Imports of these 1,173 items from China were worth $12 billion in FY19, making up for just 2.3% of India’s total imports that year but 17% of New Delhi’s purchases from Beijing.
A strategy to trim imports of as much as Rs 10 lakh crore or more than a fourth of India’s annual purchases from abroad is in the works, sources told FE. They added the government is also working on a plan to boost exports in two dozen “priority sectors” through elevated local output. The plan is in sync with the Aatmanirbhar Bharat initiative.
A concerted push to step up local manufacturing of quality products will be made, mainly through two schemes — production-linked incentives (PLI) and phased manufacturing plans (PMP). These schemes will not just help create extra capacities by luring large firms and cut imports but also improve exports substantially, a source said. At the same time, as reported by FE, both tariff and non-tariff measures will be put in place, wherever required, to target low-grade imports, which will likely hurt China. If properly implemented, it will be the biggest drive for import substitution in decades.
The 24 priority sectors include electronics, auto components, textiles, steel, aluminium, marine products, ready-to-eat and processed fruit & vegetable (mango, potato, citrus), agrochemical, electric vehicles and integrated circuits, toys, furniture, ethanol, ceramics, set-top boxes, robotics, televisions, close-circuit cameras, drones, medical devices, sporting goods and gym equipment.
Already, the government this month launched PLI schemes for 10 sectors, on top of the three announced in the wake of the Covid-19 outbreak. The total fiscal incentives are estimated to be close to Rs 2 lakh crore over a five-year period. Most of these 13 sectors — such as auto components, electronics, steel, textiles and processed food — where PLI is rolled out are part of the 24 priority ones.
While boosting local manufacturing, the government is also planning to raise tariffs on a host of items. Earlier this year, industry executives had drawn a list of 1,173 items — ranging from auto parts, compressors for AC and refrigerators to select steel and aluminium products and electrical machinery — for the government to zero in on products/sub-products on which the import duties can be hiked. These items are mostly imported from China and can be substituted with local production without much hassles, sources had said earlier.
Imports of these 1,173 items from China were worth $12 billion in FY19, making up for just 2.3% of India’s total imports that year but 17% of New Delhi’s purchases from Beijing.
While the move won’t be Beijing-specific, it will hurt China the most, as it’s the biggest supplier of such low-grade products to India.
However, realising that duty hikes alone won’t deter low-grade imports, the commerce and industry ministry is undertaking a drive to harden a crackdown on such products by formulating standards for 371 key products, in the first phase. These products encompassed imports of about $128 billion, or a fourth of the total purchases from overseas, in FY19. Of these, technical regulations for 150 products have already been firmed up. Imports of these 150 products were to the tune of $47 billion in FY19.
India’s imports rose by more than 10% year-on-year to $514 billion in FY19, although the purchases from overseas contracted by almost 8% in FY20 and close to 40% in the first half of the current fiscal, mirroring demand compression in the economy before and after the Covid-19 outbreak.
However, once the pandemic is behind us, imports are going to rise, exacerbating trade balance once again. A credible plan to curb “non-essential” imports, therefore, comes in handy, according to the sources.
Merchandise trade deficit widened from $119 billion, or 18.5% of the overall goods trade, in FY16 to $161 billion (20.4% of such trade) in FY20. This is despite the fact that global oil prices mostly remained within the government’s comfort zone during this period.
SOURCE: The Financial Express
An overhaul of the goods and services tax (GST) registration process and suspension of the registration of businesses identified as risky are among the proposals of a panel of officials attached to the GST Council.
The proposals by the law committee of the GST Council, comprising central and state officials who advise its ministerial members, aim to tighten compliance measures and target restrictions on firms identified as risky, without affecting the ease of doing business in general, said a finance ministry official.
The recommendations include the use of Aadhaar or Aadhaar-like biometric identification for new registrations, steps to identify businesses that pose a risk of revenue loss to the exchequer, use of income tax returns to verify the credentials of entrepreneurs seeking GST registration, and restriction on using tax credits from the purchase of raw materials to meet the final tax liability.
Not filing GST returns for six months could cost a business its registration. At the moment, there are 600,000 dormant GST-registered firms among the 12 million entities with registration.
Entities seeking GST registration would be profiled on the basis of their credentials and classified into trustworthy and others.
Trustworthy entrepreneurs are those who have a credible income tax payment history and have their identity authenticated by Aadhaar and have no history of having their GST registration cancelled.
These entrepreneurs will get GST registration within a week. The others will be given the registration within two months of physical verification of business premises, said the ministry official cited above.
Those that are not trustworthy may also be asked to pay a part of their tax liability in cash instead of adjusting it fully against the tax credit available to them.
The proposals put together by the law panel at a meeting held last week will be further discussed before they are placed before the council, the official said, requesting anonymity.
The move signals a major tightening of the three-year-old indirect tax system leveraging GST’s ability to track the entire supply chain using the system of input tax credits. Discrepancies will get flagged, as the system for filing GST returns becomes more automated with the use of e-invoices and auto-filled tax returns.
GST authorities have been on a nationwide compliance enforcement drive this month, which led to the busting of an invoice racket and the arrest of 48 people and three chartered accountants. As many as 648 cases have been registered so far this month.
The government is better armed to enforce greater compliance with deep digital capabilities for automatically detecting evasion, leakages, defaults and delays, according to Rishi Agrawal, co-founder and chief executive officer of Avantis Regtech Pvt. Ltd, a regulatory technology firm. “Sooner rather than later, India Inc. will need to focus on accurate and timely compliance. Ignorance of the law will not be an excuse for non-compliance," said Agrawal.
SOURCE: The Mint
India's manufacturing sector is poised to witness recovery in the July-September quarter, even as hiring outlook for the segment remains bleak, according to a survey.
Industry body FICCI's latest quarterly survey on manufacturing points towards recovery of the manufacturing sector in the second quarter ended September as compared to the previous quarter, with a rise in percentage of respondents reporting higher production.
The proportion of respondents reporting higher output during July-September rose to 24 per cent, as compared to 10 per cent in the previous quarter.
Besides, the percentage of respondents expecting low or same production is 74 per cent in the second quarter which was 90 per cent in the first quarter of 2020-21.
However, hiring outlook for the sector, though improving slightly, shows a bleak picture as 80 per cent of the respondents mentioned that they are not likely to hire additional workforce in the next three months.
"This presents slightly improved situation in the hiring scenario as compared to the previous quarter Q-1 of 2020-21, where 85 per cent of the respondents were not in favour of hiring additional workforce," FICCI said.
Moreover, the average interest rate paid by manufacturers has reduced slightly to 9.2 per cent per annum as against 9.4 per cent per annum during the last quarter and the highest rate is reported to be 12.5 per cent. The recent cuts in repo rate by the RBI has not led to a consequential reduction in the lending rate as reported by 55 per cent of the respondents, found the survey.
Based on expectations in different sectors, all the sectors except medical devices are likely to register low growth in Q-2 2020-21. The primary reason for such depressed expectations seems to be the imposition of lockdown, subdued demand, restricted exports and other guidelines in place as a response towards COVID-19 outbreak.
The survey covered wide areas of relevance for manufacturing like exports, capacity utilisation, ongoing restrictions, availability of labour/workforce and others. In many of these areas there are signs of operations inching towards normal and in coming months could see better performance.
The survey assessed the sentiments of manufacturers for July-September 2020-21 for 12 major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, medical devices, metal & metal products, paper products, textiles, textile machinery, and miscellaneous.
Responses were drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of around Rs 3 lakh crore.
The survey showed that overall capacity utilisation in manufacturing has risen to 65 per cent as compared to 61.5 per cent in Q4 2019-20.
The future investment outlook, however, is subdued as only 18 per cent respondents reported plans for capacity additions for the next six months as compared to 22 per cent in the previous quarter, the survey revealed.
High raw material prices, high cost of finance, shortage of skilled labour and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across several countries, lack of financial assistance, are some of the major constraints affecting expansion plans of the respondents.
Significantly, the percentage of respondents expecting increase in exports in July-September has increased substantially to 24 per cent when compared to the previous quarter, wherein merely 8 per cent respondents were expecting a rise in exports. Also, 19 per cent are expecting exports to continue to be on same path as that of same quarter last year, the survey noted.
As the Union Budget FY22 preparations get underway, annual budget outlays for the current year have been revised downwards for most ministries, barring two notable exceptions of the ministries of rural development and food and consumer affairs.
The spending cuts, as reflected in the revised estimates (REs) for the ministries, are steep in most cases.
The squeeze will also reflect on the expenditures by social sector and welfare ministries in the current fiscal. While new schemes requiring substantial budgetary spending have been unveiled under the stimulus packages – like the PM Garib Kalyan, Anna and Rozgar (EPF support) Yojanas — other centrally schemes are bearing the brunt.
An analysis by FE revealed that despite the three rounds of stimulus measures announced so far, the FY21 Budget size would at best be the same as the budget estimate (BE) of Rs 30 lakh crore. It could even be lower.
As the chart shows, all ministries except four – rural development, food and consumer affairs, agriculture and labour – spent less than 50% of the annual outlay for FY21 in the first half of the year (April-September). Even among the four ministries that stood apart from the rest (most of the post-pandemic welfare schemes are routed through these ministries), the ministry of agriculture and farmer welfare will also likely see the revised outlay to be a fifth lower than the BE of Rs 1.43 lakh crore. This is because of estimated savings of Rs 15,000 crore under the PM-Kisan cash transfer scheme, from the original budget of Rs 75,000 crore (BE) and another around Rs 15,000 crore to be saved under smaller centrally sponsored schemes being run by the ministry, official sources said.
The labour ministry, which is implementing the Pradhan Mantri Garib Kalyan Yojana and EPF support scheme for job creation, has been told that its RE will be around the same as the BE, which effectively means a cut of around 30% from the level corresponding to the stimulus announcements. The ministry’s BE allocation was around Rs 12,000 crore for FY21 and it was supposed to get an additional Rs 4,800 crore for the PMGKY component. On the top of it, the third tranche of Aatmanirbhar Bharat stimulus package which included Rs 6,000-crore Rozgar Yojana subsidy was announced after the finance ministry’s RE discussions with the labour ministry in October. The ministry is keeping its fingers crossed over whether additional resources will be provided or other schemes would have to be slashed in H2.
Of course, the ministry of consumer affairs, food and public distribution will see the RE to be over 50% higher than the BE of Rs 1.24 lakh crore. Even this ministry, which oversees the PM Anna Yojana would have to adjust to deferment of part of this year’s dues to FCI and/or a fresh loan arrangement. Only half the estimated outlay of Rs 1.41 lakh crore for the Anna Yojana phases I and II, which have benefited crores of people during the pandemic, is likely to be provided under RE.
Ministries with smaller budgets are also seeing budget cuts. Since expenditure curbs between 20% and 40% were imposed between April and October of this fiscal, many ministries have managed to spend only 35% instead of about 58-60% in the first seven months of the year. However, the rural development ministry, which has been at the forefront of implementing some of the pro-poor measures such as enhanced allocation of about Rs 50,000 crore for job guarantee programme, will see its RE to be 40% higher than BE.
In an office memorandum dated October 29, the finance ministry has asked ministries to stick to their REs for the remaining part of the year (November-March). However, these are subject to quarterly ceilings (25% of full-year allocation) and those ministries who have spent less might fail to utilise even RE allocation unless relaxations are given. In Q4 last year, the government lowered spending ceiling from 33% to 25%, keeping in mind the weak cash position of the government.
Even amid talks of another round of fiscal stimulus, the Centre is looking at sticking to the enhanced gross borrowing limit of Rs 12 lakh crore for FY21. Its tax revenues are under-performing — net tax receipts (post-transfer to states) were down 24.5% on year in H1, even as excise receipts grew 34%. Tax receipts are expected to improve in H2, and senior officials say the internal target is to reach at least last year’s level in absolute term.
SOURCE: The Financial Express
The law committee of the Goods and Services Tax (GST) Council has recommended tightening the registration process to weed out those issuing fake invoices, informed sources.
After its two-day deliberations, the committee suggested introducing an Aadhaar-like registration process for new applicants under the GST regime. Under this, a new registration can be done online with live photo and use of biometrics after document verification, said sources in the Department of Revenue (DoR).
Such facilities can be provided at banks, post offices, and GST seva kendras (GSKs). The GSKs can work along the lines of passport seva kendras insofar as to provide new registration facilities with the mandatory checks on fake registration.
According to DoR sources, the committee suggested that a new registrant must opt for compulsory physical verification and personal identification in case he opts for non-Aadhaar authentication-based registration and does not have the income-tax (I-T) return supporting his adequate financial capability. In such a case, he may have to furnish a recommendation letter by two taxpayers of adequate reliability.
The speed of the registration process will depend on the trustworthiness of the applicant. According to sources, the committee was of the view that to be categorised ‘trustworthy’, a registrant or a dealer must have the I-T credential and no previous cancellation of GST registration on the same permanent account number for any violation of law.
Such trustworthy applicants can be given registration within seven working days.
If applicants are not in the trustworthy category, a conditional registration will be given within 60 working days only after physical verification of the place of business. In such cases, the input tax credit to their buyers will be allowed only after filing of tax returns.
The committee also recommended that dealers may also be required to deposit a certain portion of their taxes through cash or via bank guarantee up to 2 per cent of their tax dues. Currently, they pay all taxes through the input tax credit. They should have convincing I-T footprint available to establish financial credibility to avail of an input tax credit-based payment.
For example, a dealer with a Rs 100-crore business needs to pay on average a tax of Rs 18 crore. He may then be required to pay a sum of Rs 3.6 lakh via bank guarantee.
These conditions can be relaxed or waived by jurisdictional officers, depending on verification, the committee suggested.
Also, those who appear riskier will be required to undergo in-person verification at the GSKs.
The committee proposed a full application of the business intelligence and fraud analytics tool for precise identification of riskier dealers, based on the riskier input supply chain and outward supply chain, and abnormal taxpayer behaviour in terms of input tax credit availment, etc.
It suggested suspension of the first lot of riskier traders and identification of such taxpayers on the basis of significant criteria, including non-filing of tax return for six months, added sources.
The committee underlined there are 600,000 dormant registrants. Of those given registration in 2018-19 and 2019-20, 35,000 dealers had a GST liability of more than Rs 5 lakh yearly and they paid more than 99 per cent of their tax through input tax credit. They did not pay I-T of even Rs 1 lakh lakh in the past three years.
The committee also suggested discussing these measures with states and other stakeholders before placing them formally before the GST Council for further action.
Sources said the committee's suggestions would tackle the menace of fake invoices, ineligible availment, and passing on of input tax credit by fraudsters. Moreover, they would also ensure the ease of doing business provided under the GST system is not impeded.
The authorities have launched a clampdown on those issuing fake invoices. In 10 days of the drive, the directorate-general of GST intelligence and central GST commissionerates have arrested 48 people and booked 648 cases against 2,385 entities.
SOURCE: The Business Standard
The delay in signing power supply agreements (PSA) by Solar Energy Corporation of India (SECI) with discoms for over 20,000 MW of power projects awarded in the last one year is threatening the renewable energy target of 175 giga watt (GW) by 2022.
Manufacturing projects of 12,000 MW was awarded in June, while the peak-off-peak units of 1,200 MW were awarded in February.
In addition, RTC projects of 400 MW were awarded in May. There are several other projects, totalling around 6,500 MW that were awarded in the last one year and are awaiting PSA with discoms.
In a recent MNRE notification for procurement of power from grid connected hybrid renewable projects through tariff based competitive bidding, a clause adds that if the nodal agency (SECI) is unable to enter into PSA within six months of issue of letter of award, then those projects will get cancelled.
Industry experts believe the delay in signing power supply contracts has more to do with drop in module prices which gives an impression that tariffs may fall further. The latest project awards for RTC and peak-off peak were costly in comparison to prices on power exchanges, although they are comparatively different in terms of specifications.
The discoms are wary of the must-run status of renewable power and the renewable purchase obligations, which makes it compulsory to buy a percentage of renewable power depending on state’s resources.
The Union power ministry has mandated all discoms to purchase at least 21% of their total energy requirements from renewable energy sources by 2021-22.
Kameswara Rao, lead, energy practice at PwC said, the un-contracted tendered capacity has become large and is indicative of a deeply fundamental mismatch.
The expectations of future demand, load profile; costs and reliability have diverged significantly from a discom’s perspective.
“The benefits of the current format, such as large scale, standardisation, and creditworthiness still hold, but the requirement of discoms has changed.
A consultation with discoms is a start, but there is a need for a comprehensive revamp of the format, involving scalable storage and flexible contracting for future bids,” Rao said.
Jyoti Gulia, founder of consultancy firm JMK Research, said that government should consider implementing the bidding approach as followed in thermal sector wherein all the relevant approvals are taken from discoms as well as state regulators before planning a bid and not the other way round as what is been pursued in renewable sector.
This would avoid unnecessary delays and help project developers streamline their project schedules.
Vinay Rustagi, managing director of consultancy firm Bridge To India, said that power from many of these projects is costly due to complex tender designs.
SECI is trying to bundle this relatively high cost power with low cost power from other tenders to offer an agreeable price to discoms.
“However, the possibility of some of these projects being cancelled can not be ruled out if discoms don’t come forward to purchase power. As more time passes by, the risk of cancellation increases,” Rustagi said.
SECI, however, is confident of achieving the target in coming months as it believes Covid played the spoil sport in holding physical meeting with discoms and expects some of the PSAs to be signed in coming months.
“We do not consider the delay as cause of worry and are confident of selling all these capacities.
“We don’t believe that these projects are costly. The Rs 2.66/kWh price for manufacturing projects is the cheapest that no other states have offered.
“The entire concept of blending was introduced in projects to allay the fear of discoms that prices may drop further in future bids,” a senior SECI official told FE.
SOURCE: The Financial Express
Indian Texpreneurs’ Federation (ITF) has appealed to the entrepreneurs in the textile value chain to share their achievements in the just-launched #INDIAFORSURE platform.
“Entrepreneurs can share their achievements with a focus on SURE (Stable, sUstainable, Reliable and Ethical)” said Prabhu Dhamodharan, Convenor, ITF, adding “and the information would be shared on leading social media platforms like LinkedIn, Twitter, Facebook and Instagram”.
On the need for such an exercise, he said “textile entrepreneurs and clusters need a strong platform to connect with a global audience. Fashion brands and international buyers have started to evince interest in sourcing fashion goods from India. This, therefore, would be the right time to establish the platform and showcase our manufacturing capability with SURE as a base.” It may be recalled that ITF had about three months back launched the “India for SURE” initiative. This work is in progress.
The textile and apparel sector in India is highly diversified. The industry has strength across the textile value chain from fibre, yarn, fabric, home textiles to apparels.
ITF envisions to showcase the achievements, stories of change through this platform. “Our members have shared their achievements. We are appealing to textile entrepreneurs across the country to share their journey and special achievements. This would provide an opportunity to cross learn for many others in the industry,” he said.
SOURCE: The Hindu Business Line
Negotiations for further expansion of a preferential trade agreement between India and South American nation Chile are in the final stages and both the countries would include about 400 more products under the pact with an aim to boost economic ties, an official said. The two countries had signed a preferential trade agreement (PTA) on March 8, 2006, and it came into force from August 2007. In 2016, they expanded the scope of the agreement by including more products. Currently about 2,000 goods are covered under the pact.
In a PTA, two trading partners significantly reduce or eliminate import duties on certain goods traded between them.
"The talks for the second expansion of the agreement are in final stages. About 400 more goods would be covered under the pact," the official said.
Goods like lithium and copper ores could come under the ambit of the pact among other key items, the official added. Among Latin American countries, Chile is one of the largest trading partners of India.
India's exports to Chile include transport equipment, pharmaceuticals, yarn of polyester fibres, tyres and tubes, manufacture of metals, articles of apparel, organic/inorganic and agro chemicals, textiles, readymade garments, plastic goods, leather products, engineering goods, imitation jewellery, sports goods and handicraft.
Major items of import from Chile are copper ore and concentrates, iodine, copper anodes, copper cathodes, molybdenum ores and concentrates, lithium carbonates, metal scrap, chemicals, pulp and waste paper, fruits and nuts excluding cashews, fertilisers and machinery.
SOURCE: The Economic Times
JPMorgan Chase & Co. analysts are forecasting a U.S. economic contraction next quarter as various states impose restrictions on businesses and activity amid a record surge in Covid-19 cases.
The world’s largest economy is expected to shrink at a 1% annualised pace in the January-to-March period, JPMorgan said in its 2021 U.S. outlook issued Friday. That would follow estimated growth of 2.8% in the fourth quarter and the reported 33.1% expansion in the third quarter, which came after a record contraction in the prior period.
“While the economy powered through the July wave, at that time the reopening of the economy provided a powerful tailwind to growth,” JPMorgan economists Michael Feroli, Jesse Edgerton and Daniel Silver wrote in the note. “The economy no longer has that tailwind; instead it now faces the headwind of increasing restrictions on activity.”
The U.S. recovery -- from the recession that began in February -- has on the whole been stronger than expected, in large part due to a government stimulus package and Federal Reserve monetary policy actions. But hospitalisations and deaths from Covid-19 are rising, and more than 1 million new cases were recorded over the last week.
White House economic adviser Larry Kudlow said Friday that he expects the V-shaped recovery to continue beyond January, saying in remarks to reporters that “the economy has tremendous momentum.”
Meantime, lawmakers remain at a stalemate over the size of another fiscal relief package, though Treasury Secretary Steven Mnuchin is trying to revive stalled stimulus talks. Without an extension, millions of Americans are on track to lose their jobless benefits at year end.
JPMorgan isn’t alone in its forecast. Bloomberg Economics expects GDP to contract at a 0.5% annualised pace in the first quarter.
At the same time, positive news on Covid-19 vaccines is good news for the U.S. economy, increasing JPMorgan’s confidence that the economy will expand strongly in the second and third quarters of next year. The analysts also expect $1 trillion more in fiscal support by the end of the first quarter, further supporting the case for robust growth in the following two quarters.
Until then, Dallas Fed President Robert Kaplan suggested the economy could be at risk of slipping back into recession.
“We’ll have to see what the fourth quarter looks like,” he said. “It is possible we could have negative growth if this resurgences gets bad enough and mobility falls off enough.”
SOURCE: The Business Standard
G-20 nations have deployed an unprecedented $11 trillion so far to accelerate an equitable and sustainable economic recovery from the coronavirus crisis, according to a report released ahead of the G-20 leaders’ summit in Saudi Arabia this week.
“G20 members adopted immediate and exceptional measures to address the pandemic’s impact, including the implementation of unparalleled fiscal, monetary and financial stability actions,” the release said.
The total spending to date, by way of comparison, is more than twice the gross domestic product of Japan. G-20 nations also spent a combined $21 billion to enhance pandemic preparedness and response, the statement added.
Saudi Arabia’s summit, conducted mostly online, is focusing on restoring growth and safeguarding the global economic recovery, while addressing the protracted global health and humanitarian crisis created by the pandemic.
“We have an opportunity to recover stronger and more sustainably from this pandemic, with greater social and economic inclusion,” said Saudi Arabia’s Finance Minister Mohammed al-Jadaan, who is playing a key role in shaping the agenda for the summit on Nov. 21-22.
“Through a united global response, the G20 is determined to continue tackling the major challenges of our time and work towards finding solutions,” he added.
Collectively, G-20 (Group of 20) members represent around 80% of the world’s economic output, two thirds of the global population and three quarters of international trade. The group includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Korea, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
The US apparel industry faces many problems these days – not least of which are a potentially turbulent transition to the Biden Administration and the ongoing impact of the coronavirus pandemic.
By industry consultant Robert Antoshak, and Fashion+Sustainability advisor Thomasine Dolan Dow. As Americans, we’re concerned that the presidential transition will be rocky. Refusing to accept the election results, Trump will stall and obfuscate, as will many of his supporters in the Republican Party, insisting that voting fraud undermines the election results.
Indeed, as newly re-elected Senate Majority Leader Mitch McConnell said: “If any major irregularities occurred this time of a magnitude that would affect the outcome, then every single American should want them brought to light.”
He continued: “The president has every right to look into allegations and to request recounts under the law.” But these are misleading comments as votes remaining to be counted or even contested ballots will not affect the election outcome.
Air thick with uncertainty but that’s the point: uncertainty will remain. The air will be thick with it. Biden will have to reassure an already anxious nation that his transition is going well despite Trump’s efforts to discredit the election and undermine the transition process. So, we’re in a void of sorts.
Moreover, the pandemic rages while the economy remains uneven. The political jostling only adds to the uncertainty. And the electorate is anxious and nervous about the future; a rocky presidential transition will only increase public anxiety.
“Is this a time to go out shopping? Many Americans are struggling to pay their rents, mortgages and student loans. Credit card debt is piling up. The stimulus money ran out long ago, and there is no hint that another boost from the Federal government will happen before year-end” So, is this a time to go out shopping?
That’s the critical question for our industry as we enter the holiday season. Will consumers turn out? Is there enough pent-up demand to make this a strong holiday season? Many Americans are struggling to pay their rents, mortgages and student loans.
The good news is that businesses are slowly starting to hire or bring furloughed employees back to work. The bad news is that we are on the verge of a massive coronavirus spike, which could lead to closures again if we don’t use great prudence with our public interactions.
Stores will heavily discount their products this holiday season. After all, many retailers are in dire financial straits, and there’s unsold inventory built up from before the coronavirus outbreak. For the most part, the luxury market has held its own and will likely continue to do so.
Still, other segments of the apparel market remain under pressure; the tangled cobweb-like global supply chain has wreaked havoc on the rest of the industry. Of course, we in the apparel industry did this to ourselves.
We built an opaque, hard to track, tentacled behemoth reaching all over the globe. Why you may ask? Because low retail prices equate to more sales! The more you make, the cheaper it gets; a cycle of over-production, the very essence of fast fashion. So, this is the challenge of our times: too much capacity.
Fed by fast fashion, the industry seemingly plowed into a wall with the outbreak of the pandemic. Bloodied, what should the industry do? Is 2020 the dose of medicine needed to get our house in order?
Fashion must decouple volume from the value the fashion industry is ripe for structural change and practices, including (but not limited to) environmental safeguards, sustainable materials, closer and transparent supply chains, safe and fair working conditions, smaller production runs, and tighter inventories.
A slower, more thoughtful fashion pipeline will likely yield high creativity and innovation. We’ve already seen incredible designs emerge this year, ranging from digital tracking platforms to sustainable plant-based materials. If the apparel industry does adopt sustainable measures, consumers are likely to see a price increase.
But in the meantime, this shutdown has proved we can all live with a little less. Food and health safety continue to be the priorities for most families.
“We remain in a trade war with China that will likely continue with a Biden presidency. Tariffs will make imports more expensive, with those costs passed on to consumers” Two things are still in play, however.
First, the pandemic is still here and will be here through the spring of 2021. Second, we remain in a trade war with China that will likely continue with a Biden presidency.
Tariffs will make imports more expensive, with those costs passed on to consumers. Combined, this may be just the thing to bring manufacturing closer to home. We see more and more research telling us that consumers would prefer to purchase “Made in the USA” and are willing to pay quite a bit more for it; this wasn’t always the case.
But the shutdown has pushed the pause button and given us all time to think. Has the pandemic re-focused our values? Have we learned we can live with less? We would argue, yes. Consumers can live with less and can re-learn how to shop.
The fashion adage “less is more” feels an appropriate remedy. Until the pandemic is under control, the apparel industry cannot thrive as it did in the past. And perhaps it shouldn’t. The past 40 years have seen a dramatic uptick in production and consumption, creating an unsustainable downturn in retail prices.
For the sake of low prices, brands stopped valuing their suppliers (think farmers, spinners, weavers and garment makers), and that trickles down to a consumer who ultimately feels ‘If I can buy jeans for $20, then that must be what they’re worth.’ To quote the outgoing, Twitter-prone president: “SAD.” And it’s not just the pandemic that has caught fashion on its back foot.
Weather-related disasters from climate change have left plenty of companies scrambling to move orders elsewhere or cancel them. Shoddy infrastructure in manufacturing hotspots has resulted in thousands of deaths and broken communities unable to support themselves.
Out of necessity, many online chats, webinars, and other virtual gatherings have sprouted up seemingly overnight during the pandemic. Still, they have done little to address the fundamental problems facing the industry.
It’s like being trapped on some cable news program forever doomed to endure the pontification of the same few talking heads over and over again – while missing the point of the conversation in the first place.
“Virtual gatherings are little more than echo chambers retreading the same tropes over and over again: transparency, recycling infrastructure, and circular design” Often these virtual gatherings are little more than echo chambers retreading the same tropes over and over again – typically with the same speakers, too.
For instance, everyone addresses the need for transparency, recycling infrastructure, and circular design. Still, we won’t know for some time if CEOs are green-lighting this kind of change and, if so, to what degree. Some brands have made bold proclamations on setting sustainability goals for 2025, 2030 and beyond.
Great! But why haven’t we seen many concrete public statements about slowing down the fashion calendar, reducing volume, and by the way, what is the real cost of clothing in 2021? In our case, we’re an industry built for a time that doesn’t exist anymore. All the online chats and webinars fundamentally miss that.
Some companies will fight to return to the status quo, while others will break out and try new things, anything to bring in shoppers. Meanwhile, the most sustainable thing we can do is simple: buy less. Reestablishing connections with customers We’ve touched on politics, economics, and the global pandemic – all serious challenges for our industry. Moreover, the fast-fashion model of apparel production and consumption faces even fiercer headwinds from a weakened and distracted consumer. And, make no mistake, consumer attitudes are changing.
Consequently, brands that speak to customers most authentically right now will likely come out stronger in the long run, particularly when the pandemic has run its course.
Many brands found their voice this year as they confronted the shortcomings of previous business practices that have been in plain sight all along, only never acted upon – it cost too much.
With many consumers focused on necessity purchases right now, they need to feel good about what they’re buying and from whom they’re buying. Consumers are looking for transparency and a story that they can believe.
And be confident that their clothes are sustainable. Yeah, the health of the Earth matters a lot these days. What’s needed now more than ever are systemic changes in how and where our industry does business. Otherwise, we will continue to drip water on fires that should have never started in the first place.
Source: Textile Today
With this, Nike intends to create new in-and-out-of-store experiences by connecting locals to sports.
Each Nike Unite store will be designed to celebrate local communities with the store itself being a reflection of their heart and spirit.
From local landmarks to athletes belonging to their hometowns, the stores will make people feel represented.
The products in each Nike Unite store are locally curated, every-day essentials at the best price, matched with the newness of select seasonal offerings to reflect what a particular community is interested in.
Additionally, Nike Unite reflects Nike’s ongoing endeavours to hiring people who live in the local community. Online or offline, it will give patrons a chance to get moving.
They plan to bring members closer to sports by serving athletes in the digital spaces that speak to them, supporting local schools and non-profits that give children more opportunity to stay active through ‘Made to Play’ or participating in the Nike Community Ambassador programme (which trains Nike store employees to be coaches).
The new Nike Unite stores are open in South Korea, USA and UK with a plan to open 4 additional stores across USA and China.
Source: Apparel Resources
The impact of COVID-19 on women in the readymade garment (RMG) has worsened owing to discrimination, harassment, inadequately represented voice, wage gaps, and unevenly shared unpaid care and family obligations, said a new brief from the International Labour Organization (ILO) on Friday.
In a study, titled ‘Gendered impacts of COVID-19 on the garment sector’, conducted on garment workers in Bangladesh, Cambodia, Kenya, Lesotho and Viet Nam, ILO’s Better Work project found that waged employment helped to advance women empowerment in societies considered to be highly gender.
Women’s employment in Better Work factories has enabled them to improve their leverage and influence in household spending and decision-making and has increased men’s participation in unpaid care work.
However, given the potential, and perhaps sustained, loss of employment due to the coronavirus, opportunities for women’s continued empowerment may decrease as workers lose their financial independence and, in some cases, become dependent on their families.
“Women constitute 60 per cent of the workforce in the Bangladesh ready-made garment industry. A drop in women’s employment will not only impede their economic and social empowerment, but will also give rise to shortage of experienced, loyal and skilled workers in the industry”, said Tuomo Poutiainen, Country Director of ILO Bangladesh.
The brief highlights short, medium, and long-term impacts of the crisis on women workers. It also includes a series of recommendations to help build a more just and resilient industry and greater gender equality.
Entitled the brief aims to raise awareness of the gendered reality of COVID-19 and to outline how the pandemic impacts women and men workers in the garment sector.
“Women account for approximately 80 per cent of the garment sector workforce, so they are heavily affected to start with by many of the impacts of the COVID-19 pandemic.
However, women also experience additional impacts due to the existing challenges they face in the workplace as well as expectations regarding women’s obligations in the home,” says Joni Simpson, Senior Gender Specialist for the ILO’s Regional Office for Asia and the Pacific.
Recent ILO research highlighted how major buying countries’ imports from garment-exporting countries in Asia had dropped by up to 70 per cent in the first half of 2020, due to COVID-19.
This has led to a sharp increase in worker layoffs and dismissals while factories that have reopened are often operating at reduced workforce capacity. The Asia-Pacific region employed an estimated 65 million garment sector workers in 2019, accounting for 75 per cent of all garment workers worldwide.
Recommendations include greater focus on retrenchment and closure practices as well as addressing women’s disproportionate unpaid care obligations so they can return to work as factories resume operations.
Efforts to address the COVID-19 pandemic should account for the unique ways that women and men may encounter the effects of the coronavirus at work, at home and in their communities.
The importance of strengthening efforts to combat violence and harassment in the workplace is highlighted, in view of emerging data showing that COVID-19 has increased the risks of gender-based violence. In addition, the need to ensure women’s voice, representation and leadership in dialogue and decision-making is also seen as key to ensuring a full and fair recovery from the pandemic.
“It is crucial that governments, businesses and other stakeholders understand the multi-dimensional impacts of the COVID-19 pandemic on both women and men workers, and design policies that enable a smart, sustainable and gender-responsive recovery.
Otherwise, the COVID-19 crisis threatens to exacerbate pre-existing inequalities and will hamper the social and economic sustainability of the garment sector,” said Jessica Wan, Better Work Gender Specialist.
SOURCE: The Financial Express, Bangladesh