Subsidy claims of around Rs 4,500 crore by mills may be pending with the textile ministry for investments made under the Technology Upgradation Fund Scheme (TUFS), but the ministry has in recent years been surrendering funds meant for paying the same under the scheme. Although the ministry has improved its overall spending in the past one year, the huge delay in processing subsidy claims has dealt a blow to the textile industry, already crippled by a cash crunch, huge debts and poor export demand (see table). Consequently, investments in the sector have been stopped in the current fiscal, said Prem Malik, chairman of Confederation of Indian Textile Industry. Malik has written a letter to PM Narendra Modi seeking his intervention for an early disbursement of TUFS benefits, which have been “delayed and denied to hundreds of eligible investors in recent years”.
Under TUFS, the government supports modernisation of the textile industry by providing interest subvention of 2-6% on loans and upfront capital subsidy of 10-16% for units other than spinning ones. Mills have been awaiting the release of subsidies worth R3,000 crore for more than three years now against investments made during the so-called blackout period (June 20, 2010 to April 27, 2011) as well as errors in reporting of the dole-out amount by banks to the textile commissioner, while claims worth. Rs 1,500 crore are yet to be cleared for investments made during the last fiscal, according to industry estimates. The blackout period refers to the time when the government had halted subsidy payment temporarily, seeking to change the contours of TUFS from an open-ended scheme to a closed-ended one, and announced the introduction of the revised scheme only from April 2011. The government mainly provides interest subsidy against loans to textile units, capital subsidy and a limited cushion against exchange rate fluctuation for investing in new technology. “The cases pending for a government decision for close to three years now — left-out cases and blackout cases — need to be sorted out expeditiously and funding for the scheme needs to be increased immediately by providing an additional Rs 5,000 crore for covering the pending cases and new investments required during the next two years,” Malik said in the letter to Modi.
Some of the mill representatives FE spoke to said their claims against investments made even before June last year are yet to be processed, while no decision has yet been taken by the government on the subsidy disbursement for investments during the blackout period. They didn’t wish to be named. Commenting on the subsidy disbursement, textile secretary Sanjay Kumar Panda told FE: “We have processed some claims this week and will expedite the process. There is a problem of a crunch in fund allocation this year. We have taken up the issue with the finance ministry.” The finance ministry has allocated Rs 1,521 crore for subsidy payment under TUFS for the current fiscal, down from the Budget allocation of Rs 2,300 crore a year earlier.
Curiously, the textile ministry was recently pulled up by a parliamentary standing committee for its inability to spend the allocated amounts in recent years, although it admitted that the ministry had improved its expenditure in 2014-15. Against the approved outlay of Rs 25,931 crore for the whole of the current Plan period (2012-17), the cumulative expenditure from 2012-13 through 2014-15 was just Rs 10,109.41 crore, or just 39% of the outlay, according to the committee, headed by Virendra Kumar, a BJP MP from Madhya Pradesh. Importantly, the expenditure in the first three years of the current Plan period is only 25% of the outlay of Rs 40,203.19 crore the textile ministry had demanded for itself for the entire Plan period. TUFS was introduced in 1999 to make available funds to the textile industry for upgrading technology at existing units as well as to set up new units with state-of-the-art facilities so that their viability and competitiveness in the domestic and international markets are enhanced. Since its inception, the scheme has attracted investments of more than Rs 2,71,480.30 crore until March 31, according to the official estimate.
After a 33% spurt in the last fiscal, India’s cotton yarn export registration started tumbling below the 100-million-kg mark from April 2014, as Chinese demand faltered. Since the capital-intensive spinning segment accounts for the bulk of the investments under TUFS, the non-payment of subsidy amount for earlier investments is taking a toll on the balance sheets of spinning mills.
SOURCE: The Financial Express
Aided by a sharp rise in manufacturing, the Indian economy grew 7.5 per cent in the March quarter, putting it ahead of China as the world’s fastest-growing large economy.
China had recorded 7 per cent economic growth in the January-March period. For the full year 2014-15, India grew 7.3 per cent, higher than the 6.9 per cent recorded in 2013-14, using the new series. This is the country’s fastest annual growth since 2011.
However, this overall GDP growth of 7.3 per cent was a notch lower than the 7.4 per cent estimate put out by the Central Statistics Office (CSO) in February, official data released on Friday showed. The CSO has also now lowered the third quarter (October-December 2014) GDP growth to 6.6 per cent, from 7.5 per cent estimated earlier.
Pushed by a sharp spike in ‘gross value-added’, manufacturing growth came in at 7.1 per cent, much higher than the previous year’s 5.3 per cent. Finance Secretary Rajiv Mehrishi said the growth in manufacturing would mean “that we are also creating jobs in our growth path”. Clearly, the adoption of the new GDP series (with base year of 2011-12) combined with the new concept of capturing ‘value added’ has had a positive effect on the overall output performance. However, the picture on the ground is less than encouraging, said economists. They pointed to tepid growth in the Index of Industrial Production (IIP) They said the latest GDP print may not influence RBI Governor Raghuram Rajan’s monetary policy on June 2, given that the RBI has never based its decisions solely on GDP performance. The central bank will continue to be largely guided by inflation, liquidity and credit offtake considerations and is widely expected to go in for at least a 25 basis point rate cut given the good macroeconomic fundamentals, they said. Finance Minister Arun Jaitley told reporters that the performance of manufacturing and services was encouraging. The latest numbers reflect the Indian economy’s potential to realise its strength and move into a higher growth trajectory, he said. Jaitley also highlighted that weak agricultural performance was holding back the economy and that this reinforced the need for further investments into irrigation.
“If you look at it more broadly, the two sectors that are within the control of the government which are manufacturing and services – they have done well,” said Arvind Subramanian, Chief Economic Advisor to the Finance Ministry. “Whereas those two sectors which are somewhat outside the control — agriculture because of the monsoon, and exports, which are closely related to foreign demand, have not done as well. So, had those two been a little more cooperative, the numbers would have been even better.” Finance Secretary Mehrishi expressed confidence that agricultural growth in the current fiscal will be better than the 0.2 per cent in 2014-15. Subramanian said the monsoon is yet to begin, but going by the most recent report, it could be close to normal.
Anis Chakravarty, Senior Director, Deloitte in India, said manufacturing has looked up as a result of lower input costs and a fall in global commodity prices. Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII), said “the figures reconfirm CII’s assessment that the economy is showing signs of recovery which could gather pace in the next fiscal”.
SOURCE: The Hindu Business Line
The central government, it was officially confirmed on Friday, managed to rein in its fiscal deficit for 2014-15 at four per cent of Gross Domestic Product (GDP), against the 4.1 per cent pegged in the Budget Estimate (BE) and its Revised Estimate (RE). Tentative indications in this regard had been issued recently but were awaiting confirmation. However, in the first month, April, of the new financial year, 2015-16, the deficit was Rs 1.27 lakh crore or 23 per cent of the full-year BE of Rs 5.56 lakh crore, due to front-loading of spending. This was higher than the 21.4 per cent of the BE in April 2014. In absolute terms, the fiscal deficit was checked at Rs 501,880 crore in 2014-15 against the RE of Rs 512,628 crore and the BE of Rs 531,177 crore.
The deficit is estimated at 3.9 per cent of GDP for 2015-16. April 2015 had no tax receipts; rather, refunds amounted to Rs 2,813 crore. Non-tax revenue was Rs 28,126 crore or 12.7 per cent of the full-year target of Rs 2.22 lakh crore. Total receipts for the month were Rs 27,094 crore or 2.2 per cent of the full-year BE of Rs 12.22 lakh crore, compared with 0.6 per cent for April 2014. Non-plan expenditure for the month was Rs 1.19 lakh crore or 9.1 per cent of the full-year target of Rs 13.12 lakh crore. For April 2014, it was eight per cent of the full-year target. Plan spending for April 2015 was Rs 35,160 crore, about 7.6 per cent of the BE of Rs 4.65 lakh crore, compared with four per cent for the year-ago period. As a norm, successive governments front-load spending for the financial year, while most revenues come during the second half.
SOURCE : Business Standard
India and Saudi Arabia have committed to increase cooperation in fields of trade, IT, communication and higher education.
A two-day meeting of India–Saudi Arabia Joint Commission, which concluded yesterday, focused on enhancing bilateral cooperation, knowledge exchange and economic ties between the two countries. "A wide range of issues, including cooperation in trade and commerce, higher education, health, communication, culture and IT were discussed," a finance ministry statement said after the meeting co-chaired by Finance Minister Arun Jaitley and Tawfiq Fawzan Al Rabiah, Minister of Commerce and Industry, Kingdom of Saudi Arabia.
"Ministers from both sides also acknowledged the need to explore investment opportunities in both countries," the statement added. The next meeting of the Commission would be held in 2016 in Saudi Arabia.
SOURCE: The Economic Times
The U.S. economy contracted in the first quarter as it buckled under the weight of unusually heavy snowfalls and a resurgent dollar, but activity has rebounded modestly.
The government on Friday slashed its gross domestic product estimate to show it shrinking at a 0.7 percent annual rate instead of the 0.2 percent growth pace it estimated last month. A larger trade deficit and a smaller accumulation of inventories by businesses than previously thought accounted for much of the downward revision. There was also a modest downward revision to consumer spending. With growth estimates so far for the second quarter around 2 percent, the economy appears poised for its worst first-half performance since 2011. Economists, however, caution against reading too much into the slump in output. They argue the GDP figure for the first quarter was held down by a confluence of temporary factors, including a problem with the model the government uses to smooth the data for seasonal fluctuations. Economists, including those at the San Francisco Federal Reserve Bank, have cast doubts on the accuracy of GDP estimates for the first quarter, which have tended to show weakness over the last several years. They argued the so-called seasonal adjustment is not fully stripping out seasonal patterns, leaving "residual" seasonality. The government said last week it was aware of the potential problem and was working to minimize it.
When measured from the income side, the economy expanded at a 1.4 percent rate in the first quarter.A measure of domestic demand was revised up one-tenth of a percentage point to a 0.8 percent rate and business spending on equipment was much stronger than previously estimated, taking some edge off the slump in output. at a 0.8 percent pace. Apart from the statistical quirk, the economy, which expanded at a 2.2 percent pace in the fourth quarter, was hammered by labor disruptions at West Coast ports. Also dragging on growth was a sharp decline in investment spending in the energy sector as companies such as Schlumberger and Halliburton responded to the plunge in crude oil prices. Spending on nonresidential structures, which includes oil exploration and well drilling, was revised up to show it tumbling at a 20.8 percent rate instead of the previously reported 23.1 pace. Mining exploration, shafts and wells investment plunged at a 48.6 percent pace, the largest since the second quarter of 2009.
Economists estimate unusually heavy snowfalls in February chopped at least one percentage point from growth. Trade was hit both by the strong dollar and the ports dispute, which weighed on exports through the quarter and then unleashed a flood of imports in March after it was resolved. That resulted in a trade deficit that subtracted 1.90 percentage points from GDP instead of the 1.25 percentage points reported last month. The GDP report also showed after-tax corporate profits declined 8.7 percent. That was the largest drop in a year and the second quarterly fall, as the dollar weighed on multinational corporations and oil prices hurt domestic firms. Multinationals like Microsoft Corp, household products maker Procter & Gamble Co and healthcare conglomerate Johnson & Johnson have warned the dollar will hit sales and profits this year. While the economy has pulled out of its first-quarter stall, data on retail sales and industrial production have suggested only a modest pace of growth early in the second quarter. But reports on housing, consumer confidence and business spending plans indicated momentum could be building. Unlike 2014, when growth snapped back quickly after a dismal first quarter, the dollar and investment cuts by energy companies continue to hamstring activity. But growth could accelerate as the year progresses. The value of inventory accumulated in the first quarter was revised down to an increase of $95 billion from the lofty $110.3 billion increase reported last month. That meant inventories contributed 0.33 percentage point to GDP instead of the previously reported 0.74 percentage point, suggesting warehouses are not bulging with unwanted merchandise and that businesses have latitude to order more goods from factories.
While consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down by one-tenth of a percentage point to a 1.8 percent rate, it could finally get a lift from the considerable savings households amassed because of cheaper gasoline. Personal savings increased at a robust $726.4 billion pace.
The dollar rally has faded and the greenback is about 4 percent off its peak in March against the currencies of the main U.S. trading partners, easing pressure on U.S. exporters. In addition, rig counts suggest the energy investment rout is nearing its end. (Reporting by Lucia Mutikani; Editing by Paul Simao)
SOURCE : The Economic Times
Pakistan bilateral trade with Nigeria, currently stands at US$ 500 million. Federal Minister for Industries and Production, Ghulam Murtaza Khan Jatoi on Thursday reiterated the government’s resolve for enhancing bilateral trade with Nigeria. The High Commissioner of Nigeria, Dauda Danladi called on Minister for Industries and Production and highlighted many potential sectors where Pakistan and Nigeria can assist each other including textile, machinery, agriculture, vehicles and technological development. The High Commissioner told the Minister about his visit of different cities and the immense potential of trade and investment existing between both the countries.
The Minister discussed the potential agreement between Pakistan and Nigeria which includes industrial policy, data and information sharing and establishment of industrial infrastructure in Nigeria. The agreement also details cooperation between small and medium enterprises (SMEs) through joint ventures and technology transfers. Ghulam Murtaza said that there was a great export potential for Pakistani goods including textile products, agricultural machinery, fertilizers, pesticides, vehicles, pharmaceutical products, cereals, legumes, sports goods and toys, plastic articles and leather articles.
He also assured that he will coordinate with the Ministry of Commerce and the Ministry of Textile to make all these potential partnerships possible, and create working groups of the Small and Medium Enterprises Development Authorities (SMEDAs) of both the countries.During the meeting both sides emphasized the need for enhanced cooperation in textile ginning, weaving and garments where as both side agreed enhance cooperation in oil and gas sector.
SOURCE : Yarn and fibre
Pakistan has asked Belarus to initiate the process of entering into a free trade agreement to boost trade ties between the two countries, the Pakistani media has reported. Pakistani industries and production minister Ghulam Murtaza Khan Jatoi made the proposal during a meeting with his Belarusian counterpart Vitaly Vovk in Islamabad on May 26. Ahead of the meeting, the two countries signed 12 Memorandum of Understandings (MoUs) in the field of tractors, chemicals, leather footwear manufacture, milk products and tyres during the Pakistan-Belarus business and investment forum in Islamabad on the occasion of the first visit of Belarusian president to Pakistan. Vovk expressed interest in setting up plants in Pakistan for the manufacture of automobile parts and assembly of buses, tractors and grain harvesters.
He was also keen on military-related manufacturing and assembly and sought recommendations from Jatoi. Belarus will also consider technological upgrade and expansion of existing facilities. Jatoi invited Vovk to visit the Heavy Mechanical Complex in Taxila in order to gain a better understanding of infrastructure that Pakistan could offer and spoke about the viability of joint-venture proposals and said the ministry of industries would assist Belarus in selecting the best possible investors from the private sector. He suggested that Pakistan’s industrial parks should be used for trade and investment opportunities and assured Vovk that Belarus would be allowed to export manufactured and assembled products from Pakistan to regions across the globe.
African Growth and Opportunity (AGOA) Forum 2015 to be held in Gabon to discuss trade and economic issues also countries are expected to meet specific eligibility requirements to qualify for AGOA. AGOA is a non-reciprocal and unilateral preference programme that provides duty-free access into the United States for qualifying exports from eligible African countries. In addition to the tariff preference.The programme is similar to the Generalised System of Preference (GSP), a US trade preference programme that applies to over 120 developing countries, including sub-Saharan countries. AGOA, however, builds on the GSP by providing preferential access to the US market for more products, such as apparel, and sets out additional eligibility criteria. The GSP represents a set of formal exceptions from the WTO's Most Favoured Nation (MFN) principle which allows developed countries to offer developing countries preferential treatment on specific goods. AGOA's authorization which expires on September 30, 2015, hence most African governments and some US Congress members, including trade associations, particularly the US Chamber of Commerce, have highlighted the success of the programme and want an expedited re-authorisation of the programme. The debate is whether AGOA in its current form is achieving the initial goals of the programme, which is effectively improving the economic circumstances in Africa. Others also discussed how to improve the value of non-oil exports into the US under the programme, as currently about 70 per cent of exports to the US under the programme are made up of petroleum products. The AGOA Extension and Enhancement Act of 2015 has already been approved by the Senate, awaiting approval by the House of Representatives and the US President. AGOA and GSP, when renewed, would help develop key industries and foster improvements in governance and policy regarding labour and human rights.
The initial draft released on April 16, appears to settle on a 10-year re-authorisation. It also includes a 10-year extension of the third-country fabric provision, which is essential to nurture the development of the textile and apparel industry on the continent. Another critical part of the draft extension act is the promotion of greater regional integration by expanding the rule of origin to allow AGOA countries flexibility to combine inputs to meet the rule of origin for AGOA eligible products. There is also emphasis on policy implementations promoting the adoption and implementation of WTO Agreements, with particular attention on the recently adopted WTO Multilateral Trade Facilitation Agreement, which can reduce red tape at the borders, increase trade in services and resolve critical agricultural policy issues. This will be executed through a Technical Assistance and Capacity Building Programme to be carried out by different US agencies.
Key provisions of the legislation also include efforts to address "unfair" practices by the European Union (EU) that condition African countries access to the European market on signing unbalanced trade agreements. However, some experts believe this is to assist the US catch up with the EU on trading with the continent. The draft gives the US President the authority to include cotton products on the list of AGOA preference items available to least developed countries. There are proposals in the draft outlining a path for deepening and expanding trade and investment between the US and Africa beyond 2025 when the currently contemplated extension is expected to expire. It requires the US Administration to develop a long-term strategy for negotiating trade agreements with individual sub-Saharan African countries or regional blocs. Their focus should be on expanding the non-oil exports to the US markets. They need to narrow in on a few products which they can effectively and efficiently produce for export under this programme. As an example, a handful of AGOA countries, particularly Kenya, Lesotho and Mauritius provide the bulk of apparel exports under the programme. In 2014, Kenya exported $423 million worth of apparel to the US under AGOA, Lesotho, $289 million; Mauritius $227 million and Swaziland $77 million. Ghana may wish to examine why these countries have been so successful in utilising the preference programme.
Apparel production, unlike textile production, typically requires low-skilled labour and minimal capital expenditures, allowing the producing countries to become globally competitive. The average tariff on apparel in the US is 11.4 per cent as compared to an average of 3.5 per cent for all products. This restriction on US imports of apparel makes the AGOA preferential treatment for this product line advantageous, making the AGOA countries competitive with low cost producers in Asia. In the agricultural sector, they can focus on selected products that are in demand in the US. For example, there has been an upsurge in the demand for tilapia and red sweet potatoes in the US. There is also an increase in the demand for ‘niche’ products such as plantain, cassava, plantain chips and coconut water. We need to identify a few of such products and focus on optimising these value chains and providing incentives to encourage production for export.
Out of over 300 products identified for export by the Ghana Export Promotion Council, a comprehensive focus on the handicrafts, baskets and bags will also be useful in taking advantage of the programme. Ghana can take advantage of AGOA by focusing on a few carefully selected products and rapidly building our capability to effectively produce, process and export such products. Ghana can also take advantage of the capability development programmes that will be promoted by the various US agencies. We at the American Chamber of Commerce, Ghana, will be available to assist with such efforts as we continue at all times to promote Ghana as a favourite destination for US investment.
The American Chamber of Commerce, Ghana is the representative arm of US businesses and subsidiaries in the country, including Ghanaian businesses with US ties.
SOURCE : Yarn and fibre
