The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 21 JULY, 2020

NATIONAL

INTERNATIONAL

India Inc divided over changing its strategies for sourcing inputs

Indian industry is divided over changing its input sourcing strategies that is at present heavily dependent on China. Sectors such as automobiles and textile machinery aim to diversify their input sourcing, but capital goods and electronics sectors don’t find it viable to diversify input sourcing, according to the latest quarterly survey of Indian manufacturing by industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci). Half of the respondents of the automobile sector and one-third of the respondents in the textile machinery sector indicated that they plan to change their raw material and input sourcing strategies. However, capital goods, cement and ceramics, chemical, fertilizers and pharmaceuticals, leather and footwear and textiles sectors said they do not intend to change their sourcing strategy. Two-thirds of respondents of electronics and electricals said they do not plan to change source of inputs. In the crucial chemicals, fertilizers and pharmaceuticals sector, which is heavily dependent on China, 78% of respondents indicated that they do not plan to change their raw input sourcing strategies. “The remaining respondents stated that they will try to strengthen in-house manufacturing and some of the key raw material sourcing will be shifted away from one country," the Ficci survey said. Chinese imports and investments have been facing fresh scrutiny in India after a tense border standoff that left 20 Indian soldiers and an unspecified number of Chinese troops dead. India aims to dismantle trade links with China as part of a policy to cut dependence on the country.India has banned railway and road projects for Chinese companies and has barred 59 Chinese apps, including TikTok, on national security grounds. Prime Minister Narendra Modi has said India needs to end its dependence on import of solar panels, which are mostly sourced from China. The proportion of respondents reporting higher output during June quarter of FY21 has fallen to just 10% as compared to 15% in March quarter of FY20. The future investment outlook looks subdued as only 22% respondents reported plans for capacity additions for the next six months as compared to 28% in previous quarter. The hiring outlook for the sector is bleak as 85% of the respondents said they are not likely to hire additional workers in the next three months.

Source: Live Mint

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India begins anti-subsidy probe on Chinese export of certain yarn

The product resembles silk, cotton and wool in its feel and texture. It is used in making woven fabrics, home furnishings, knitting and others. It is a popular choice for making fabrics such as georgettes, crepes and chiffons. India, China, India anti-subsidy probe Chinese export, New Delhi, Commerce and Industry Ministry, low-cost import from China, Chinese yarn, cheap chinese yarn, Commerce Ministry, Directorate General of Trade Remedies, DGTR, Viscose Rayon Filament Yarn, Association of Man-Made Fibre Industry of India, AMFII, anti-subsidy investigation, subsidized import from China, silk, cotton, wool, home furnishings, knitting, georgettes, crepes, chiffons, yarn originating from China, yarn exported from China, global trade rules, World Trade Organization, WTO, anti-subsidy duty, countervailing duty,  Association of Man-Made Fibre Industry of India (AMFII) has filed an application before the DGTR, on behalf of domestic industry, for anti-subsidy investigation on the imports of this yarn from China. (Representational image) The Commerce and Industry Ministry on Monday initiated a probe into alleged low-cost imports of a certain type of yarn from China, which is impacting the domestic industry. The Commerce Ministry’s investigation arm Directorate General of Trade Remedies (DGTR) has started the probe to assess if the subsidy programme of China for exports of ‘Viscose Rayon Filament Yarn above 60 deniers” is impacting the Indian industry. L&T Group Chairman lists reforms India needs for Aatmanirbhar BharatGood start-ups are getting sold to foreign firms, Indian investors need to play greater role: Piyush Goyal. Association of Man-Made Fibre Industry of India (AMFII) has filed an application before the DGTR, on behalf of domestic industry, for anti-subsidy investigation on the imports of this yarn from China. The applicant has alleged that material injury to the domestic industry is being caused due to subsidized imports from China and has requested for imposition of countervailing duty on these imports.  The product resembles silk, cotton and wool in its feel and texture. It is used in making woven fabrics, home furnishings, knitting and others. It is a popular choice for making fabrics such as georgettes, crepes and chiffons. “On the basis of the duly substantiated written application by or on behalf of the domestic industry, and having satisfied itself, on the basis of the prima facie evidence submitted by the domestic industry, substantiating subsidization” of the yarn originating in or exported from China, “the authority hereby initiates an investigation to determine the existence, degree and effect of alleged subsidies…and to recommend the amount of countervailing duty, which, if levied, would be adequate to remove the injury to the domestic industry,” the DGTR said in a notification. If it is established that subsidies by China are impacting domestic industry, the DGTR would recommend the amount of countervailing duty, which if levied, would be adequate to remove the injury to the domestic industry. The period for investigation is from April 2019 to March 2020. However, it will cover the data of 2016-19. Under the global trade rules of the World Trade Organization (WTO), a member country is allowed to impose anti-subsidy or countervailing duty if a product is subsidised by the government of its trading partner. These duties are trade remedies to protect domestic industry. Subsidy on a product makes it competitive in price terms in other markets. Countries provide subsidies to boost their exports. India and China both are members of the Geneva-based multi-lateral organisation. China is a major trading partner of India.

Source: Financial Express

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India seeks new preferential treatment from US on drugs, other goods

India is seeking concessions for generic drugs it exports to the US in return for opening its dairy markets and slashing tariffs on farm goods as the two sides seek to shore up a new trade deal, three sources said. India accounts for 40 per cent of US generic drug imports, including the anti-malarial hydroxychloroquine, touted by US President Donald Trump in the fight against Covid-19. To win preferential treatment on pharmaceutical exports, the government of Prime Minister Narendra Modi is dangling the carrot of opening its dairy and farm markets to the Trump administration, months ahead of the US presidential election. “Americans recognise the political compulsion that brings its own benefits,” one of the sources with knowledge of the plans said. India, one of the world’s largest consumers of dairy products, has offered an opening to US dairy imports through a quota-based system, two of the sources said. These products would need a certificate they are not derived from animals that have consumed feeds that include internal organs, blood meal or tissues of ruminants because of religious sensibilities in India. India's federal trade ministry did not immediately comment and the US Embassy in New Delhi referred questions to the US Trade Representative.

Source:  Business Standard

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JNPT plays catch-up with Mundra port by operationalizing SEZ

After ceding its long-held pole position in container handling to arch-rival Mundra port in the first quarter of FY 21, state-owned Jawaharlal Nehru Port Trust (JNPT) has announced the start of operations at its port-based special economic zone (SEZ), an area in which Mundra has been present since 2003. On Monday, JNPT said two units in its multi-product SEZ – OWS LLP and Krish Food Industry - have completed their first phase of operational activity and have been declared operational units by the Development Commissioner, SEEPZ, SEZ.Three more companies are likely to commence their construction activities soon. JNPT has allotted plots to 19 MSMEs and 1 Free Trade Warehousing Zone (FTWZ) co-developer at its multi-product SEZ spread over 277 hectares at Navi Mumbai.  The remaining units are also expected to become operational soon. When fully operational, the SEZ is expected to generate ₹4,000 crore of investments and create 57,000 jobs. JNPT is providing infrastructure and facilities to units in the SEZ. The port authority enjoys the Special Planning Authority (SPA) status for the SEZ project. Also, the electricity distribution license from MERC, Maharashtra government, is provided to JNPT SEZ. All the clearances for setting up SEZ are in place. This will further help in reducing set up time and cost for the units being setup in JNPT SEZ and will further enhance the “Ease of Doing Business”, the port said in a statement. The multi-product port-based SEZ aims to boost exports by enabling port-led industrialization under the Sagarmala program of the Shipping Ministry. The port hopes that the SEZ units will generate cargo that adds to the volumes shipped through its facilities. “JNPT is confident of attracting leading global companies for making India a manufacturing hub as the infrastructure development underway in JNPT SEZ is as per the international benchmark. The potential investment by the units and the employment generation will give a boost to the entire eco-system around JNPT region,” JNPT Chairman Sanjay Sethi said.

Source: Business Line

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FinMin rules out clarification, FAQ on ‘Google Tax’

Equalisation Levy is not applicable on any e-commerce operator with a permanent establishment in India   - istock.com/marchmeena29. The Finance Ministry has ruled out issuing any clarification or frequently asked questions (FAQs) on Equalization Levy, also known as ‘Google Tax’, on non-resident e-commerce companies. “Is there a need? The law is very clear,” a senior Finance Ministry official told Business Line. Last week, India responded to the US Trade Representative Office on the issue, saying the underlying policy objective and application of Equalization Levy is to ensure that neutral and equitable taxation is applicable to e-commerce operators that are resident in India, or have a physical presence here, and those that aren’t. The purpose is to ensure a level playing field with regard to e-commerce activities undertaken in India. In fact, some companies have already paid. The total amount (without bifurcating the levy at the rate of 6 per cent on digital ad and 2 per cent on nonresident e-commerce companies) collected in Equalization Levy so far this fiscal is around ₹200 crore. Introduced in 2016, Google Tax was initially applicable to payments for digital advertisement services received by non-resident companies without a permanent establishment here, if these exceeded ₹1 lakh a year. The rate of tax was 6 per cent. The companies using these services were required to withhold the tax amount. In the 2020-21 Budget, the government widened the ambit of the levy by including e-commerce companies. The applicable tax rate is 2 per cent (plus a surcharge) on the amount of consideration received/receivable by an e-commerce operator. This came into effect on April 1 and July 7 was the due date for the first instalment. In this context, an e-commerce operator refers to a non-resident who owns, operates or manages a digital or electronic facility or platform for online sale/provision of goods/services or both. The levy is not applicable on any e-commerce operator making/providing/facilitating e-commerce supply or services, having a permanent establishment in India. It is also not applicable on e-commerce supply or services effectively connected with such a permanent establishment. Also, an operator with an annual turnover of up to ₹2 crore is exempted from the levy.

Internal transactions

Some companies have complained that Google Tax will be levied even on transactions between branch offices and the head office through the digital platform. The Finance Ministry official quoted above said these are just hypothetical queries, and do not reflect ground realities. “You start complying with the law. If you have any doubt, raise the issue, we will deal with it as it comes,” he said, urging more companies to work towards compliance.

Source: Business Line

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Free trade agreements have not served India’s economy well: S Jaishankar

The free trade agreements (FTAs) that India entered into over the years have not been able to largely serve the country’s economy well in terms of building its capacities, though all such pacts are not the same, External Affairs Minister S Jaishankar said on Monday. The external affairs minister said there are ways of engaging the world which do not necessarily have to be “FTA-centric”. Jaishankar made the comments during an online interaction with leading industrialist Sunil Kant Munjal and strategic affairs expert Prof C Raja Mohan on CNBC-TV18. The idea in simple terms is to put in place a one-stop digital platform for investors to obtain all requisite central and state clearances/ approvals in a time-bound and hassle-free manner.India's regulatory system anything but investor-friendly. Central licences for new investors as many as 767! The chemical and related products are clubbed together in 15 broad categories.Silver lining! India turned net exporter of chemicals after 10 years in FY 20. Replying to a question on New Delhi’s ties with neighbouring countries, he said it is a complex neighbourhood and India is often like a “punching bag”, adding creation of structural linkages could address the problem of “volatility” resulted by domestic politics of the countries. Elaborating on his views on FTAs, Jaishankar said: “The fact is that they have not served the economy well in terms of building our capacities. I think there are ways of engaging the world which do not necessarily have to be FTA-centric,” the external affairs minister said. He, however, added that all the FTAs are not the same. “Look at the state of the economy, look at the state of the manufacturing then look me in the eyes and say yes these FTAs have served me well. You won’t be able to do that,” Jaishankar said during the discussion on geopolitics of opportunities. He said post COVID-19, the world is heading towards a more protectionist economy. When asked about non-alignment and the current geo-politics, the external affairs minister said it was a term of a particular era and particular geopolitical landscape. Noting that India maintains a strong streak of independence in its foreign policy, he said today people turn to the country as part of solution, as it has been a key player in dealing with all major global issues and challenges like maritime security, climate change and terrorism. “If we are to grow by leveraging the international situation, then you have to exploit the opportunities out there,” he said. “Either you are in the game or you are not in the game…. I would say that the era of great caution and a very much greater dependence on multilateralism, that era is to a certain extent behind us. “We have to step out more, we have to be more confident, we have to articulate our interests better, we need to take risks because without taking risks like in business or in banking, you cannot get ahead. Those are the choices we have to make and I think there is no getting away from it,” he added. To a question on the neighbourhood, he said the relations at times are impacted by the interplay of politics and sharp positioning. “We need to create those structural linkages between us and our neighbours so that they they care of political cycles and any volatility their politics may produce,” he said. “Because, very often people say things about us. We are actually like a punching bag and the domestic issues which one of our neighbours is having,” Jaishankar said in an apparent reference to Nepal. “I would say the sensible thing to do is to make sure that you have strong structural linkages so that the politics of the day plays on, but the realities of the economics and the social interactions and the people to people contacts… that carries on. “Having said that I would take a lot of care with my neighbours to kind of smoothen the frictions as they come along. Sometimes you anticipate problems, sometimes it is important that you do not get provoked,” he said. About China, he said the economies of India and China were roughly of the same size when the then prime minister Rajiv Gandhi visited Beijing in 1988.However, now, China’s economy is about four-and-half or five times that of India largely due to a series of reforms the neighbouring country initiated around 40 years back. He said India too grew “fairly significantly” during the period. “The fact that we did not intensively industrialised, or pushed manufacturing the way many other Asian economies did. The fact that we opened up very much later, we opened up a full decade-and-half after China did,” he said.

Source: Financial Express

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Clothing retailers defer new launches over lower demand amid coronavirus

Large retailers like Big Bazaar, FBB and Cantabil have opened their selective stores with 'no exchange, no return' policy Clothing and apparel retailers have deferred new launches for this season due to slower than expected recovery in consumer demand following coronavirus (Covid-19) driven nationwide lockdown and delay in unlocking of retail shops. Many apparel and clothing retailers have not opened their retail stores, at all, due to lockdown. Large retailers like Big Bazaar, FBB and Cantabil have opened their selective stores with 'no exchange, no return' policy. Thus, retailers are operating with 25-30 per cent of their store capacity. Since, apparel and clothing differ in fitting for similar size, depending upon manufacturers, consumers often exchange clothes. With the exchange facility not available now, consumers are hesitant on buying clothes and eventually defer their purchase. “New launches are completely on hold. Since Covid-19 pandemic came into light and nationwide lockdown started, there have been no launches of new brand or collection. Barring a few in January - February this year, new launches of brands and collections are deferred,” said Ujjwal Lahoti, managing director, Lahoti Overseas, one of India’s largest kidswear brands producers and retailers. Apparel and clothing retailers used to come out with 'end of season sale' with branded products sale at heavy discounted price around this time every year. This year, however, the 'end of season sale' has disappeared as many retailers are struggling for survival amid high rentals and other fixed costs and extremely weak sales. "Enthusiasm is gone. Not only new launches but opening up of new pipeline stores too have been deferred. Earlier, we used to operate some stores just for location advantage even if they were non-profitable. Now, business sentiment has completely changed with retailers' focus on break even or profit earning before expansion into new products or location," said Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI). With slower than initially envisaged recovery in sales of apparels and home textiles, domestic retailers are deferring new season launches to October - November 2020, which is trickling down to lower offtake for fabrics and yarn. In contrast, better demand for downstream products in some of the international markets, together with competitive prices for Indian cotton, and therefore, cotton yarn, are resulting in a relatively better export demand for India’s cotton yarn. However, the export demand is not adequate to compensate the sector for the loss in demand in the domestic market, which consumes nearly 70% of the yarn produced in the country. “Many retailers are aiming new launches to begin during Dussehra and Diwali season. But, the senario looks gloomy this year,” said Mehta.  Meanwhile, the national lockdown implemented in India from March 25, 2020 onwards, to contain the spread of the virus, was officially lifted from the second week of June 2020 with certain guidelines and restrictions. However, even after a month, the operations for spinners have not yet fully ramped up. This is despite the fact that several companies outside the containment zones had already commenced operations in April and May 2020, after taking requisite approvals from the concerned authorities. Capacity utilisation for most players across the sector is estimated to have averaged at between 30 and 40 per cent in April - June quarter 2020 (Q1, FY2021). "The main reason for the slow recovery has been the sluggishness in demand in the downstream segments of fabrics and apparels. The trend has been weaker in the domestic market, where consumer-discretionary spending and consumer footfalls in markets remains abysmal, particularly in metros and tier-I markets. Yarn, being an intermediate product, is resultantly facing a ripple effect of the contraction in demand in the downstream segments," said Jayanta Roy, Senior Vice President, Icra Ratings. Apart from Covid-19 related concerns, another cause for worry for the Indian spinning sector has been the flare-up witnessed in geo-political tensions between India and China in recent months.

Source: Business Standard

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FIEO suggests government to issue showcause notice to risky exporters for tax refunds fraud

Responding to media reports highlighting that 1,377 exporters, who fraudulently claimed IGST refund worth Rs 1,875 crore, FIEO said: “While the number of untraceable exporters as a percentage of total number of exporters is not much yet untraceability of such a large number of exporters requires concerted efforts by all of us to trace them and bring them to books.” The Federation ofIndian Eport Organisations (FIEO) has suggested the government to issue suitable show cause notices to ‘risky exporters’ who have fraudulently claimed refunds under integrated goods and services ta (IGST) but are untraceable now. “Government should further proceed in the matter by immediately issuing them suitable show cause notices. If they do not respond, DGFT should initiate action to suspend/cancel their Import Eport Code making them ineligible for further exports/imports and authorities should initiate proceedings against them to recover government money,” the apex association of exporters said in a statement on Saturday quoting its president Sharad Kumar Saraf. Risky exporters are seen as suspicious by the customs department for claiming their duty drawback and IGST refunds on the basis of bogus invoices and their consignments undergo manual checking before their claims are refunded. Responding to media reports highlighting that 1,377 exporters, who fraudulently claimed IGST refund worth Rs 1,875 crore, and are untraceable at their place of business, FIEO said: “While the number of untraceable exporters as a percentage of total number of exporters is not much yet untraceability of such a large number of exporters requires concerted eorts by all of us to trace them and bring them to books.” Every exporter has a PAN and a bank account before he applies for an IEC. For opening the bank account, necessary KYC is done by banks also besides introduction of account by another customer. The Directorate General of Foreign Trade also keeps their email, telephone and bank details including the photograph of the person who applies for IEC. Exporters are also required to have GST registration providing email and mobile number, which is cross veried through electronic mode. The registration of exporters is also done at Customs and bank details are captured in which IGST amount is credited. FIEO said these exporters may also be members of some export promotion councils or other commodity boards who can also help in providing necessary information available with them, and Star exporters also submit Chartered Accountant Certicates, which are also at times veried by the licensing authorities. “We need to pool the information available, with all the agencies to locate them as a few black sheep should not dent the image of genuine exporters of the country,” Saraf said.

Source:   Economic Times

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New Form 26AS is the Faceless hand-holding of the Taxpayers

The new Form 26AS is the faceless hand-holding of the taxpayers to e-file their income tax returns quickly and correctly. From this Assessment Year, taxpayers will see an improved Form 26AS which would carry some additional details on taxpayers’ financial transactions as specified in the Statement of Financial Transactions (SFTs) in various categories. It is stated that the information being received by the Income Tax Department from the filers of these specified SFTs is now being shown in Part E of Form 26AS to facilitate voluntary compliance, tax accountability and ease of e-filing of returns so that the same can be used by the taxpayer to file her or his income tax return (ITR) by calculating the correct tax liability in a feel-good environment. This would also bring in further transparency and accountability in the tax administration. The earlier Form 26AS used to give information regarding tax deducted at source and tax collected at source relating to a PAN, besides certain additional information including details of other taxes paid, refunds and TDS defaults. But now, it will have SFTs to help the taxpayers recall all their major financial transactions so that they have a ready reckoner to enable them while filing the ITR. It is further explained that the Department used to receive information like cash deposit/withdrawal from saving bank accounts, sale/purchase of immovable property, time deposits, credit card payments, purchase of shares, debentures, foreign currency, mutual funds, buy back of shares, cash payment for goods and services, etc. under Section 285BA of Income-tax Act, 1961 from “specified persons" like banks, mutual funds, institutions issuing bonds and registrars or sub-registrars etc., with regard to individuals having high-value financial transactions since the Financial Year 2016 onwards. Now, all such information under different SFTs will be shown in the new Form 26AS. It is stated that the Form 26AS for any taxpayer, from now onwards, will display in part E of the Form, different fields such as, type of transaction, name of SFT filer, date of transaction, single/joint party transaction, number of parties, amount, mode of payment and remarks etc. Furthermore, this would help the honest taxpayers with updated financial transactions while filing their returns, whereas it will desist those taxpayers who inadvertently conceal financial transactions in their returns. The new Form 26AS would also have information of transactions which used to be received up to Financial Year 2015-16 in the Annual Information Returns (AIR).

Source: PIB

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Industry shows willingness to join ‘Atmanirbhar Bharat’ slogan, shift dependence on China

Sectors such as automotive, textiles machinery and leather are looking at alternative sources of inputs and raw materials An industry survey has shown that several sectors are willing to join the ‘Atmanirbhar Bharat’ slogan that envisages products imported from abroad are locally manufactured and exported. After the Prime Minister’s exhortation on June 11 to the industry to focus on indigenous production and the Galwan Valley clash on June 15, which soured trade ties with China, certain sectors such as automotive, textiles machinery and leather are looking at alternative sources of inputs and raw materials, reads a FICCI survey released on Sunday. Around half of the respondents from the automotive sector, which was the worst hit in the April-June quarter, indicated they are planning to “reduce dependence on one country”. Over a quarter of this sector’s imports, estimated at Rs 30,000 crore, come from China. The willingness to shift is likely to be higher once the government completes the exercise of curbing imports of 1,173 non-essential products from China such as toys, plastics, electronics and auto components for vehicle manufacturing. So far, two-thirds of respondents from electronics and electricals are unwilling to change their input sourcing strategies. Imports by this segment from China average Rs. 90,000 crore every year. But half of the respondents from the leather and textile sectors were preparing to change their raw material import strategy. These sectors were among the worst hit in the AprilJune quarter and immediate prospects of revival look bleak, said the survey. Footwear and leather imports are estimated at Rs 5,000 crore annually.

Source: Tribune India

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Help Indian MSMEs market products globally: Nitin Gadkari to Amazon

Union MSME Minister Nitin Gadkari on Monday urged e-commerce major Amazon to list products from small businesses separately on its platform and help micro entrepreneurs market their goods globally. Highlighting that the micro, small and medium enterprises (MSME) sector is a major job creator and backbone of the Indian economy, Gadkari said the quality of their products is good but more expertise is needed in design and packaging.  “I would request you, if it is possible, to find out a solution for MSMEs. With your international exposure, if you can plan product designing and giving new vision, awareness, product development to all entrepreneurs, regarding what global companies want…it is a win-win situation. It will increase your turnover and help Indian economy,” the minister said. He was speaking at the unveiling of Amazon’s Exports Digest 2020. Gadkari said the MSME sector accounts for 30 per cent of India’s growth and about 48 per cent of the country’s exports. Gadkari added the vision is to increase the contribution of MSMEs to 60 per cent of India’s exports within the next five years. “The rural, tribal and agri sections of the economy need to be developed on a priority basis…65 per cent of our population belongs to these areas. There are 115 aspirational districts where per capita income is very negligible. “Goods exported from Indian MSMEs via the programme can be classified into micro, small and medium. My suggestion is to also make a separate category of handloom, handicrafts and particularly agro-MSMEs,” he said. The minister also said the government is focussing on expanding agro-MSMEs, processing, handloom, bio-fuel and other industries.

Source: Financial Express

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Retail trade suffered Rs 15.5 trillion business loss due to Covid-19: CAIT

CAIT Secretary General Praveen Khandelwal said the domestic trade is passing through its worst period in the current century India's retail trade has suffered a business loss of about Rs 15.5 trillion in past 100 days due to the Covid-19 pandemic, traders' body CAIT said on Sunday. In a statement, the Confederation of All India Traders (CAIT) said traders across the country are depressed because of minimal of the consumers, considerable absence of employees, facing financial crunch and yet have to meet several financial obligations. "No support policy from the central or state governments is yet another crucial factor which is haunting the traders," CAIT claimed. CAIT Secretary General Praveen Khandelwal said the domestic trade is passing through its worst period in the current century which reflects that if immediate steps are not taken about 20 per cent of the shops in India will have to close down their shutters.

Source: Business Standard

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India can learn a lot from Korea’s economic boom

In 1961, the per capita income of India and South Korea was similar at $85.4 and $93.8. In 2019, there was a huge difference as they stood at $2,104.1 and $31,762, respectively. How did that happen and what can India learn from it? Mint explains In 1961, the per capita income of India and South Korea was similar at $85.4 and $93.8. In 2019, there was a huge difference as they stood at $2,104.1 and $31,762, respectively. How did that happen and what can India learn from it? Mint explains what has happened between1950s to now? As Arvind Panagariya, the first vice-chairman of NITI Aayog, writes in India Unlimited: “In the early 1950s, South Korea, Taiwan, Singapore, China, and India had comparable per capita incomes. The first three switched to outward oriented policies in the early to mid-1960s, resulting in wholesale economic transformation." Export oriented policies ensured that South Korea grew at 8.97% per year between 1960-2000, with the GDP (in constant 2010 US dollars) jumping from $23.3 billion to $724.6billion. The fast growth was due to labour-intensive exports, which by 1972 accounted for 72.5% of Korea’s goods exports. What labour-intensive exports are these? As Panagariya writes in Free Trade and Prosperity: “Most products whose exports grew rapidly during the 1960s were labour-intensive. These included plywood, woven cotton fabrics, clothing, footwear and wigs... In the later years it only intensified, with new, unexpected items such as wigs and human hair emerging as major exports." This expansion of labour-intensive exports led to the creation of jobs, which helped people move away from agriculture towards manufacturing jobs. This led to income levels rising and that created a demand for services. In the process, a large part of the economy was rapidly urbanized. What else did Korea do right to drive fast growth? The labour markets were flexible. Policy changes weren’t random. Education was given the highest priority. Panagariya writes: “An important reform in 1965 raised deposit interest rates to encourage savings. This change plus rising incomes contributed to increased savings." The higher savings were channelized to build more industry and raise incomes. Where did India go wrong vis-à-vis Korea? Up until 1991, India had an inward-looking import substitution policy. Even after opening up, we haven’t been able to get labour intensive exports going. In the last 15 years, India’s engineering exports have been more than labour-intensive exports of leather, textiles and readymade garments,puttogether. Only when we add agricultural and allied products exports to the labour intensive exports, does the situation change. Nevertheless, in the last two years, engineering exports have been more even after adding agricultural exports. Why has India’s export growth been lagging? A major reason for this is that Indian firms in manufacturing are small. As the Economic Survey of 2019-20 points out: “Most firms face [a] complex architecture of the Indian governance framework. Manufacturing units have to conform with 6,796 compliance items, which is a… time consuming task." Of course, every unit does not have to conform to every item, but this is a long list nonetheless. This is where economic reform is needed.

Source:   Live Mint

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The Chinese dragon's grip on imports

But look under the hood of the air conditioners and 50 percent of components— compressors, controllers, motors and copper tubes—come from China. “There is no Indian compressor manufacturer,” says Pradeep Bakshi, managing director at Voltas. Voltas’ air conditioners are assembled in India. In the eyes of Indian consumers, they are a made-in-India brand. But look under the hood of the air conditioners and 50 percent of components— compressors, controllers, motors and copper tubes—come from China. “There is no Indian compressor manufacturer,” says Pradeep Bakshi, managing director at Voltas. While the company is looking to develop a vendor ecosystem, it would take a minimum of 12-18 months to put that in place. Bakshi says the company is exploring several options, including tying up with rivals, to set up a compressor facility that can manufacture at scale. Vendors in this space work on large top lines and low margins and no one Indian air conditioning company can give them the business they need to be viable. In the interim, Voltas continues to import from its Chinese suppliers. The recent border skirmishes as well as the government’s call for industry to become ‘aatmanirbhar’, or selfreliant, have done nothing to halt their Chinese imports. It’s business as usual. For India, imports from China stood at Rs 461, 524 crore ($61.5 billion) in 2019-20, according to the ministry of commerce. Three sectors—organic chemicals, capital goods and electrical items (television tubes, mobile phone parts and compressors, among others) —account for 62 percent of these imports. While economies of scale are not a problem in several businesses like mobile phones, Indian industry continues to import from China. “This situation has come because of our complacency in blindly accepting cheaper imports from China,” said Sajjan Jindal, chairman of JSW Group, in a statement. The JSW Group’s annual imports from China total $400 million (Rs 3,000 crore). While companies move to shift manufacturing to India, an additional wrinkle is that since India is a signatory to the World Trade Organization (WTO) rules, it cannot unilaterally hike tariffs against any one country. Vendors setting up plants in India could still be swamped with imports from, say, Vietnam or other WTO members. “The only way out is to provide support for both domestic and overseas manufacturers who want to set up operation in India,” says Jayant Dasgupta, India’s former ambassador to the WTO. At least one industry executive who declined to be named said his business was adopting a wait and watch attitude and would continue to import from overseas. Industry Takes the Lead One area where Indian industry has had success in reducing dependence on China has been in the organic chemical space. These comprise chemical compounds that act as raw materials to a host of industries—active pharmaceutical ingredients (APIs) for the pharma industry are a prime example. The industry has seen several success stories with manufacturing shifting out of China primarily on account of environmental concerns. But even here, there are instances of raw materials coming from China. “Things flow from the petrochemical value chain and the starting blocks are bulk commodity chemicals that need to be made at humongous scale for the economic viability to set in,” says Koushik Bhattacharya, director and head industrials at Avendus Capital, an investment bank. So, on the bulk chemical side, there is limited scope to set up operations in India and raw materials are sourced from China. India only makes ethylene and propylene and most of that feedstock is used for the manufacture of polymers. While backward integration is possible, there is a limit to how much Indian businesses can invest and Bhattacharya reckons that investments are only possible by companies that are valued at over $1 billion (Rs 7,500 crore), of which there are only a handful. “Any move to reduce dependence on China for raw materials would force companies to import from Europe and increase costs,” says Vinati Saraf Mutreja, managing director & CEO, Vinati Organics, one of the leading companies in the chemicals space. The company exports its finished products to China and any tariff retaliation by China would have a negative impact on its business. The company has seen its market cap compound at 30.4 percent a year in the last five years to Rs 10,500 crore. Another area that has been steadily gaining ground is contract manufacturing. As India’s domestic market grows, original equipment manufacturers are making more televisions, washing machines and mobile phones in India. “Component manufacturers go where the demand is,” says Sunil Vanchani, chairman of Dixon Technologies, a Noida-based contract manufacturer. His company manufacturers home appliances, lighting solutions and mobile phones and says enquiries for more contract manufacturing have come in the last few months but land acquisition has proved to be a hurdle. According to the Ministry of Electronics and Information Technology, electronics manufacturing has grown at a CAGR of 25 percent in India for the last four years and domestic hardware worth $70 billion (₹300,000 crore) is made in India. Key to getting more companies to shift base to India is financial support from the government to provide incentives to set up manufacturing facilities. In April, the Production Linked Incentive Scheme for Large Scale Electronic Manufacturing announced ₹40,951 crore of incentives over the next five years based on certain investment milestones. Expect more companies to announce plans to set up electronic- and semi conductor-making facilities in the next few months. Last, there is capital goods—a sector that has been in the doldrums for the last decade. Demand for setting up new power plants, mining and construction equipment, and boilers and turbines has been flat or declined sharply over the last five years. In the interim, supplies from China have risen from ₹69,000 crore in 2015-16 to ₹93,000 crore in 2019-20 while Indian manufacturers have struggled to match Chinese prices. For now, the government has not announced any incentives to move capital goods manufacturing to India. Trade Terms An additional challenge in moving manufacturing to India is the level of support the government can provide to industries. The WTO prohibits the use of unfair incentives and countries are allowed to impose anti-dumping duties, countervailing duties and safeguard duties to level the playing field. China’s manufacturing journey started before it joined the WTO in 2001 and a large amount of investments had already been made at favourable terms to manufacturers. That is an advantage not available to India. Recent reports of Chinese containers being scrutinised at Indian ports have not been backed by written notifications, according to trade lawyers. Dasgupta who represented India at the WTO finds the import restriction debate ill-informed and ill-advised. “When we harass importers we only end up hurting our interests,” he says. Instead, the government needs to work step-by-step to identify sectors that we need to reduce dependence on and then work on getting those manufacturers to set up shop in India. The experience of India’s textile industry provides a sobering example of what can go wrong. Since the abolition of US and EU textile quotas in 2004, the gains have flowed disproportionately to China, Bangladesh and Vietnam. India has only managed to carve a niche in home textiles—a smaller and less lucrative part of the market. Indian textile makers have long complained of high electricity charges, inflexible labour laws and the stuck GST refunds. For now, as Voltas’ troubles in sourcing compressors in India show, the road ahead in getting companies to manufacture in India is long and arduous. What India has going for itself is the China Plus One strategy—which involves diversifying investments into other countries to reduce overconcentration in China—that western companies are actively pursuing. Still, it is far from certain that India would be the only beneficiary and countries like Vietnam, Thailand and Bangladesh could end up benefitting more. Imports from China would then shift to these countries. Expect plenty of posturing like the recent rules that mandate ecommerce companies display the country of origin on their products from August 1. As Mekhla Anand, partner (indirect tax), at Cyril Amarchand Mangaldas says “The government has not issued any notification restricting the import of goods from China. While delays are being reported in clearance of shipments, these appear to be procedural issues.”

Source: Money Control

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Indian direct selling industry records USD 2.47 bn sales in 2019, ranks 15th globally

The Indian direct selling industry has recorded sales of USD 2.47 billion in 2019, reporting a growth of 12.1 per cent, a report by World Federation of Direct Selling Associations (FDSA) said. This has helped the direct selling industry improve its ranking to the 15th from the earlier 19th a year before, said The Global Direct Selling - 2019 Retail Sales report by Washington-based WFDSA. Moreover, in terms of the number of direct sellers, India has been ranked at sixth position, proving employment to 57.50 lakh people. However, the global direct selling industry has reported an overall decline of 4.3 per cent in sales to USD 180.47 billion in 2019. According to the report, the US is leading in the list contributing 20 per cent of the global direct selling industry with sales of USD 35.21 billion, though it has registered a marginal de-growth of 0.4 per cent. It is followed by China with 13 per cent contribution, Korea and Germany with 10 per cent each and 9 per cent by Japan. Terming it as a good sign for the industry, Indian Direct Selling Association (IDSA) said it now hopes to find space in the top five players globally much earlier than the previous estimates of a decade. India recorded the highest year-on-year growth and CAGR over three years, in top 20 Direct Selling markets around the world, the association said in a statement. "India has recorded the highest year on year growth rate of 12.1 per cent and the the highest CAGR of 16.3 per cent over the period of last three years, amongst the top 20 direct selling markets across the globe," IDSA Chairperson Rini Sanyal said. According to a latest joint report by IDSA and data insight rm Kantar, the Indian direct selling industry has witnessed a Compounded Annual Growth Rate (CAGR) of approximately 16 per cent and grown from Rs 8,308 crore in 2015-16 to Rs Rs 13,080 crore in 2018-19. In this, wellness tops the chart of leading segments in Direct Selling followed by cosmetics and personal care. The Indian Direct Selling Industry's contribution to the exchequer stood at around Rs 2,500 crore in 2018-19, said the IDSA report.

Source: Economic Times

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 Global Textile Raw Material Price 21-07-2020

Item

Price

Unit

Fluctuation

Date

PSF

764.55

USD/Ton

0%

21-07-2020

VSF

1210.12

USD/Ton

-0.47%

21-07-2020

ASF

1689.30

USD/Ton

0%

21-07-2020

Polyester    POY

691.60

USD/Ton

-1.73%

21-07-2020

Nylon    FDY

1988.26

USD/Ton

-0.71%

21-07-2020

40D    Spandex

4005.12

USD/Ton

0%

21-07-2020

Nylon    POY

1845.22

USD/Ton

-0.39%

21-07-2020

Acrylic    Top 3D

1859.52

USD/Ton

0%

21-07-2020

Polyester    FDY

886.85

USD/Ton

0%

21-07-2020

Nylon    DTY

2238.58

USD/Ton

0%

21-07-2020

Viscose    Long Filament

5149.44

USD/Ton

0%

21-07-2020

Polyester    DTY

936.91

USD/Ton

-0.76%

21-07-2020

30S    Spun Rayon Yarn

1716.48

USD/Ton

0%

21-07-2020

32S    Polyester Yarn

1337.42

USD/Ton

0%

21-07-2020

45S    T/C Yarn

2159.90

USD/Ton

-0.66%

21-07-2020

40S    Rayon Yarn

1873.82

USD/Ton

0%

21-07-2020

T/R    Yarn 65/35 32S

1666.42

USD/Ton

0%

21-07-2020

45S    Polyester Yarn

1516.22

USD/Ton

-0.93%

21-07-2020

T/C    Yarn 65/35 32S

2031.17

USD/Ton

0%

21-07-2020

10S    Denim Fabric

1.13

USD/Meter

0%

21-07-2020

32S    Twill Fabric

0.64

USD/Meter

0%

21-07-2020

40S    Combed Poplin

0.93

USD/Meter

0%

21-07-2020

30S    Rayon Fabric

0.48

USD/Meter

-0.30%

21-07-2020

45S    T/C Fabric

0.65

USD/Meter

0%

21-07-2020

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14304 USD dtd. 21/07/2020). 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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Sri Lanka exports bounce back in June 2020 to US$ 906 million

 According to the Sri Lanka Customs provisional statistics, earnings from merchandise exports rebounded in June 2020 to US$ 906 million increased by 50.4% compared to the US$ 602 million earned in May 2020, the Export Development Board (EDB) reported. The export sector progressively commencing actions following the relaxation of lockdown measures and the recovery of both domestic and global supply and demand chains to some extent contributed to the growth. EDB Chairman Prabhash Subasinghe said the bounce is certainly back in exports which has now become the breadwinner for Sri Lanka’s favorable trade balance. “Exports have become a national priority, now more than ever, it is certainly impressive to see a strong V shaped recovery in the export sector, comparatively to the lowest point in April 2020, exports are up 327%. I thank the entire export community for serving the national economic needs at our most vulnerable time and we at the EDB stand ready to serve our export community,” he said. Export Earnings from Merchandise in June 2020 increased by 50.4% compared with the value recorded in May 2020. However, in comparison to June 2019, earnings from merchandise exports declined by 16.42%. Export earnings from Apparel & Textiles increased 83.72% to US$ 402.04 million during the month of June 2020 compared with US$ 218.83 million recorded in May 2020. However, 20.22% decline recorded in June 2020 in comparison to June 2019. Export earnings from tea increased as both values (6.14%) and volumes (4.52%) increased in June 2020 compared with May 2020. In addition, export earnings from tea recorded 1.55% increase in June 2020 in comparison to June 2019. Earnings from all the major categories of Coconut based products increased in June 2020 compared with June 2019 due to the improved performance in export of Coconut Oil, Cocopeat & Activated Carbon. In addition, Export earnings from Rubber & Rubber finished products increased by 34.58% to US$ 68.89 million during the month of June 2020 compared with May 2020. With the poor performance recorded in tire sector, Export of Rubber & Rubber finished products decreased by 14.74% during the month of June 2020 compared with the same month in the previous year. Export earnings from Spices and Essential Oils increased significantly in June 2020 compared with May 2020 as the growth in cinnamon (81.7%), pepper (84.78%), nutmeg and mace (106.67%) and essential oils (22.75%). In parallel export earnings from Spices and Essential Oils increased by 29.96% in June 2020 in comparison to June 2019. Earnings from seafood increased by 13.7% to US$ 24.32 million in June 2020 in comparison to US$ 21.39 million recorded in June 2019 and also increased by 110.93% in June 2020 compared with May 2019 due to the better performance of export of frozen fish. Meanwhile, export earnings from Food & Beverages (-8.36%) and Electrical & Electronic Products (-6.28%) declined during the month of June 2020 compared with June 2019. Moreover, led by a higher demand for personal protective equipment (PPE) such as face masks, protective suits, surgical gloves, etc., earnings from exports of Apparel & Textiles and Rubber & rubber-based products grew significantly during the month of June 2020. PPE related exports recorded US$ 106.46 million in June 2020. Total export earning for January to June 2020 was US$ 4,362.34 million compared to US$ 5,929.74 million recorded in a similar period of the previous year – a decline of 26.43%. This is a 58% achievement of Revised Merchandise Export Target of US$ 7,521 million in 2020. Major Exports such as Apparel & Textiles (US$ 1,936.66 million), Tea (US$ 571.66 million) and Coconut & Coconut Based Products (US$ 281.59million) and Rubber & Rubber based products (US$ 349.17 million) recorded decrease of 29.64%, 16.54%, 10.33% and 23.62% respectively during Jan-June 2020 compared to the similar period of previous year. Petroleum & Other Export crops recorded positive growth rates during the period. The top export destinations during the period Jan-June 2020 were United States of America (US$ 1,147.5 million), United Kingdom (US$ 361.6 million) India (US$ 277.5 million), Germany (US$ 250.3 million) and Italy (US$ 183 million). Being the largest single country export destination, United States of America absorbed US$ 242.36 million worth of exports in June 2020 as 66.56% increase in comparison to US$ 145.51 million absorbed in May 2020. However, exports to United States of America decreased by 9.37% in June 2020 in comparison to June 2019. In addition, Exports to United Kingdom as the largest trading partner in the EU Region recorded an increase of 53.64% to US$ 65.39 million in June 2020 compared with May 2020. Meanwhile exports to UK decreased by 30.46% in June 2020 in comparison in June 2019. However, Exports to Italy, France, and Russia showed better performance in comparison of June 2019 - June 2020 and May - June 2020. Exports to India, China, Germany, Belgium & Netherlands increased by 60%, 40%, 42.9%, 80% and 34% respectively in June 2020 compared with May 2020 while exports in June 2020 decreased by 15.3%, 20.29%, 12.72%, 15.6% and 10.8% respectively in comparison in June 2019. The EDB estimates services exports including ICT/BPM, Construction, Financial services, Transport & Logistics and Wellness Tourism to a level of US $ 1,780.5 million during the period of Jan-June 2020 compared to US$ 2,026.58 million recorded in the corresponding period of previous year. However, estimated service exports declined by 12.14% during the period of Jan-June 2020 compared with the corresponding period of previous year. Compared with the overall performance of Merchandise exports, the exports of services have performed well during the period of Jan-June 2020.

Source: Colombo Page

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Turkish govt provides over $100B of investment incentives in last 5 years

More than 28,000 projects received investment incentives from the Turkish government totaling $107.36 billion over the last five years, with the manufacturing sector taking the lion’s share of total support, official data showed. According to Industry and Technology Ministry data compiled by the Anadolu Agency (AA), once completed, almost a million people are expected to be employed as part of projects supported by government incentives. The companies whose projects got certificates are backed by the government with incentives such as tax exemptions or deductions, customs duty exemptions, insurance premium support, discounts on electricity bills, low-interest rates and land.  From 2015 to 2019, the manufacturing sector, which includes sub-industries such as telecommunications, textiles and shipbuilding, obtained government investment incentive certificates for a total of 13,617 projects with a fixed investment amount of $40.4 billion. Once finished, the projects are expected to create a total of 531,404 jobs. During the same period, incentive certificates were issued for 5,921 projects with fixed investment of $31.7 billion in the energy sector, which is projected to add 22,128 new jobs. Following energy, the services sector received 6,797 incentive certificates with a fixed investment amount of $30.3 million. In addition, a total of 1,851 projects in the mining and agriculture sectors obtained incentive certificates with fixed investment of $4.75 billion. Over 43,000 people are expected to be employed in these projects when completed.

Source: Daily Sabah

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Japan govt to pay at least $536 million for companies to leave China

 Fifty-seven companies including privately-held facemask-maker Iris Ohyama and Sharp will receive a total of 57.4 billion yen ($536 million) in subsidies from the government Japan’s government will start paying its firms to move factories out of China and back home or to Southeast Asia, part of a new program to secure supply chains and reduce dependence on manufacturing in China. Fifty-seven companies including privately-held facemask-maker Iris Ohyama and Sharp will receive a total of 57.4 billion yen ($536 million) in subsidies from the government, the Ministry of Economy, Trade and Industry said Friday. Another 30 firms will receive money to move manufacturing to Vietnam, Myanmar, Thailand and other Southeast Asian nations, according to a separate announcement, which didn’t provide details on the amount of compensation. The government will pay a total of 70 billion yen in this round, the Nikkei newspaper reported. The payments come from 243.5 billion yen that the government earmarked in April to reduce reliance on Chinese supply chains, with the money aimed at helping companies shift factories back home or to other nations. As US-China relations deteriorate and the trade war worsens, there’s been increasing discussions in the US and elsewhere about how to “decouple" economies and firms from China.

Source: Bloomberg

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New Chinese textile unit in Casablanca to create 650 jobs

A new high-tech textile industrial unit in Casablanca will start operations shortly, under an agreement signed this week by Minister of Industry and Trade, Moulay Hafid Elalamy, and the managing director of Omega Textile Maroc, Song Linghui. The unit, requiring an investment of 80 million dirhams, will manufacture hosiery, socks and lingerie by using new techniques and advanced 4.0 technology machines, said the ministry in a press release. The output is destined to the local market as well as to exports. The project will generate 200 direct jobs and 450 indirect jobs in the long term, as well as an estimated turnover of nearly 75 million DH, the press release said. For Elalamy, this important investment confirms the confidence that international investors have in Morocco as a production and export platform and in the capacity of the national textile industry to position itself in the post-coronavirus period. The unit will give a boost to the Moroccan knitwear industry and help develop the added value of by-products around the two knitwear ecosystems and the distribution of brands nationally and internationally, particularly in Africa. Omega Textile Maroc, a company operating under Moroccan law with a 100% Chinese capital, specializes in the manufacturing of socks, lingerie (tights, stockings, knee-highs, etc.), T-shirts, bras, etc.

Source: The North Africa Post

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