Public capital expenditure will be stepped up and the disinvestment programme will “gain momentum” from now on, she stressed. Emphasis has also been laid on state-run banks raising capital from the market, she added.
Finance minister Nirmala Sitharaman on Tuesday asserted that the Budget for FY22 will be “vibrant” enough to sustain economic revival in the aftermath of Covid-19 disruption. Public capital expenditure will be stepped up and the disinvestment programme will “gain momentum” from now on, she stressed. Emphasis has also been laid on state-run banks raising capital from the market, she added.
Speaking at an Assocham event, Sitharaman said: “Something which certainly will be a feature (in the Budget) is that we shall definitely sustain the momentum on public spending in infrastructure. That is the one way, we assure the multipliers will work and the economy revival will be sustainable.”
“Recognising that this is an unusual year, borrowing has been kept absolutely at levels with which we can quickly put the money back in capital expenditure and so on. The emphasis on public expenditure for infrastructure through the public sector undertakings (CPSEs) will be definitely kept up,” the minister said.
After lagging behind in the first and second quarter of FY21 due to Covid-19 disruptions, the CPSEs’ capex has covered a lot of lost ground in the third quarter, she said. The minister has also noted that the National Investment and Infrastructure Fund (NIIF) is taking steps to mobilise funds from abroad including from sovereign wealth funds.
The Centre, states and central PSEs among them will likely spend Rs 7.5 lakh crore on capital investments in the second half of this year, up 80% over such expenditure in the first half, according to an FE analysis, based on official projections and information gathered from different sources. The expected surge in public capex in H2 would mean that a recovery in fixed investment rate that was visible in Q2 will gain further steam in the second half of the fiscal year, giving a strong support to gross capital formation.
On disinvestment, Sitharaman said the slow pace of disinvestment was due to liquidity issues in FY20 and Covid-19 in FY21. “Pace of disinvestment will now gain a lot of momentum, and those which have already given cabinet approval, will be taken up with all earnestness. Also, banks should also be able to base their values in the market and should be able to raise money from the market, even that emphasis has been given.” She said corporatisation of the Defence Research and Development Organisation (DRDO) labs are also being done.
The government had budgeted an ambitious disinvestment target of Rs 2.1 lakh crore for FY21, hoping to garner a substantial chunk of non-tax revenue to partly make up for a lower-than-expected rise in tax collection, even before the pandemic spread its tentacles. However, the disinvestment receipts so far have been about Rs 10,900 crore or 5% of the FY21 target. While there will be likely a substantial shortfall compared with the disinvestment target, the government is banking on strategic disinvestment of fuel retailer-cum-refiner BPCL, which could fetch about Rs 70,000 crore. Recently, the government received expression of interest from potential buyers for its 52.98% stake in BPCL and 100% in Air India.
Source: The Financial Express
Richest Indian Mukesh Ambani on Tuesday said India will grow to be among the top three economies in the world in the next two decades and per capita income would more than double. At a fireside chat with Facebook CEO Mark Zuckerberg, Ambani said India’s middle-class, which is about 50 per cent of the nation’s total number of households, will grow three to four per cent per year.
“I firmly believe that in the next two decades, India will grow to be among the top three economies in the world,” said Ambani, who heads oil-to-retail-to-telecom conglomerate Reliance Industries Ltd. More importantly, it will become a premier digital society, with young people driving it.
“And our per capita income will go from USD 1,800-2,000 per capita to USD 5,000 per capita,” he said. Facebook, Jio and many other companies as well as entrepreneurs in the world have a golden opportunity to be in India, and be part of the economic and social transformation that will accelerate in the coming decades, he added. Ambani said India has faced the COVID crisis with enormous resilience and resolve.
“The sheer magnitude of COVID-19 pandemic, like everybody else in the world, did startle all of us in India. But then I think it is not in India’s DNA to be deterred by a crisis,” Ambani said, adding that every crisis presented an opportunity for new growth. India is ready and pretty much on par with the world to roll out one of the largest vaccine programmes in the first half of 2021, he added.
From building a hospital dedicated to COVID-19, to producing PPEs, and from meal distribution programmes for vulnerable sections, to Jio ensuring connectivity and handling the rise in network traffic as people worked from home, Reliance and Reliance Foundation had taken a series of steps in the face of the pandemic.
“…Sometimes I wonder that if the pandemic had struck India just four or five years earlier, we would not have been in as good a shape as what we are today, with all the connectivity we have,” Ambani said, lauding the Digital India vision. It is during the pandemic that India has attracted the largest foreign direct investment in its history.
“…We have our own example of how Jio and Facebook concluded our partnership right in the middle of lockdown,” Ambani said, referring to Facebook’s Rs 43,574 crore investment in Jio Platform earlier this year.
It may be recalled that Jio Platforms — that houses India’s youngest but largest telecom firm Jio and apps — has raised about Rs 1,52,056 crore from marquee investors, including Facebook, Google, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton, Public Investment Fund of Saudi Arabia, Intel Capital and Qualcomm Ventures, for a total 32.9 per cent stake.
Ambani said he is of the firm belief that technology, with all the digitisation steps that India has taken, will democratise the wealth and value creation for individuals and small businesses.
“And together with our platforms and the tools that we will provide to small businesses and to individual consumers, I believe will drive India to a 5 trillion economy and will make a much more equal India, with more equal wealth growth at the bottom of the pyramid,” Ambani said. There are great future opportunities in areas like education and healthcare, he said, adding that the next two decades will prove to be “historic” in terms of the social and economic transformation.
Source: The Financial Express
Some of the top Indian textile companies are seeing some hope in the coming months as the revenues dropped less than what many expected them to.
Many textile companies are now focussing on exports and are hoping that revenues and profit margins would pick up in the coming months, a report said.
Most of the textile companies have been under stress for the past few years. The Covid pandemic and the economic slowdown that followed had only made the situation worse for the sector, ..
SOURCE: The Economic Times
Higher in-home consumption due to increased stay-at-home period and a sharper focus on health and hygiene amid the pandemic are helping Indian home textile exporters weave their way out of the downturn faster than other textiles segments, according to a Crisil report released on Tuesday.
Revenue de-growth for home textile exporters will be limited to 10-12 per cent this fiscal compared with 30-35 per cent for the overall textile sector, indicates a Crisil analysis of 50 companies that account for over 60 per cent of India’s home textile exports.
SOURCE: The Economic Times
Home textile exporters are emerging out of the downturn faster than other textile segments with increase in demand from people working from home and a sharper focus on health and hygiene amid the pandemic.
Revenue degrowth of home textile exporters will be limited to 10-12 per cent this fiscal compared with 30-35 per cent for the overall textile sector, according to a Crisil analysis of 50 companies that account for over 60 per cent of India’s home textile exports.
While lower revenues will hurt operating margins, exporters would save on fall in the requirement for working capital and lesser capex.
Also read: Textile products prices have gained traction in October: Ind-Ra
The ₹55,000-crore Indian home textile sector, comprising products such as terry towels, bed sheets and spreads, pillow cases, curtains and rugs and carpets, derives 60-70 per cent of its revenue from exports.
The United States and the European Union account for over 80 per cent of these exports, with big-box retailers of essentials and departmental stores among the major customers.
Anuj Sethi, Senior Director, Crisil Ratings, said export order flow has improved significantly beginning with the second quarter of the current fiscal due to reopening of departmental stores and pent-up demand.
Sales are expected to stay strong in the third quarter due to the festive season, when these retailers launch large-scale programmes, he said.
The improvement is borne out by a 7 per cent sales growth in the fiscal second quarter for four large, listed home textile exporters which logged 40 per cent lower revenue on-year in the first quarter.
The lockdown had a limited impact on retailers of essentials as these operated through the Covid-19 pandemic. However, sales at departmental stores suffered heavily in the March-May period. Some retailers also underwent restructuring, leading to permanent store closures.
Also read: Retailers take the online route to banish Covid fears
Operating margin of home textile exporters is expected to fall by 200 basis points to 12-13 per cent from 15 per cent seen over the past two fiscals.
That said, home textile manufacturers deriving a larger part of their revenue domestically are affected more than exporters due to extensive lockdowns in India and gradual opening of many retail outlets, leading to slower recovery.
Source: The Hindu Business Line
A relentless torrent of funds rushing into India’s markets may tip the central bank’s delicate balancing act in 2021.
For most of this year, the Reserve Bank of India has capped currency gains as global investors poured around $50 billion into stocks and stakes in companies. This has boosted rupee liquidity in a banking system that’s already flush with cash from the RBI’s stimulus measures.
There’s growing consensus among traders and fund managers that the mounting pressures -- particularly the liquidity glut distorting money markets -- may spur the central bank to consider a range of changes, from relaxing its grip on Asia’s worst-performing currency to curtailing bond purchases.
A modest gain in the rupee over the past month could mean that policy makers are already dialing intervention down a touch, or that inflows are starting to get the better of them.
“We believe that the RBI is facing a tough task of liquidity management while juggling FX inflows, secondary bond market purchases to keep long-term borrowing costs low and ensuring money-market rates are aligned to the policy rate," said Kanika Pasricha, an economist at Standard Chartered Plc in Mumbai. Steps must be taken to realign money-market rates with policy rates, she said.
While most currencies in Asia have benefited from a weaker dollar, the rupee is down 3% this year. Traders point to how the RBI has bought $58 billion of dollars in the first nine months of the year as signs of its intervention.
Governor Shaktikanta Das has only commented very broadly on the matter, writing in the most recent policy statement that the central bank acts to damp forex volatility and keep the rupee in sync with underlying domestic fundamentals.
Inflows into India’s equity markets have grown to more than $19 billion this year, on course for the most on an annual basis since 2013. Foreign investors have also completed about $30 billion of acquisitions in cash, according to data compiled by Bloomberg.
Declines in the dollar, which is forecast to keep falling in 2021, are fueling fund flows into emerging markets globally.
In India, capital inflows may reach $82 billion by the end of the fiscal year though March, then continue at much the same pace for the following 12 months, according to estimates from Deutsche Bank AG.
“Given the multiple challenges from excess liquidity due to capital flows and inflation, the RBI may be forced to reduce the intervention and allow appreciation," said Arvind Chari, head of fixed income and alternatives at Quantum Advisors Pvt.
The median of estimates compiled by Bloomberg is for the rupee to appreciate to 72 per dollar by the end of 2021. Analysts at Goldman Sachs Group Inc. forecast the currency as strong as 70 by March 2022. It ended trading at 73.5575 on Monday.
To be sure, some including B. Prasanna, ICICI Bank Ltd.’s head of global markets, sales, trading and research, argue that when you look at the rupee relative to a basket of its trading partners, the currency is overvalued and the RBI will have little tolerance for it to strengthen sharply.
With excess cash in the banking system estimated at 7 trillion rupees ($95 billion), key overnight rates have plunged below the reverse repurchase rate that marks the lower bound of the central bank’s policy corridor.
Lower shorter rates without a similar drop in long-term borrowing costs means a steeper yield curve, which tends to undermine efforts to stoke growth.
The pricing also points to loan rates dropping below similar tenor bond yields, which crimps profits for banks. If things stay this way long enough, it would also cause a mismatch between assets and liabilities in the financial sector, which could ripple through wider economy.
Analysts suggest the RBI will be forced address the glut early in 2021.
Among a host of options, it could allow wider access to the reverse repo window, hold variable reverse repo auctions at higher rates and set up a standing deposit facility to absorb surplus liquidity, according to economists at HSBC Holdings Plc including Pranjul Bhandari.
Other possibilities are raising the cash reserve ratio and opting not to replenish currency that leaks out of circulation, they wrote in a recent note.
But there are also fears that taking these kinds of actions could end up spooking debt markets and erode demand for government bonds.
This would be a big problem with the government selling record amounts of bonds to nurse the nation through the coronavirus pandemic.
Against this wider back drop, the central bank this month reminded markets of its capacity to deliver surprises.
While the RBI kept rates unchanged as expected at its final policy meeting of this year on Dec. 4, it dashed expectations among traders and fund managers that it was ready to start soaking up excess liquidity.
Michael Patra, the influential deputy governor in charge of monetary policy, said this month that the RBI is keeping a “very careful and close watch on the liquidity situation" and is aware that excess funds in the system can fuel inflation.
The next monetary policy decision is scheduled for Feb. 5, by which time market pressures may be even higher.
“Options for the RBI to manage and accelerate the recovery are a complex balancing of alternatives involving economic and financial tradeoffs," said Saugata Bhattacharya, chief economist at Axis Bank Ltd. in Mumbai. “A range of tools will be deployed incrementally to gradually drain the system liquidity and tighten financial market conditions."
Source: The Mint
The government is all set to launch a ‘Brand India’ mission, focused on the promotion of quality products that are manufactured in the country. The move, being piloted by the Piyush Goyal-led commerce and industry ministry, is based on similar policies in other countries, including the US, Switzerland, Germany and France, which regulate claims made to goods produced in their jurisdiction.
The idea is linked to the extent of local production with countries such as Switzerland offering the tag to service sector companies if they are headquartered there. In case of food products, the requirement is 80% local production. Goyal’s plan, discussed with the Quality Council of India and other agencies last week, is looking at country of origin certificates, which will be voluntary with self-certification to be vetted by certain entities. It will be applicable to natural as well as manufactured goods ..
To be eligible for the tag, manufactured goods producers need to be registered in India and should comply with the prescribed health and safety standards. A minimum 20% local content is being discussed with the final assembly required in India.
Sources said the entire certification process is proposed to be completed within six to 10 days of an application being filed, with monitoring expected to start after six months. Once a decision is taken, the mission can be launched in around a year with the initial plan to be tested through a few pilots.
Those who opt for the scheme may be given recognition by the government emarketplace and other platforms, preference in public purchase and other benefits, including those under trade agreements, sources familiar with the deliberations told TOI, adding that the plan is still to be firmed up.
After the recent tension with China, the government has shifted to an Atmanirbhar Bharat strategy, where it is seeking to get Indian companies to be part of the global value chain, in addition to produce for the domestic market. Along with import curbs on some products such as TV sets and tyres, the Centre is also insisting on disclosing the country of origin of goods, especially in case of ecommerce. A host of products, from electronics to automobiles and defence equipment have been identified ..
Source: The Economic Times
According to a recent Retail Sourcing Report Forecast, while the global trade suffered as a result of the COVID-19 pandemic, the projections for 2021 do suggest that we are on the road to recovery. The report highlighted that global manufacturing rebounded through Q3 and Q4 of the current year, with output figures, exports and new orders having spiked to some of the highest levels recorded since 2018. According to the report, physical-distancing and stay-at-home orders have accelerated the progression of the e-commerce industry, with e-commerce accounting for over 16.1 per cent of total global retail sales in 2020, up from 7.4 per cent in 2015. By 2023, online retail should comprise 22 per cent of total retail.
With Indian retail too on the recovery path, this festive season was the hook that the industry was looking up to count in profits. We looked closely at the sourcing aspect of the retail business to get more insights into the market responses.
Buying on a rise
“The lockdown has forced people to stay indoors and made consumers adjust to the essential style of living. The opening up of the shops and markets came as a breather after months of restrictions. We have been able to register very good sales during Diwali and have been witness to revenge buying. There has been a prominent demand all across our stores, in fact we had to do emergency sourcing just to fulfil the demands we were encountering,” Anshul Grover, Sourcing Head – Bestseller mentioned.
Anshul further mentioned that the response was extremely overwhelming and they could cut corners and make up for the losses the brand had faced owing to the pandemic. Anshul voiced his excitement for the end of the year sale and mentioned that the preparations are underway to make it a worthwhile celebration for the shoppers.
Comfort is pivoting the change
“This year made people realise a lot of things and changed the way they look at the retail market. The industry also altered its path and way of doing things in line with the altering customer responses. One thing that we have learned in this path is that comfort clothing is now becoming the talk of the town and people want to invest on clothes that are easy to wear and which allows them to be comfortable all through their WFH routine. This is where our sales got boosted and we did see a noteworthy response from our customers during the last few months. We were fast to understand the trend and source as per the need of the hour and that helped us stay closer to the customer. We did not have to restructure our sourcing processes, because our offering was well aligned to the times and #NewNormal. We just ensured that the stores, retail outlets and all our touchpoints have enough stocks to service the increasing demands for comfort clothing. We are really aiming to have a good quarter sales in the start of the next year as well,” stated Wickrant Gambhir, Head of Sourcing, Jockey India.
Sourcing to stay on track
Ramesh Ramalingam, AVP Sourcing, Arvind Fashion Limited highlighted that the race to recovery is still not over. “Even though festivities have been a good time to get back on the feet and has motivated us to walk the path ahead with more hopefulness, there is a long way to go. On the sourcing front, we generally stay stocked for the year much ahead in time and given the lockdown, we have been able to sell online and with the stores opening and the festivities, the response has been good overall. But, the trend is certainly towards comfort clothing and that is what we are aiming to increase in our plan for at least a few months in the coming year too.”
Some alterations, preparedness and a strategy to watch the trend has helped brands and retailers source clothing that fits the bill of the #NewNormal. But, they univocally inform that this is just the start; good sales number to moderate business can only give way to a normal market figure when the momentum of sales keeps on. Staying on track is more important now and that will eventually make all the difference.
Source: Apparel Online
INTERNATIONAL
The US and its European allies will continue to promote policies that will restrict China’s geopolitical ambitions
While recent years have seen the remarkable rise of China’s global power and influence, 2020 will remain for long embedded in the minds of the people of India as the year marked by the death of over 170,000 fellow citizens stricken by Covid-19.
India put an end to an era of repeated famines, with a Green Revolution which made it self-sufficient in food production two decades after Independence. Its economic growth, however, was amongst the slowest in Asia, lagging behind the rapid growth of its free market-oriented eastern neighbours. The process of economic liberalisation in India was welcomed across Asia and the world, as India’s economic growth briefly touched 8 per cent, and more.
There are questions on whether such a high growth rate can be sustained. It must be acknowledged that much more is required to be done to revitalise our industrial sector, which has not risen up to expectations. The government now talks of building a “self-reliant” India, with a much greater dependence on its industrial growth, together with disincentives on industrial imports.
The US and Europe have seen a massive rise in imports from a resurgent China, causing serious distortions in their economies and raising possible threats to their security. They now appear keen on getting out of a Chinese embrace, or becoming excessively dependent on China. This is particularly in industries which have security implications. This is also evident in policies of the Trump Administration, which are likely to be followed by European allies and even by the incoming Biden Administration.
Unlike President Donald Trump, Joe Biden enjoys a close rapport with the leaders of European partners. Western countries now appear set to reduce their dependence on China for finished engineering products whose original designs were fashioned in the US and Western Europe.
It has taken five decades for the US and its European allies to realise that China has taken them for a ride up the garden path, while benefiting from their reluctance to realistically understand the dangers a close embrace of China posed.
Search for new partners
The process of the US and its allies realising that they have to look for new partners who can be reliable, has just got started, erratically under the Trump Administration. There are, however, few, if any, leaders in Europe who trusted President Trump’s ability to be a long-term partner of any country. The Trans-Atlantic relationship was badly scarred and damaged by Trump.
The Europeans would, however, be more comfortable with President Joe Biden who is known to be measured and transparent in the conduct of foreign policy. Biden is a strong believer in the importance of the Trans-Pacific Partnership. The Europeans, in turn, are slowly distancing themselves from moves promoting China’s geopolitical ambitions. This is evident in recent moves by leading European players like France and Germany.
Despite their intense dislike for President Trump, the European Union joined the US in a group of 22 countries sponsoring a resolution in the UN Human Rights Council, on July 8, 2019, which condemned China’s mass detention of Uighur Muslims, in its Xinjiang Province. It called on China to “refrain from the arbitrary detention and restrictions on freedom of movement of the Uighurs and other minority communities”.
Not surprisingly, China mobilised support from 37 other countries to oppose the resolution. Despite its preoccupation with the coronavirus pandemic, the European Parliament recently urged the European Union to impose “targeted sanctions” on China, including a ban on export of technology to China that can be used to violate human rights. It remains to be seen how and when the EU and the US will work jointly on implementing the proposed sanctions.
One can now expect a substantial measure of cooperation and coordination between the US and the European Union in dealing with the security and other challenges China poses. Most notably, that the US will end all collaboration in telecommunications with Huawei. A number of European countries are set to follow suit. That is a serious setback to China’s global ambitions in telecommunications.
The Biden Administration will assume office next month. While one can expect a broad continuation of policies that the Trump Administration assumed on China, the Biden team will be much more measured and consistent, in the administration of strategic and economic policies. The phased US withdrawal of its excessive military presence globally and particularly in the Arab and Islamic world will be carefully undertaken.
Saudi Arabia appears to be particularly concerned by the proximity of the Saudi Royalty to the Trump family. But other Arab countries appear ready to fall in line with new American policies. Given the strength of the Jewish lobby in Biden’s Democratic Party, Israel will receive continuing American support. But Biden will work to end sanctions on Iran imposed by Trump, while proceeding cautiously on this issue, in deference to Israel’s concerns.
Biden will also have to take note of China’s growing influence in Iran, where Chinese investment is set to increase substantially. With China presently undertaking joint Air Force exercises with Pakistan, on India’s western borders, India will have to be prepared for much closer Pakistan-China cooperation on provision of real time intelligence and arms supplies. China appears to be preparing for a long-term physical presence in both Gilgit-Baltistan and in the Gwadar Port.
Fallout for India
There may be exaggerated expectations about how much India can benefit from the growing estrangement between China on the one hand, and the US and its European allies on the other. The Indian Ocean region is becoming a Centre for great power rivalry. This was evident in the Joint Air Exercises carried out by Pakistan and China recently, just adjacent to India’s eastern borders.
This was also a time when China’s armed forces are deadlocked in a military confrontation with India in Ladakh. The Chief of Defence Staff General Bipin Rawat noted recently that 120 warships of various countries are now deployed across the Indian Ocean Region. He added that: “China’s rise has been one of the most defining moments of the 21st century”. This could also be the moment when India moves together with friends and partners, to meet the challenges posed to the balance of power in the Indian Ocean region, by the rise of an assertive and aggressive China.
The writer is a former High Commissioner to Pakistan
Source: The Hindu Business Line
The textile and clothing imports of the USA under United States-Mexico-Canada Agreement (previously NAFTA) have fallen 23.79 per cent in January-October ’20 period.
According to OTEXA, the imports of USA valued US $ 3.64 billion in the said period as against US $ 4.78 billion in the same period of 2019.
Of total import of USA, apparels contributed US $ 2.16 billion and fell 33 per cent on yearly note.
Mexico shared US $ 1.81 billion (down 32.47 per cent) and the contribution of Canada was US $ 351.27 million (down 35.74 per cent) in US apparel import in first 10 months of 2020.
On the other hand, the fall in textile imports of USA from these two countries was comparatively less than decline in apparel segment.
Mexico shipped US $ 977.79 million worth of textile products to USA in Jan.-Oct. ’20, marking just 6.16 per cent Y-o-Y decline.
Canada, however, noted just 1.48 per cent fall in its textile exports to USA which valued US $ 505.19 million.
It’s worth noting here that USA has seen Y-o-Y growth from some Asian and African countries in its apparel imports during pandemic-hit year but the downfall from Mexico and Canada is a serious dent in ‘nearshoring’ approach of the US buyers.
Source: Apparel Online
Cotton trouser is one of the important product categories for the US buyers; however, the import of the same has sharply fallen in January-October ’20 by 25.61 per cent in value term.
The total import of cotton trousers valued US $ 7.61 billion in the 10-month period shrinking significantly from US $ 10.24 billion in the same period of 2019, according to OTEXA.
Out of 35 cotton trousers’ shippers to USA, only 2 managed to grow on Y-o-Y basis which are Ethiopia and Myanmar.
Ethiopia shipped US $ 58.34 million worth of cotton trousers to USA in the said period, marking 21.86 per cent surge from the same duration of 2019.
On the other hand, Myanmar totalled US $ 17.68 million (up 82 per cent) in its cotton trouser export to USA. Markedly, both the countries have shown resilience even in some other product categories made out of cotton in 2020.
Bangladesh, the top exporter of the segment to USA, declined by 18 per cent to US $ 1.66 billion, while Vietnam remained at second spot with US $ 1.44 billion export revenues which were down by 4.55 per cent on Y-o-Y note.
As far as India is concerned, it slipped to the 9th spot in 2020 because of significant fall of 34.40 per cent on yearly note and the export of the cotton trousers to USA valued just US $ 187.34 million.
What’s setback for India is that it has been surpassed by Jordan which grabbed 8th rank with US $ 235.0 million export figures in Jan.-Oct. ’20, falling by just 6.65 per cent from Jan.-Oct. ’19 period.
Source: Apparel Online
