MARKET WATCH 19 JUNE, 2020

NATIONAL

INTERNATIONAL

Tetile sector needs a vision and mission

‘Atmanirbharta’ will not be complete if already self-reliant sectors are not supported to dominate the global markets Prime Minister Narendra Modi has embraced ‘atmanirbhar’ or ‘self-reliance’ as a development strategy to reboot the Indian economy. It is about tapping India’s inherent strengths to emerge stronger as a nation, economically and otherwise. Policies are being reshaped in line with this philosophy and the most recent are the schemes with incentives worth ₹50,000 crore announced to make India self-sufficient in the electronics sector, especially in the manufacture of mobile handsets. Though the country can boast that 97 per cent of its mobile phone demand is met locally, the worrying part is that 88 per cent of the components that go into a handset including the display, printed circuit board and the chip sets are imported. The value of these imports has been rising so rapidly that it has began to impact the balance of payment position. The scheme seek to attract investments from global handset component players and create a strong domestic supply chain which will not only reduce the dependence on imports but also make India a global handset manufacturing hub. Today, a negligible share of the handsets manufactured in the country are exported. The larger vision of a ‘Atmanirbhar Bharat’, thus, is not just import substitution but to build capacity for manufacturers in India to dominate the global market. While pursuing such a policy will, no doubt, boost the country’s manufacturing and exports, the government should not lose sight of sectors which are already self-reliant and can, with a little help, play a larger role in the global market. The textile sector is a case in point.   If there is one sector in the country that is self-reliant end-to-end, it is textiles. Unlike Bangladesh and Vietnam or for that matter China, which are dominating the global textile market, India has abundant supply of raw material. It is the largest producer of cotton, accounting for 25 per cent of the global output. It is also the second largest producer of man-made fibres — polyester and viscose. Over the years a large spinning, weaving and apparel making capacity has been established to convert the raw material into end products. Labour availability is plenty and, most importantly, a strong domestic market exists. Stagnant exports But the sector, which accounts for seven per cent of India’s manufacturing output, two per cent of GDP, 12 per cent of exports and employing about 10 crore people, has been stagnating in recent years. Its exports have remained at the $40-billion level for the last six years (it briefly touched $42 billion in FY15). The share of textiles in India’s overall exports has declined from 15 per cent in FY16 to 12 per cent in FY 19. Relatively newer entrants like Bangladesh, Vietnam and Cambodia have gained substantially during this period. Bangladesh’s apparel exports have risen from $26.60 billion in 2015 to $33 billion in 2019. Vietnam, in a short span of time, has grown to become the third largest apparel exporter in the world. On the other hand, India’s apparel exports declined from $18 billion in FY17 to $17 billion in FY19. Internal factors, more than competition, are responsible for the stagnation of India’s textile exports. Lack of scale: While India’s spinning capacity is of a global scale, the same cannot be said about weaving and apparel making. In fact, apparel units in the country have an average size of 100 machines. Compare this with Bangladesh which has on an average of at least 500 machines per factory. Apart from lower labour cost and tariff benefits on account of it being a `least developed country’, the better economies of scale makes Bangladesh imports highly competitive visa-vis India. The only way India can overcome this challenge is by setting up mega apparel parks close to ports with `plug and play’ facilities and common infrastructure for effluent treatment, etc. This will help Indian players scale up faster at lowest cost and maximum efficiency in operations. Bias towards cotton: Indian policymakers have always favoured cotton. Not surprising, as 5.8 million farmers are engaged in cotton cultivation. GST on cotton is uniformly 5 per cent for fibre, yarn and fabric. But not so for man-made fibres (MMF), which are taxed at 18 per cent for fibre, 12 per cent for yarn and 5 per cent for fabric. This   inverted tax structure makes MMF textiles costly. This explains why it accounts for just $6 billion of the $39-billion textile exports. But what has complicated the situation is the global shift in fashion towards MMF. Today, 72 per cent of the global textile fibre consumption is MMF. From 48.2 million tonnes in 2010, end use of non-cotton fibre across the world is expected to increase to 94.3 million tonnes by 2025. To be a serious player in the global market, India needs to have a fibre neutral tax policy. Also, there is an imminent need for an MMF Mission to upgrade the industry’s skill when it comes to non-cotton textiles. Lack of trade agreements: Preferential Trade Agreements, including FTAs, help gain duty-free access to large textile markets such as the EU, Australia and the UK which, otherwise, levy 12-14 per cent import duty. They will help Indian players counter Bangladesh which, as a ‘least developed nation’, gets duty-free access. Vietnam has just signed an FTA with the EU and its apparel exports will also suffer no duty from September. But India’s FTA negotiation with the EU has remained suspended since 2013 after 16 rounds of talks. A wide difference, especially in opening up the automobile and wine sectors, is the reason. An India-Australia Comprehensive Economic Co-operation Agreement has been in the works for eight years (Australia wants greater access for its agri exports). The British government has indicated that the UK-India FTA post-Brexit (a $3- billion opportunity) is not a priority due to high-value trade disputes the two countries are involved in. The government should look through the prism of ‘atmanirbhar’ to adopt an appropriate ‘give and take’ policy and sign the FTAs. Job creation can be an important metric. Every $1 billion increase in textile exports adds 1.5 lakh jobs. India needs a fresh blueprint for the textile sector. Once that is drawn up, the country needs to move into mission mode to achieve it. ‘Atmanirbharta’ will not be possible if the government fails those sectors that are already self-sufficient and capable of dominating the global market.

Source:  The Hindu

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Economic signals show India set to bounce back, says PM Modi

 Economic indicators show that India is ready for a swift bounceback as business activity and demand are back to the level seen before the Covid-19 pandemic, Prime Minister Narendra Modi said on Thursday. Modi expressed his optimism while launching the auction of 41 coal blocks for commercial mining, which he said would be another big leap for the sector, which was once mired in scams, excessive state control and inefficiencies. The auction is expected to attract 33,000 crore investments over 5-7 years. “This auction is taking place at a time when the economic activity is fast returning to normal. Consumption and demand are fast attaining the pre-Covid-19 levels. There cannot be a better time for a new beginning … India will turn this Covid-19 crisis into an opportunity. It has taught India to be self-reliant,” he said. The PM said the rural economy was also looking up as crop planting is 13% more than last year, while wheat output and procurement are higher, which has given more money to farmers. “All these indicators tell us that the Indian economy is ready to bounce back and march forward.” ‘Other Sectors to Benefit Too’ Reforms in coal mining will lead to self-sufficiency in the fuel, ending awkward situation of India being one of the world’s biggest importers of the fuel despite being a leading producer, Modi said. The transformation in the sector would improve the lives of the poor in the mineral-rich areas and trigger growth in various sectors of the economy, he said. “When we increase coal production, then positive impact is also felt on production and processing in steel, aluminium, fertilizers and cement sectors with an increase in power generation,” the prime minister said. Modi said the government aims to gasify 100 million tonnes coal by 2030 through four projects entitling an investment of 20,000 crore. The blocks being auctioned are spread over five states having total geological mines of 16,979 million tonnes and a cumulative peak capacity of 225 mtpa. Coal minister Pralhad Joshi said Coal India would continue to be a dominant player in the India’s coal sector even after commercial mining begins. He said the government will help private miners in land acquisition for coal blocks and there will be no different yardsticks for private and public companies. Vedanta Resources chairman Anil Agarwal had said India imported coal worth 80,000 crore last financial year. Even with large mineral deposits, exploration contributes only 2% to the country’s GDP. He had asked the government to issue clearances to companies based on self-certification for reducing time in processing applications. Tata Sons chairman N Chandrasekaran has said that commercial coal mining auction was an important move  towards fulfilling self-reliance in energy sector and the government should come up with a coal trading platform. Mix of Small, Medium Blocks The government will offer five mines of over 10 mtpa capacity and nine blocks with peak capacity in the range of 5-10 million tonnes. Coal secretary Anil Jain said the government has offered a mix of small and medium coal blocks to cater to all sizes of businesses. Sources said companies like Adani Group, Vedanta Resources and JSW Steel will eye bigger blocks like Chendipada- I&II, Macchakata and Mahanadi and Phuljhari (East & West). The two-stage bid process has begun with the government issuing global tenders for the coal blocks. The coal ministry will hold pre-bid meetings with potential bidders between June 25 and July 18. The last date for bid submission will be August 18. The Cabinet Committee on Economic Affairs had on May 20 approved the methodology for auction of coal and lignite mines for sale on revenue-sharing basis and increasing the tenure of coking coal linkage. Developers will have easy entry and exit options. Any company registered in India will be eligible to participate in coal auctions and there will be no restrictions on sale or utilisation of coal

Source: Economic Times

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Government working on steps to cut import dependence on China, boost manufacturing

 The government is working on steps to reduce import dependence on China and boost domestic manufacturing, sources said on Thursday. They said policymakers are not considering any knee-jerk measure against China in the wake of ongoing border tensions between the two countries. China accounts for about 14 per cent of India's imports and is a major supplier for sectors like cell phones, telecom, power, plastic toys and critical pharma ingredients. One of the major steps on which the government is working is to restrict low quality Chinese imports, and for those technical regulations, which includes safety and quality standards, for about 370 products are being formulated with a view to cut imports of these non-essential items from countries like China, they added. These items include chemicals, steel, consumer electronics, heavy machinery, telecom goods, paper, rubber articles, glass, industrial machinery, metal articles, furniture, pharma, fertiliser, food and textiles. Policymakers are also looking at non-tariff barriers being imposed by India's trading partners such as China. The other steps include attracting global companies that are seeking to set up alternate global supply chains outside China. The government recently put import restrictions on tyres, while also making its prior approval mandatory for foreign investments from countries that share land border with India to curb "opportunistic takeovers" of domestic firms, following the COVID-19 pandemic, a move which will restrict FDI from China. The commerce ministry has also identified 12 sectors -- food processing, organic farming, iron, aluminium and copper, agro chemicals, electronics, industrial machinery, furniture, leather and shoes, auto parts, textiles, and coveralls, masks, sanitisers and ventilators -- to make India a global supplier and cut import bill. To cut import dependency on China for APIs (Active Pharmaceutical Ingredients), the government in March approved a package comprising four schemes with a total outlay of Rs 13,760 crore to boost domestic production of bulk drugs and medical devices in the country along with their exports. It also set up a high level empowered group of secretaries, to be chaired by the cabinet secretary, and a Project Development Cell (PDC) in ministries/ departments with a view to attract investments to the country. During April 2019-February 2020, India imported goods worth USD 62.4 billion, while exports to the neighbouring country stood at USD 15.5 billion in the same period. The main goods imported from China include clocks and watches, musical instruments, toys, sports goods, furniture, mattresses, plastics, electrical machinery, electronic equipments, chemicals, iron and steel items, fertilisers, mineral fuel and metals. India has time and again raised concerns over widening trade deficit with China which stood at about USD 47 billion during AprilFebruary 2019-20.

Sources: Economic Times

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Consumption demand for textiles unlikely to revive in current fiscal, says report

 

 Textile companies have been impacted by the subdued domestic demand and declining export demand due to lockdowns in the global markets on account of COVID-19. According to a report by India Ratings and Research, the domestic demand could revive in the third quarter of the current financial year with the onset of the festive season and reopening of retail spaces. However, export demand would depend on global economies such as the US and UK. The agency expects a huge revenue downfall for textile companies in the first half of the current fiscal and a moderate recovery only over the second half of fiscal year 2022. With the stoppage of production and shortage of labour due to the lockdown, revenue is likely to bottom out over first half of the current fiscal. The report said the consumption demand is unlikely to revive in the current fiscal. “This is likely to result in a fall in EBITDA in the range of 20%-50% YOY, depending on the segments, leading to deterioration in credit metrics. Furthermore, players in spinning, readymade garments carry high debts on account of stretched working capital cycles with low cushion to borrow. The agency expects the working capital cycle to stretch for textile players over the next 9 months due to delays in collections and a longer inventory,” the report said.

Source: Times of India

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Hard Times: ‘The people in the middle suffer the most’ says yarn trader from Surat

Until migrant workers return to the city, looms will remain silent and traders will be idle. In 2019, Scroll.in’s Hard Times series sought to explain and illustrate how India’s slowest economic growth in a decade was affecting ordinary people. This followed reporting by Scroll.in in 2016 and 2017 on the effects that demonetisation had on the lives of Indians around the country. As the world continues to grapple with the Covid-19 crisis, Hard Times now takes a look at the impact of India’s draconian lockdown on individuals and firms from all corners of the economy. Since the last week of May, Nitin Puthavala has been setting out on his bike every morning, riding through the textile hubs of Surat city, diligently calling on yarn dealers, loom owners and other old acquaintances. He has been hoping to revive his modest business as a yarn trader, but nearly three months after the Centre announced a nationwide lockdown to contain the Covid-19 pandemic, he has resigned himself to fate. The looms have fallen silent, traders sit idle. The chaos and clatter of Surat’s giant textile industry in southern Gujarat has wound down to a slow murmur. “The karigars have left the city. Without them, the industry cannot run,” said 45-year-old Puthavala, who has been trading yarn for the past 18 years. The karigars or craftspeople he is referring to are lakhs of skilled, daily-wage migrant workers who operate the looms, work in mills and yarn processing factories and transport goods. ‘Income has been zero’ When the coronavirus lockdown was suddenly announced at four hours’ notice on March 24, the workers were left without work or pay, with rent to pay and no ability to feed themselves for long. Lack of transport options forced millions of urban migrants across India to undertake perilous journeys back to their villages, often on foot. In Surat, those who stayed back erupted in aggressive protests against city and state authorities on at least three occasions, demanding transport to allow them to get home. In May, as the Indian Railways started running Shramik Special trains for migrant workers, textile labourers finally emptied out of Surat and returned to their villages in north and east India. Now that India has begun the process of “unlocking” its economy, Surat’s textile business owners and traders like Puthavala are itching to restart work. But only a fraction of the industry has been able to open up, with the handful of karigars who are still in the city. “If the workers had been given time to travel home before the lockdown, they would have been back by now. But they could leave only in May, and will not be back before midAugust,” said Puthavala. “For more than two months, my income has been zero. So it’s a bad situation.” ‘People in the middle’ Puthavala is the sole breadwinner for a small family that includes his wife, a 13-year-old son and an 18-year-old daughter. They live in a densely populated middle-class neighbourhood near Surat railway station, not far from the large textile mill complexes on Ring Road where Puthavala usually works. As a relatively small trader, he does not have an office of his own. He is always on the move, juggling meetings with other cogs in the wheel of a complex, well-established network of agents and middlemen, brokering deals between yarn manufacturers and loom owners. The yarns that Puthavala deals in – nylon, polyester, viscose, cotton – are woven into fabrics that ultimately become the saris, dupattas and readymade salwar suits that Surat famously exports. The cost of yarn ranges from Rs 70 per kg for lower grade polyester to more than Rs 600 per kg for viscose, and a middleman’s average commission is 2% or 3% of that. To buy and supply tonnes of yarn to weavers every month, Puthavala must have several lakhs of rupees in hand at all times – yarn makers do not supply their processed thread without being paid first. “But the payment chain does not work the same way when I sell to weavers. Loom owners can take 35 to 70 days to pay me, so my income is never steady or reliable,” said Puthavala, who can earn more than Rs 60,000 on some good months as little as Rs 25,000 at other times. With such fluctuations, savings have been crucial for him to be able to provide for his family. Two months of the lockdown, however, have nearly wiped out Puthavala’s savings. Hesitant to talk about how he and his family have been coping with the financial strain, he expresses himself in more general terms. “The big companies have enough money to fall back on, so they don’t suffer. And the small men never had anything to begin with, so they carry on,” he said. “It is vachche na manaso – the people in the middle – who suffer the most, because they find it difficult to admit to anyone that they have no money. They have never had to beg before.” ‘Why did we lock down?’ Like many other traders and manufacturers in his industry, Puthavala bears mild resentment towards the migrant workers who left Surat after the Covid-19 lockdown. “Many NGOs had been working to provide food and shelter to the workers during the lockdown, but their mentality is such that when they got calls from their villages asking them to return, they decided to go home no matter what,” said Puthavala. Tejas Randeria, a larger yarn trader and a former loom owner, has a more sympathetic view towards the migrant labourers. “They left because they were scared about the virus and their families were panicking in the villages,” he said. “Their wages are decent – experienced workers can get at least Rs 20,000 a month – but after the lockdown they had no income and no way to pay rent.” Randeria describes migrants from Uttar Pradesh, Bihar and Odisha as “much more hardworking” than Surat’s local population, because they are willing to take up labourintensive factory work with 12-hour shifts, as per the industry’s culture, rather than the 8-hour shifts required by law. “Our entire industry is dependent on them,” he said. Even if migrant workers return to Surat by mid-August, Puthavala believes business will not normalise before Diwali. “And even then, I don’t think it will be the same as it was before the lockdown,” he said. “Already our dhandho – business – has reduced by 60% since notebandi and GST, and the lockdown has made it even worse.” Puthavala is referring to demonetisation of 86% of Indian currency in November 2016, followed by the implementation of the Goods and Services Tax regime in July 2017, both of which dealt a severe blow to small businesses in Surat’s textile hub. ‘Atmanirbhar’ To revive his own trade, Puthavala has been keenly following government announcements of economic packages for businesses. On May 14, his hopes lifted when the Gujarat government announced a scheme to provide a Rs 1 lakh loan at 2% interest for people in lower income groups. “But it turns out you need two guarantors to submit all their tax returns and other documents if you want to apply for the loan. Who is going to do that for a small businessman like me? How are people like us supposed to become atmanirbhar?” he said, quoting Prime Minister Narendra Modi’s exhortation to Indians to become self-reliant in the wake of the Covid-19 crisis. Puthavala also mocked the central government’s announcement of a Rs 20 lakh crore economic package to revive Indian economy. “If the government had that much money to give to the needy, there would be no poverty in India,” he said. With no immediate financial relief in sight, Puthavala is doing the only thing he can do – set out to work every day, hoping to strike small business deals, and wondering whether the lockdown was even necessary. “They shut everything for two months, now they are opening everything up, and still asking us to use masks and sanitisers and maintain distancing,” he said. “If that’s all we needed to do, why did we need the lockdown?”

Source:  Scroll.in

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Faster initiation of anti-dumping probes on China imports soon

India will respond faster to complaints about dumping of Chinese goods, as the country looks to stimulate local production and reduce dependence on imports. The commerce and industry ministry plans to reduce the time taken to initiate anti-dumping cases by a few days, from around 30 days now. This is chiefly aimed at protecting domestic companies from unfair trade practices. “Almost half of our anti-dumping cases are against China and imports from them do major damage…our response time will be short,” said an official. The government usually responds within a month and has, in some cases, even done so within two weeks. The endeavour is to reduce it further. These measures are used to counter unfair trade practices and structural changes have led to a reduced response time,” the official added. In fact, the average number of days taken to initiate anti-dumping investigations came down to 32 in 2019 from 259 days in 2016. The Covid-19 pandemic this year has, however, led to data gaps, with domestic manufacturers unable to access the detailed information required to challenge cheap Chinese imports before the Directorate General of Trade Remedies (DGTR), a quasijudicial body which recommends such measures. The finance ministry takes a final call on imposing the same. DGTR, which comes under the commerce and industry ministry, is investigating around 35 cases of dumping from China across products including chemicals, steel, polyester yarn, copper and various yarns. This week, it recommended anti-dumping duty on organic base aniline and antimicrobial agent ciprofloxacin hydrochloride imported from China. India conducts anti-dumping probes based on applications filed by domestic manufacturers who show prima facie evidence of dumping of goods in the country, claiming injury. As of December 31, 2019, there were definitive antidumping measures in force against 92 Chinese products. Industry sources said the government has drawn up a prescriptive list of 300 products on which it can impose restrictions and encourage local manufacturers to begin production.

Source:   Economic Times

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France commits 200 million Euros for India's Covid response

France and India on Thursday signed an agreement with Paris committing 200 million euros to support Delhi's Covid response. The credit financing agreement was signed by Dr C.S. Mohapatra, Additional Secretary - DEA, and Bruno Bosle, Director - AFD (French Development Agency) in India in the virtual presence of Emmanuel Lenain, Ambassador of France to India. Through this loan, France will work with India to increase the state and central governments’ capacities to support the country’s most vulnerable people in the wake of the COVID-19 crisis. The programme design, developed by the World Bank in collaboration with the Indian authorities, seeks to optimize and scale up the Indian Government’s existing social protection measures. Focusing on boosting the Pradhan Mantri Garib Kalyan Yojna, the programme will provide further benefits to lowincome families to ensure that the health, social and economic shocks arising from Covid-19 do not endanger people's well-being or their contribution to the country’s economic growth in the long run. The programme also seeks to protect essential frontline workers of the pandemic, including those in healthcare, sanitation, and security, by providing them with health insurance. Social assistance programmes will also be put in place for migrant workers and low-income urban households that may be unable to seek compensation under PMGKY. Recalling the importance France attaches to facing global challenges through multilateral cooperation, the Ambassador of France to India, Lenain, said, “President Macron and Prime Minister Modi have been working together so that the excellent relations between our two countries translate into concrete cooperation in the fight against Covid-19. The Indian Government’s rollout of the PMGKY is a testament to its commitment to ensuring that the most vulnerable sections of society are protected, and it is this commitment that France, through the French Development Agency and its partners, is determined to support.” The World Bank is the lead funder on this programme, which is supported by AFD and other multilateral and bilateral development banks. Agence Française de Développement (AFD – French Development Agency) Group is a public financial institution that finances, supports and accelerates transitions towards a more just and sustainable world.

Source:   Economic Times

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"UP to become 'Textile Hub'", Additional Chief Secretary Handloom and Textile Industry informed

Chief Minister Yogi Adityanath looking for new opportunities every day in the direction of providing employment to the migrant workers. He is confident that Uttar Pradesh will become a Textile Hub. CM Yogi Adityanath also saw a presentation of the Department of Handlooms and Textiles during a review meeting on Coronavirus infection with Team-11 at his office, Lok Bhavan on Thursday. In his statement, Chief Minister Yogi Adityanath said that due to the circumstances arising due to Covid-19, the workers/labourers who returned to the state have a large number of tailoring experts. We are committed to providing employment to them. We will have to promote the textile industry in the state even during these difficult times so that more employment opportunities can be created. Meanwhile, air and road connectivity in the state is constantly getting better. This will greatly benefit the textile industry. We are confident that Uttar Pradesh will also be the main parenting hub of the country and millions of employment opportunities will be created. Chief Minister saw the presentation of the roadmap regarding the creation of a Textile Hub for employment generation in the textile industry sector in the state. On this occasion, he said that there are vast employment opportunities in the textile sector in the state. During the presentation, Additional Chief Secretary Handloom and Textile Industry Ramaraman informed the Chief Minister that at present there are about four and a half thousand industrial units of textiles in the state. Of these, about 3000 units are located in Gautam Budh Nagar and remaining 1500 units in Ghaziabad, Kanpur, Lucknow and Bareilly. About 22,000 crores are exported annually from all these.

Source:   Newstrack

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India set to erect a Great Wall against Chinese companies

India is considering multiple, comprehensive measures to curtail the country’s economic reliance on China, targeting trade, investment and project services in the wake of border hostilities. These are likely to include restrictions on participation by Chinese companies in government contracts and infrastructure projects, higher tariffs on imported Chinese finished goods as also a closer review of free trade agreements that are being used by the country to export goods indirectly into India. A high-level meeting, likely to be attended by key stakeholder ministers and top officials from the Prime Minister's Office (PMO), is expected soon to discuss the details and the extent of measures, government officials told ET. “Measures are being examined... All pros and cons of how and when as also their repercussions on Indian businesses will be looked into,” said a government official. Steps to Curb Imports from China On the trade side, there could be tariff as well as non-tariff measures to discourage imports from China that added up to $70 billion in FY19, more than from any other country. India had a $53 billion trade deficit with China in FY19 and attempts to address it have not made much progress. Chinese companies have a big share of India’s mobile phone and electronics markets. The government will consider measures to curb Chinese imports while simultaneously providing an environment for the domestic production of such goods. India will also review its free trade agreements with other countries to see if they are being used by China to access the local market. India has already walked out of the negotiations on the Regional Comprehensive Economic Partnership (RCEP), which includes China among others, reasoning that there is no safeguard against a further rise in exports from that country to India. Stringent quality standards and checks could also be introduced to contain the inflow of goods from the country. Infra Contracts One set of likely measures is aimed at preventing Chinese companies from participating in contracts for infrastructure projects, government officials said. This includes the introduction of a clause based on the principle of reciprocity that would seek to restrict participation of companies from countries where Indian companies face curbs in applying for contracts. Various options are being examined by the law ministry on the exact contours of the clause to ensure it cannot be challenged and meets international norms. The omnibus clause could cover all countries, the official said, though it is primarily aimed at Chinese companies. One of the first sectors to introduce the clause could be roads and highways before it is expanded to others and eventually includes public sector units, said the officials. The ministries of road transport and highways and law are already in discussions to finalise the wording of the new clause, one official said. The government has moved to scrap and rework contracts floated by state-owned telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) to keep out Chinese equipment suppliers over security concerns. Additional criteria could be introduced to ensure that contracts awarded by the government as also public sector entities are secured by Indian suppliers of goods and services. The law ministry is examining the feasibility of introducing such a clause in contracts in line with restrictions or stringent conditions imposed by some other countries on Indian companies from participating in contracts. “These stiff criteria essentially are barriers to ensure that only local companies can participate,” the official said, adding that such restrictions imposed by other countries are also being examined in detail. Atmanirbhar Mission The exercise had already been underway as part of the government's Atmanirbhar, or self-reliance, mission and has gained in importance in the wake of changed circumstances at the border, he said. The cabinet secretary, who also chairs a committee on boosting local manufacturing, has held discussions with various ministries that deal with infrastructure projects on how to increase local sourcing of both goods and services. The lowest bidder is generally accorded prior security clearance but there’s a growing view that a more stringent framework is needed, said the official cited above. Some bids in which Chinese companies were roped in as partners by an Indian company in the roads sector have been cancelled recently, including one in Nagpur. The government has already reserved supply contracts of up to 200 crore for local producers. The government is likely to revisit these criteria to ensure wider participation by domestic companies, another official said. “There is a growing concern in the government about overdependence on external supply chains concentrated in a single country especially in crucial segments such as pharmaceuticals or supply of large equipment and machinery in many crucial sectors, which needs to be cut down,” the official said.

Source:  Economic Times

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Developing Asia to "barely grow" in 2020; India's GDP to contract by 4% this fiscal: ADB   

 India’s economy will contract by 4% in financial year 2020 as against a growth of 4% projected in its April outlook, the Asian Development Banks said in its supplement report on Thursday while also slashing the growth forecast for India for 2021 to 5% compared to 6.2% projected in April. “The Indian economy is expected to contract by 4.0% in fiscal 2020, then grow by 5.0% the following year as economic activity normalizes gradually,” it said. According to ADB, growth in Indian GDP slowed to 3.1% in the last quarter of fiscal year 2019, its slowest since early 2003 and the economic growth slowed to 4.2% in the whole of FY2019 as both exports and investment started to contract. “Migrant workers have gone home to their villages after losing their jobs in the cities and will be slow to return even after containment measures are relaxed,” it added. For developing Asia as a whole, nearly flat growth of 0.1% in 2020 has been projected, down from 2.2% forecast in April, saying the containment measures to address the coronavirus disease (COVID-19) pandemic has hampered economic activity and weaken the external demand. This would be the slowest growth for the region since 1961, it said in its regular supplement to ADO 2020 released in April. The region had witnessed a growth of 5.1% in 2019. ADB, however, maintained growth in the region in 2021 will rise to 6.2% as projected in April, though it will remain below what had been envisioned and below precrisis trends. According to ADB, excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, developing Asia is forecast to grow 0.4% this year and 6.6% in 2021. Inflation for developing Asia is forecast at 2.9% in 2020, down from a forecast of 3.2% in April, reflecting depressed demand and lower oil prices. In 2021, inflation is expected to ease to 2.4%, it said. “Economies in Asia and the Pacific will continue to feel the blow of the COVID-19 pandemic this year even as lockdowns are slowly eased and select economic activities restart in a ‘new normal’ scenario,” ADB chief economist Yasuyuki Sawada said . “While we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a Vshaped recovery,” Sawada said, suggesting governments should undertake policy measures to reduce the negative impact of COVID-19 and ensure that no further waves of outbreaks occur. According to ADB, risks to the outlook remain on the downside with possibility of multiple waves of outbreaks in the coming period which may lead to sovereign debt and financial crises cannot be ruled out. “There is also the risk of renewed escalation in trade tensions between the United States and the People’s Republic of China (PRC),” it said. East Asia is forecast to grow 1.3% in 2020— the only subregion to experience growth this year—while growth in 2021 will recover to 6.8%. Growth in the PRC is forecast at 1.8% this year and 7.4% in 2021, compared to the April estimates of 2.3% and 7.3%, respectively. Hit hard by COVID-19, South Asia is forecast to contract by 3.0% in 2020, compared to 4.1% growth predicted in April. Growth prospects for 2021 are revised down to 4.9% from 6.0%. Economic activity in Southeast Asia is expected to contract by 2.7% this year before growing by 5.2% in 2021. Contractions are forecast in key economies as containment measures affect domestic consumption and investment, including Indonesia (-1.0%), the Philippines (-3.8%), and Thailand (-6.5%). Viet Nam is forecast to grow 4.1% in 2020. While that is 0.7 percentage points lower than ADB’s April estimates, it is the fastest growth expected in Southeast Asia. Central Asia's economic activity is expected to contract by 0.5% compared to the 2.8% growth forecast in April due to trade disruptions and low oil prices. Growth is forecast to recover to 4.2% in 2021. Restricted trade flows and declining tourism numbers have dampened economic outlook for the Pacific subregion. The subregional economy is forecast to contract by 4.3% in 2020 before rising to 1.6% growth in 2021.

Source: Economic Times

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Lenzing joins forces with Ruby Mills to manufacture ‘antiviral’ fabric

Lenzing India has joined hands with Mumbai-headquartered Ruby Mills to introduce H+ Technology, an antiviral, antibacterial and antifungal fabric. The partners to the agreement said H+ Technology works across a wide range of pure as well as blended fabrics, its efficacy tested to ensure effective protection against virus transmission up to 30 washes, without compromising on hand-feel, breathability and finish of the fabric. “We are working towards breaking the barrier that fabrics and textiles are carriers of diseases and viruses,” Avinash Mane, Commercial Head – South Asia, Lenzing said, while reassuring consumers that apparels with the tag of TENCEL, LENZING, ECOVERO and H+ technology would be safe to wear. Asserting that the H+ Technology fabrics are significantly superior and most relevant during times that call for heightened protection in everyday life, Rishabh Shah, President, Ruby Mills, said: “Our processing expertise and continuous pursuit for perfection and quality has led us here.”

Source:   The Hindu Business Line

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Covid recovery for MSMEs to be long haul; revenue likely to fall a fifth in FY21 for small businesses

Credit and Finance for MSMEs: In comparison to India Inc, which is headed towards around 15 per cent decline in revenue, MSMEs are staring at a steeper fall at 17-21 per cent. Credit and Finance for MSMEs: Around 5 per cent contraction in the Indian economy due to Covid pandemic is expected to push MSMEs into existential crisis with revenue likely to fall a fifth in FY21, according to a Crisil survey. In comparison to India Inc, which is headed towards around 15 per cent decline in revenue, MSMEs are staring at a steeper fall at 17-21 per cent. Earnings before interest, taxes, depreciation and amortization (ebidta) for MSMEs will “shrink to be 200-300 basis points to 4-5 per cent as weak demand gnaws away gains from lower commodity prices,” Crisil said in the survey titled The Epicentre of an Existential Crisis. “MSMEs were doing fine until Covid crisis emerged. This will be long-drawn and will continue. The biggest issue for MSMEs will be the demand because if you don’t have that then the question of having people back etc. is secondary. MSMEs account for a lion’s share in the economy, be in terms of GDP, employment etc. The way we are seeing Covid cases rise despite lockdown, it is a bit worrying how things will pick up and demand will revive,” Binaifer Jehani, Business Head, Crisil SME Solutions told Financial Express Online. The creditworthiness of MSMEs will also be impacted “aggravating the liquidity stretch these units have been grappling with, particularly on the working capital front,” Crisil added. According to the survey involving around 450 MSMEs across multiple sectors including real estate, auto components, textiles, FMCG distributorships etc, lending to MSMEs will slow down from 6.5 per cent in FY20 to 6 per cent in FY21. The survey also highlighted that around 70 per cent of 40,000 companies, most being MSMEs with turnover up to Rs 100 crore, have cash for employee cost for only two quarters. “A three-pronged strategy is essential now: one, improve the sentiment around job security for formal and informal workers to boost consumption. Two, hasten the implementation of the Rs 3 lakh crore Aatmanirbhar scheme to ensure flow of liquidity to MSMEs continues. Three, and most importantly, lenders have to go beyond traditional credit processes because they have to play a seminal role in recovery,” Amish Mehta, Chief Operating Officer, Crisil said. Last month, the government had announced Rs 20 lakh crore stimulus package for the economy that involved significant measures to provide relief to Covid-hit MSMEs. This included a Rs 3 lakh crore collateral-free scheme for MSMEs. As per the Finance Ministry, as on June 12, public sector banks had disbursed loans worth Rs 16,031.39 crore out of Rs 32,049.86 crore sanctioned.

Source:   Financial Express

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Global Textile Raw Material Price 19-06-2020

Item

Price

Unit

Fluctuation

Date

PSF

829.61

USD/Ton

0%

19-06-2020

VSF

1241.59

USD/Ton

0%

19-06-2020

ASF

1638.05

USD/Ton

0%

19-06-2020

Polyester    POY

790.10

USD/Ton

0%

19-06-2020

Nylon    FDY

2045.81

USD/Ton

0%

19-06-2020

40D    Spandex

3992.85

USD/Ton

0%

19-06-2020

Nylon POY

5192.11

USD/Ton

0%

19-06-2020

Acrylic    Top 3D

1022.90

USD/Ton

0%

19-06-2020

Polyester    FDY

1925.88

USD/Ton

0%

19-06-2020

Nylon    DTY

1777.73

USD/Ton

0%

19-06-2020

Viscose    Long Filament

987.63

USD/Ton

-0.71%

19-06-2020

Polyester    DTY

2327.99

USD/Ton

0%

19-06-2020

30S    Spun Rayon Yarn

1726.94

USD/Ton

-0.08%

19-06-2020

32S    Polyester Yarn

1410.90

USD/Ton

0%

19-06-2020

45S    T/C Yarn

2179.84

USD/Ton

0%

19-06-2020

40S    Rayon Yarn

1904.72

USD/Ton

0%

19-06-2020

T/R    Yarn 65/35 32S

1664.86

USD/Ton

0%

19-06-2020

45S    Polyester Yarn

1594.32

USD/Ton

0%

19-06-2020

T/C    Yarn 65/35 32S

2017.59

USD/Ton

0%

19-06-2020

10S    Denim Fabric

1.11

USD/Meter

0%

19-06-2020

32S    Twill Fabric

0.63

USD/Meter

0%

19-06-2020

40S    Combed Poplin

0.93

USD/Meter

0%

19-06-2020

30S    Rayon Fabric

0.48

USD/Meter

0%

19-06-2020

45S    T/C Fabric

0.64

USD/Meter

0%

19-06-2020

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14109 USD dtd. 19/06/2020). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

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Bangladesh: Remove VAT on all types of yarn: BTMA

Welcoming the decision to reduce value added tax (VAT) on all kinds of yarn from Tk4 to Tk3 per yard in the proposed budget for fiscal 2020-21, the Bangladesh Textile Mills Association (BTMA) has demanded that VAT be removed altogether on all yarn. It also urged the government to raise the existing alternative cash assistance from 4 per cent to 10 per cent for six months to compensate for the losses faced by export-oriented textile mills due to aggressive promotional strategies by competing nations. The association earlier proposed waiving VAT on all kinds of yarn as the industry had lost around Tk20,000 crore during the COVID-19 lockdown imposed by the government, it said in a press release. A fixed Tk6 ad valorem VAT has been proposed to be imposed on yarn produced from man-made fibres (MMF) that, the association thinks, will not benefit the related textile mills due to a dearth of export orders for yarn and buyer shortfall the textile mills have been plunged into. Therefore, BTMA urged a reconsideration of the proposal and clamping of a Tk2 ad valorem VAT on every MMF yarn. To stop unethical trading and protect the interests of the domestic industry, BTMA had earlier proposed changing the tariff structure of some Harmonised System (HS) coded fabric. However, as the budget did not reflect the issue, it urged the authorities to reconsider the matter. BTMA also thinks a 0.5 per cent withholding tax on export prices of all types of readymade garments will be challenging for the textiles and readymade garment units in their struggle to survive in the global market in the COVID-19 context. It has, therefore, requested the government to fix the rate of withholding tax at the previous rate of 0.25 per cent.

Source: Fibre2Fashion

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COVID-19 will likely transform global production: UNCTAD

Production is set for significant transformation in the decade ahead as the COVID-19 pandemic amplifies challenges, according to World Investment Report 2020 released recently by the United Nations Conference on Trade and Development (UNCTAD). Three key technology trends will shape global production: robotics-enabled automation, enhanced supply chain digitalisation and additive manufacturing, it said. Existing trends deriving from the challenges of growing economic nationalism, the new industrial revolution and the sustainability imperative were already steadily brewing towards an inflection point and the outbreak of the pandemic looks set to tip the scales further, the report said. “The major transformation underway in international production will profoundly impact developing countries over the coming decade. This may call for major policy rethink.,” said UNCTAD secretary-general Mukhisa Kituyi. The pace and extent of new technological adoption will partly depend on the policy environment for trade and investment, which is trending towards more interventionism, rising protectionism and a shift to regional and bilateral frameworks. They will also depend on sustainability concerns, including differences between countries and regions on emission targets and environmental, social and governance (ESG) standards, market-driven changes in products and processes, and supply chain resilience measures. The effects on international production from the technology, policy and sustainability trends are multi-faceted, and will play out differently across industries and regions, landing in four possible trajectories: reshoring, diversification, regionalization, and replication. The transformation of international production in the post-pandemic era will bring both challenges and opportunities for investment and development policymakers. The main challenges in the new era of international production are likely to involve increased divestment, relocations, investment diversion and a shrinking pool of efficiency-seeking investment, implying tougher competition for foreign direct investment (FDI), says the report. Changes in the locational determinants of investment will negatively affect developing countries’ ability to attract MNE operations. In contrast, new opportunities are likely to arise due to investors looking to diversify supply bases to enhance production resilience. Recovery will depend on policymakers safeguarding a trade and investment policy environment favouring a gradual adjustment of international production networks. Governments will face the challenge of dealing with adverse developments but at the same time have plenty opportunities to capitalize on emerging avenues, the report added.

Source: Fibre2Fashion

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Philippines: Ray of hope for garments as Adidas, H&M ‘vow support’

Global retailer giants Adidas AG and Hennes & Mauritz AB (H&M) have expressed their commitment to restructuring their production networks in the Kingdom, Minister of Commerce Pan Sorasak said on Tuesday. The two companies will work more closely with the government to improve the garment industry’s situation, which has been affected adversely by the onset of the Covid-19 pandemic, he said. He said this at a meeting with Adidas Sourcing Ltd Representative Office in Cambodia procurement director Matthew Armstrong and H&M production manager for Cambodia and Vietnam Christer Horn af Aminne, at the ministry. The minister outlined the government’s drive to diversify the garment market through bilateral free trade agreements (FTAs) with many countries. He noted that an FTA with China is set to be finalised later this year and that FTA negotiations with South Korea are scheduled to begin next month. He said: “We would like to ask the companies to continue placing orders and join the government to support Cambodia’s garment sector post-Covid-19.” Cambodia Chamber of Commerce vice-president Lim Heng expects orders of the Kingdom’s textile products to gradually pick up as the US and European markets reopen. “We’ve observed the US and Europe open up certain regions and announce the reopening of the market where the Covid-19 situation has shown marked improvement. It would be boon for us if industry giants were to begin placing orders again,” he said. Royal Academy of Cambodia economics researcher Ky Sereyvath said the garment sector would only revert to normal after a vaccine for Sars-CoV-2, the virus that causes Covid19, is found. He expects the sector to continue to reel from the fallout of the pandemic over the next three to five months. “We believe that consumer spending on clothing products will continue to decrease during the period, no matter how much we try to push orders.” However, he noted, Cambodia remained a leading exporter of garments, footwear and travel products to the US and EU markets during the pandemic period. He said: “As the Covid-19 saga comes to a close, Cambodia will remain a valuable trade partner for the EU, more so now as Bangladesh, the largest producer of textiles, struggles with a larger number of Covid-19 infections than Cambodia.” Garment Manufacturers Association in Cambodia secretary-general Ken Loo told The Post that he could not put a timeframe on when orders of garments, footwear and travel products would pick up steam. “There will be orders again, but on a smaller scale after the US and the EU countries reopen,” he said. A joint-statement between GMAC, the Cambodia Footwear Association (CFA) and European Chamber of Cambodia in Cambodia (EuroCham) that was submitted to the European Commission on June 2, said some 250 Cambodian apparel, footwear and travel goods factories have had to suspend operations, impacting more than 130,000 workers in the sector. In the first quarter of the year, the letter said, many buyers had cancelled orders after they were completed or while they were in process. It is estimated that in the second quarter of the year, trade will likely fall by 50 to 60 per cent compared to last year.  

Source:  Phnom Penh Post

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Pak PYMA decries 2.5% additional regulatory duty on yarn

The Pakistan Yarn Merchants Association (PYMA) recently expressed its frustration at the government for not offering relief on imported raw materials to the textile industry and small and medium enterprises (SMEs) in the 2020-21 budget. Association chairman Danish Hanif also termed the imposition of a regulatory duty of 2.5 per cent on raw materials ‘disastrous’. Hanif urged the government to provide equal business opportunities based on a uniform policy for the export, import and industrial sectors. Around 70 per cent of the need for polyester filament yarn (PFY), an important raw material for weaving, knitting and home textiles, is met by imports. PFY was subjected to a higher customs duty of 11 per cent and additional customs duty of 2 per cent and PYMA has been opposing this for three years. However, it has not been abolished; he was quoted as saying by Pakistani media reports. PFY was subjected to anti-dumping duty ranging from 3.25 per cent to over 11 per cent for imports originating from China and Malaysia. The protection offered to domestic manufacturers was already excessive, and with further imposition of 2.5 per cent regulatory duty in this budget, it would be grossly unjust and a disincentive for exports and industrialisation, Hanif said. The proposal for a 3 per cent value-addition tax on commercial importers of PFY at the import stage is a very harsh and unrealistic tax and would end up increasing the cost to the SME sector, he added.

Source: Fibre2Fashion

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