In line with Government of India's top focus on energising MSMEs in the country, a special meeting of Cabinet Committee on Economic Affairs (CCEA) was convened under the Chairmanship of Prime Minister Shri Narendra Modi, here today, which approved the upward revision of MSME definition and modalities/ road map for laying down effective implementation mechanism for the remaining two announcements under the Atmanirbhar Bharat Package. These include:
· In the package announcement, the definition of micro manufacturing and services unit was increased to Rs. 1 crore of investment and Rs. 5 crore of turnover. The limit of small unit was increased to Rs. 10 crore of investment and Rs 50 crore of turnover. Similarly, the limit of a medium unit was increased to Rs 20 crore of investment and Rs. 100 crore of turnover. It may be noted that this revision was done after 14 years since the MSME Development Act came into existence in 2006. After the package announcement on 13th May, 2020, there were several representations that the announced revision is still not in tune with market and pricing conditions and it should be further revised upwards. Keeping in mind these representations, it was decided to further increase the limit for medium manufacturing and service units. Now it will be Rs. 50 crore of investment and Rs. 250 crore of turnover. It has also been decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium. This is yet another step towards ease of doing business. This will help in attracting investments and creating more jobs in the MSME sector. The following table provides the details of revised limits:
· Approval for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs. This will benefit 2 lakh stressed MSMEs.
· Approval for equity infusion of Rs. 50,000 crore for MSMEs through Fund of Funds (FoF). This will establish a framework to help MSMEs in capacity augmentation. This will also provide an opportunity to get listed in stock exchanges.
· With today's approval, implementation Modalities and Road Map for entire components of the Atmnirbhar Bharat Abhiyan package are in place. This will help in attracting investments and creating more jobs in the MSME sector.
In the aftermath of COVID-19 pandemic, Prime Minister Shri Modi was quick to recognise the role of MSMEs in building the Nation. As such, MSMEs formed a very prominent part of the announcements made under the Atmanirbhar Bharat Abhiyaan. Under this package, the MSME sector has not only been given substantial allocation but has also been accorded priority in implementation of the measures to revive the economy. To provide immediate relief to MSME sector, various announcements have been made under the Package. The most important ones also included:
· Rupees Three lakh crore collateral-free automatic loans for MSMEs to meet operational liabilities, buy raw material and restart businesses.
· Revision of MSME definition to render maximum benefits to the sector;
· Disallowing global tenders in procurements uptoRs. 200 crores- to create more opportunities for domestic players, And clearing
· Approval for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs. This will benefit 2 lakh stressed MSMEs.
· Approval for equity infusion of Rs. 50,000 crore for MSMEs through Fund of Funds (FoF). This will establish a framework to help MSMEs in capacity augmentation. This will also provide an opportunity to get listed in stock exchanges.
With today's approval, implementation Modalities and Road Map for entire components of the Atmnirbhar Bharat Abhiyan package are in place. This will help in attracting investments and creating more jobs in the MSME sector.
In the aftermath of COVID-19 pandemic, Prime Minister Shri Modi was quick to recognise the role of MSMEs in building the Nation. As such, MSMEs formed a very prominent part of the announcements made under the Atmanirbhar Bharat Abhiyaan. Under this package, the MSME sector has not only been given substantial allocation but has also been accorded priority in implementation of the measures to revive the economy. To provide immediate relief to MSME sector, various announcements have been made under the Package. The most important ones also included:
· Rupees Three lakh crore collateral-free automatic loans for MSMEs to meet operational liabilities, buy raw material and restart businesses.
· Revision of MSME definition to render maximum benefits to the sector;
· Disallowing global tenders in procurements uptoRs. 200 crores- to create more opportunities for domestic players,
· And clearing of MSME dues by the Government and Public Sector Units within 45 days.
Government of India has been taking all necessary steps to ensure that the benefit of these landmark decisions reaches to the MSMEs at the earliest. In this regard, following necessary policy decisions have been already taken and the implementation strategy has been put in place.
· The scheme for Rs. Three lakh crore col lateral-free automatic loans was earlier approved by CCEA and has been formally launched.
· Modalities have been worked out for Upward revision of MSME Definition making it more inclusive broad-based providing greater avenues to MSMEs to harness their potentials.
· Similarly, amendments in General Financial Rules mandating no global tenders for procurement upto 200 crore have been carried out. The new rules have already been issued and effected. This will open up new business avenues for Indian MSMEs.
· To ensure that MSME payments are released within the timeframe of 45 days, directions have been issued at the level of Cabinet Secretary, Expenditure Secretary and Secretary, MSME.
· To further ease the burden on MSMEs, RBI has extended moratorium on repayment of loans for another three months.
To manage all this, a robust ICT based system called CHAMPIONS has also been launched by the Ministry of MSME. The portal is not only helping and handholding MSMEs in the present situation, but is also providing guidance to grab the new business opportunities and in the long run, become national and international Champions.
MSME Ministry is committed to support the MSMEs, and the people who depend on them. All efforts are being made to encourage MSMEs to take benefit of the initiatives under the Atmanirbhar Bharat package and our other schemes.
Background:
Micro, small and Medium Enterprises (MSMEs) popularly called as MSMEs are the backbone of Indian economy. Silently operating in different areas across the country, more than 6 crore MSMEs have a crucial role to play in building a stronger and self-reliant India. These small economic engines have a huge impact on the country's GDP-making a contribution of 29 percent. They contribute to almost half of exports from the country. Additionally, more than 11 crore people are employed in the MSME sector.
Source: PIB
Union Textile Minister Smriti Irani on Monday thanked Prime Minister Narendra Modi for the ‘massive support granted to MSMEs.’ She said that decisions will have a major transformative impact on the entire textiles industry, especially apparel segment which primarily consists of micro, small and medium enterprises (MSMEs). In a series of tweets, she lauded the decisions taken by Union Cabinet for MSMEs. Thanking Prime Minister Modi, Irani tweeted: “Grateful to PM @narendramodi Ji for the massive support granted to MSMEs. Decisions will have a major transformative impact on the entire Textiles Industry especially apparel segment which primarily consists of MSMEs.” In another Tweet, she said: “Approval to Rs 20,000 crore as subordinate debt to provide equity support & Rs. 50,000 crore equity infusion to help MSMEs in managing the debtequity ratio will reinvigorate the sector which is the backbone of our economy.” The Union Cabinet has approved the modalities for implementing Rs 50,000 crore equity infusion to support MSMEs, which was announced last month as part of Atma Nirbhar Bharat package last month to help the sector cope up with the situation created by COVID-19. It also approved Rs 20,000 crore subordinate debt for stressed MSMEs and a new definition for MSME under which enterprises with investments up to Rs 20 crore and a turnover of less than Rs 250 crore will now be defined as ‘medium’ units. In a subsequent tweet, she said the revision of MSME definition after 14 years is a landmark step towards encouraging MSMEs to expand their horizons. “MSMEs contribute 29% of India’s GDP, 48% to our exports & are a driving force behind employment to crores of people. Revision of MSME Definition after 14 years is a landmark step towards encouraging MSMEs to expand their horizons & boost #AatmaNirbharBharat,” she tweeted. Earlier in the day, briefing media about the decisions, Information and Broadcasting Minister Prakash Javadekar said the government has further revised the definition of MSMEs, under which businesses that have investments up to Rs 1 crore and turnover of less than Rs 5 crore will be classified as ‘micro’ units. Businesses will be defined as a ‘small’ unit if the investment is Rs 10 crore with a turnover of less than Rs 50 crore whereas enterprises with investments up to Rs 20 crore and a turnover of less than Rs 250 crore will now be defined as ‘medium’ units. Finance Minister Nirmala Sitharaman had last month given details about the package for MSMEs after Rs 20 lakh comprehensive package was announced by Prime Minister Narendra Modi.
Source: News Live
In the recent past, tweets have been noticed by the Government on the issue of waiver of late fee applicable on non-filing of GSTR 3B returns. The demands are largely for the waiver of late fee for the returns which were required to be filed from the beginning of Goods & Services Tax (GST) i.e. August, 2017. It may be noted that for helping the small businesses having turnover less than Rs 5 crore in the current situation arising out of COVID-19, Finance Minister Smt. Nirmala Sitharaman had already announced extension of GST returns of February, March, April and May 2020 till June 2020. No late fee will be charged for this period. The current requests for waiver of late fee pertain to the old period (August 2017 to January 2020). It may be appreciated that the late fee is imposed to ensure that the taxpayers file return in time and pay taxes on the amount collected from buyers and due to the Government. This is a step to ensure that a certain discipline is maintained regarding compliance. Honest and compliant taxpayers would be discriminated negatively in the absence of such a provision. In GST, all decisions are taken by the Centre and the State with the approval of the GST Council. It would not be possible or desirable for the Central Government to unilaterally take a view on this issue and therefore, the trade is informed that the issue of late fee would be taken up for discussion in the next GST Council meeting.
Source: PIB
The government on Monday extended the validity of scrips or certificates, provided under export incentive schemes, which are expiring between March 1 and June 30 this year till September 30. The Foreign Trade Policy (FTP) provides tax incentives for goods and services under the Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS). Depending on the nature of services and product, the government gives duty credit scrips or certificates to exporters. These scrips can be transferred or used for payment of a number of duties including the basic customs duty. "Relaxation has been provided for applicable late cuts for SEIS/MEIS applications and the validity of scrips issued under Chapter 3 of FTP which are expiring between March 1 and June 30 this year has been extended up to September 30 this year," the Directorate General of Foreign Trade (DGFT) said in a public notice. In a separate trade notice, the DGFT said that as per a pact signed between India and Mozambique for import of pigeon peas and other pulses grown there, 2 lakh tonnes of pulses will be imported during 202021 with certain conditions. It said import will be allowed only through 5 ports -- Mumbai, Tuticorin, Chennai, Kolkata and Hazira -- and it will be subject to production of "Certificate of Origin" certified by the authorised signatories in the ICM (Instituto de Cereasi de Mocambique) with stamps provided by the Government of Mozambique, which is being shared with the concerned customs authorities of these ports and the Central Board of Indirect Taxes and Customs. Although quantitative restrictions has been imposed on import of moong, peas, and toor dal, it has been notified that the restrictions shall not apply to the government's import commitments under any bilateral or regional agreement or memorandum of understanding.
Source: Economic Times
RAJIV Sajdeh, vice-chairman, CII, Amritsar, and one of the partners of Indo German Yarn and Fibres LLP, believes that gradually industries in the country will pick up pace in the coming days. He had established Indo German Yarn and Fibres LLP in 1990 and has been engaged in the field of technical textiles for the domestic and export market. The company is working closely with the European firms in this sector, especially Germany. It is producing performance-based yarn and fabric, used in Industrial Personal Protection. The special fabrics produced by them are inherent fire resistant at high temperatures and resistant to sharp cuts. These yarns and fabrics are exported to the Netherlands, Germany, Turkey, USA and China. In an interview with Neeraj Bagga, he discusses the current scenario for the business community. Excerpts:
How has the lockdown impacted your business?
Our major consumers, including steel mills, automotive industry and fibre optic cable, were severely impacted by the lockdown. As a result, in this first quarter, we could only touch 30 per cent of the turnover in comparison to the corresponding period last year. Export orders scheduled for April-May could not be placed and some have been cancelled. Low sales have resulted in piling up of raw material, affecting the flow of liquidity.
How do you expect resumption of your business with full capacity?
We expect that our supplies related to some essential production-based industries will come back on track soon. As other industries come back on line, things should get better in the next quarter. At present, we are operating with 30 per cent capacity and hopefully we will start working with 50 per cent capacity by June-end if things remain normal. Further projections are difficult at the moment as some major industrial states like Gujarat and Maharashtra will take more time to resume industrial activities.
How are you dealing with the issue of paying salaries to workers?
We paid full salaries for March and April in a phased manner to our employees. We hope to continue with the same mode during this quarter until we regain the previous speed. Our employees have been very understanding and co-operative in this regard. Liquidity is the key to our survival. Excellent relations with our suppliers and buyers helped us during these hard times. Raw material suppliers have been coporative with us as far as payment extensions are concerned.
Do you consider the current crisis as a challenge or an opportunity?
This unprecedented crisis posed a big challenge and brought out some opportunities, which we never thought. The Indian textile sector accepted the challenge and rose to the occasion by producing PPE kits and will soon export them. The government has also recognised the role of the technical textile sector in providing protection to our frontline warriors.
What are your expectations from the government?
The textile sector is reeling under inverse GST. The raw material is charged at 18 per cent, yarns at 12 per cent and fabric at five per cent. This results in huge liquidity blockage and needs to be immediately rectified. The government should provide some direct benefits in taxes to those companies who have continued to pay full salaries to their employees during this period. Undoubtedly, we expect so much from the government, but at the same time, the district administration, District Industry Center and police also assisted the industrialists in the resumption of their stalled factories.
Source: The Tribune
To urge India back to the negotiations for the Regional Comprehensive Economic Partnership (RCEP), its 15 member countries have offered New Delhi the option of deferring commitments related to opening up its market. This means, India would not have to make any commitment on this crucial issue at the time of signing the agreement, according to a diplomat from a member country…….
Source: The Hindu Business Line
Ahead of the first virtual bilateral summit between Prime Ministers of India and Australia on June 4, Indian apparel exporters have requested for an early Comprehensive Economic Partnership Agreement (CEPA) saying it would more than triple their exports to Australia in three years. India exports around $200 million of garments per year to Australia. “An early conclusion of the India-Australia CEPA would surely impact Indian apparel exports positively. As per our estimates, India can increase additional exports of $500 million in the next three years, if the CEPA with Australia is concluded,” Apparel Export Promotion Council (AEPC) said in a letter to Prime Minister Narendra Modi. Indian apparel exporters are desirous of engaging with Australia in a big way. It is our sincere prayer and request to have an early CEPA with Australia and to include apparel as a focus product to enter the Australian market in a large way, AEPC chairman A Sakthivel said in the letter. Australia is the 18th largest importer of apparel with $6.6 billion imports in 2019. Presently, China is the major supplier to Australia with 64 per cent share while India’s share is 1.2 per cent with exports worth $206 million. Indian apparel can make faster inroads in the Australian market, Sakthivel said. “Australia presently has preferential agreements with our major competitors like China and Vietnam. Australia also gives GSP benefits to Bangladesh and Cambodia, resulting in a 5 per cent duty advantage for these countries vis-à-vis India,” Sakthivel said, adding that the bilateral discussions should also include India-Australia CEPA. The letter also highlighted India’s duty disadvantage of 9.6 per cent in the EU market as compared to competitors like Bangladesh, Cambodia, Sri Lanka and Pakistan. "Recently, Vietnam has also concluded an FTA with the EU, implementation of which will make us uncompetitive with Vietnam also in the EU market," Sakthivel said. “There is an urgent need to have a level playing field in terms of market access and margin of preference in the biggest global market for Indian apparel i.e. EU (44.5 per cent). We are aware of the efforts being made by the Government for resuming the EU FTA and forging new ties with the UK and the US,” he added. Sakthivel thanked the Prime Minister for the various announcements to help the industry in mitigating the present crisis due to the pandemic. He thanked him for his leadership during the crisis and expressed confidence that the country would soon get back to high growth path and become 'Self-Reliant' India. AEPC has made similar requests to Union minister of textiles Smriti Irani and Union minister of commerce and industry Piyush Goyal.
Source: Fibre2Fashion
With a majority of manufacturing facilities across sectors still operating below optimum levels, India Inc awaits a pick-up in demand to ramp up production capacities as Lockdown 4.0 ends and Unlock 1.0 begins. Several manufacturers TOI spoke to across sectors said their operations are running below 100% capacity. While those operating in essential services, such as pharmaceuticals and fast-moving consumer goods (FMCG), are better off but still not utilising full capacity, others in consumer durables, auto, auto components, tyres, jute and textiles find their factories stunted way below 100% capacity levels. Manpower shortage and demand-related issues continue to plague companies. Among the worst hit is auto sector. Naveen Soni, senior VP (sales and service) at Toyota Kirloskar, which is currently operating at 15-20% of the installed capacity in the factory, said an increase in production will depend on the demand in the market. “We are not building unnecessary inventory, and thus keeping our production levels under check,” said Son. Maruti, too, is in the early stages of capacity utilisation as work has begun at its Gurugram facility (in Haryana) only recently, and its parent Suzuki’s factory in Gujarat started production on May 25. Maruti chairman R C Bhargava said that strict conditions around social distancing and also on movement of workers will result in reduction of overall output. The company has also reduced the number of shift hours from 8 to around 6.5 hours. Industries dependent on auto, too, will have to wait for demand growth before ramping up capacities. Ceat’s plants are working at 50% capacity. Factories of MM Forgings, a leading supplier of auto parts to vehicle makers, said its factories are working at 25% of rated capacity as demand from its original equipment manufacturer (OEM) consumers hasn’t increased. “It will happen in stages and increase when they (OEM consumers) build up their production in a staggered manner,” said MM Forgings MD Vidyashankar Krishnan. MM Forgings has five factories across India, from Panagudi to Pantnagar. Other than consumer demand, a key reason for under-utilisation of capacities is the unavailability of skilled workers. “The exodus of migrant workers from key industrial belts has posed a huge challenge to manufacturers. It’s also difficult to replace migrant workers with the local workforce owing to the lack of required skills,” said Voltas MD & CEO Pradeep Bakshi. All of Voltas’ four factories, spread across Waghodia, Pantnagar and Sanand, are currently operational, although not at full capacity. “We are operating based on the requirement of the market. We will increase production as and when the market fully opens up,” said Bakshi, while adding the company is facing hurdles more at the back-end than the front-end. On the other hand, from a virtual standstill when the first lockdown started, Hindustan Unilever (HUL) has increased production to 80-90% of optimum levels. However, there are certain challenges. “In some of our factories located at state borders, getting people from another state to come to work is an issue. We also continue to encounter significant capacity constraints in the main sea and air freight ports of the country. This is putting at risk ingredient supply for which, local production is not available. We are hopeful that these issues will be addressed soon,” said an HUL spokesperson. For ITC, the concern is retail demand. Sources said capacity utilisation in various lines may vary from 30-35% to 60-70%. The jute industry in West Bengal that produces almost 90% of the of the food grain packaging material of the country, is operating at 45-50% capacity. Till May 31, the jute industry was allowed to deploy 50% of workforce. Ghanshyam Sarda, a leading jute mill owner, said that following a new directive it can operate with 100% workforce. However, here as well, the major problem would be availability of workers. Thus reaching full capacity utilistion would take time. The two factories of Thiagarajar Mills, which have a capacity to make 1 lakh spindles of cotton yarn, are operating at 70% of rated capacity as the company awaits export orders and better credit situation in the market, said Hari Thiagarajan, a director of the company. On the other hand, the pharma industry is coming back to normal probably faster than others as it’s part of essential services and was functioning mostly during the Covid induced lockdown. The industry is now working 65-70% capacity, and even problem areas like Baddi (Himachal Pradesh) are in a better shape. However, congestion at Nhava Sheva port, still remains a bottleneck, and the onset of monsoons could further complicate the issue. Another challenge that remains is the supply from the packaging and ancillary industry, said Sudarshan Jain, secretary general of Indian Pharmaceutical Alliance. “Overall, the situation on the manufacturing front has improved significantly particularly on the packaging material suppliers front which earlier was a challenge. We continue to operate our Nashik factory at 100% capacity and our contract manufacturing factories are also steadily increasing operations from their current 60-65% of capacity (up from 3035% capacity) a couple of weeks ago,” a GSK official said. Biscuits leader Parle Products is operating its manufacturing at 70% capacity. Parle Products category head Mayank Shah said that the company will continue to operate at these levels till the government allows increasing workforce in factories beyond 50%. Shah, however, said the situation across the spectrum has improved considerably. “Raw material supply has streamlined considerably and slowly distributors who were not servicing the markets have started taking orders from retailers ensuring products are on the shelves,” he said. All of Parle’s 130 manufacturing units are operational. Unibic said it is in a relatively better position because of a single factory in Bengaluru. “In terms of capacity, we are close to 100%, but we have rationalised our stock-keeping units and are producing limited line of products that require less manpower to compensate for the labour problem,” said Unibic CEO Sreenivasulu Vudayagir.
Source: Times of India
The final part of the series looks at how industries are waiting for demand to bounce back. Arun Tiwari, 42, is a power loom worker who knows nothing about designer carvings that are manufactured for embroidery work on fabrics, saris, and dress material. But with Surat emptied by an exodus of workers, employers are hiring unskilled labourers like Tiwari, who, in turn, is relieved to earn Rs 250 per day. “My wife and I don’t have any money left to go home to Uttar Pradesh. At least the daily wage is something,” said Tiwari. His employer Rasikbhai Kotadiya is managing with unskilled labour to keep his weaving unit in the Kim-Pipodara industrial area on the ...
Source: Business Standard
A 5.6% depreciation of the rupee against the greenback since January has hardly come as a solace to exporters, as they struggle to cope with an unprecedented cancellation of orders following demand crash in the wake of the Covid-19 outbreak and patchy implementation of the home ministry’s lockdown orders by states to facilitate the resumption of manufacturing. Importantly, according to the RBI’s real effective exchange rate (REER) index, based on the export-weighted average of 36 currencies, the rupee was “over-valued” by almost 16% in April, despite the depreciation in recent months. The domestic currency had remained overvalued by just over 16% in FY19 and close to 20% in FY20, according to the index. As such, fresh orders from the EU and the US, the top two markets that have borne the maximum brunt of the pandemic, are barely flowing in, exporters told FE. Merchandise exports contracted by as much as 35% in March and 60% in April. Currencies of some of India’s competitors, too, have weakened against the dollar, blunting the advantage for New Delhi. The Malaysian ringgit has depreciated by 5.9% since January, while the Indonesian rupiah has dropped by 5.1%. The Singapore dollar and the Pakistani rupee have weakened by 4.7% each. In software services exports, roughly 28% of payments are made in currencies other than the dollar. According to Ravi Sehgal, chairman of the engineering exporters’ body EEPC, since hardly any exports are taking place, the rupee depreciation doesn’t count much. Engineering goods are the largest segment, making up for over a quarter of the country’s goods export basket. Although the Bangladeshi rupee has held steady and Vietnam’s currency has weakened only by 0.5% against the dollar since January, they enjoy much greater cost advantage than India in labour and logistics. Also, Bangladesh has duty-free access to the US and the EU markets in garments, while Vietnam, with its attractive incentives, has already emerged as a major electronics export hub, leaving India far behind. Also, as pointed out in an earlier report by HSBC, India’s domestic bottlenecks explain 50% of the recent slowdown in overall exports (remaining the biggest threat to its outbound shipments), followed by world growth (33%) and the exchange rate (just 17%). Similarly, according to an earlier Nomura report, every 1% depreciation in the REER raises export growth by just 0.9 percentage point in the same quarter, whereas every 1% of global GDP growth drives up export growth by 2.7 percentage points with a lag of one quarter. This means global growth can potentially create more export opportunities for India than its currency depreciation. The International Monetary Fund (IMF) has predicted a 3% contraction for 2020 global GDP, warning that the Covid-19 outbreak has plunged the global economy into its worst recession since the Great Depression in 1930s. The WTO, too, has warned that global trade volume growth could crash in the 13-32% range in 2020. These would weigh on the Indian exports as well. The US, the EU and China made up for 40% of India’s merchadise exports. Also, the US (and Canada) and Europe made up for 61.2% and 25.6%, respectively, of India’s software services exports worth $118 billion in FY19, according to a RBI report released in November 2019. Of course, the dollar still is the prefered currency, with a 72% share. However, the much bigger worry for the exporters is the potentially massive demand slowdown due to the pandemic. In such a case, the currency relief is hardly any solace, exporters stress. Global supply chain has been hit hard, cargo movement has been affected, shipping lines altered and warehouse capacity stretched, they say. Already, as many as 58% of the 103 respondents in a survey by CARE Ratings suggest exports will contract in FY21 following the covid-19 outbreak, with sectors such as tourism, aviation, auto, electronics and metals facing the maximum risk. FIEO president Sharad Kumar Saraf has already cautioned said: “The MSMEs particularly in employment intensive sectors like carpets, handicrafts, apparels, footwear, gems and jewellery, marine and perishable with their major market in Europe and the USA are likely to be worst affected particularly in first quarter of FY21, as per the current trend.” Gupta has called for an immediate package for the exporters to reverse the slide. At the same time, he has stated that the government’s move to help MSMEs through guaranteed and collateralfree loans (additional) of Rs 3 lakh crore will help small exporters as well.
Source: Financial Express
The country's primary textile millers have once again called upon the government to impose anti-dumping duty on cheap Indian yarn to save the $8 billion domestic textile industry. Thanks to the global coronavirus pandemic, hundreds of mills in India are sitting on unsold yarn, which they are diverting to Bangladesh on the cheap and many local garment makers are lapping them up. For instance, the local millers are selling the widely-consumed 30-carded yarn is selling at $2.80 to $2.90 a kilogram, whereas the same quality yarn can be managed at $2.60 to $2.70 per kg from India, according to the Bangladesh Textile Mills Association (BTMA). Besides, the Indian yarn is highly subsidised as the government provides incentives for cotton purchase and production of yarn at the mill level, according to BTMA Secretary Monsoor Ahmed As a result, yarn worth $1.4 billion have remained unsold at the factory level in Bangladesh over the last two months, he told The Daily Star yesterday. Subsequently, the BTMA recently wrote to Finance Minister AHM Mustafa Kamal, Commerce Minister Tipu Munshi and Textiles and Jute Minister Golam Dastagir Gazi requesting measures to stop the invasion of cheap Indian yarn. In the letter, the association also called for increasing the cash incentive for garment exporters by 6 percentage points to 10 per cent if local yarn and fabrics are used. The local millers churn out $12 billion worth of yarn a year and can meet 85 per cent of the demand for raw materials by the knitwear sector and 35 per cent by the woven sector. In fiscal 2018-19, Bangladesh exported garment items worth $35 billion, and 63 per cent of the garment items were made from local raw materials. As a result, the retention value was also high at $15 billion, according to BTMA President Mohammad Ali Khokon. On the other hand, the retention value from the imported raw materials was only $3.25 billion, he said in the letter. The BTMA also demanded the import prices of yarn be scrutinised at the land ports along the Bangladesh and Indian bordering areas. Meanwhile, the Indian clothing manufacturers have already taken steps to save their domestic industry. On May 22, Rakesh Biyani, president of the Clothing Manufacturers Association of India (CMAI), sent a letter to Indian Textile Minister Smriti Zubin Irani to request an additional duty on import of apparels from Bangladesh. The CMAI said the domestic clothing industry is under threat because of duty-free import from different countries, including Bangladesh. Thanks to the duty-free trade benefit, Bangladesh's garment export to India has increased a lot in recent time despite having a 12.50 per cent countervailing and provincial duty. Bangladesh has been enjoying duty-free trade benefit to Indian markets from 2011 under the South Asian Free Trade Area (SAFTA). Under the SAFTA, Bangladesh enjoys zero-duty benefits on the export of all goods -- including apparel products -- except 25 alcoholic and beverage items. In fiscal 2017-18 and 2018-19, Bangladesh exported $566 million worth of garment items to India and imported $7.74 billion worth of textile-related items, including raw cotton, cotton yarn, fabrics and textiles, according to Khokon.
Source: The Daily Star
Trade group teams up with rights lobby for 'battle' with European partners
With the coronavirus pandemic pummeling Bangladesh's textile industry, a two-pronged campaign is underway to salvage the country's biggest export earner by cajoling big Western clothing retailers to honor previous purchase commitments. The U.K.'s Edinburgh Woolen Mills Group, whose key brands include Peacocks, Jaeger, Bonmarche, and Austin Reed, has canceled orders worth more than $30 million from nearly three dozen Bangladeshi factories, despite entreaties from the Bangladesh Garment Manufacturers and Exporters Association, BGMEA since mid-April. Now the trade group is playing hardball. On May 21, the association sent a letter to Philip Day, the company's billionaire owner, threatening to blacklist the retailer in Bangladesh unless it settles outstanding payments with suppliers by May 29. That has intensified a fracas between the conglomerate and BGMEA, which represents more than 4,600 apparel makers. Many of the 1,000 or so retailers who source products from Bangladesh have canceled or put on hold textiles orders. As of April, more than $3 billion in orders were in limbo, leaving 1,150 factories and 2.8 million workers, mostly women, facing poverty. BGMEA President Rubana Huq estimates that half a million jobs have disappeared since the deadly coronavirus arrived in Bangladesh on March 8 and the lockdown that followed on March 26. Nearly 400 factories have shut down in recent months, one-third of which have gone out of business. "Such scaling down of the industry [was] caused by the first wave of the tsunami," said Huq. But BGMEA has powerful allies, including Bangladeshi Commerce Minister Tipu Munshi. "Toughening up [its] position, BGMEA has done a good job," Munshi told the Nikkei Asian Review. "They are doing the right thing." Munshi, who headed the association between 2005 and 2006, said that with the help of Bangladesh's diplomatic missions abroad, the ministry is pushing Western retailers hard to honor their agreements with Bangladeshi companies, restoring orders that have been canceled or suspended. "Some deals are being renegotiated, while other buyers are promising to compensate" those that have lost business, Munshi said. "We're trying to resolve this issue with buyers' representatives and the buyers themselves." The Bangladeshi economy relies heavily on the garment and textile industry, which accounts for 12% of the country's gross domestic product and 84% of its merchandise exports. Earlier in May, Jafar Uddin, the commerce secretary, wrote to Bernd Lange, chairman of the European Parliament's international trade committee, seeking his intervention to restore garment orders that have been suspended or nixed by European brands. "Such unbearable and uncompassionate action by some European apparel businesses does not go with the idea of ethical and value-based trade," Uddin said. In a 15-minute phone conversation with Bangladeshi Prime Minister Sheikh Hasina on April 29, her Swedish counterpart, Stefan Lofven, gave assurances that Swedish companies would stop canceling Bangladeshi clothing shipments. The following day, Sigrid Kaag, the Netherlands' minister for foreign trade and development cooperation, pledged to his Bangladeshi counterpart that Dutch buyers will continue to buy Bangladeshi garments. Bangladesh is going beyond public diplomacy. In a video conference with Bangladeshi expatriates in Ireland on May 23, Foreign Minister A.K. Abdul Momen urged the Bangladeshi diaspora living in Europe to mobilize public opinion against "unfair" cancellations of Bangladeshi textile orders by European fashion labels. BGMEA has also stepped up its lobbying. The association is working with the United Nations and global rights groups, such as the International Labor Organization, Human Rights Watch and the Worker Rights Consortium, to promote ethical buying. BGMEA is also part of an alliance that includes trade associations from the world's major apparelproducing nations. "We are fighting our own battle, with the help of global media and civil society," said Huq. A case in point is Edinburgh Woolen Mills. "We wouldn't mind having a row" with a brand that has an insignificant stake in Bangladesh and goes into occasional bankruptcy, Huq told Nikkei. Miran Ali, a director with BGMEA, echoed that thought: Edinburgh "is [engaged in] a sing[ular] case of unfair business practices. ... Bangladesh is no longer going to simply bend over backwards to accommodate unscrupulous brands," he told Nikkei. Edinburgh Woolen's Chairman John Herring on May 27 in reply to the BGMEA president's letter dated May 21 lashed out at the group's approach, saying it is "unconstructive" to exert political pressure on British companies. The association "appears to be putting media noise and tactics above engagement, discussion and solutions," a company representative told Nikkei. Following a global uproar, H&M, Inditex, PVH, Marks & Spencer, Target, Primark, Decathelon and other international brands agreed to source apparel from Bangladesh without breaching previous agreements. Last year Bangladesh's textile shipments came to nearly $35 billion, making it the world's second-largest exporter, after China. But its position is now in peril. In the 10 months through April, the country's textile shipments shrank 14% to $24.48 billion, their lowest in five years, government figures show. Ahsan H. Mansur, executive director at the Policy Research Institute of Bangladesh, a think tank, said Western buyers have "legal and moral obligations" to support suppliers without canceling shipments they have previously ordered.
Source: NIKKEI Asian Review
Factory activity in China expanded at a slower pace in May as the country attempts to get back on track after the coronavirus, official data showed Sunday, with the global economic slump making the sector's recovery difficult. China's factories have stirred back to life after the lifting of strict lockdown measures imposed when the deadly virus surfaced in the central city of Wuhan, but its spread worldwide has dragged down key foreign markets -- weighing heavily on Chinese exports. The Purchasing Managers' Index (PMI), a key gauge of activity in China's factories, was at 50.6 points in May, remaining above the 50-point mark separating growth from contraction each month. But the figure was down slightly from 50.8 the month before, and 52.0 in March, according to the National Bureau of Statistics (NBS). NBS senior statistician Zhao Qinghe pointed to weakness in China's imports and exports, saying "the epidemic situation and economic situation globally remain severe and complex, and foreign market demand is still shrinking". Zhao said indexes on new export orders and imports remained at relatively low levels. The "momentum of economic recovery is steady and improving", Zhao added, but there is weakness in some industries such as textiles and apparel. Non-manufacturing PMI was at 53.6 in May, a slight increase from the month before, with the NBS flagging that the construction and service industries are showing signs of recovery. Business activity in the cultural, sports and entertainment industry, however, remains low with many entertainment venues still closed amid fears of a second wave of COVID19 infections. Nomura analysts said in a report this week that "with economic growth in the major economies of Europe and the Americas set to drop by around 15 percent year-on-year in the second quarter, China's exports seem poised to fall". They added that even with exports of coronavirus-related medical supplies providing a boost in recent weeks, this is not likely to offset external challenges. It is also likely to be "unsustainable" as new cases peak and more countries ramp up their own production of goods, they said.
Employment concerns
Economists flagged concerns around employment, with UOB head of research Suan Teck Kin noting the employment index for both manufacturing and services were below 50. He said there is a "need to watch on that, especially with China's official job creation number adjusted downward quite significantly this year". Premier Li Keqiang's annual work report this year at the National People's Congress made stabilising employment a top priority, targeting new urban employment of over nine million -- a drop from 11 million targeted in 2019 -- following the pandemic hit. Iris Pang, ING chief economist for Greater China, told AFP that the above-50 figure in May suggested "there was some domestic demand pick-up" compensating for weak markets overseas. Policymakers have long sought to wean China off cheap exports and government spending in favour of domestic consumption, although it is unclear if this will yield results. But Pang, too, said employment could pose a problem, with a potential trickle-down effect on spending and local demand if job losses grew and domestic sectors could not provide sufficient work for people laid off.
Source: The Daily Sabah
More than 225 current and former global VIPs urged the world's 20 major economic powers on Monday to hold an urgent meeting to agree to a $2.5 trillion plan to tackle Covid-19 and launch an economic recovery from the pandemic, especially for hard-hit developing and middle-income countries. They said in a letter that these poor and middleincome countries, which represent nearly 70 percent of the world's population and approximately one-third of global GDP, demand immediate action. Over 100 countries have approached the International Monetary Fund for help a, they said, and more are expected to do so. Without action from the G20, the prominent global figures warned that the recession caused by the pandemic will deepen, hurting all economies, ``and the world's most marginalized and poorest peoples the most.'' They said the G20 nations, currently led by Saudi Arabia, represent 85 percent of the world's nominal GDP and have ``the capacity to lead the mobilization of resources on the scale required.'' ``We urge leaders to do so immediately,'' their letter said. The signatories include more than 75 former world leaders, three Nobel peace prize winners, four Nobel laureates in economics, former U.N. secretary-general Ban Ki-moon, philanthropist George Soros, former World Bank president James Wolfensohn, former NATO secretary-general Javier Solana and numerous former U.N. officials and past and present economists, humanitarian and health experts. The summit meeting of the world's economic powerhouses was started during the 2008 financial crisis, but leaders have held only one video meeting since Covid-19 began circling the globe, and their next meeting isn't scheduled until November in the Saudi capital Riyadh. U.N. Secretary-General Antonio Guterres urged the G20 leaders before that meeting in late March to adopt a ``wartime'' plan including a stimulus package ``in the trillions of dollars'' for people and businesses in the developing world trying to tackle the pandemic. The G20 leaders did pledge on March 26 to inject over $5 trillion into the global economy to limit job and income loses from Covid-19, and to ``do whatever it takes to overcome the pandemic.'' But their response has been criticized. The letter said ``May 30th saw the highest daily figure recorded worldwide for new cases of Covid-19,'' with countries on every continent trying to stop transmission of the coronavirus. Around 6.19 million infections have been reported worldwide, with over 372,000 people dying, according to a tally by Johns Hopkins University. The true death toll is believed to be significantly higher, since many died without ever being tested. The global figures said the G20 leaders need to hold a second meeting to advance implementation of their action plan ``and agree to a more strongly coordinated global response to the health, economic and social emergencies we face.'' The G20 comprises the European Union and 19 countries: Argentina, Australia, Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and United States. Pointing to the increase in world poverty, former New Zealand prime minister Helen Clark said: ``While we welcome the good intentions at the heart of the G20 action plan, concrete measures must urgently be agreed and be implemented in full.'' The signatories pointed to the IMF estimate that emerging markets and developing countries need $2.5 trillion to overcome the crisis. But only a fraction of that $2.5 trillion has so far been allocated,'' they wrote. ``The G20 should agree that the $2.5 trillion level of support will now be provided.'' The global VIPs called for a doubling of the money available to the World Bank for emergency economic aid, and $1 trillion in additional special drawing rights for the IMF. They also said debt relief for some 76 countries agreed to in April by the G20 _ including 40 poor countries in sub-Saharan Africa _ ``needs to be scaled up radically to include relief by bilateral, multilateral and private creditors until the end of 2021,'' and it needs to be done urgently. Former British Prime Minister Gordon Brown, who chaired the G20 summit in 2009 and helped organize the letter, said: ``Without a G20 leaders' meeting online soon ... a vacuum in global leadership will open up just at the time when we need global action most __ to avoid a second wave of Covid coming out of the poorest countries and to move the world economy from rescue operations to planning a global recovery.'' He said a G20 summit, unlike U.S. President Donald Trump's expanded Group of Seven summit proposed in September, would include representatives from Africa, Latin America, the Middle East and most of Asia and ``could agree a global growth plan and unite a divided world.''
Source: Times of India
Global CFOs more negative on economy and expect big coronavirus hit to their company in 2020: Survey
Nearly half (48.8%) of leading chief financial officers surveyed in the latest CNBC Global CFO Council Survey say the Covid-19 pandemic will have a “negative” impact on their companies in 2020, while another 39% say it will have a “very negative” impact. The CFOs who responded to this quarter’s survey have grown more certain about the negative outlook for their businesses, and more downbeat about the outlook for the global economy, in the three months since CNBC last surveyed them. The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing more than $5 trillion in market value across a wide variety of sectors. In the first-quarter survey, conducted in March, 30% of CFOs said it was “too early to know” the impact the pandemic would have on their companies this year. Now only one of the 41 CFOs surveyed says it’s too early to know, and just two think the impact will be positive for their companies, leaving the overwhelming majority facing down a very tough 2020. Forty-one of the 130 members of the council responded to the survey, which was conducted from May 14–28 (15 from North America, 10 EMEA and 16 APAC). On average, CFOs rated the GDP outlook for every region of the world as “declining,” with the exception of Brazil and Latin America, which are viewed as “strongly declining.” Both regions are currently global hot spots for new infections. Brazilian President Jair Bolsonaro has been criticized for his response to the pandemic. That is the first time since CNBC began surveying the CFOs that any region has been given the worst possible rating. The “declining” outlook for the U.S. economy is its worst ever. Fueling the downbeat view, a majority of CFOs report significant declines in demand for their companies’ products or services. Sixty-four percent of CFOs say their companies have seen a decrease in demand in the U.S. since April 1, with most of them calling it a “major decrease.” Meanwhile, 56.4% have seen a decrease in demand from Europe, and 30.8% have seen a decrease in demand from China. One bright spot in the results: 28.2% reported an increase in demand from China, a sign that some companies could be seeing the economic and consumer rebound that happens when a country starts to put the worst of the pandemic in the rearview mirror.
Source: CNBC
