MARKET WATCH 17 SEPT, 2020

NATIONAL

INTERNATIONAL

Government to bring out strategy paper on boosting industrial growth: Piyush Goyal

New Delhi: The government is in the process of bringing out a strategy paper on boosting industrial growth which will be a road map for all businesses in the country, Parliament was informed on Wednesday. In a written reply to the Lok Sabha, Commerce and Industry Minister Piyush Goyal said the government is in the process of rationalising the existing central labour laws into four labour codes -- on wages; industrial relations; occupational safety, health and working conditions; and social security by simplifying, amalgamating and rationalising the relevant provisions of the existing central labour laws. The Code on Wages has been approved and notified, he added. "The government is in the process of bringing out a strategy paper on boosting industrial growth which will be a road map for all businesses in the country," he said. In a separate reply, he said an EFC (Expenditure Finance Committee) note on startup India seed fund scheme, with a total proposed corpus of Rs 945 crore, has been formulated by the Department for Promotion of Industry and Internal Trade (DPIIT). "The EFC note was circulated for inter-ministerial consultations to the concerned departments/ ministries," he said, adding that the note has been finalised. He also said that since the launch of Startup India initiative on January 16, 2016, a total of 36,106 startups have been recognised by DPIIT in 586 districts, as on September 6. "A total number of 4,22,986 employment has been reported by 34,267 DPIIT recognised startups as on September 6," he added. In a separate reply, the minister said India's exports of PPE Kits, masks, sanitisers during April-August 2020 stood at USD 632.23 million.

Source: Economic Times

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To attract investments, India to give a leg-up to start-ups, textiles, steel and agri-exports

As India looks to attract more investments, the government is giving a leg-up to specific sectors such as textiles, start-ups, steel and agricultural exports. Sources told CNBC-TV18 that a secretaries' panel on commerce and industries, headed by Commerce Secretary Anup Wadhawan in a recent meeting, provided a detailed update to the Prime Minister's Office (PMO) and Cabinet Secretary on vision 2020 with regards to these sectors. According to the panel, the expenditure finance committee is working on setting up seed funding and credit guarantee scheme for start-ups – which are at an advanced stage. "The government has released Rs 1,200 crore for start-ups under the fund of funds scheme," sources said. The fund of funds scheme was approved by the government to promote start-ups, under which a sum of Rs 10,000 crore will be provided to start-ups by 2025. Sources added that mega textile parks and a 'focus product scheme' for man-made fibre have almost been finalised. The panel will push for policy reforms to fast track investments and create an enabling ecosystem for start-ups. "Consultations on a policy for green field investments in the steel sector are in the advance stage. Similarly, discussions on developing 19 iconic tourist sites are advancing," sources said. Speaking about the agri-exports policy, sources said: "15 states have finalised their action plan and 20 cluster-level committees have been formed in the cluster districts." Moreover, for promotion of bulk drug and medical devices parks, an outlay of Rs 3,400 crore has been approved to boost the pharma industry. The panel also informed the top government that key departments are in the process of having quality control norms. "The draft quality control order for five products has been notified and consultations are on for another 10 products," sources confirmed. Speaking about MSMEs, sources said that under the Aatma Nirbhar Bharat campaign, major schemes have been approved for the sector, including provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs and equity infusion of Rs 50,000 crore through Fund of Funds. The panel pointed out that the actual offtake is being closely monitored by Finance Minister Nirmala Sitharaman. The panel also highlighted that action is underway to usher in labour reforms by subsuming 29 Labour Laws into 4 Labour Codes with emphasis on simplification, rationalisation and system-based implementation.

Source: CNBC

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Make use of anti-China sentiments, and capture US apparel market: Textile forum tells India enterprises

COIMBATORE: With anti-China sentiments on the rise in the US and across the globe, the textile sector in the region sees an opportunity to capture the American apparel market. oimbatore-based textile forum Indian Texpreneurs Federation (ITF) has asked textile enterprises in the state to focus on the US market ‘aggressively’ now. Prabhu Dhamodharan, ITF’s convenor, said China’s share in the US apparels was declining. “In 2019, China saw a loss in its market share to the tune of Rs 20,000 crore. In the first seven months of this year, US apparel imports dropped by 30%, of which the drop in Chinese apparels is 49%,” he said. In addition, the US has also announced new restrictions on import of apparel from China’s Xinjiang region, citing human rights violations against the Uighur people.  This combination of factors, and the situations post the Covid-19 outbreak, could accelerate the trend of decline in Chinese apparel imports by global countries, Dhamodharan said. “This trend may create a $10billion opportunity in the US apparel market for other countries including India,” he said in a communication.  “While India’s competitor Vietnam has a free trade agreement with the EU and Bangladesh has 'zero duty access' to the EU, the case is different with the US. Both India and its competitors don’t have free trade agreements with the US as of now. We have a level-playing field there, so it's the right time to step up efforts with US markets as a market diversification strategy,” he said. Dhamodharan told TOI that over the past two to three months, there have been several inquiries from US people who used to buy from China. “They send us samples saying they were buying them from China and inquire us whether we can supply the same to them. Right now, in regions like Tirupur, around 75% units focus on European markets. Focus on the US is less. It’s the right time for us to shift our focus. Groups of textile units can also form marketing alliances within themselves and can market their products in the US,” he said.

Source: Times of India

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Cap on incentives may affect Indian textile exporters

from India Scheme (MEIS) at ₹2 crore per exporter for four months till December 31 will likely affect 700-750 exporters of textiles, engineering items, automobiles, chemicals, pharmaceuticals, oil and gas. More than 35,000 exporters claim benefit under the MEIS. India early this month took the decision following the department of revenue asking the commerce ministry to review MEIS coverage so that its fiscal benefits can be reduced to ₹9,000 crore in this fiscal. The cap was introduced as the government found MEIS had failed to deliver the desired result of boosting exports, which were worth around $300 billion in the last five years despite its liberal application across sectors.The government said 98 per cent of the exporters who claim MEIS would be unaffected by the changes as per an analysis of claims in the same period of 2018-19. The top 50 exporters from these sectors account for around 20% of the benefits under the scheme, the outgo under which was 45,000 crore in fiscal 2020.  It also said the new Import Export Code obtained on or after September 1 would be ineligible to submit any MEIS claim for exports, and the ceiling would be subject to a downward revision to ensure that the total claim didn’t exceed the allocated ₹5,000 crore for the period. “The large exporters which have high-value exports would get adversely impacted. We also fear that this might act as a disincentive for exporters to become large,” the Confederation of Indian Industry (CII) said in a letter to the ministries of finance, and commerce and industry.

Source: Fibre2fashion

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Right time to conquer US apparel market, textile forum tells bizmen

Coimbatore: As outrage builds against China across the world, the textile sector in the region sees remarkable growth opportunities in the US apparel market. City-based textile forum Indian Texpreneurs Federation (ITF) has asked textile enterprises in the state to aggressively focus on US markets.China’s share of US apparel imports has been declining, said ITF convenor Prabhu Dhamodharan. “In 2019, China saw a loss in its market share to the tune of Rs 20,000 crore. In the first seven months of this year, US apparel imports dropped by 30%, of which the drop in Chinese apparels was 49%,” he said. The US has also announced new restrictions on import of apparel from China’s Xinjiang region, citing human rights violationsagainst the Uighur population. These factors and the situations post the Covid-19 outbreak, could accelerate the trend of decline in Chinese apparel imports by global countries,” Dhamodharan said. “This trend may create a $10billion opportunity in the US apparel market for other countries, including India.” “While India’s competitor Vietnam has a free trade agreement with the EU, and Bangladesh has zero duty access to the EU, the case is different with the US. Both India and its competitors don’t have free trade agreements with the US. We have a levelplaying field there. So, it’s the right time to step up efforts in US markets as a market diversification strategy,” the official said. In the last two to three months, there have been several inquiries from US businessmen who used to buy from China, Dhamodharan told TOI. “They sent us samples they bought from China and wanted to know if we can supply them. Right now in regions like Tirupur, around 75% units focus on European markets. Focus on US is less. It’s the right time for us to shift our focus. Groups of textile units can also form marketing alliances and market their products in the US.” This is the right time for the Indian textile industry to tap the global anti-China sentiments and for the sector to address and solve its own lacunae, Tirupur-based textile industry representatives said. President of the Tirupur Exporters Association (TEA) Raja M Shanmugam said the three main lacunae were inconsistency in quality, non-fulfilment of order quantity and not delivering on time. “While not all units have these issues, it is widespread in the apparel sector. We have to accept this and address them both collectively and individually,” he said. “To address this, we have to up skill our workforce. The state should help the sector in this.

Source: Times of India

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India-China trade deficit fell to $5.5 billion in Q1: Govt to Parliament

The trade deficit between India and China in April-June (Q1) of this fiscal year fell to $5.48 billion, compared to $13.1 billion in the corresponding period last year, Parliament was informed on Wednesday.  In a written reply, Commerce and Industry Minister Piyush Goyal said the trade between the countries, too, dipped to $16.55 billion in Q1, against $21.42 billion in the same period last year.  “The Centre has consistently taken steps to balance our trade with China by increasing exports and reducing dependence on imports from China,” he said.

Source: Business Standard

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20-50% YoY profit drop for Indian textile firms in FY21

Indian textile companies have significantly increased their plant capacity use in August this year with the easing of lockdown restrictions, according to India Ratings and Research (Ind-Ra), which expects textile players to record 15-35 per cent year on year (YoY) decline in their top line and 20-50 per cent YoY drop in operating profits over fiscal 2020-21. Ind-Ra recently published the August 2020 edition of its credit news digest on India’s textile sector. Textile players’ weak profitability over the first half of this fiscal along with supply chain disruptions has affected cash flows, while the moratorium announced by the Reserve Bank of India (RBI) under the COVID-19 relief package has provided the inevitable liquidity support.  However, the lifting of moratorium from September 1 without the full recovery in cash flows would require additional caution and monitoring of cash flows, Ind-Ra said. Some of such stressed issuers, mostly in the sub-investment grade rating category, may opt for the one-time loan restructuring announced by RBI to survive the imminent liquidity challenges, the organization said. The prices of textile products have recovered broadly in August 2020 from the lows of April-May 2020. International cotton prices (US) continued to recover in August 2020 by 4 per cent month over month (MoM), after dipping in April 2020. Indian cotton prices increased by about 5 per cent MoM in August last week, following a partial correction in the international prices over July 2020. Cotton arrival is almost complete in the current season while the Cotton Corporation of India (CCI) continues to procure to support cotton prices. Plant utilisation of pure man-made fibres and yarn manufacturers was severely affected over the first quarter of this fiscal amid the lockdown. The volume recovery of pure man-made fibres and yarn should be quick but has started relatively late from August 2020, while cotton and blended spinners’ volumes have started recovering from June 2020. Ind-Ra expects both the segments’ volumes to have corrected to 50-80 per cent in August 2020 and reach 70-80 per cent of normal over September 2020, led by pent-up demand and strong export order build up in all the segments. Both man-made fibres and cotton segments should start benefitting from the low raw material prices in the third quarter. Ind-Ra expects raw material prices to remain moderate in the second half of this fiscal. Fibre and yarn prices have been steady in August 2020 while discounts are also offered in few segments to boost sales. Cotton yarn and blended yarn prices largely remained flat in August 2020, despite demand recovery as the supplies also increased steadily. Moreover, margins of large spinners could remain under pressure as their cotton season procurement was at about 10% higher prices and operating utilisations are still below optimum levels.  Ind-Ra expects fabric and apparel prices to have declined in August 2020, led by a quick supply restoration than demand recovery. During July-August 2020, most players have resorted to discounts to boost sales and also generated the much required internal liquidity. Ind-Ra expects apparel prices to remain modest in the second half of this fiscal to push sales. Readymade garments exports recovered significantly starting June-July 2020. Order book build up in August 2020 was strong supported by restocking at global retailers and global sector consolidation. Large Indian players are benefitting from the shift in market share to India from China. Large apparel and readymade garment manufacturers have largely been able to resolve labour mobility and availability concerns. Demand for home textiles has been only moderately affected as these are necessary items for day-to-day life. However, the US-China trade war has affected imports from China into the United States, thus giving a strong push to exports from India.  The agency expects the demand for home textile exports to sustain in the second half of this fiscal at healthy levels achieved over August-September 2020. Ind-Ra expects Indian players to increase their already strong market share in terry towels and bed linens, led by supply chain diversification away from China.

Source: Fibre2fashion

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67% of foreign deals in August were asset sales, shows analysis

The large inflow of foreign money in recent times is more likely to help deleverage indebted promoters than aid the setting up of new factories and other investments that could generate new jobs. Around 67 per cent of the deals made in August were asset sales, shows an analysis of Bloomberg data. While this isn’t always the case (it was less than 1 per cent in July), there does seem to be limited incentive for foreign investment in the creation of new capacity that could generate new jobs. Sreejith Balasubramanian, economist — fund management, IDFC Asset ...

Source : Business Standard

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India is committed to working with the G-20 nations for making the world a better place and applauds

"India has already taken significant action for the protection of wildlife, combating pollution, and climate change. Together with the G20 countries, we are committed to working towards making the world better. Our government under the leadership of Prime Minister Narendra Modi has undertaken many steps to protect and sustain coral reefs in the country through promotional and regulatory measures," Javadekar said at the G20 Environment meeting He added that India "is one of the few countries" whose climate actions fulfil the requirements of the Paris Agreement. "We have taken the largest target of the restoration of 26 million hectares of degraded land. India is one of the few countries whose climate actions fulfil the requirement Paris agreement to ensure less than 2 degrees rise in global temperature." Javadekar said that there were countries speaking on "ambitious" climate goals and action for 2050, which haven't done enough on the Kyoto Protocol and also on commitments made at the Paris Agreement. "They must step up their efforts to ensure the achievement of the global goals under the UNFCCC (United Nations Framework Convention on Climate Change) and the Paris Agreement on the basis of equity. We should channel our efforts towards facilitating and furthering the implementation of consensus-based decisions and outcomes arrived at a multi-lateral climate change forum under the UNFCCC," he added.

Source : Business Standard

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India to organize world's largest virtual fair for textiles

New Delhi: India is organizing the world’s largest virtual fair for textiles with around 5,000 sellers and 30,000 buyers across the globe. Textiles secretary Ravi Capoor on Wednesday said the government is planning a Tetile India Fair and looking for an Indian platform for the same. “India is planning a Textile India Fair. We are organizing the largest virtual fair inthe globe with 4,000-5,000 sellers and 25,000-30,000 buyers across the globe,” Capoor said at GLOBIZ- Global Textile & Home Furnishing Epo event organisedby Ficci, adding that the government is looking for an Indian platform for the fair. He said while India has competition in apparel, home furnishings and textiles sector has the potential to double exportsin two years and asked industry to plan a huge outreach programme to expand the country’s exports to new markets suchas Japan, CIS and Latin America. “80% of our exports go to 5-6 markets and we are focused on a few markets which is good but we need to expand to newer markets… We can move to new areas when the chips are down for major suppliers,” he said. Capoor said orders are coming in for Indian textiles sector and it is about how industry meets the supplies and adheres to delivery schedules. In the April-August period, India’s exports of cotton yarn, fabrics, made-ups, handloom products, man-made yarn, fabrics and made-ups, readymade garments, jute products, handicrafts and carpets were $8.7 billion.

Source :Times of India

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Economic recovery still not well entrenched, RBI is ‘battle ready’: RBI Guv

RBI Governor Shaktikanta Das on Wednesday said economic recovery is still not well entrenched and that the central bank is "battle ready" to take appropriate measures to support growth. Addressing a virtual conference organised by industry body Ficci, Das said that Gross Domestic Product (GDP) data released by the government was a "reflection of the ravages of the COVID-19".The economy contracted 23.9% during the April-June quarter on account of the strict lockdown imposed by the government towards end of March to check the spread of coronavirus infections. "Nevertheless, high frequency indicators of agricultural activity, the purchasing managers' index that is PMI for manufacturing and certain private estimates on unemployment point to some stabilisation of economic activity in the second quarter of the current year, while of course contractions in several other sectors are also simultaneously easing," he said. However, Das said that the economic recovery was not yet fully entrenched and also that the recovery is likely to be gradual. "The recovery is, however, not yet fully entrenched and moreover, in some sectors, the uptick, which was noticed in June and July they appear to have levelled off. By all indications the recovery is likely to be gradual as efforts towards the reopening of the economy are confronted with rising infections," he said. At the same time, Das assured the industry that the RBI stands "battle ready" and whatever measures are required will be taken to support liquidity, growth and control price rise. According to him, the immediate policy response to COVID-19 in the country has been to prioritise the stabilisation of the economy and support quick recovery policies for durable and sustainable high growth in the medium term post the coronavirus. The Governor also said financial market conditions in India have eased significantly across segments in response to the front-loaded cuts in the policy repo rate and large system-wide as well as targeted infusion of liquidity by the central bank. "We are also very carefully monitoring the markets. As and when required further measures will be taken. I even said it earlier during my statements that the RBI stands fully prepared... I had used the terminology that the RBI stands battle ready and whatever measures are required will be taken up by the RBI," he said. Despite substantial increase in the borrowing programme of the government, Das said that persistently large surplus liquidity conditions have ensured non-disruptive mobilisation of resources at the lowest borrowing costs in a decade. Currently, government paper borrowing rates are the lowest in the last 10 years, he added. Moreover, Das said that benign financing conditions and the substantial narrowing of spreads have spurred a record issuance of corporate bonds of close to Rs 3.2 lakh crore during 2020-21 up to August. Noting that fragility of NBFCs is a concern, Das said the RBI is regularly monitoring the health of top 100 NBFCs and it would be the endeavour of the central bank that no large institution should fail. Prior to the IL&FS crisis, Das said there were light touch regulations for the NBFC sector and the RBI is now trying to bring the regulations at par with banks so that there is no repeat of failure. Regarding loan restructuring scheme, the RBI chief said he would look into the suggestions of the industry. Interests of depositors and financial stability were kept in mind while framing the loan restructuring scheme, he said, adding that it had to be careful and a balanced decision on the part of the RBI. "The primary concern of any banking system should be the protection of the depositors' interests because ultimately it is the depositors' money. "... so, on the one hand we had to keep in mind the interest of the depositors, the need to maintain financial stability, the stability of the banking sector as we don't want a repeat of the situation which India experienced a few years ago where the NPA levels of banks had gone up very steeply," he said. On the other hand, Das said, "we are also equally mindful of the fact that COVID-19 has substantially affected a large number of businesses and particularly businesses that have availed loans from the banks. Therefore, they also needed some relief".The emphasis of resolution plan is to enable companies facing cash problem due to COVID-19 crisis to come back to normalcy and resume their activities, he noted. "So both the sides had to be matched. In fact, the revival of businesses would also ensure that the NPA levels are kept low and it will also ensure a quicker economic recovery," he said. Describing the New Education Policy 2020 (NEP) as a historic and much needed new age reform, he said it has the potential to leverage India's favourable demographics by prioritising human capital and that the goal to increase public investment in the education sector to 6 per cent of GDP must be pursued vigorously. It is important to recognise that investment in education pays by raising average wages, he said, adding that higher education also contributes to economic development through greater sensitivity to environment/ climate change, energy use, civic participation and healthy lifestyle. "While laudable crisis time response to scale up health infrastructure has helped in dealing with the health emergency, a more comprehensive approach similar to NEP for the health sector may be warranted, which must also cover deeper penetration of insurance, given the high burden of out of pocket expenses in India, and also preventive care," he said. Noting that India's participation in Global Value Chains (GVCs) has been lower than many emerging and developing economies, he said there is need to tap this potential segment for bolstering global trade and growth. With strong drug manufacturing expertise at low cost, India is one of the largest suppliers of generic drugs and vaccines, he said. A sharp policy focus on other GVC intensive "network products", including equipment for IT hardware, electrical appliances, electronics and telecommunications, and automobiles would also provide the cutting edge to India's export strategy with considerable scope for higher value additions, he added. Terming tourism as an engine of growth, the RBI Governor said although the sector is severely impacted by COVID-19, this is a sector where pent up demand could drive a V shaped recovery when the situation normalises. He also said COVID-19 has brought the importance of food security and food distribution or supply chain network to the forefront of public policy debate in India.

Source: The News Minute  

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Global Textile Raw Material Price 17-09-2020

Item

Price

Unit

Fluctuation

Date

PSF

804.30

USD/Ton

-0.18%

17-09-2020

VSF

1308.47

USD/Ton

0.11%

17-09-2020

ASF

1746.11

USD/Ton

0%

17-09-2020

Polyester    POY

731.86

USD/Ton

0%

17-09-2020

Nylon    FDY

1995.98

USD/Ton

0%

17-09-2020

40D    Spandex

4184.16

USD/Ton

0%

17-09-2020

Nylon    POY

901.89

USD/Ton

0%

17-09-2020

Acrylic    Top 3D

2239.93

USD/Ton

-0.33%

17-09-2020

Polyester    FDY

5322.60

USD/Ton

0%

17-09-2020

Nylon    DTY

953.63

USD/Ton

-0.77%

17-09-2020

Viscose    Long Filament

1862.91

USD/Ton

0%

17-09-2020

Polyester    DTY

1922.05

USD/Ton

0%

17-09-2020

30S    Spun Rayon Yarn

1778.64

USD/Ton

0.25%

17-09-2020

32S    Polyester Yarn

1397.18

USD/Ton

-0.53%

17-09-2020

45S    T/C Yarn

2232.54

USD/Ton

0%

17-09-2020

40S    Rayon Yarn

1567.21

USD/Ton

0%

17-09-2020

T/R    Yarn 65/35 32S

2099.47

USD/Ton

0%

17-09-2020

45S    Polyester Yarn

1936.84

USD/Ton

0%

17-09-2020

T/C    Yarn 65/35 32S

1722.45

USD/Ton

0%

17-09-2020

10S    Denim Fabric

1.16

USD/Meter

0%

17-09-2020

32S    Twill Fabric

0.65

USD/Meter

0%

17-09-2020

40S    Combed Poplin

0.95

USD/Meter

0%

17-09-2020

30S    Rayon Fabric

0.48

USD/Meter

0%

17-09-2020

45S    T/C Fabric

0.67

USD/Meter

0%

17-09-2020

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14785 USD dtd. 17/09/2020). 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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US restrictions on some textile imports from Xinjiang in China could augur well for the Indian textile exporters: ICRA

In a recent announcement on September 14, 2020, the US has imposed restrictions on the import of certain products originating from the Xinjiang Autonomous Region in China, citing concerns on illegal and inhumane forced labour in the region. ICRA expects the development to benefit domestic textile exporters. While there were speculations of a more broad-based ban on the products originating from the region, the restrictions have been limited to a few entities for now. Besides banning imports of other product categories, including hair products and computer parts, the ban includes restrictions on some entities from the region involved in manufacturing apparels and producing and processing cotton. Xinjiang is a major cotton-producing belt, which accounts for an estimated 80-85% of China’s cotton output. Commenting on this, Jayanta Roy, Senior VP and Group Head, ICRA Ratings, said, “While the immediate impact, in terms of the market catered to by the identified entities, is not quantifiable, this development could have major repercussions for the global textile trade. With China being the leading apparel exporter, accounting for more than 35% of the global trade and more than three-fourths of China’s cotton originating from the Xinjiang region, any extension of the ban to a wider base in China could trigger a material shift in global apparel trade in coming years.” Amid concerns on origination of the coronavirus from China, there have already been reports of several international buyers looking at diversifying their sourcing base across countries.  As per ICRA’s channel checks, several major apparel exporters from India have either already started receiving increased orders or are in active discussions with large international buyers, looking at increasing their sourcing from India. The shift, which was previously expected to take place gradually over the medium term, could be expedited in the light of this recent development. “While over the past few years, Vietnam and Bangladesh have been the key beneficiaries for a shift away from China, India also stands to gain from any such market opportunity which may arise, given its strong presence in the cotton-based apparels,” Roy added. Widening of the scope of the ban could, however, be practically challenging as the existing systems are not adequate to track the origin of the raw material. Accordingly, cotton originating in the Xinjiang region could end up as yarn or fabric in another region/ country, which could be processed further to manufacture apparels. Further, there could be likely retaliatory actions by China, as seen over the past couple of years amid the ongoing US-China trade war, which could prevent widening of the scope of the ban. This is more so considering the significant dependence of the US on China for its cotton exports. This could also have implications on the progress on the trade deal, which was executed in January 2020, to settle the ongoing trade war.

Source: IIFL

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EURATEX stands for clear & predictable GSP regulation

The European Apparel and Textile Confederation (EURATEX) has published a position paper on the revision of the Generalised Scheme of Preferences (GSP). EURATEX believes that the scheme should be simple to apply, predictable and encourage exports diversification. EURATEX is advocating for a series of changes to be considered in the forthcoming revision. "Trade policies can encourage countries in respecting human, social and political rights, but these efforts should not be standalone. They should be accompanied by other programmes and policies. Respect of good governance and human rights comes also from better monitoring of the conventions annexed to the GSP regulation. Plus, their implementation should be quick, effective and the European Commission (EC) should be the primary actor in the assessment process," EURATEX said in a media statement. "We believe that the withdrawal mechanism should be applied to GSP standard beneficiary countries in case of serious and systemic violations of principles related to the protection of the environment and good governance," the statement added. EURATEX has proposed that the next regulation should cover a wider range of products. GSP beneficiary countries will then need to diversify their exports and do not depend on one or few sectors. Such diversification will boost their investments and make their economy more stable in the long term. With regard to the application of product graduation (losing GSP preferences), it is important to review the system by targeting GSP+ and EBA countries, and targeting individual products instead of product’s section. EURATEX found an emblematic case to support the change in classification. As an example, if we look at EU’s imports of HS Chapter 63 from Pakistan and India, we see the threshold of 6 per cent was already reached. However, if we look at Section S-11a (Textiles) or S-11b (Clothing), the thresholds are not reached yet. Hence, an approach by product typology would be more relevant and accurate. EURATEX has also emphasised that the current safeguard mechanism should allow a certain level of predictability for the economic operators. "Therefore, it should be activated only when conditions are fulfilled, communication on it should be transparent, and it should be extended to all GSP countries," the organisation said. The EU textile and clothing industry, with around 160,000 companies employing 1.5 million workers, is an essential pillar of the local economy across many EU regions. With over € 61 billion of exports in 2019, the industry is a global player successfully commercialising high added value products on growing markets around the world.

Source : Fibre 2fashion

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Cambodia’s free trade agreement with China

The Cambodian government must ensure its free trade agreement with China has its people’s interests at heart, Heimkhemra Suy writes. For Cambodia’s free trade agreement (FTA) with China to be a success, it must both improve the country’s economic competitiveness, and garner the kinds of Chinese investment that will produce local jobs. The expected signing of an FTA between Cambodia and China builds off their existing trade relationship, valued at $7.4 billion in 2018, with China promising to push the countries’ bilateral trade to $10 billion by 2023. But in order for the Cambodia-China FTA to improve Cambodia’s economic competitiveness, and for it to produce jobs for Cambodians and benefit ordinary people at large, the government must ensure the deal has their interests at heart. Much of the case for FTAs rests on improving economic efficiency, allowing each signatory nation to carry out the economic activity in which they specialise, participate in international trade, and become better off than they would be by operating a more independent economy. In the context of this agreement, Cambodia is poised to leverage and further develop its rice industry, in return for China’s economic efficiency in manufacturing. In this way, each party can benefit by investing further in areas where they have comparative advantage. More specifically, an FTA offers an exporting country either reduced or no tariffs on its goods exported to another country, making prices more competitive and ideally expanding Cambodia’s exports to China. In terms of rice —Cambodia’s primary goods export to China —buyers would be able to purchase the goods at a lower overall price as they are not paying tariffs under an FTA, increasing demand for Cambodian rice and providing more jobs and income to local farmers. Then, the government could use economic gains and the surplus from its increased exports to purchase more of the products that carry a high opportunity cost to Cambodian producers — or products like electronic devices that local producers either cannot make, or cannot make efficiently. Though the forthcoming FTA gives reason for optimism, Cambodia should pay attention to fairness in its bilateral relationship with China. Considering China exports much more to Cambodia than vice versa, with the powerhouse economy exporting more than $6 billion in 2018 to Cambodia’s $1.4 billion in exports, more Chinese producers stand to benefit from the tariff reductions than Cambodian ones. The Cambodian government will also lose some tax revenue without import taxes on Chinese goods as a result of the FTA, though free trade proponents would argue that this loss could be balanced by gains from Cambodia’s increased exports to China. Then, in looking for a new source of tax revenue, Cambodia might be pushed towards implementing domestic consumption taxes — something that would transfer tax burden onto consumers in Cambodia. The FTA might cement China’s economic dominance in Cambodia, but it appears that Cambodia has already become dependent on Chinese-produced raw materials to support the garment industry, as seen when dozens of factories suspended production near the start of the global COVID-19 pandemic. This was both because China could not export raw textile materials, and because international demand plummeted in response to the crisis. China also supplies some 40 per cent of Cambodia’s foreign direct investment and holds half of Cambodia’s public external debt, valued at $7 billion in 2018. When the European Union announced in February that Cambodia’s ‘Everything But Arms’ (EBA) preferential trade status with it would be partially withdrawn effective this month, it intensified concerns among some analysts that China’s economic influence in the country would become even more pronounced. Details of the Cambodia-China FTA are still under wraps, but Cambodia’s export statistics suggest that the deal would only make up for part of the damage of preferential trade status with the European Union, which was Cambodia’s second-largest trade partner in 2019. Although China was Cambodia’s largest trade partner last year, some 95 per cent of Cambodia’s exports to the European Union were textiles, footwear, bicycles, and foodstuffs, including rice, while Cambodia mostly exports food and raw materials to China. As a result, the FTA is unlikely to ease the strain of losing trade with Europe, and the International Monetary Fund has said it could lead to tens of thousands of jobs lost in the garment sector alone. This means that for Cambodia, trade diversification is key. Reliance on one country has made Cambodia less elastic to external risks, seen in the shockwaves sent through the China-dependent tourism and garment industries in the wake of the COVID-19 pandemic If Cambodia hopes to get the best out of the China deal, its terms should be driven by Cambodia’s domestic demand and supply, either focusing on existing export products or promoting new products that could feasibly be exported. Questions remain over whether this FTA would generate inclusive growth and benefit Cambodians. Further, there are concerns that additional Chinese investment may not bring jobs and therefore be of limited benefit. Cambodian policymakers must do two things to make the most of this FTA. First, they must steer prospective Chinese investors towards contributing to local development and creating local jobs. Second, key local products should be identified and supported, so that Cambodian producers can compete with Chinese firms. Then, Cambodia will be poised to experience not just the risks, but also the benefits of freer trade with China.

Source: Policy forum

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UK, Japan agree in principle on post-Brexit FTA

The United Kingdom and Japan agreed in principle last week on a post-Brexit free trade agreement (FTA). Japanese foreign minister Toshimitsu Motegi and British international trade secretary Liz Truss reached the accord over a videoconference. The two had reached a substantial agreement on most areas on August 7 following talks in London. Both sides are seeking to implement a new deal next January. The two sides have been negotiating a deal since June as the United Kingdom will cease to be part of the Japan-European Union (EU) FTA when its period for transitioning out of the bloc ends this December. The UK department for international trade said the UK-Japan Comprehensive Economic Partnership Agreement will increase its trade with Japan by around £15.2 billion (¥2.07 trillion). The deal meant 99 per cent of the country’s exports to Japan would be tariff-free, it said. Digital and data provisions in the agreement went ‘far beyond’ those in the EU’s trade deal with Japan, helping British financial technology firms operating in Japan, it said.

Source: Fibre2fashion

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