and on the economy, when provided with the right type of financial support and research expertise. “This initiative is intended to creatively and technically address the challenge of maintaining growth in the crucial early years of business, whilst also providing support for much-needed innovation, and sustainable growth, especially in these challenging and rapidly changing times. The diversity of projects selected are indicative of the breadth of innovation potential in the fashion sector. The dynamism they naturally bring as SMEs, and the bespoke academic expertise provided by BFTT is a perfect mix to deliver industry-changing innovation which cements a vision for a more sustainable fashion system which supports growth here in the UK and around the world.” The Business of Fashion, Textiles and Technology is a five-year industry-led project, which focusses on delivering innovation within the entire fashion and textile supply chain.
Source: Fashion United
Vietnam has traditionally focussed on garment production with little capacity for fabrics manufacturing. It is estimated that Vietnam imports up to 89 per cent of fabrics — 55 per cent from China, 16 per cent from South Korea, 12 per cent from Taiwan and 6 per cent from Japan. US and EU markets account for more than 60 per cent of Vietnam’s garment exports. Vietnamese garment manufacturers predominantly focus on the simplest cut-make-trim (CMT) model where buyers control and own all the pre- and post-production processes. CMT production contributes 65 per cent of Vietnam’s total exports, while the more advanced business models, like Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM), that allow for higher profit margins account for only 35 per cent. When the coronavirus pandemic struck in January, Chinese fabric manufacturers suspended production, disrupting fabrics supply to Vietnam. As the pandemic centre shifted west from China in March, many orders from the European Union and the United States were cancelled, causing significant damage to Vietnam’s garment manufacturers. Vietnam’s Textile Association reported that 70 per cent of garment manufacturers started reducing shifts and rotating workers in March, with an additional 10 per cent following in April or May. By June 2020, the estimated loss to the industry could reach US$508 million. Data from Vietnam’s Customs Agency suggests that imports and exports of all textile and garment products fell massively in the first quarter of 2020. Exports of garments totalled US$7.03 billion, a 1.4 per cent year-on-year reduction compared to 2019 and 34 per cent lower than the expected growth of 50 per cent prior to the pandemic. Despite the devastating impact of COVID-19, the pandemic provides some valuable lessons for the industry on recovery and ways to move forward. First, it is essential to establish a resilient supply chain of fabrics and other raw materials, which relies on the development of domestic fabric production. Having a reliable domestic supply of fabrics will mitigate disruptions and help capitalise on free trade agreements (FTAs) that impose rules of origin. For example, in order to enjoy preferential tariffs under the recently signed European Union–Vietnam FTA (EVFTA), Vietnamese garment manufacturers must satisfy the fabric-forward rule that requires the use of domestically produced fabrics (with the exception of fabrics imported from South Korea). Second, it is important to diversify the demand base to reduce over reliance on a few key customers. Vietnam should leverage FTAs, especially the newly signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), to explore new export markets. This could also help drive industry growth. Manufacturers should also pay more attention to Vietnam’s promising domestic market and explore new product offerings. Domestic and international demand for antibacterial masks and protective gear has proven an effective and important relief measure during the crisis. Third, Vietnamese garment manufacturers should consider making the necessary investments to advance from the labour-intensive CMT model towards more capital-intensive models that allow for higher profit margins and more control and resilience to external shocks. OEM and ODM capable firms have proven to be more resilient and better equipped to quickly respond to the pandemic. TNG, an OEM company based in Thai Nguyen, has stockpiled enough fabric for production until the second quarter of 2020. TNG has also arranged alternate sourcing from Pakistan and other domestic suppliers. This, together with agile management, enabled TNG to start producing antibacterial masks in just three days, helping the company record a 65 per cent increase in revenue compared to 2019, despite cancelled overseas orders. Despite this severe yet temporary setback, Vietnam’s textile and garment industry should be optimistic about the future. In 2019, more than 80 per cent of Foreign Direct Investment (FDI) in the textile and garment industry shifted towards manufacturing fabrics and other raw materials. TAL, a Hong Kong-based company, was approved to build a US$350 million fabric plant in Thai Nguyen province in early 2019. In February 2020, Texhong, another Hong Kong-based company, committed another US$500 million (in addition to an existing US$500 million investment) to expand yarn and fabric production capacity in Quang Ninh province. These FDI firms are expected to provide competition pressure and spill-over benefits that could stimulate innovation and growth of domestic and state-owned fabric producers. The government is also supporting Vietnam’s textile sector with the construction of dedicated textile industrial parks. Rang Dong Textile Industrial Park in Nam Dinh province, the largest of its kind, is expected to be operational from 2022. Despite the economic shock of COVID-19, all signs are pointing in the right direction for Vietnam to take its place as the world’s third-largest textile and garment exporter after China and India.
Source: East Asia Forum
