India has initiated a probe into alleged dumping of polyester yarn, used in the garment industry, from China, Indonesia, Nepal and Vietnam, a move aimed at guarding domestic players from cheap inbound shipments. The probe was launched following a complaint by eight domestic manufacturers, including Suryalakshmi Cotton Mills and Suryalata Spinning Mills. In their application to the commerce ministry's investigation arm Directorate General of Trade Remedies (DGTR), these companies alleged that dumping of the yarn from these countries is impacting the domestic industry and the government should impose antidumping duty on the imports. The DGTR, in a notification, said that on the basis of the prima facie evidence submitted by the domestic firms, "the authority, hereby, initiates an investigation to determine the existence, degree and effect of any alleged dumping" of the product from these nations. The directorate would probe whether the dumping of the product is impacting domestic players and if this is established, DGTR will recommend imposition of anti-dumping duty. The revenue department will take the final decision on duty imposition. In international trade parlance, dumping happens when a country or a firm exports an item at a price lower than the price of that product in its domestic market. Dumping impacts price of that product in the importing country, hitting margins and profits of manufacturing firms. According to global trade norms, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers. The duty is imposed only after a thorough investigation by a quasi-judicial body, such as DGTR in India. Imposition of anti-dumping duty is permissible under the World Trade Organization (WTO) regime. India and these four countries are members of this Geneva-based organisation, which deals with global trade norms.
Source: Economic Times
Union Minister of Commerce and Industry Shri Piyush Goyal today held meeting, through Video conference, with the industry and trade associations. This was the fifth such meeting since the lockdown with the associations, to assess the impact of Covid-19 lockdown and subsequent relaxations on their activities, and take note of their suggestions to put the economy back on tracks. The meeting was attended by the Ministers of State for Commerce and Industry Shri Som Parkash and Shri H.S.Puri, and Officers of the Ministry of Commerce and Industry. Among the Associations, the meeting was attended today, by CII, FICCI, ASSOCHAM, NASSCOM, PHDCI, CAIT, FISME, Laghu Udyog Bharati, SIAM, ACMA, IMTMA, SICCI, FAMT, ICC and IEEMA. Addressing the associations, Shri Goyal said that Futures is ours to choose- it would be better to be ready and start working for the Post-Covid period, with good ideas, firm implementation plans, and to make India a world power. Talking about the Prime Minister’s adage of ‘Jaan Bhi, jahan bhi’, the Minister said that worst for the economy is over. Things are looking up, and revival is in the air. He said that the steps taken by the Government under the Aatmanirbhar campaign will help the Nation fight the economy. The Minister said that Aatamnirbhar Bharat will not be inward-looking, closed or anti-foreigner. Rather, the concept entails a confident, self-reliant, caring nation which takes care of all the strata of the society and nurtures development of all parts of the country. Shri Piyush Goyal said that in the last three decades post-liberalization, the country progressed but the focus was city-centric. The rural and backward areas remained deprived, forcing millions of people from there to migrate to cities for employment and opportunities. He said that Aatamnirbhar Bharat will inculcate the spirit of oneness among 130 crore citizens of India. It will support Indian companies He said that it is very anguishing to note that even for several routine items like furniture, toys, sports shoes, we are importing. This is despite the fact that the country has technical prowess as well skilled manpower. These things need to change. Shri Goyal called upon the industry to make efforts in this regard, by thinking about sustainable, out-of-the-box ideas. He said the fight against the Covid-19 can’t be undertaken by the Government alone, it is the nation’s fight and all stakeholders have to play an important positive role. The Minister assured the Associations that their suggestions are duly examined, and due and timely action is taken on the rational, genuine demands.
Source: PIB
The Centre is likely to look at the option of the Reserve Bank of India (RBI) monetising the deficit in the second half of the financial year, a senior government official has said, asserting that the Centre is seriously examining the issue. “It is an option which we have not closed. It is very much there,” the official, who did not wish to be identified, further said. The assessment within the government is that expenditure in the first half of the financial year would be met through market borrowing and spending re-prioritisation for various ministries. There is an uncertainty about how long the pandemic will last and the government is not keen on rushing into any decisions so early in the financial year. The RBI’s monetisation of the fiscal deficit broadly means the central bank printing currency for the government to take care of any emergency spending and to bridge its fiscal deficit — this action is resorted to under emergency situations. This practice was followed in 1980s and late 1990s, where the central bank helped in funding the deficit. But since then, several reforms have been ushered in, including the Fiscal Responsibility and Budget Management Act (FRBM), to keep a hawk eye on the fiscal deficit and prompt governments to follow a fiscally prudent path. The Covid-19 pandemic has had a devastating impact on revenues, both direct and indirect, due to the three-month national lockdown unveiled to stop spread of the coronavirus. This has pushed the government to raise its full-year borrowing plan by nearly 50% to help meet its spending commitments due to the pandemic. Experts have said the move could push the fiscal deficit to 5.5% of the GDP from the earlier target of 3.5%. “It will all depend on how much borrowing the government may need to do through the RBI,” said N R Bhanumurthy, professor at the National Institute of Public Finance and Policy, while responding to a question whether it would stoke inflation. He said the RBI could either print money or buy government bonds from primary dealers to fund the deficit. “The government, if it resorts to monetisation, must clearly specify that it is a temporary measure and spell out its fiscal road map clearly,” said Bhanumurthy. RBI governor Shaktikanta Das has been quoted as saying that the RBI has not taken any view on monetisation of the deficit. Former FM P Chidambaram and other economists have backed the idea of monetisation of the deficit and have said the government should not shy away from this option.
Source: Economic Times
The textile and clothing industry wants the banks to be advised to transfer full benefits of RBI’s recent and earlier repo rate reductions. Confederation of Indian Textile Industry (CITI), the apex body for Indian textile and clothing sector, has demanded a debt restructuring package and further extension of moratorium period till March 31, 2021. Welcoming the recent monetary measures announced by the RBI governor, CITI chairman T Rajkumar said: “The foremost demand of the textile and clothing industry was a debt- restructuring package, the only solution to all the financial problems being faced by the industry. The textile industry needs one-time restructuring to make it viable and vibrant in view of the emerging international opportunities to replace China.” Rajkumar stressed that repo rate cuts initiated by the RBI on several occasions in the last one year had not been fully transmitted by banks to borrowers —whatever passed on were minuscule. The textile and clothing industry wants the banks to be advised to transfer full benefits of RBI’s recent and earlier repo rate reductions. Though the decision of margin money reduction, and deferring of interest on working capital for six months with an option that the interest on moratorium can be converted into FITL or term-loan and can be repaid by March 2021 was beneficial, repaying interest amount within next six months would be a daunting task for the T&C industry that is grappling with the lockdown situation at the moment, Rajkumar said. The RBI governor’s decision to extend moratorium period for another three months to August has definitely brought some relief to the T&C industry, but the moratorium period should further be extended till March 31, 2021, to ease the financial burden on companies in an industry badly hit because of its highly capital and labour intensive nature, the CITI chairman said. The industry provides employment to more than 110+ plus million people. CITI chairman thanked the RBI governor for reducing repo rate by 40 basis points, under the liquidity adjustment facility (LAF), bringing it down to 4% from 4.40% with immediate effect. Accordingly, the marginal standing facility (MSF) rate and the bank rate stand reduced to 4.25% from 4.65% and the reverse repo rate, under LAF, now stands reduced to 3.35% from 3.75%. The extension of maximum possible period of pre- and post-shipment of credits from 12 months to 15 months would boost the prospects of the industry, he said. He hoped that in the coming days, RBI would come out with more relaxing norms as the outlook towards economic activity other than agriculture is likely to remain depressed in Q1 and Q2 of 2020-21, and the recovery is likely to be expected in Q3 and Q4 as supply lines would gradually be restored to normalcy and demand would gradually revive.
Source: Financial Express
The country wide lockdown since March is expected result in contraction of India's manufacturing output index by at least 50 to 60 per cent in April and also at least one quarter of GDP is expected to be wiped out according to a research report by State Bank of India. But is expected to moderate in May. "We believe IIP manufacturing and IIP in April will contract by 50% -60% with some improvement in May in the range of -30% to -35%" said the SBI report released on Wednesday. Official release of IIP numbers for April is scheduled to be released in the second week of June. The estimates are based on SBI composite index for May. "The yearly SBI Composite Index for May has increased marginally to 41.0 implying a large declines, compared to 40.0 in Apr’20" said, S K Ghosh, group chief economist, SBI. The SBI Composite Index is a leading indicator for manufacturing activities in the Indian economy aims to foresee the periods of contraction and expansion. Covid related lockdown could now wipe out one quarter growth or GDP . With FY'20 real GDP at Rs 147 lakh crores, one quarter GDP loss is estimated at Rs 37 lakh crores assuming the lockdown extension into June, according to the report. The ongoing efforts to control COVID-19 pandemic led to sharp declines in output and employment across the world economies for a third successive month in May but the rate of decline is easing, it said. "We believe with COVID peak likely in the last week of June. There is a large likelihood of a even larger loss that we have factored in" the report said.
Source: Economic Times
CRISIL predicts India’s growth to fall off the cliff and contract 5% in fiscal 2021, mowed down by the Covid-19 pandemic. In sign that business activities are looking up, albeit gradually, the average number of e-way bills generated per day on the Goods and Services Tax Network portal rose to 9.4 lakh in the third week of the current month (May 18-25), compared with 8.2 lakh and 6 lakh respectively for the two preceding weeks. Of course, still the economic transactions are way behind what could be considered normal – in May last year, 17.4 lakh e-way bills were generated on GSTN portal and subsequent months saw this going up due to a drive by the authorities to improve compliance – but it is nevertheless clear that with the lockdown rules being relaxed, the transactions have been on the rise from early May. The transactions in the economy have crossed the half-way mark of the business as usual scenario. In April, the month which saw strict observance of the lockdown, e-way bills on GSTN had plunged to less than 3 lakh/day. In February, an average of 19.7 lakh e-way bills was issued by the portal on a daily basis. However, in March, which is otherwise the busiest month of the financial year, the average e-way bills generated dropped to 13.1 lakh/day due to lockdown imposed in the last week of the month. Analysts have opined that the nation-wide lockdown since March 25 and a Covid-induced slowdown in economic activity even earlier may have dragged down growth in the range of 1.2-1.9% in Q4FY20. The full-year (FY20) growth may thus slip to as low as 4.2-4.3%, against the second advance estimate of 5% (projected before the spread of the pandemic). As for the first quarter of FY21, when economic activities came to a standstill, some analysts expect growth to contract by as much as 25-40%. CRISIL predicts India’s growth to fall off the cliff and contract 5% in fiscal 2021, mowed down by the Covid-19 pandemic. Stating that economic conditions have precipitously slipped since its mid-April forecast of 1.8% GDP growth, the agency said the first quarter will suffer a massive contraction of 25%. The services sector saw a record slump in April, much sharper than the slide in manufacturing. Services PMI crashed to 5.4 in April, against 49.3 in March, recording its worst month-on-month fall since the survey started over 14 years ago. The RBI has projected negative growth for FY21, without giving a specific estimate or even range. However, some analysts have warned of an unprecedented contraction, given the first quarter washout. For instance, Nomura has predicted (-)5.2% growth for FY21, Crisil pegs it at -5% and SBI group chief economic advisor Soumya Kanti Ghosh projects it at -6.8%. E-way bills are required for GST-registered businesses to transport cargo if it exceeds over Rs 50,000 in value. GSTN, the government portal, issues these receipts after relevant information (related to cargo, sender, recipient and vehicle for transport) are provided. With resumption of domestic flights this week, the associated activities are expected to give a further boost to e-way bill generation. However, experts warned that the paucity of labour in economic hubs due to migrants travelling back to home states through this month could dampen the pace of recovery. Abhishek Jain, tax partner at EY, said: “Generation of e-way bills is a reflection of movement of goods i.e. economic activity across India. Since April was a complete lockdown the e-way bills generated had fallen to a record low. The uptick of e-way bills generated in May clearly shows green shoots of goods movement and economic activity.” A new set of more relaxed guidelines was issued on May 17 for the fourth phase of lockdown. Experts said more e-way bills were required last week as economic activity including app-based cab services, markets, shops and other commercial establishment were allowed to operate. Further, private offices were also allowed to function with full strength.“As normalcy is gradually restored in trade and business, the number of e-way bills generated by the taxpayers during a day has multiplied if we compare it with previous phases of lockdowns. These numbers will slowly grow as trade and industry is further allowed relaxations,” Himanshu Relan, partner at Nangia & Co, said.
Source: Financial Express
Exports of textiles and cotton yarn, which were coming apart even before the pandemic struck because of competition from Vietnam, Chinese stock liquidation and lack of free trade pact support, have been further devastated. India’s yarn exports contracted 30 per cent in the quarter ended March as imports by China, which accounts for a third of India’s yarn exports, fell as garment units there shuttered. Imports by Bangladesh, which accounts for nearly a fifth of India’s yarn exports, also declined. “Overall, exports are estimated to have nosedived 80-90 per cent in April and won’t revive in a hurry. Consequently, we expect yarn exports to slide 35-40 per cent (year-on-year) this fiscal,” reads a research note from Crisil. Indian merchandise exports fell 13 per cent (in dollar terms) in the quarter ended March compared to a year ago, and a steep 60 per cent in April as the Covid-19 pandemic and shutdown of national borders slammed global trade. The US and the European Union, which together account for 64 per cent of India’s readymade garment (RMG) exports, are staring at a recession. The US is the worst-infected country now, and the pandemic-driven lockdown has ripped many apparel retailers there. Besides, a spike in unemployment and fall in personal incomes would cut spending on apparel. In the March quarter, India’s garment exports slipped around 16 per cent and in April, the fall was a drastic 91 per cent. Readymade garments exports may dive 30- 35 per cent this fiscal, Crisil said.
Source: India Today
The total number of PPE body coveralls produced in India crossed the 1-crore mark on Wednesday, according to the textiles ministry. "Under the able leadership of Hon''ble Prime Minister @narendramodi Ji total number of PPE Coveralls produced in India has crossed 1 crore today. A significant landmark towards the vision of #AatmaNirbharBharat," the Ministry of Textiles tweeted. India has become the world''s second largest manufacturer of personal protective equipment (PPE) body coveralls within a short time span of two months, the government had said last week. China is the world''s leading producer of PPE body coveralls, crucial to safeguard against COVID-19 infection.
Source: Outlook India
Revise the existing institutional mechanisms for trade and investment policymaking to make policies more coherent and inclusive. The measures necessitated to contain the Covid-19 pandemic have triggered an economic downturn globally. Experts believe that the economic shock from this is likely to exceed the recession brought on by the global financial crisis of 2008-09. India, too, is experiencing its greatest economic turmoil in recent times. The IMF has projected a GDP growth of 1.9% for India, which may possibly be the country’s worst performance since the economic liberalisation of 1991. As it gradually lifts lockdown restrictions and focuses on action needed for economic revival, the government plans to aggressively push its ‘Make in India’ programme with a dual strategy of policy and fiscal incentives to existing and prospective domestic and foreign investors, and duty protection to dissuade imports of finished goods. It is believed this proposal comes in the wake of several Covid-hit countries and MNEs looking at India as a viable investment alternative to China. In recent years, the government has undertaken several economic reforms with a view to attract FDI. In addition to opening up a plethora of sectors for foreign investment and easing out sectoral cap restrictions, these include the easing of foreign exchange control rules, substantial reduction in corporate income tax rates, and increased investment in infrastructure. To provide impetus to the manufacturing sector and make India a global manufacturing hub, the government launched the Make in India campaign in 2014, with an intent to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build best-in-class manufacturing infrastructure. As the Covid crisis changes the face of globalisation, it brings India an opportunity to realise this dream by attracting the multinationals moving away from China—if the correct policies are in place. At this time, the government must resist the tendency to adopt protectionist measures to safeguard the domestic economy as doing so may have a negative impact on foreign investment flows into the country. For several reasons, therefore, it is crucial to review the existing architecture of India’s trade and investment policies, which will play a central role in shaping the organisation and structure of international commerce in the times to come. First, India’s trade policy seems to be out of sync with its FDI policy. On the one hand, India wants to liberalise its industry, attract FDI, and woo investors; on the other, it wants to restrict imports to shelter its industries. It is inevitable that MNEs operating in a country like India, which is still in the budding stage of developing its manufacturing sector, will import intermediate goods and parts needed to manufacture products. Second, it is important to recognise the fact that FDI is just another way of conducting trade. Estimates suggest that about a third of global trade occurs in the form of intra-firm trade among MNEs; the remaining two-thirds occurs either as exports by MNEs to non-affiliates or trade among non-MNE national firms. The advent of global value chains, and the expansion of activities of MNEs have only increased the value of intra-firm trade flows. Our empirical work for India also finds a strong, positive, and self-reinforcing relationship between bilateral trade and FDI flows. In short, trade and FDI are complementary in the case of India. Third, the domestic policies, rules, and regulations underpinning trade and FDI in India has remained distinct and fragmented, having historically been affected by different objectives and goals, and controlled by separate organisations. This is not suitable for an economy where trade and FDI are closely interlinked. Although certain policy coordination mechanisms do exist, the extent of synchronisation between trade and FDI policies, and that of their formulation through inclusive deliberations, needs a closer look. Going ahead, it is important to realise that trade and investment are inextricably interlinked, and this warrants rethinking the way the Indian government formulates its foreign trade and investment policy. The foremost change must be to stop thinking of foreign trade policy as merely a means to promote exports, but to look simultaneously at issues of trade (including exports and imports) and FDI. There is a need to review the existing institutional mechanisms for trade and investment policymaking, and revise them as necessary to ensure more integrated, coherent, and inclusive policies. To take advantage of the opportunity presented by Covid-19, India needs to not only liberalise its trade and FDI policy regimes but also do so in a synchronised and coordinated manner. After all, trade and FDI are merely two sides of the same coin. Pant is Director and Vice Chancellor, IIFT & Bimal is Fellow, ICRIER.
Source: Financial Express
Retail businesses devastated by the 62-day lockdown have been declared eligible for the scheme, although they are not recognised or registered as MSMEs. The Rs 3 lakh crore emergency credit borrowing scheme for Micro, Small and Medium Enterprises (MSMEs) announced by the govt on May 12 will also cover retailers and other businesses. Retail businesses devastated by the 62-day lockdown have been declared eligible for the scheme, although they are not recognised or registered as MSMEs. Finance ministry sources say that the inclusion covers members of the nearly seven crore strong trading community. The emergency credit line facility provides 100 per cent guarantee coverage by National Credit Guarantee Trustee Company (NCGTC) to member lending institutions or MLIs on up to Rs three lakh crore to eligible MSMEs. With the National Credit Guarantee Trust corporation or NCGTC releasing the guidelines for the scheme today, it has been clarified that MSMEs/business enterprises — constituted as proprietorships, partnerships, registered companies, trusts and limited liability partnerships (LLPs), and also interested borrowers under Pradhan Mantri Mudra Yojna or PMMY — would be eligible for the scheme. The assistance under this scheme will come in the form of additional working capital through a term loan facility for eligible MSMEs and other businesses. Credit under the scheme would be up to 20 per cent of the borrower’s total outstanding credit up to Rs. 25 crore, excluding off-balance sheet and non-fund based exposures, as on February 29, 2020, i.e., additional credit shall be up to Rs 5 crore. Speaking to India Today TV, Confederation of All India Traders (CAIT) General Secretary Praveen Khandelwal, said, “The Covid-19 lockdown has seriously hurt the retail businessmen and traders. The losses over the last 60 days are estimated to be over 9 lakh crore and loss on GST is over Rs 1.5 lakh crore.“ CAIT estimates that before the pandemic struck, retail businesses had a daily turnover of over Rs 15,000 crore. Khandelwal says that the losses are going to mount as revival is difficult. “Only 5 per cent of the pre-Covid business is back after the easing of restrictions and only 5 per cent of the workforce is back. If the crisis continues by December, retail businesses would be in serious trouble.” The Guaranteed Emergency Credit Line (GECL) facility was approved by the Union cabinet on May 22. Retailers and wholesalers, as per the MSME ministry’s June 2017 Office Memorandum, did not figure in the eight activities in the “manufacture or production of goods or providing or rendering of services in accordance with section 7 of the Micro, Small and Medium Enterprise Development Act, 2006.” MSME minister Nitin Gadkari during a series of interactions via video conference assured the trading community that the government would try to address the crisis faced by them via the inclusion of traders under the MSME sector as service providers. What makes the new guarantee scheme attractive is the capped Interest rates at 9.25 per cent for banks, and at 14 per cent for NBFCs on loans provided for 4 years along with a 12-month moratorium. This improves lending as banks levy interest between up to 17 per cent and NBFCs charge up to 30 per cent.
More on the scheme
The scheme would be applicable to all loans sanctioned under GECL during the period from May 23, 2020 to October 31 2020, or till an amount of Rs. 3 lakh crore is sanctioned under GECL, whichever is earlier. The eligibility criteria for MSMEs under the scheme along with the Rs. 25 crore credit ceiling as on 29.2.2020 and an annual turnover of up to Rs 100 crore in FY 2019-20 are: * The Scheme is valid only for existing customers on the books of the Lending institutions* Borrower accounts should be classified as regular, SMA-0 or SMA-1 as on 29.2.2020. Accounts classified as NPA or SMA-2 as on 29.2.2020 will not be eligible* The MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to MSMEs that are not required to obtain GST registration. * Loans provided in individual capacity will not be covered under the scheme.
Source: India Today
Finance minister Nirmala Sitharaman has taken most observers by surprise by including wide ranging reforms in her stimulus package. Alongside, some states have announced some equally bold reforms. Most notable among the latter are those relating to labour laws by Uttar Pradesh and Gujarat and to land laws by Karnataka. Proposals relating to the Essential Commodities Act; agricultural marketing; and legal framework for farmers to engage with processors, aggregators, large retailers and exporters represent the deepest reforms in agriculture to date. Yet, it is difficult to overlook the fact that even these reforms cannot make India’s poorest farmers prosperous. 70 million or 48% of all land holdings in India are smaller than half hectare, with an average size of just 0.23 hectare. The average value added on these holdings is small and the income accruing to the owner smaller still once marketing costs are taken into account. Even tripling this income would fall short of making the owner prosperous. These farmers need an exit to gainful employment in industry and services. Ideally, the starting point for exit is a liberal land leasing law that allows the farmer to lease out her holding for any use and for any length of time thereby yielding the maximum possible rent. Absent such a land leasing law, the proposed Karnataka land law reform could offer a workable alternative. That reform allows farmers to convert land from agricultural to non-agricultural use and sell it at market price. The conversion would get the farmer fair market value for her. Other states must consider similar reform or a liberal land leasing law. The possibility of exit offered by these land law reforms need not translate into actual exit, however. The latter requires the availability of well-paid jobs in industry and services. The only way India can create these jobs in large numbers is by replacing China as the world’s factory of light manufactures. Pessimists would no doubt argue that the vast volume of exports necessary to become the world factory are infeasible in the wake of Covid-19. But they forget that no shock ranging from the black death pandemic of the 14th century to Spanish Flu and Great Depression of the 20th to 9/11 terrorist attacks and the global financial crisis of the 21st, has been able to bottle up trade for long. World trade will rise up again sooner than most pessimists think. In fact, Covid-19 lull offers India an excellent window of opportunity to implement reforms that would help it maximise the benefit of reopening of export markets post-Covid-19. India’s factor markets – capital, labour and land – still remain major constraints on economic activity, especially as they apply to medium and large enterprises whose emergence on a substantial scale is essential to the capture of world markets in light manufactures. Financial markets in India remain weak. Unfortunately, banks are likely to weaken yet further because of a large volume of defaults on loans expected in the post-Covid-19 era. Keeping this in view, the government has been wise not to fire all its fiscal bullets when announcing the stimulus package despite the pounding it has had to take from many commentators. Once Covid-19 recedes, it will need to infuse large sums of resources into banks to recapitalise them. On labour law reforms, UP and Gujarat have announced reforms bolder than anyone including this author could have predicted. Each has suspended all but three central labour legislations for limited periods, UP for three years and Gujarat for 1,200 days. But these reforms go too far in one dimension and not far enough in another. Suspension of some key provisions in labour laws relating to health and safety of workers, resolution of industrial disputes and right to form unions and strike for even a short period violate the spirit of a modern-day democratic state. At the same time, a well-functioning market economy must also give employers rights to reassign workers to different tasks and terminate them (with fair compensation) when their services cannot be profitably deployed. The central government will need to balance the legitimate rights of the two sides as it considers the proposals by UP and Gujarat for approval. The dimension in which the proposed reforms fall short is time. What India needs most are many more medium and large enterprises in light manufactures that are globally competitive. But no entrepreneur worth her salt will invest in such enterprises if she faces the prospect of the current labour law regime returning once the suspension period is over. This is especially true of the current laws relating to reassignment of tasks and termination of workers in enterprises with 100 or more workers. In its present form, the reform would fail to turn UP and Gujarat into manufacturing hubs. Finally, land market rigidities too need to be addressed. High land prices have made even infrastructure projects excessively costly in India. More land needs to be brought on the market through conversion of agricultural land for non-agricultural use, release of excess land held by sick as well as healthy PSUs, auctioning unused land owned by various public sector entities, and raising the floor space index in the cities.
Source: Economic Times
The package has a large role for RBI, with 40% of the amount mentioned being provided as liquidity by the central bank. What is one to make of the Rs 20 lakh crore economic package? First, it is not a package that exclusively tackles the immediate fallout of the Covid-19 pandemic. Second, it addresses the larger issue of reforms in various areas—agriculture, mining, FDI, the power sector, and so on. Third, it does not provide any demand-side stimulus, which was expected given that the announcement of the package had mentioned everyone being included. Fourth, it depends heavily on financial institutions (FIs) to deliver the goods, and is, hence, follows more of a supply-side approach. Fifth, there is something for the really poor, but with limits, as the relief is time-bound and not for the full year. Therefore, for the population that is being provided with money and employment through MGNREGA, a lot will depend on when the economy will recover—the 100 days’ wages address the need of only three months, whereas many had virtually permanent jobs, earning anywhere between Rs 10,000-30,000 per month against the Rs 6,000 receiveable under the scheme. From the standpoint of corporate India, it would be a disappointment as several sectors—especially, aviation, tourism, etc, for whom recovery is improbable this year—were expecting tax breaks, loan guarantees, and funds for resuscitation. The government has taken a macro view, addressing needs from below, including those of SMEs, but not the onus of alleviating the pain of industry, which is the key driver of the economy. The package has a large role for RBI, with 40% of the amount mentioned being provided as liquidity by the central bank. This is an indirect way of supporting the economy: RBI can infuse liquidity in banks and nudge them to lend at a lower cost by altering the repo rate, but the final call is to be taken by banks after evaluating risk, which is going at a premium today given the inability of the majority of sectors to operate during the shutdown. The government has often used this formula—of allowing for more liquidity through RBI and restructuring debt to ensure production can proceed—to revive the economy. The advantage this time is the government’s assertion that Rs 3 lakh crore of SME loans will be guaranteed by the sovereign—this should enable banks to lend, though the fine print on this is yet to be revealed. The time-frame goes up to October, meaning that borrowers must have an appetite for such loans. The challenge really is that SMEs, which have been impacted the most, would need to start production to feel confident of taking loans. This means there needs to be demand, which is lacking today. Therefore, an externality has to be solved for this to happen. The announcement of the components of the package in tranches, across five days, did have a touch of drama. There was, however, a method to this rather elaborate unveiling. As one moved from the first to the last component, the focus changed to medium- and long-term reforms, instead of immediate relief or stimulus against the pandemic. Strengthening agriculture has always been a goal, and the allocation of Rs 1.5 lakh crore under different schemes is spread over two to three years. The issues of mining and minerals, as well as airspace, are far-reaching in terms of reform, but presently, individual companies may not be too eager to get into such projects when the challenge is of survival. The same holds for the privatisation of discoms in Union Territories. Improvements in the business environment are always welcome, and less onerous laws under the Companies Act are suited to this. Hence, only the first two tranches are to have an impact on the current situation. There has been some funding for street vendors and migrant labourers, but this will, at best, be in the form of sustenance. Central and states governments have to urgently take up rehabilitation of migrant labour. A plan has to be drawn up to bring them back as they cannot live on MGNREGA or agriculture, from which they had moved away to begin with. This is one of the two gaps to be filled for the economy to resume as labour shortage will be a hurdle going ahead, especially for construction, factories, retail malls, etc. The other issue to be taken on jointly is that of logistics. Even today, states do not want their migrant population back for fear of spreading the virus—this is also the issue with supply chains. Presently, even manufacturers of essential goods have to deal with panchayats, municipal organisations, and state governments (based on their stance on opening up the economy) forcing them to close. This is serious, and needs be resolved lest the lifting of the lockdown becomes more haphazard—just as the detention of migrant labourers for 45 days before being allowed to go back has only caused large-scale trauma. Banks and the capital market would play a vital role in the road to recovery as most of the schemes involving funds that have been spoken of are to come from FIs, banks, and the market. Some, like NBFCs, have guarantees attached while the PSUs have to borrow in a big way to address the issue of financing of receivables of discoms. The conundrum for banks is that while a lot of push has been given to supplying funds, with guarantees being thrown in along the way, there are no measures to stimulate demand. The package is not Keynesian in nature, but more a set of survival measures. Banks will be reading the fine print all through since they have to be assured that the guarantee given by the government for SMEs is for the entire time period. They already have to deal with the moratorium given to borrowers, which has to be extended for at least another two quarters as it is unlikely that those who were unable to pay by March will be able to do so by even September. The spectre of NPAs increasing will surely dominate their vision all through the year.
Source: Financial Express
The Reserve Bank of India (RBI) is likely to allow banks to assign zero risk weight for loans that will be extended to the micro, medium and small enterprises (MSMEs) under the ₹20 lakh crore economic package announced by the government earlier this month. The Finance Ministry had requested the central bank to make these loans risk free, following an interaction with banks. As a part of the package, a ₹3 lakh crore loan for the MSME sector was announced. This will be guaranteed by the National Credit Guarantee Trustee Company Limited (NCGTC) in the form of a Guaranteed Emergency Credit Line (GECL) facility. However, such loans would attract a risk weight of a minimum 20% since these don’t come with direct government guarantee. This facility is similar to the loans that are guaranteed by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). After banks highlighted the issue with the government, the Finance Ministry asked the RBI to waive the requirement of assigning a risk weight to the loans, sources said. “The RBI is likely to waive the requirement of risk weight,” a source said. “The Finance Ministry is expected to issue detailed guidelines on this credit guarantee loan issue,” the source added. Sources also said that the government had factored in less than 15% non-performing assets from this ₹3 lakh crore of loans. “The government has said that it has made [available] a corpus of ₹41,600 crore for the scheme, which is spread over the next few years. This means the government is factoring in less than 15% non-performing assets, as of now,” said an official of a public sector bank.
Other small borrowers
Though primarily meant for the MSME sector, other small borrowers including non-banking financial companies can also avail themselves of the scheme, sources said. The scheme will be applicable till October 31, or till an amount of ₹3 lakh crore is sanctioned, whichever is earlier. Zero risk would mean that banks will not have to set aside additional capital for these loans. The move is aimed at encouraging lenders to extend credit, as banks have turned risk averse and have been reluctant to lend. Finance Minister Nirmala Sitharaman, who met chief executives of pubic sector banks last week, said banks had been asked to extend loans automatically to eligible borrowers without fear of the ‘3Cs’ — CBI, CVC and CAG. The tenure of loan under this scheme will be four years, with a moratorium period of one year on the principal amount. The NCGTC will not charge any guarantee fee. The interest rate under the scheme is 9.25% if the loan is extended by banks and financial institutions, and 14% if by NBFCs.
Source: Doordarshan
Sri Lanka’s finances were fragile long before the coronavirus delivered its blow, but unless the country can secure aid from allies like China, economists say it may have to make a fresh appeal to the IMF or default on its debt. All the tell-tale crisis signs are there: a tumbling currency, credit rating downgrades, bonds at half their face value, debt-to-GDP levels above 90% and almost 70% of government revenues being spent on interest payments alone. The IMF seems the obvious option — Sri Lanka has already asked the Fund for a ‘Rapid Credit Facility’ — but securing a new longer-term arrangement might not be straight forward. The new government veered off its soon-to-expire current IMF programme late last year by slashing taxes, including VAT and the ‘nation-building’ tax brought in after the island’s long-running civil war in 2009. In February, the IMF warned Colombo was set to miss its 2019 primary surplus target “by a sizable margin”, and the economic outlook has deteriorated dramatically since then. Sri Lanka’s central bank sought to allay fears of a default in a statement last week, calling speculation “baseless” and vowing the country will “honour all its debt service obligations in the period ahead”. External debt payments between now and December amount to $3.2 billion. Other costs could bring that up to $6.5 billion in the next 12 months, Morgan Stanley estimates, and with FX reserves of just $7.2 billion, it has described the situation as a ‘tightrope walk’. The crunch point looks likely to be a $1 billion international sovereign bond payment due in October. “The market is pricing in the risk of a credit event there,” said Aberdeen Standard Investments’ Kevin Daly, pointing to the recent drop in some of country’s bonds to under 50 cents on the dollar and rise in borrowing costs to over 20%. “If they were to seek an IMF funding programme that would at least address some concerns, but let’s not forget the last fiscal measures sent the wrong signal.” One view, dismissed by the central bank, is that delayed parliamentary elections may have hampered decisive policymaking, including how to navigate the economic hit from the pandemic. Ratings firm S&P Global estimates that only recently-defaulted Lebanon spends a larger proportion of revenue on bond interest payments. Add to that the hammerblow from the virus. Tourism, which accounts for nearly 12% of the country’s economy and 11% of jobs according to World Bank, has been floored again just a year after the Easter Sunday suicide bombing attacks.
IMF OR BUST?
Sri Lanka’s sizable textiles industry has been shredded too as global retailers shut up shop during lockdowns. Morgan Stanley forecasts the fiscal deficit will reach 9.4% of GDP this year, while a primary balance deficit of 3% of GDP would be more than 4 percentage points off stabilising debt levels. “The room to kick the can down the road is not really there any more,” said Mark Evans, an analyst at Ninety One, formerly Investec Asset Management. Sri Lanka “probably has the capacity to service its debt obligations this year,” he added. “But much beyond that it becomes more questionable without a credible (fiscal consolidation) plan that could unlock IMF and other multilateral support.” Other bilateral support could potentially come from China, especially as Beijing was a backer of President Gotabaya Rajapaksa’s elder brother Mahinda, who ruled the island from 2005 to 2015 and is now its Prime Minister.With one of the deepest ports in the world, Sri Lanka has also long been a target of Beijing’s ambitious Belt and Road scheme, while regional power India has been vying for deals to counter China’s influence. China’s foreign ministry didn’t immediately respond to a request for comment on the possibility of help. Sri Lanka’s central bank said last week it was engaging with “all investment and development partners”.It is working on currency swap and credit lines with both India’s central bank and the People’s Bank of China and Beijing, and also seeking assistance from the Asian Infrastructure Investment Bank (AIIB) and other multilaterals. Aberdeen’s Daly said any signals of debt help from China could trigger a relief rally in bond prices but IMF support was still likely to be needed and that would come with stringent conditions. “They would have to do an about face to get an IMF programme, but that is probably one of only things they can to address the concerns about debt sustainability.”Additional reporting by Swati Shetye in Mumbai and David Lawder in Washington
Source: Reuters
Central Chairman All Pakistan Textiles Processing Mills Association (APTPMA) Muhammad Pervaiz Lala demanded to support textile processing industries and employment, government should pick two regulatory costs to employers, namely SESSI and EOBI as Pakistani competitor – India also provides such type of support. Therefore, Government should waive payments of EOBI, SESSI/PESSI and taxes & levies for export sectors for March to June 2020. Commenting over the proposals for forthcoming budget 2020-21, he said that From July 2020 onward, Self Registration and Assessment Scheme should be introduced without any surveillance and post audits. EOBI & SESSI cards should be given to workers. With this scheme voluntarily registration will be increased benefiting both employees and employers. Due to COVID-19 and lockdown across Pakistan, the Textile Processing industries have halted production. Resultantly facing multiple losses, he added. Central Chairman, Muhammad Pervaiz Lala mentioned that the Textile Exporters and Manufacturers come under final tax regime for which the profit of 4% is considered and presently pending refund amount of WHT is adjusted against payment of Workers Welfare Fund (WWF) at Federal Board of Revenue. Even after adjustment some amount of refund against WHT is still held up at FBR. Now provincial government is also demanding SWWF from exporters. Some federal government officials verbally advised not to make payment of SWWF to provincial government whereas on the other hand provincial government inspector visits factories to follow up and it is cause of great harassment. We wonder how we could adjust pending refund amount of WHT if we pay WWF to Provincial Government. It is to be noted that all our exporters' data is available with FBR, he added. Central Chairman, APTPMA Muhammad Pervaiz Lala, said that exporters are exempted from payment of WORKERS WELFARE FUND (WWF) and they are allowed to use the amount for labor related compliance matters which will directly benefit for the welfare of workers engaged in the manufacturing process and will help in enhancing exporters as the compliance level/standard of local companies will increase. He demanded that Industries will be provided relief in cost of manufacturing and Exemption should be given to export oriented industries, he added. Chairman, APTPMA demanded immediate suspension of Export development surcharge and mentioned that 0.25% Export Development Surcharge is deducted from export proceeds of the exporters. This increases the cost of doing business of the exporters. Huge amount of EDF collected by Government is available in its kitty. APTPMA Chairman Proposed that Govt should suspend collection of Export Development Fund (EDF) surcharge till the huge unutilized amount of EDF is exhausted. This will make our industry competitive and capture more markets, he argued. Central Chairman, Muhammad Pervaiz Lala pointed out that there are 14 Gazette Holidays and 52 Sundays which total up 66 holidays in a year. Apart from casual and privilege leaves, the frequent holidays declared by the Provincial Government greatly hurts the production schedules of the export manufacturing units. As a consequence of this, he mentioned that Exporters have to bear overtime expenses of workers to make shipments on time. He proposed that the Govt fix for the Export Oriented Industries number of Federal Gazetted holidays in the year and the workers should not be entitled to Provincial Government's Holidays and Fix Gazetted Holidays can be adjusted by Employer and Employee with mutual consent. This will provide strength to exporters to achieve challenging export target for enhancement of Exports and earn valuable foreign exchange and shall also provide level playing field.
Source: Business Recorder
In nearly every way imaginable, the COVID-19 pandemic has upended the world order. It has tested global leaders, disrupted global supply chains and deeply affected individual lives in ways big and small. But amidst tragedy and chaos, this pandemic also has demonstrated the deep interconnectedness that exists between people and planetary systems. It shows the turmoil that can result when one element of the system is out of balance — a situation certain to repeat itself many times over if we ignore long-term risks such as climate change. This interconnectedness is particularly evident in the textiles industry, with its complex — and increasingly fragile — global supply chains. We have the opportunity to rethink our sector to make it fit for the future. But where do we begin? As a nonprofit specializing in the sustainability of raw materials in the textile industry, Textile Exchange believes that it is impossible to know where we need to go in future until we know where we are now. In this spirit, today we are pleased to publish our latest Material Change Insights Report, which offers valuable insights into the state of fiber and materials sourcing in the textiles sector in the context of the COVID-19 pandemic. The report draws on exclusive data provided through Textile Exchange’s Corporate Fiber & Materials Benchmark program, the largest peer-to-peer comparison initiative in the textiles sector, with more than 170 brand participants. It provides one of the most data-backed and comprehensive analyses of how the industry is progressing in its shift to preferred materials, as well as alignment with global efforts such as the Sustainable Development Goals (SDGs) and the transition to a circular economy. The report builds on Textile Exchange’s Material Change Index — a family of indices, published earlier in the year, that tracks individual company progress. Here are a few takeaways from this year’s analysis: Climate change and raw materials sourcing are inextricably linked — and sourcing preferred materials is a powerful way for a company to reduce its climate impacts. The choices a company makes when sourcing raw materials either can damage or improve the health of the planet — and sourcing preferred materials is a way to make sure it’s the latter. In 2018, reporting companies collectively converted 1.7 million metric tons of materials to preferred, resulting in a saving of 1 million metric tons greenhouse gases. Companies are increasingly sourcing their raw materials from preferred sources. Reporting companies sourced nearly 40 percent of their materials from preferred sources in 2018. This includes cotton, polyester, nylon, manmade cellulosics, wool and down. Textile Exchange defines a preferred material as one which results in improved environmental and/or social sustainability outcomes and impacts in comparison to conventional production. More companies are incorporating circularity into their strategies, but a deeper rethinking of systems change is still lacking. Companies are recognizing the urgent need to reduce dependency on virgin material inputs and eliminate waste by shifting towards a circular value chain. Eighty-six percent of companies responding to our circularity module have a circularity strategy in place, up from just 29 percent of the same companies two years before. However, most are focusing on one or a few circularity activities. Circularity leaders are moving in the right direction, with design strategies, post-consumer collection, and use of recycled content and other circularity-enabling practices— efforts that must be connected, accelerated and scaled to achieve the transformative shift we need. The SDGs are a useful framework for global action, although the majority of companies have not yet set measurable targets. The way we produce, (re)use and dispose of or recycle our materials has an impact on nearly every one of the 17 SDGs. The textile industry has a powerful opportunity to shift the needle in both producer and consumer contexts. Our study shows that 66 percent of companies said they have started aligning their business strategy with the SDGs. However, 71 percent have not set measurable targets within their goal alignment, which is needed for these commitments to be meaningful. The time for urgent action is now. We are encouraged by the progress we are seeing. But we realize that meaningful change requires an even deeper commitment to a sourcing model that regenerates instead of extracts, that benefits instead of exploits, that prioritizes the health of the planet and all of us people on it. Now is the time to double down on this commitment. Let’s embrace fairness and kindness. Let’s accelerate innovation, rather than stall it. We may not have been able to prevent the current pandemic, but we do have it within our power to learn from it and build back with a more resilient future in mind.
Source: Green Biz
UKFT, the collective voice of the UK fashion and textile industry, has announced that fashion retail, fashion designers, tailors and dress makers will be among the retailers that are expected to be able to re-open from the June 15. UKFT reported that in order for these businesses to reopen they must have undertaken an appropriate Covid-19 risk assessment. UKFT also stated that Scotland, Wales and Northern Ireland will shortly announce their own time lines for the re-opening of retail. The health and safety executive has published guidance and advice on how to carry out a risk assessment. UKFT reported that businesses should also involve its team in the assessment process. Businesses must keep a written record of its risk assessment unless they have fewer than 5 employees or are self-employed. If a business has more than 50 employees, the government expects them to publish the risk assessment online. The government has published guidance on how to manage the re-opening process here and the British Retail Consortium has also published its own guidance. To help manage the risk all businesses should: increase the frequency of handwashing and surface cleansing; make every effort to allow staff to work from home. Where this is not possible businesses should make every effort to maintain the 2 metre physical distancing guidelines; if it is not possible to maintain the 2 metre physical distancing take all possible measures to reduce the risk of transmission; use screens where possible; team members should work back to back or side to side; reduce the number of people operating at one time (introduce shift working).
Source: Fibre2Fashion
