The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 10 AUGUST, 2015

NATIONAL

INTERNATIONAL

 

Textile Raw Material Price 2015-08-10

Item

Price

Unit

Fluctuation

PSF

1122.24

USD/Ton

0%

VSF

2125.51

USD/Ton

0%

ASF

2471.99

USD/Ton

0%

Polyester POY

1069.19

USD/Ton

0%

Nylon FDY

2733.26

USD/Ton

-2.86%

40D Spandex

5948.86

USD/Ton

0%

Nylon DTY

5940.82

USD/Ton

0%

Viscose Long Filament

1350.55

USD/Ton

0%

Polyester DTY

2524.25

USD/Ton

-3.68%

Nylon POY

2664.93

USD/Ton

0%

Acrylic Top 3D

1294.28

USD/Ton

0%

Polyester FDY

2990.51

USD/Ton

-1.06%

30S Spun Rayon Yarn

2717.18

USD/Ton

0%

32S Polyester Yarn

1784.66

USD/Ton

-0.89%

45S T/C Yarn

2877.96

USD/Ton

0%

45S Polyester Yarn

2894.04

USD/Ton

0.56%

T/C Yarn 65/35 32S

2620.71

USD/Ton

0%

40S Rayon Yarn

1977.59

USD/Ton

0%

T/R Yarn 65/35 32S

2427.78

USD/Ton

0%

10S Denim Fabric

1.13

USD/Meter

0%

32S Twill Fabric

0.95

USD/Meter

0%

40S Combed Poplin

1.05

USD/Meter

0%

30S Rayon Fabric

0.76

USD/Meter

-0.21%

45S T/C Fabric

0.77

USD/Meter

0%

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.16078 USD dtd. 9/8/2015)

The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

Back to top

Efforts on to take textile industry to greater heights: Gangwar

Noting that even small countries are catching up with India in the textile sector, Union Minister of State for Textiles Santosh Kumar Gangwar said that efforts are on to give a right identity and direction to this industry to take it to greater heights. Speaking on the sidelines of the two-day 17th Garment Fair organised by Garments Manufacturer and Wholesalers Association here, the Minister said, "We know that India should have topped the list in textile sector, but small countries are marching ahead. We are aware of this and are making efforts to give a right identity and direction to the Indian textile industry."  Gangwar alleged that in the last ten years, the identity of the sector was associated with "irregularities" and noted that CBI had filed a case against the then Union Textile Minister and a probe is on. "But now the process of transformation is taking place in the Indian textile sector. Prime Minister Narendra Modi announced Handloom Day in Chennai. In the coming days, our intention is to ensure that the (textile) sector progresses in the right direction," he said. The Ministry of Textiles is now making efforts to revive the units under it (that are closed) in Mumbai and other places in the country, he said, adding the Centre has recently set up textile units in all states across north-eastern region. Union Minister of State for Labour and Employment Bandaru Dattatreya was also present on the occasion.

SOURCE: The Statesman

Back to top

Textile mills plan production halt for a day

Spinning mills across the country are proposing production stoppage for a day to draw the attention of the government to the industry’s plight and stress the need for right policy initiatives.

Neglected sector

In a hurriedly convened meeting of its executive committee here last week, the Southern India Mills Association (SIMA) decided to take this extreme step, as the members perceived that the sector is being neglected by the government. Recalling the association’s earlier call for production halt in 2008, K Selvaraju, Secretary General, SIMA, said “we took the lead then to impress upon the then government the need for withdrawal of 14 per cent import duty on cotton. A similar attempt is being made now to highlight the present plight of the sector.” A day’s production halt is expected cost the industry roughly Rs. 6,000 crore, notwithstanding the loss to the exchequer. The mills are also contemplating a production cut of 15 to 20 per cent in the short run, in consultation with the spinning mills located in other parts of the country

Struggling to survive

Lamenting the stepmotherly treatment meted out to the textile sector, T Rajkumar, Chairman, SIMA, said the sector has huge potential for exports, but due to lack of support from the Centre, the industry is struggling to sustain and survive. “If the government holds a deaf ear even now, a good number of units will be forced to down shutters, rendering thousands jobless,” he said. The Association has sought government’s attention to allocate Rs. 6,500 crore to clear all pending TUF subsidies, extend Merchant Export Incentivisation Scheme till the FTAs are signed, implement GST and announce a National Textile Policy without further delay. “The industry has been facing yet another long-drawn recession for the last 15 months. Spinning and powerloom sectors are the worst affected. Though various State governments have announced attractive textile policies, these have become a major threat for the existing capacities to compete with new capacities being created. “In the absence of a level playing field (due to higher rates of duties for Indian textile products in international markets), higher raw material cost, high cost of funding and transaction cost, the industry will not be in a position to achieve its potential growth rate.

Global recession

“Policy initiatives at this juncture is crucial to strengthen the competitiveness of the Indian textile industry,” the SIMA chief said. He pointed out that global recession had pushed the Indian textile industry to the corner and the country had become the least preferred nation in textile trade due to higher rates of duties. Rajkumar further said that the synthetic textile manufacturers were also in a bad shape as huge volumes of yarns and fabrics were imported from countries like China, Indonesia and Thailand. “High levies of over 20 per cent on synthetic fibres apart from the anti-dumping duty did not allow the Indian synthetic industry to grow,” he said and appealed for immediate withdrawal of the anti-dumping duties and reduction of central excise duty from 12.5 per cent to 6 per cent. The industry will be able to sustain and not require any incentive if a level playing field is created on tariff rates, raw material cost, cost of funding and transaction cost, Rajkumar said.

SOURCE: The Hindu Business Line

Back to top

Commerce Minister Nirmala Sitharaman moves Cabinet note on interest subvention scheme

To give a fillip to exports, the Commerce Ministry has moved a Cabinet note on a proposal to provide cheaper credit access to exporters from various sectors under the interest subvention scheme.  "We have moved a Cabinet note on the interest subvention scheme for inter-ministerial consultation. I hope the scheme should encourage exports," Director General of Foreign Trade (DGFT) Pravir Kumar told PTI.  Kumar, however, did not elaborate on the subvention rate or the sectors.

Under the interest subvention scheme, exporters are provided credit at subsidised rates by banks which are later compensated by the government.  Loans at subsidised rates will help exporters boost shipments as the country's exports stayed in the negative zone in the past seven months.  Last week, Commerce Minister Nirmala Sitharaman had told Parliament that the interest subvention scheme for various sectors was under consideration of the government.  The previous interest subvention scheme was available up to March 31, 2014.  For the seventh month in a row, India's exports fell 15.82 per cent in June to $22.28 billion.

SOURCE: The Economic Times

Back to top

Exporters worried as orders plummet

"Is anyone listening? We are in panic here," said Mecca Rafeeque Ahmad, a Chennai-based leather goods exporter who owns the Farida Group. Also president of the Council of Leather Exports, Ahmad had to shut down one of his manufacturing units to cut costs. "We have no idea where things are heading for. Everyone is silent. I had to close down one of my factories because there is no demand for finished leather goods. By this time we generally start shipping Christmas and New Year orders. But this year we are seeing a decline of 15-20 per cent in our order books. Large-scale job losses are inevitable," said Ahmad, a former president of the Federation of Indian Export Organisations (FIEO). Leather exports in the first quarter of this financial year declined by almost five per cent from those in April-June 2014. Finished leather goods account for 21 per cent of the total leather exports from India. China and the European Union are the biggest markets.

FROM BAD TO WORSE

  • Export order books are on the decline, creating a panic among exporters
  • Textiles, leather, gems & jewellery have seen 15-20% decline in order book positions
  • Exports of yarn and fabrics are the worst hit, given a demand slowdown in China and the EU
  • Currency volatility remains a big concern
  • Jewellery exporters demand immediate restoration of interest subvention
  • Textiles sector sees Bangladesh and Vietnam as huge threat

In the first quarter of 2015-16, India's merchandise exports contracted 16.75 per cent to $66.69 billion, from $80.11 billion in the same period of 2014-15. Exports have fallen for seven months in a row. The situation is equally grim for other export-oriented labour-intensive industries, such as textiles, gems & jewellery, and handicraft. Even star export houses in the textiles sector are feeling the pinch. "We have lost competitiveness to duty-free low-cost countries like Bangladesh and Vietnam. Even in the worst of recessions, we have not faced such competition. They are taking basic business away from us. Nobody is in love with India. Buyers will go where they can buy cheap," said Sudhir Dhingra, chairman & managing director of apparel maker Orient Craft, which supplies to retail conglomerates JC Penney and Walmart.

D K Nair, secretary-general of the Confederation of Indian Textile Industry (CITI), believes the condition of forward contracts has gone from "bad to worse". "Export of fabric and yarn is down, owing to a slowdown in China. It is the biggest market for Indian yarn and we are adversely affected. The condition of the European economy is not conducive, either. We expect the second quarter to be as bad as the first. If the rupee strengthens, it will be a double whammy. Exports in the whole of this year are going to be bad," Nair said. However, he added, garment shipments were still seeing some growth due to demand in the US and diversification into non-traditional markets. The gems & jewellery industry is expecting a fall of 20 per cent in fresh export orders. "Compared to last year, export sales this year are down by 15-20 per cent, mainly due to volatility in the currency, and a complete lack of demand," said Vipul Shah, chairman, Gems & Jewellery Export Promotion Council, and CEO of Asian Star, a Mumbai-based company.

SOURCE: The Business Standard

Back to top

‘Delay in subsidy announcement holding back export initiatives’

Against the prospect of a heavy decline in India’s exports in the current financial year, the southern regional chairman of the Federation of Indian Exporters Organisations (FIEO), A Sakthivel, has urged the Centre to revive the interest subvention scheme for exporters and give it retrospective effect from April. “The subsidy will give a boost to exports from the MSME and the manufacturing sectors as it will reduce their interest burdens,” Sakthivel, who is also a Tiruppur-based apparel manufacturer-exporter, told BusinessLine . He noted Union Minister of Commerce and Industry Nirmala Sitharaman had last month said the government will revive the scheme, but so far no formal announcement has come, though monthly exports figures have been falling continuously since December. The delay in formally announcing the scheme was holding back export initiatives. The UPA government had introduced the subsidy scheme which reimbursed three per cent of the interest paid by exporters in the MSME sector on their bank credit. The rationale for the subsidy was the cost of credit in India was high and the MSME sector paid around 6 per cent more on their credit than their Asian counterparts

Export groups

Sakthivel wanted the government to reclassify the export country groups (currently A, B and C groups) in view of the changing global scene. The government has classified the countries into A (which includes USA and European Union), and B and C for administration of incentives under the Merchandise Export from India Scheme (MEIS) and others. Sakthivel wanted Russia and South American countries to be included in the grouping so that the exporters could get the incentives. He also called for paying better incentives for exports to European Union.

SOURCE: The Hindu Business Line

Back to top

Economy showing signs of recovery: CII survey

There is reason for cheer as there are green shoots of recovery taking shape in the economy, says a new survey by the Confederation of Indian Industry. The CII ASCON industry survey for the April-June period reveals a slight improvement in growth trends in terms of production over the corresponding quarter a year ago.

‘Noteworthy growth’

Naushad Forbes, Chairman, CII Associations’ Council and President Designate of the body, said, “The recent trend of slow but continuous progress in industrial growth is noteworthy. There are fewer sectors anticipating negative growth and there has been a significant and perceptible positive movement in percentage points recorded by many of the sectors which were in moderate and negative growth category a year ago.”

Positive surge

Of the 93 sectors surveyed, the share of sectors that have recorded growth of more than 20 per cent in April-June 2015-16 has surged up to 16.1 per cent against 7.1 per cent recorded in the year-ago period. The share of sectors witnessing a growth rate of 10 to 20 per cent has reduced significantly to 9.7 per cent from 14.3 per cent last year. Similarly, those reporting moderate growth has declined marginally to 51.7 per compared to 51.8 per cent in the year ago period. Meanwhile, 23.6 per cent of sectors have recorded a decline in the first quarter this year, down from 26.9 per cent last year, the statement said.

More than 50 per cent respondents were worried about issues such as margin pressure from stiff competition, competition from imports, shortage of power, high regulatory burden, lack of domestic and export demand, shortage of skilled labour and talent and high tax burden, among others. Industrial relations, transport infrastructure bottlenecks, cost and availability of finance have been quoted as moderately important factors impeding growth. In order to boost growth, the industry chamber recommends measures such as reduction in interest rates, speedy implementation of infrastructural projects and addressing supply-side constraints on a variety of fronts including infrastructure, energy, agriculture and labour. The survey, which tracks the growth of different industrial and services sectors of the economy, is based on the feedback collected from CII-affiliated industry associations across sectors.

SOURCE: The Hindu Business Line

Back to top

Look beyond US, EU; explore new markets: DGFT to exporters

Concerned over declining exports, Director General of Foreign Trade ( DGFT) Pravir Kumar asked exporters to look beyond the US and European markets, and tap new opportunities for their shipments, including in the FTA partner countries.  "It is a good idea not to keep all your eggs in one basket. If we depend too much on the US and Europe, then if there is problem in one area, the whole country and the industry will suffer. So, we would like our exporters to explore possibilities in other countries," Kumar said while addressing a national rubber conference here.  Exports are a big challenge considering sluggish global demand, he said, adding that exporters should try other markets like Latin America, Africa, CIS and ASEAN nations besides FTA partner countries.  The government is working on various options to push exports in new markets and there are huge opportunities in countries with which India has signed free trade agreements (FTAs), Kumar said.  Exports can be pushed to FTA partner countries as India has lowered some barriers under the pact and it can negotiate with partnering countries to lower trade barrier on their side too, he added.  "We would like our industry to take full advantage of opportunities under FTAs and see what markets we can negotiate," he said.

Elaborating external and internal challenges being faced in promoting trade in the present scenario, Kumar said since the government has no control over external factors, it is more focusing on addressing internal issues so that to provide a platform for easy of doing business.  He said: "In our new foreign policy, we are focusing on simplifying schemes and procedures. We are making online submission of applications and forms wherever possible to facilitate an environment for trade."  Contracting for the seventh month in a row, India's exports dipped by 15.82 per cent in June to USD 22.28 billion due to global slowdown and dip in crude oil prices that impacted shipments of petroleum products.

SOURCE: The Economic Times

Back to top

India can take on China with low cost of wages: Jaitley

Expecting a moderation in interest rates in coming days to spur manufacturing growth, Finance MinisterArun Jaitley  said Indian industry can take on China, with lower wage cost and competitive pricing of products. Speaking at a leather industry event, he said India’s largest competitor faced a “great challenge of a high wage bill”. China's labour cost, once affordable, is now high. Therefore, their (China's) costs have to go up... Our wage Bills are lesser than our competitors. In future, hopefully, with interest rates also moderating, the costs would have to be kept under control,” he said.  Jaitley said in the past India had slowed in cost competitiveness because of its labour regime, cost of utilities like power, infrastructure, high cost of capital and various other factors. “As the Indian economy is growing today ... it is also important for us to utilise all our potentials from thermal to hydel to non-conventional (power) and bring down the cost of production itself as the quantity of power production in this country is increasing,” he said. Infrastructure is an area of top most priority for the government. “We are investing a lot into our railways, rural roads, highways, ports, and hopefully with power situation in place, our wage bills are lesser than our competitors,” Jaitley said. He said the services sector growth has been "reasonably well" over the last few years and this year the agriculture growth is also comfortable. For India to grow in future, emphasis should now be on the manufacturing sector, he said. He also hoped that the changed regime of indirect taxation should come into this country "sooner or later". The government proposes to roll out indirect tax reform Goods and Services Tax (GST) from April 1, 2016.

SOURCE: The Business Standard

Back to top

India's trade gap with China at $8 billion in April-May

India's trade deficit with China touched $8 billion during April-May this fiscal, Parliament was informed. The trade deficit has increased to $48.47 billion in 2014-15 from $36.2 billion in 2013-14.  "Increasing trade deficit with China can primarily be attributed to the fact that Chinese exports to India rely strongly on manufactured items meeting the demand of fast expanding sectors like telecom and power while India's exports to China are characterised by primary products, raw material and intermediate." Commerce and Industry Minister Nirmala Sitharaman said in a written reply to Lok Sabha.  She said that to boost exports and to maintain balance of trade with India's trade partners including China, government has taken several measures including market study initiatives to identify specific products having export potential.  India is also actively taking up issues related to trade and non-trade measures with its trading partners. Replying to a separate question, the minister said India has entered into 11 free trade agreements and five preferential trade agreements with other countries. "India is negotiating FTAs and PTAs with some countries, including Israel and the EU."

SOURCE: The Economic Times

Back to top

Weak crude oil may bring Rs 88,800-cr gains this year

The country is set to save Rs 88,800 crore this financial year, thanks to a drop in the price of the Indian basket of crude oil to a six-month low of $49.11 a barrel. The crude oil price decline has mainly been on account of higher drilling activity and stockpile in the US, a strong dollar, an ailing Chinese economy, and the prospect of Iran boosting production after sanctions on the country were lifted recently. The Indian basket represents the average price of Oman and Dubai sour-grade and sweet Brent crude oil processed in Indian refineries (in the ratio of 72:28). The current price of the Indian basket is the lowest since 30 January, when it stood at $46.28 a barrel. Between April 1 and August 6 this year, the price has averaged at $58 a barrel. “The government had budgeted for an average crude oil price of $70 a barrel for this financial year. If the average price of $58 a barrel is sustained for the rest of the year, it will lead to a saving of Rs 78,000 crore in companies’ import bill, and of around Rs 10,800 crore in the government’s subsidy bill,” said K Ravichandran, senior vice-president at research & ratings agency ICRA.

At present, every $1 fall in crude oil prices brings import bill down by Rs 6,500 crore, and the government’s subsidy burden is reduced by Rs 900 crore. However, the benefit is limited by the ongoing depreciation in the rupee’s value. The rupee has weakened by 74 paise, or 1.17 per cent, against the dollar in the past three weeks. Currently, every Rs 1 increase in the dollar exchange rate increases oil import bill by Rs 7,455 crore, according to Petroleum Planning and Analysis Cell (PPAC), an arm of the petroleum ministry. The decline in crude oil prices is positive for Indian refiners — those of Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) — as their working-capital requirements would come down. Product prices and gross underrecoveries (GURs) — losses on account of selling petroleum products like liquefied petroleum gas (LPG) and kerosene below market price — would also come down. “The current subdued crude price is likely to continue for the next couple of years, owing to higher US shale production, Organization of Petroleum Exporting Countries’ (OPEC’s) insistence on not cutting production, and possibility of more oil from Iran. For us, it is a definite winning proposition,” IOC Chairman B Ashok told Business Standard. These gains, however, could be limited by inventory losses. IOC had to suffer Rs 15,000 crore of inventory losses last financial year.

Lower under recoveries for refiners would also mean reduced subsidy-sharing for upstream companies like Oil and Natural Gas Corp (ONGC). The government has already exempted upstream firms from subsidy-sharing for LPG and limited the burden on kerosene by offering Rs 12 a litre (anything above that level is borne by the upstream companies. The OMCs’ underrecoveries came down from Rs 139,869 crore in 2013-14 to Rs 72,314 crore last financial year, thanks to a deregulation of the diesel price and rollout of the direct benefits transfer scheme for LPG (DBTL). In the current financial year, the government is budgeting for a petroleum subsidy bill of Rs 30,000 crore, including Rs 22,000 crore on LPG sales and the rest on kerosene. The government might now be able to save Rs 10,800 crore of this from the decline in crude oil rates. India imported 189 million tonnes of crude oil for $112 billion last financial year (2014-15). With the decline in crude oil prices, a Rs 78,000-crore cushion is expected to be created for importers, OMCs could pass on the benefit to consumers by reducing the retail prices of petrol and diesel.

SOURCE: The Business Standard

Back to top

India received $24 bn in FDI from European Union in last 3 years

Despite the Free Trade Agreement talks with the European Union being in limbo, India has received an impressive USD 24 billion in Foreign Direct Investment from the 28-nation bloc over the last three years. As per official figures, India received USD 6.23 billion in FDI equity inflows from EU in 2012-13 which increased to USD 9.06 billion the next year. The FDI inflow was USD 8.20 billion in 2014-15, which was a decline of USD 862 million compared to the year ago period. In 2015-16, the amount in first two months of current fiscal was USD 1.39 billion. In total, India received USD 24.91 billion in FDI equity inflows from EU between April 2012 and May 2015. The EU has been India’s largest trading partner and the two-way trade is likely to swell significantly if the countries could firm up the long-pending Free Trade Agreement, officially called the Broadbased Investment and Trade Agreement (BTIA). India had on Wednesday deferred scheduled talks on the proposed pact later this month which was to resume after a gap of two years after the EU imposed a ban on around 700 generic drugs which were clinically tested by India’s GVK Biosciences on the ground of inaccuracy in data.

In March, the EU had not responded to India’s proposal for a brief visit by Prime Minister Narendra Modi to Brussels, the headquarters of the bloc, during his trip to France, Germany and Canada in April. However, it recently invited him for the India-EU summit just before or after the G-20 summit scheduled to be held in November in Turkey. The last India-EU Summit had taken place in 2012. The two-way commerce between EU and India stood at about USD 99 billion in 2014-15 while it was USD 101.5 billion in 2013-14. The talks on FTA have been caught in a jam on sticky issues relating to intellectual property rights (IPR), data security for IT services and tariff in the automobile sector. The last round of talks on the FTA were held in May, 2013. The EU has been maintaining that it was ready to show flexibility on all major issues that have stalled the talks as the FTA will be a “win-win deal” for both the sides. The EU was also looking at insurance, banking and retail as major areas for economic engagement with India.  Launched in June 2007, negotiations for the proposed FTA have witnessed many hurdles as both the sides have serious differences on crucial issues. Besides demanding significant duty cuts in automobiles, the EU wants tax reduction in wines, spirits and dairy products, and a strong intellectual property regime. On the other hand, India is asking for granting ‘data secure nation’ status. The country is among nations not considered data secure by the EU.

SOURCE: The Financial Express

Back to top

Global crude oil price of Indian Basket was US$ 49.11 per bbl on 07.08.2015

The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 49.11 per barrel (bbl) on 07.08.2015.  In rupee terms, the price of Indian Basket increased to Rs 3133.71 per bbl on 07.08.2015 as compared to Rs 3131.25 per bbl on 06.08.2015. Rupee closed weaker at Rs 63.81 per US$ on 07.08.2015 as against Rs 63.76 per US$ on 06.08.2015. The table below gives details in this regard: 

Particulars

Unit

Price on August 07, 2015 (Previous trading day i.e. 06.08.2015)

Pricing Fortnight for 01.08.2015

(July 14 to July 29, 2015)

Crude Oil (Indian Basket)

($/bbl)

* 49.11

55.15

(Rs/bbl

3133.71        (3131.25)

3511.95

Exchange Rate

(Rs/$)

63.81            (63.76)

63.68

SOURCE: PIB

Back to top

China exports fall as lower EU demand hurts growth

China's exports declined more than expected in July, hobbled by a strong yuan and lower demand in the European Union, and adding pressure on Premier Li Keqiang to stabilise growth. Overseas shipments fell 8.3 percent from a year earlier in dollar terms, the customs administration said. The reading was well below the estimate for a 1.5 percent decline in a Bloomberg survey and compared with an increase of 2.8 percent in June. Imports dropped 8.1 percent, widening from a 6.6 percent decrease in June, leaving a trade surplus of $43 billion.

Along with weak domestic investment, subdued global demand is putting China's 2015 growth target of about 7 percent at risk. The government has rolled out fresh pro-expansion measures, including special bond sales to finance construction, but has held off weakening the yuan as China seeks reserve-currency status. "Exports are no longer an engine for China growth - no matter what the government does, it's just impossible to see strong export growth as in the past," said Bank of Communications economist Liu Xuezhi. "It means additional slowdown pressure, and it requires the government to be more aggressive in the domestic market." Liu said China is likely to accelerate infrastructure spending as fixed-asset investment is the "the most immediate and effective" way to stimulate growth.

China's exports to the European Union fell 2.5 percent in the first seven months of 2015 from a year earlier, while shipments to Japan dropped 10.5 percent. One bright spot was exports to the US, which expanded 9.3 percent. The slump in exports "compounds downward pressure on China's economy and threatens to bring exchange rate depreciation onto the table as a tool to restore competitiveness," Tom Orlik, chief Asia economist at Bloomberg Intelligence, wrote in a research note. The People's Bank of China has adopted a vice-like grip on the yuan, allowing little movement of the currency in the onshore market exchange rate ended a decade ago.

SOURCE: The Business Standard

Back to top

China under mounting pressure to ease policy as economy stumbles

China is under growing pressure to further stimulate its economy after disappointing data over the weekend showed another heavy fall in factory-gate prices and a surprise slump in exports. Producer prices in July hit their lowest point since late 2009, during the aftermath of the global financial crisis, and have been sliding continuously for more than three years. Exports tumbled 8.3 per cent in the same month, their biggest fall in four months, as weaker global demand for Chinese goods and a strong yuan policy hurt manufacturers. "Policy focus is definitely the (producer) deflation at this stage," said Zhou Hao, economist at Commerzbank AG in Singapore. He said China's central bank would likely need to further cut interest rates again, having already cut four times since November in the most aggressive easing in nearly seven years. The gloom may only deepen in the coming week with a raft of economic data forecast to show renewed weakness in factories, investment and domestic spending.

The world's second-largest economy is officially targeted to grow at 7 per cent this year, still strong by global standards, but some economists believe it is growing at a much slower pace. Economists expect the central bank to cut rates by another 25 basis points this year, and further reduce the amount of deposits banks must hold as reserves by another 100 basis points, according to a Reuters poll last month. The producer price index fell 5.4 per cent from a year earlier, the National Statistics Bureau said, compared with an expected 5.0 per cent drop. It was the worst reading since October 2009 and the 40th straight month of price decline. Falling producer prices are worrying because they eat into the profits of miners and manufacturers and raise the burden of their debts. China's corporate debt stands at 160 per cent of gross domestic product, twice that of the United States, according to a Thomson Reuters study of over 1,400 firms. In line with the sluggish economy, annual consumer inflation remained muted at 1.6 per cent despite surging pork prices, in line with forecasts and slightly higher than June's 1.4 per cent.

Challenging second-half

A cooling housing market, uneven exports and weak investment have cooled annual economic growth, which will be slowest in a quarter of a century even if it hits Beijing's target this year. A strong yuan policy - designed in part to support domestic consumption and help Chinese firms to borrow and invest abroad - is hurting exporters. Trade data showed depressed demand from Europe and the first drop in exports to the United States, China's biggest market, since March. Chinese firms have laid off workers for 21 consecutive months as they slash prices to a six-month low to attract customers, an official survey showed this month. China's turbulent stock markets, which have fallen by almost a third since peaking in June, also add a new sense of urgency for top officials as they try to ensure a stable financial system can fund Beijing's efforts to rekindle economic growth. Yet, even the central bank has warned that looser policy may not be effective in lessening the pain felt by companies. Companies are holding back on spending amid a reluctance by banks to lend due to rising bad debts. "Maintaining a growth rate of 7 per cent in the second half of the year will be a challenge," ANZ Bank said in a note at the weekend. "Monetary policy will need to become more supportive."

SOURCE: The Business Standard

Back to top

Vietnam-Textiles sector under pressure post-TPP

In just the first half of this year, textile exports to markets joining the Trans-Pacific Partnership (TPP) accounted for 70 per cent of the total export value and will grow substantially once the agreement is signed. Issues surrounding rules of origin, however, are a major concern as 60 to 90 per cent of materials for textiles made in Vietnam are imported from countries that are not members of the TPP.

Origin pressure

According to the Vietnam Textile and Apparel Association (Vitas), among the TPP markets the US is Vietnam’s largest, accounting for 42 per cent of total textile exports in July and estimated at $5.18 billion, up 11.01 per cent compared with July 2014, followed by Japan with $1.3 billion. In the eleven TPP markets, Vietnam’s textile exports since the beginning of 2015 have all seen positive growth.  The TPP, however, has very strict requirements on the origin of materials, to which Vietnam’s textile exporters have paid inadequate attention. Textile exports must follow the “yarn forward” rule, meaning that all materials used in production must have been produced in countries participating in the TPP.  

A representative from the World Bank in Vietnam said that the country is the third-largest exporter to the US market but a vast share of its production materials are imported, mostly from China. When joining the TPP Vietnam must provide more of its own inputs to increase added value as it will not be able to import materials from China if it wants to benefit from the preferential tariffs provided under the TPP.Currently, the added value of the textile sector is low due to low labor productivity. For example, with Polo shirts, Vietnamese workers can sew 12 units a day while Chinese workers can sew 25 units. Mr. Nguyen Xuan Duong, Chairman of the Board at the Hung Yen Garment Corporation, acknowledged that Vietnam’s labor productivity is low, at only 30 per cent of that in Malaysia and 40 per cent of Thailand’s. Therefore, if the sector wants to move up the value chain it needs to invest in resources and technology.

Degree of optimism

According to Ms. Dang Phuong Dung, Vice Chairman and General Secretary of Vitas, the “yarn forward” rule will be major stumbling block for Vietnam because of weaknesses in material supplies such as fabric and dyeing, which are dependent upon imports. It is therefore necessary that enterprises and the government make greater efforts to attract foreign investment that addresses these weaknesses, she said. Meanwhile, Mr. Vo Tri Thanh, Vice Chairman of the Central Institute for Economic Management, is optimistic that the rules of origin, technical and labor standards, and environmental and legal procedures will be difficult in the short term but will drive enterprises forward in the long term. He believes that after joining the TPP the textiles market will grow and this creates opportunities for the sector to develop. The tariff rate on textiles is currently 16 to 17 per cent but under the TPP will be zero. It is clear that the TPP provides competition and benefits to the textile sector.

SOURCE: The Global Textiles

Back to top

Nigeria to Revive Textile Industry, Says Emefiele

In line with its resolve to support the revitalisation of critical sectors in the economy as well as to promote locally made goods, the Central Bank of Nigeria (CBN) initiated a meeting that would lead to the revival of the country's ailing textile industry. CBN Governor, Mr. Godwin Emefiele, while speaking during a meeting with cotton, textile and garment industry stakeholders in Lagos, said the central bank would provide single-digit interest rate and long-tenored loans to operators in the industry. Emefiele, however, stressed that the problems that had stunted the contribution of the textile industry to Nigeria's growth, were far beyond funding. He also disclosed that he recently met with the Comptroller-General of the Nigeria Customs, as part of a collaboration to tackle smuggling of textile goods.

"Mr. President is committed to the rejuvenation and revival of this sector and he is desirous of bringing this industry back to life," he said. According to Emefiele, it was disheartening that an industry that literally touched the fabric of the entire country now pales in the shadow of its past success. "A sub-sector that once employed over one million hardworking Nigerians is now almost completely dominated by imports from Asia. We are all aware of the challenges that have beset and continue to plague the industry and I am under no illusion that this meeting will immediately resolve these issues. "The central bank under my leadership is prescribing to work with the industry to come up with holistic solutions for the long-term sustainable development of the sector. I can assure you that the Bank is ready to provide funding under our Real Sector Support Facility for the industry. "This in my humble opinion is the crux of this meeting, which I will like us to keenly deliberate upon. How for instance, can we get cotton farmers to increase their output, reducing dependency on imports? Or how can all stakeholders form a strong advocacy to create a more enabling environment for the sector to thrive once again? I am confident that with our collective efforts, we can finally change the sad narrative about this industry," he added.

Continuing, the CBN governor pointed out that the human needs for clothing and the competitive advantage of the country made the sector formidable and key in our path to industrialisation in the 1970s and 1980s. During this era, he noted, that the textile industries were spread across the country, with many mills located in Kaduna, Lagos, Funtua, Gusau, Asaba, Aba, Kano and a host of other cities. There were well over 159 vibrant textile mills operating at close to full production capacities. “Indeed, Kaduna was known as the 'Textile City' of the country, becuase of the preponderance of huge integrated textile mills domiciled in the city. "Unfortunately, these glory days are now distant memories. I recall with bittersweet memories, many years ago as a credit manager when I transversed Lagos, going from Anthony Village, to Oshodi all the way down to Amuwo Odofin and Mile 2, appraising loan requests from textile companies. “As a credit manager, it was a race against time, as if you didn't have a textile company in your loan portfolio you were deemed to have underperformed. "Now, these days, as I drive past these factory locations, I shudder with sadness at the abandoned and dilapidated structures. Indeed, many of the premises have been leased or sold to other companies, who are involved in importation of various commodities like rice, tomatoes, textiles, dairy, products and even automobiles. "Sadly, from a pinnacle of 150 vibrant mills, the sector can only boast of less than 20 textile companies still managing to stay afloat. While the resolution of many of these challenges are well outside the purview of the CBN, it will be expedient to explain how the Bank can complement the effort of other agencies in ameliorating these challenges. "Key among these issues has been policy somersault by various governments. The country today officially and unofficially imports millions of dollars of textile products into the country.  Since the CBN has no mandate to out rightly ban the importation of any product into the country, the Bank recently included textiles as one of the 41 items excluded from forex sales from the Nigerian forex market,” he added.

Meanwhile, the Bankers Committee, which is made up of the bank chief executives, the CBN and NDIC, said they would commence the imposition of market sanctions on the chronic debtors whose names and firms had been published in national newspapers. The acting Director, Banking Supervision, CBN, Mr. Kolawole Balogun, disclosed this while briefing journalists at the end of the committee's 323rd meeting in Lagos. He added: "We have seen good responses from the name and shame strategy of recovering delinquent facilities. This is not the end, there will be follow up actions in terms of market sanctions. It is the decision of the Bankers Committee. However, those who regularise their accounts with the banks will not be part of this.” In addition, the Bankers’ Committee clarified that domiciliary accounts were still operational in the country. Speaking on this, the Managing Director, Guaranty Trust Bank Plc, Mr. Segun Agbaje, said domiciliary accounts were still operational, except that banks no longer accept cash deposit of dollars and other foreign currencies. He, however, said the CBN was ready to meet demand for invisible trade items through its windows.

SOURCE: The This Day Live

Back to top

How China is trying to accelerate its GDP growth?

China can tolerate being called anti-democratic or a currency manipulator amongst a host of other things by its western counterparts and emerging market peers. But what it can never tolerate is the perception that its Government is not in control. For the first time in many decades, there is a feeling amongst market participants that the so called ‘Beijing put’ has vanished. There is suddenly no guarantee that Chinese policymakers can intervene to stem the severe capitulation in domestic asset prices and reverse its medium term economic fortunes. Desperate times call for desperate measures. Crisis intervention measures used by China so far have not been starkly different from what other global majors like Japan, US, UK and the Euro-zone have used in the past during the crisis years.

On the monetary policy front, interest rates have been sharply cut although not to the zero bound. But in terms of liquidity support to the financial system, China has gone all out by the reduction in reserve requirements ratio, easing of collateral standards and rules, robust repo activity and opening the central bank’s wholesale windows to a larger array of institutions. There has been direct central bank/treasury investment and recapitalization of systemic institutions. Direct lending to private non-financial enterprises may soon follow according to Macquarie. In terms of direct central bank intervention in asset purchases including sovereign bonds, corporate bonds and mortgage instruments, China is not in full QE mode yet. But the indirect intervention in the equity markets is a clear signal that curbing volatility and putting a floor on the stock market is one of Beijing’s top priorities.

The regulatory actions taken by policymakers are yet another hint at just how bad things are. Temporary ban on short-selling, suspension of stock trading, easing stock buy-back rules, temporary prohibition on selling by key shareholders, encouraging national pension and investment funds to buy national assets/equities are some of the measures that have been taken. Changes in accounting rules (elimination of mark to market etc) may soon follow. Most of these above measures, at least in theory, reduce market efficiency thus opening the door for even more volatile moves in the future.

Clearly, all signs point towards some more aggressive form of Chinese styled QE. As in the case of Japan, US, UK and the Euro-zone, QE can certainly shore up asset prices for prolonged periods of time. But the key risk for China and in turn the global economy is that structural reforms will be put on the backburner. China should accept the harsh reality that 4-5 percent growth is the new normal and get rid of its silly obsession of trying to accelerate nominal GDP growth. The current liquidity relief measures must be accompanied by core structural reforms as the economy slowly tilts towards being more driven by consumption than investment. The lessons from Japan must be learnt and applied quickly. The structural reform agenda must be laid out with the same ferocity as the need to subdue and control asset price volatility within the backdrop of excessive leverage, overcapacity and stagnant demand.

SOURCE: The Financial Express

Back to top

Pakistan Textile body sends proposals to govt for industry revival

The Standing Committee on Textile of the Senate chairman Mohsin Aziz has said that Senate will raise the issue of restoration of viability of textile industry on Monday (today) while the committee has already sent its recommendations to the government to facilitate the sector. He said that the leadership of APTMA had made a detailed presentation on the tariff, tax and investment related issues confronting the viability of the industry to the Standing Committee on Textile of the Senate. The Standing Committee agreed that the textile mills are being closed down due to the wrong policies of the government. Mohsin Aziz said that the Senate Standing Committee has sought special electricity tariff for the export-oriented textile industry operating on the independent feeders with zero line losses, arguing that only a regionally competitive electricity tariff could save the textile industry ahead. He added that the committee has also suggested the zero rating regime for the textile exporters in line with the WTO laws. He pointed out that the high cost of doing business has halted the investment prospects in the textile industry.He said the textile millers were unable to bear this burden and compete in the region. “The federal finance minister has also agreed that the textile industry has become uncompetitive in the region.”He said that on Monday the Senate would be told that Pakistan textile industry has registered a growth of merely 22 percent during last five years, which is even less than the world average increase of 44 percent. He said the textile exports have increased by 230 percent in Vietnam, 160 percent in Bangladesh, 97 percent in China and 94 percent in India during 2006 – 2013. He said the viability of the textile industry has been challenged because of the undue burden and jobs of 15 million workers are at stake.

The government has burdened the textile industry with Rs38 billion gas infrastructure development cess, Rs78 billion electricity surcharge and Rs65 billion innovative taxes. The total impact of this burden comes around Rs157 billion per annum, which is 12 percent of the sales of the industry.Its to be noted that four committees have been constituted to tackle the issues relating to the ministry of commerce, ministry of water and power, ministry of oil and gas and the federal board of revenue.Chairman APTMA S M Tanveer, along with the group leader APTMA Gohar Ejaz also held meeting with the Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan to discuss the restoration of viability of the textile industry including a regionally competitive electricity tariff and zero rating of taxes on exports. The meeting was chaired by Haroon Akhtar Khan, Special Assistant to Prime Minister on Revenue. Secretary Textile, Amir Muhammad Khan Marwat, Senior officials from Ministry of Commerce, Members of FBR and other senior officers of FBR also attended the meeting. The representatives of the industry explained viability issues of the industry due to high inputs and tough international competition. They also raised certain issues relating to FBR which were discussed at length. Many of the issues were settled during the meeting on which the textile industry representatives expressed their satisfaction. Mr. Haroon Akhtar Khan, Special Assistant to Prime Minister on Revenue, assured the industry that FBR will facilitate the industry and try its best to resolve the issues (which could not be settled during the meeting), as early as possible.

SOURCE: The Nation

Back to top