India hosted the first meeting of the BRICS finance and central bank deputies of 2021 in virtual mode on Wednesday, according to a statement from the finance ministry.
India had assumed the BRICS chairship for this year, at a time when the organisation, formed by the nations of Brazil, India, Russia, China and South Africa, was celebrating its 15th anniversary.
The meeting was co-chaired by Tarun Bajaj, economic affairs secretary and Michael Patra, deputy governor of the Reserve Bank of India, under the theme, ‘BRICS@15: Intra-BRICS Cooperation’.
The priorities for the year, set by India, included the global economic outlook and response to Covid-19 and social infrastructure financing.
The issues discussed ranged from the activities of the New Development Bank, fintech for small and medium enterprises, financial inclusion and the BRICS contingent reserve arrangement, which is a framework for the provision of support through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures.
Source: The Economic Times
The Punjab state cabinet last week approved an amendment to the Industrial & Business Development Policy, 2017, for extension of the goods and services tax (GST) formula for availing incentives under the said policy till October 17 next year. This was reportedly done to promote post-COVID industrial revival and attract greater investment.
The move was also a result of feedback from several industry associations, who had demanded extension of the last date of claiming the GST incentive, given in the notification dated October 17, 2018, and make this last date as coterminous till the expiry of the Industrial Policy of the state.
The fiscal incentive under the present policy was only applicable for investment proposals received by March 31, 2020, on the Invest Punjab Business First Portal.
To avail the benefit of additional borrowing of 2 per cent of gross state domestic product (GSDP) in 2020-21, the state cabinet also gave approval to amend the Punjab Fiscal Responsibility and Budget Management (FRBM) Act, 2003, according to media reports from the state.
Notably, the central government has allowed 2 per cent of GSDP, of which 1 per cent shall be unconditional and remaining 1 per cent shall be conditional to specific reforms.
Source: Fibre2Fashion News
Many exporters, who had been issued notices by the Directorate of Revenue Intelligence (DRI) for availing GST exemptions where exports preceded imports, have managed to get a temporary relief from the Gujarat High Court. The high court said that it would be hearing the complaints by the exporters.
DRI had begun issuing notices to exporters in the last few months, raising questions around benefits claimed under the GST framework for advance authorisation scheme.
The scheme essentially allows exporters to claim credit of raw materials bought before actually exporting the product.
“The restriction to claim benefit of IGST (integrated GST) exemption to advance authorisation licence holders has been imposed by way of rules and creates a distinction between two classes of Indian exporters. Accordingly, judicial review of such a restriction will have to be decided by the courts,” said Abhishek A Rastogi, partner at Khaitan & Co, who is representing some exporters in the Gujarat High Court.
The exporters were asked to pay IGST first as the foreign trade policy has been amended and several notifications were issued in the last few months.
Source: The Economic Times
The government is looking to ensure that India become self-reliant in the silk sector in the next two years, Union Minister Smriti Irani said on Tuesday.
The Minister of Textiles and Women & Child Development said that the recent Budget has brought cheer to the textile industry with the announcement of seven mega textile parks.
Addressing the inaugural session of the Karnataka Vastra Tek – Apparel & Textile Conclave organised by the Department of Handloom and Textiles, Government of Karnataka in association with FICCI Karnataka State Council, Irani elaborated on the growth of the silk sector in the state. She also said that Karnataka reigns in the realm of silk.
“Under the Silk Samagra Program, the Government of India dedicated specifically over Rs 2,000 crore for the development of silk. I am hopeful that the industry gives the state of Karnataka ideas, proposals or initiatives that can make our country Aatmanirbhar in silk. We in the Ministry of Textiles are looking at the next two years to ensure that India is self-reliant in the space of silk,” she said.
On the future of textiles in the state of Karnataka, the minister said that the Minimum Support Price operations for cotton procurement by the Cotton Corporation of India has touched over Rs 359 crore in the state.
“From 2014-15 to this year, the Ministry of Textiles has extended support of over Ra 1,622 crore only for cotton procurement and MSP operations benefiting over 1.67 lakh farmers,” she said.
Highlighting the importance of the handicraft sector, the minister said that ‘Pehchaan Cards’ or identity cards were distributed to over 26,000 artisans.
The latest handloom census has brought to light that there are over 50,000 weavers in Karnataka who are looking at new opportunities digitally to expand their markets.
She further suggested that on lines of the GeM portal that has brought on board over 1,50,000 weavers from across the country, a similar digital opportunity is given to the marketing of artisans and weavers of Karnataka.
The textiles and the apparel sectors were tested as an industry during the COVID times and “we rose to that challenge nationally and internationally by becoming the second largest manufacturers of PPE suits,” Irani said.
“The fact that we could turn around our manufacturing processes in less than 60 days to meet the immediate need of our country speaks volume and is a testimony to the talent of the textile industry,” she added.
Source: The Financial Express
The finance ministry will soon set up an internal working group to redraw the country’s fiscal consolidation road map following the sharp slippage caused by the Covid-19 pandemic. A new legislation based on this group’s recommendation may be introduced in the monsoon session of parliament, a senior government official told ET.
“An internal group may be set up to examine various issues… Various recommendations from expert committees are already available,” the official said, explaining why the finance ministry may opt for an internal group instead of setting up another committee.
The government has pegged the fiscal deficit for FY22 at 6.5% of GDP, which will be brought down to 4.5% by FY26. It’s seen at 9.5% of GDP in this fiscal year.
The current Fiscal Responsibility & Budget Management (FRBM) Act mandates a fiscal deficit of 3% of GDP to be achieved by March 31, 2021.
The Finance Commission, which presented its report in November and was seized of the fiscal slippage, , has recommended bringing the fiscal deficit down to 4% of GDP by FY26 in the base case scenario but has also provided some flexibility. In the event of a strong recovery, the commission has suggested a target of 3.5% of GDP but if growth is weak, the fiscal deficit can go up to 4.5% of GDP to provide a counter-cyclical boost.
The group will examine the options of a range and a fixed target. The fiscal consolidation framework has so far targeted a fixed fiscal deficit of 3% of GDP, which has not yet been attained.
The Economic Survey for the current year presented before the February 1 budget called for a “more active, counter-cyclical fiscal policy” to enable growth during economic downturns.
“Any economy has oscillations — there are ups and downs. When fiscal policy is pro-cyclical, that actually exacerbates those troughs. When fiscal policy is counter cyclical, that mitigates those peaks and troughs,” chief economic advisor KV Subramanian told ET in an interview after the budget. “When the peaks and troughs are mitigated, macroeconomic uncertainty goes down, which is extremely important for investment to happen from the private sector.”
Source: The Economic Times
In a perfect world, one would not think twice before entering an apparel retail store, try several options before making a purchase. They would go from store to store and eventually, end up at a restaurant to cap a perfect evening with a good dinner.
But we no longer live in a perfect world.
"COVID came as a body blow to us. All dine-ins were shut, and we get about a third of our revenue from dine-in, so that revenue stream shut overnight," said Pratik Pota, CEO and Whole Time Director, Jubilant FoodWorks. Customers were concerned, and overnight, there was a change in consumer behaviour, he added.
While food deliveries resumed after the initial phase of the lockdown, sectors such as apparel were hit harder. Speaking about Surviving the Pandemic at the ET India Inc Boardroom, Sangeeta Pendurkar, CEO, Aditya Birla Fashion and Retail Ltd – Pantaloons, said that in the first phase of the lockdown, there was panic and uncertainty. In the later stage when stores started opening up, safety became the first criteria.
The ET India Inc Boardroom brings together industry leaders, policy makers and economists to discuss and deliberate key sectors of the economy. Over the five-day conclave, experts will uncover trends and challenges in the BFSI, Retail, Manufacturing and MSMEs sectors, as well as the economy as a whole.
Puma, known for its aggressive mindset, had to undergo a 180-degree shift. We shifted to a "surviving the pandemic" mindset, said Abhishek Ganguly, MD, PUMA India and Southeast Asia. "We had to manage cash, take care of people, ensure our people kept their jobs and salaries."
The panel also discussed the learnings that business leaders can take from the pandemic. "Empathy in leadership was never as important as in the crisis and now I hope it stays with us in the time to come," said Abhishek.
All panellists said going digital is the way forward and working solutions will become hybrid. "Covid has compressed four-five years of change in six months," said Pratik. He added omnichannel, contactless, and digital will be the way forward.
Discussing the role of technology for experiential retail were Hari Vasudev, Country Head and SVP - Technology, Walmart Global Tech India, Nitin Chhabra, CEO, Ace Turtle Services and Raghu Krishnananda, CTO, Myntra Jabong.
"Shopping has become omnichannel," said Hari. While people may not be comfortable entering a store, they prefer to drive to the parking lot of the store to pick up their orders. Others prefer curb-side pickup. Consumers only want to think about their shopping experience, as opposed to online or offline.
There are now a lot more customers from Tier 2 and 3 cities, said Raghu, and the challenge is to address the needs of these new shoppers - how to recreate the offline experience online, address language issues, improve the speed of delivery.
On the way forward, Nitin said traditional organisation structures will have to change. "Companies that were already working on mobile checkout have pivoted to contactless. Nearby stores have moved to WhatsApp to connect with customers."
Raghu and Hari both said technologies such as AI, ML, AR-VR and IoT will go a long way for greater personalisation, and better decision by a company, and increasing efficiency.
The lockdown has been eased, businesses are opening up and the economy is talking sustainability and growth. Abheek Singhi, MD and Senior Partner, BCG, Ambareesh Murty, Founder and CEO, Pepperfry, Devendra Chawla, CEO, Spencer's Retail, Vishak Kumar, CEO, Madura Fashion & Lifestyle deliberated on business models and how they will have to change to ensure sustainable growth.
Devendra was in the unique position of having his company working throughout the lockdown. As people stayed home, Spencer's suddenly needed more people for the delivery of essentials. "That's when we tied up with Uber. People were not taking cabs, so we signed an MoU with Uber, and showed their driver partners how to make contactless delivery."
He added online sales have shot up and there is a move to "back to roots" for customers, such as natural and home remedies and nutrition. Brands, he said, must understand this.
Abheek said consumption, credit and confidence will be the key drivers going forward, while Ambreesh said awareness and appreciation of all the things at home has grown. On what the future holds, Vishak said the trends will be 'back to office'. The big fat Indian wedding will be back, festivals will be big and health and fitness will also see significant interest. "Hanging out will come back with a vengeance, and travel will get repurposed," he added.
Girish Budhiraja, Chief Product & Marketing Officer, SBI Cards & Payment Services, Sudipta Roy, Group Head - Unsecured assets, cards & payments, ICICI Bank, Vidya Pradeep, Head of Credit, Debit Cards portfolio, Payzapp & Smartbuy, HDFC Bank, spoke about retail credit in a panel discussion moderated by Praveena Rai, COO, NPCI.
Girish said the share of online has increased to more than 50% in spends across age groups, which is encouraging, while Sudipta said that some segments such as travel are still doing poorly but others are overcompensating. "POS took a hit, while contactless transactions rose, indicating safety concerns," said Vidya. The EMI growth has risen significantly, she added.
All panelists agreed that new-to-credit customers are on the rise in Tier 2-3 cities, they have the spending power and are disciplined. The speakers also spoke about the huge scope in digitising B2B payments, the emergence of new categories and demand for more tools and products and solutions.
Source: The Economic Times
India’s first Toy Fair will not just offer a platform for the domestic toy manufacturers to display their range to the global audience, but will also provide an opportunity to showcase India as a major sourcing hub for global brands, say leading players in the Indian industry.
“The Toy Fair can serve the purpose of showcasing our capabilities to the global toy manufacturers and becoming a bigger destination to source toys from,” R Jeswant, CEO of Funskool, told BusinessLine.
“There can also be distribution opportunities to cater to the domestic markets and identify partners to manufacture global toy brands in India,” he added.
One of India's leading toy manufacturing company, promoted by the MRF Group, Funskool sells a whole range of international toys from Hasbro, LeapFrog, Tomy, Ravensburger and Siku besides housing licensed products from Disney, Warner Brothers, Nickelodeon etc. Funskool also has a range of own brands like Giggles, Fun Dough and Handycrafts .
Government support
Last week, the Government of India had announced that the country’s first ever Toy Fair will be held virtually between February 27 and March 2. The fair, aimed at promoting the domestic toy industry under the Atmanirbhar Bharat campaign, will include a virtual exhibition of over 1,000 stalls, knowledge sessions and webinars on diverse topics such as toy-based learning, craft demonstrations, competitions and product launches.
Shobhit Singh, Director of Gujarat-based Stone Sapphire India, believes that such toy fairs, with active government participation, will also help global toy brands to consider shifting their manufacturing base to India. Stone Sapphire manufactures and distributes arts, craft and stationery kits for children under the brand ‘Skoodle’.
“ There is a genuine interest and policy focus on creating awareness about our manufacturing capabilities as a nation by the Government of India,” Singh said, adding, “The platform looks promising for B2B connections and trade talks amongst all big and small ventures.”
Funskool’s Jeswant said that the government has been quite active in promoting the domestic toy industry through various means such as regular seminars and webinars, duty hike on imported toys and creation of several toy manufacturing clusters to boost India's traditional toy industry among other measures.
In Budget 2020, the government increased the import duty on toys (including surcharge and cess) to 66 per cent (from 22 per cent). It also brought in Bureau of Indian Standards (BIS) regulation for imports, which requires importers to certify the factories from where the products are sourced.
According to estimates, 65-70 per cent of all toys that come into India are imported and a majority of them are from China. While the global toy industry is estimated to be around $90 billion, Indian toy market, at retail value, is only about $450 million.
“China is the biggest manufacturer of toys in the world, and they address the global market. But when we talk about Indian toy manufacturers, it’s a fledgling industry and we are just coming up,” Jeswant said, adding, “We just scratched the surface and the market for Indian traditional toys will grow in double-digit CAGR over the next few years.”
Source: The Hindu Business Line
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that Aadhaar authentication for goods and service tax (GST) registration will not be required for a person who is not an Indian citizen.
Aadhaar authentication for GST registration will not be needed for a government establishment, local authority, public sector undertaking or any specialized agency of the United Nations Organization or for consulates or embassies of foreign countries, the Board said in a notification on Wednesday.
“The government, on the recommendations of the Council and in supersession of the notification dated the March 23,2020, hereby notifies that the provisions of sub-section (6B) or sub-section (6C) of section 25 of the CGST Act shall not apply to a person who is not a citizen of India,” the CBIC said.
Experts say that the move will provide much needed clarity and relaxation for entities and individuals.
“This notification provides the much needed relief especially to MNCs having foreign directors, who are not required to obtain Aadhaar number and would not have been able to comply with the requirement,” said Abhished Jain, tax partner at EY.
The exemption will be applicable on a department or establishment of the central government or state government, a local authority or a statutory body or a public sector undertaking or a person applying for registration under the provisions of sub-section (9) of section 25 of the said Act, the notification added.
This will come as a relief to various low-risk business enterprises backed by the Indian government, foreign government and United Nations,” said Rajat Mohan, senior partner at AMRG Associates.
The government had introduced significant changes to the Central GST rules related to GST registration and availing input tax credits last year, in order to check fake invoicing and tax leakage.
It tightened provisions for GST registration, making in-person verification mandatory for all applicants and 1% GST payment for those risky dealers and fly-by-night operators that show unusually large turnovers and have no financial credibility.
CBIC had enabled biometric-based Aadhaar authenticiation for applicants and granting of GST registration within seven days instead of three days earlier. For those not opting for Aadhaar-based authenticiation, GST registration will be given after 30 days.
Authentication will be done at one of the facilitation centres that will be set up on the lines of Passport Seva Kendras or Aadhaar Seva Kendras.
As per the new rules from January 1, 2021 use of input tax credit was restricted to 99% of output tax where the value of taxable supply other than exempt supply and zero-rated supply in a month exceeds Rs.50 lakh.
The rules did not apply to government departments, a local authority or a statutory body and in cases where income tax of more than Rs 1 lakh has been paid or the registered person has received a refund amount of more than Rs 1 lakh in the preceding financial year on account of unutilized input tax credit.
Source: The Economic Times
Ethiopian Ambassador Tizita Mulugeta listed the priority sectors of his country as textile and apparel, leather and leather products, pharmaceuticals, agro-processing, tourism, information and communciation technology and mining and energy.
The bilateral trade between India and Ethiopia stood at USD 1.27 billion in the recent past years. The government of Ethiopia has taken several initiatives to encourage investors from India in different sectors, Mulugeta said at an interactive session with Merchant Chamber of Commerce and Industry.
MCCI president Aakash Shah said Ethiopia is poised to emerge as a middle income country and a major manufacturing hub in Africa by 2025.
The two countries have very deep economic ties and there are over 558 Indian companies in Ethiopia with licensed investment of approximately USD 4 billion mostly in agriculture and manufacturing, he added.
Source: The Business Standard
Indian minister for micro, small and medium enterprises (MSME), road transport and highways Nitin Gadkari recently inaugurated 50 clusters for artisans spread over 18 states under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI). Over 42,000 artisans have been supported in the clusters in the traditional segments of muslin, khadi, coir, handicraft, handlooms, wood craft, leather, pottery, carpet weaving, bamboo, agro processing and tea.
The MSME ministry has funded ₹85 crore for development of these 50 clusters. The ministry’s SFURTI scheme aims to organise traditional industries and artisans into clusters to make them competitive and increase their income.
Gadkari said more research needs to be done on what kind of village products are required by consumers, and how to attractively design and market these products. He suggested that the National Institute of Design, Ahmedabad may be approached to improve the design and attractiveness of traditional products, an official release said.
A web portal is also required, on the lines of Amazon or Alibaba, to market these products effectively, both in India and abroad, he added.
The Minister also pointed out the need to step up the pace of formation of such clusters, since only 82 of the 371 announced so far are actually functional, and said a target of 5,000 clusters is easily achievable if red tape can be reduced.
These clusters are in Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Nagaland, Odisha, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal.
Source: Fibre2Fashion News
India's economy is likely to have returned to growth in the December quarter due to the easing of restrictions on movement after the first wave of the coronavirus epidemic peaked, a Reuters poll predicted.
The median forecast from a survey of 58 economists, conducted between Feb. 18-24, put year-on-year growth at 0.5% in the December quarter, as the economy stabilised after contracting 23.9% and 7.5% in April-June and July-Sept quarters respectively.
"We forecast a mild expansion in the December quarter owing to strong resumption in economic activity, festival led consumer spending and modest recovery in manufacturing," said Rini Sen, economist at ANZ. "We believe services likely spearheaded growth."
The previous poll, taken a month ago, had predicted a 2.0%contraction.
However, the wide range of forecasts in the latest poll - from a contraction of 4.7% to a 2.6% expansion - underscores the uncertainty.
India has reported the second highest number of coronavirus cases, lagging only behind the United States, but it is widely accepted that infections are far higher than officially recorded.
The economic recovery has been aided by the government's spending plan and its commitment to not bring its fiscal deficit down to pre-pandemic levels for at least five years, and by the Reserve Bank of India's pledge to keep monetary policy accommodative.
"Pent-up goods demand supported by elevated financial savings have led to a rise in manufacturing. Alongside this, a strong pick-up in government spending on social welfare schemes and capital expenditure has also helped," noted economists at HSBC.
The central bank slashed its key repo rate by 115 basis points last year and has since held it steady at 4%.
"We expect liquidity normalisation to be calibrated and incremental during the course of the year. No change is expected in the repo rate this year," said Radhika Rao, economist at DBS Bank in Singapore.
Minutes of the last RBI monetary policy committee meeting showed optimism for a recovery, but concerns have increased about a second wave of infections and renewed lockdowns in a few areas in the state of Maharashtra, which accounts for about 16% of India's economic output.
Source: The Economic Times
After being relegated to the second spot in the previous two fiscal years, China again became India's biggest trading partner in the first nine months of FY21.
This was despite heightened tensions between the two countries. However, while China has a huge trade surplus with India, the US has trade deficit with India.
For instance, China imported goods worth $15.3 from India and exported goods worth $45.4 billion to India, leaving a surplus of $30.1 billion for the neighbouring country during April-December.
China was the biggest exporter of goods to India and the US the biggest importer from India in the first nine months of the current fiscal year.
Source: The Business Standard
Luxury textiles and jewellery are not new to India. The maharajahs patronised guilds with master craftspeople working in fine weaving and embroideries for centuries. They created custom-made clothes and saris for royalty, some of which are yet to be matched for their sophisticated concepts and superb workmanship. Indian luxury goods have always been defined by their exceptional heritage value in that they were invariably handmade, using skills inherited over generations. Bespoke textiles in India, therefore, were never meant for mass consumption, but were produced under the patronage of kings and temples.
This order has changed radically in the western world. In the last five decades, many European fashion houses, created by highly talented but a small number of designers, have been bought over by multinational companies. They then began mass producing one-of-a-kind couture collections and sold them at enormously expensive prices. Marketing and not handcrafted quality dictated the sales, and technology started playing a large and vital part in the manufacture, till they were no longer totally hand-tooled.
In the post-pandemic world, we will need to look at a different concept of luxury goods, especially from an Indian perspective. There are at least 16 million craftspeople in India, whose works are not showcased in museums. The production of Indian luxury goods takes place in modest environments, mostly villages in the unorganised sector. What is not modest is the creativity and handiwork of the artistes who toil in relative obscurity. It is remarkable that this sector still functions in India.
In the absence of institutional support, bank credit and government financial packages, these artistes and craftspeople find no space or sympathy from any quarter. Handcrafted luxury goods are our inheritance and we have to find solutions which are innovative, and not leave it to the ministry of textiles alone.
The existence of our textile heritage is almost like a miracle. It has survived due to a number of accidental factors. In its initial phases, National Institute of Fashion Technology was born, which produced the first batches of Indian fashion designers. They were encouraged to show collections, which focused on artisanal handicrafts that had survived the test of time. Part of this was due to the relatively small financial outlay required to put together collections.
Though modest in commercial terms, the Indian fashion industry was able to create disproportionate hype across the country. It influenced the film world and found traction even in the rural hinterland, creating a unique identity. There was an aspiration to belong to this new fashion phenomenon, which was purely indigenous. This is rare anywhere in the world.
The media had just found its wings and was only endlessly happy to cover the flow of new collections from young designers. Glamorous wedding trousseaus echoed the feudal styles of the maharajahs of yore. Fashion designers were on top of their game in India and the trickle-down effect led to the celebration of folk arts such as bandhini, zardozi and the fabulous embroideries of Kutch. Handwoven Benarasi saris, paithanis and patolas from Gujarat were also showcased across the world. There was a premium on handmade textiles and garments.
In real terms, before the pandemic, the textile and apparel industry in India employed nearly 45 million people, next only to the agriculture sector. Handicraft exports from India to the United States increased 2% year on year; it was $3.39 billion in February 2020.
Today, we see a tragic reversal; export orders have dried up and domestic demand, crumbled. This has resulted in large-scale unemployment across the weaving, printing and embroidery communities, which have been hit the hardest, and which have little access to credit. The communities of weavers in Benaras and elsewhere have to rely on middlemen for loans to buy yarn. This way, they get trapped in a vicious cycle which leads to great impoverishment.
We will need fashion designers to become the catalysts in an industry on which so many livelihoods depend. A lot of small enterprises that survived on hype may shut shop. But with the depth of the crafts sector, there is some hope for continuing the tradition. As spending patterns become more conservative, people’s tastes also change, One hopes they will once again opt for what they understand — more classic designs, handwoven saris, authentic embroidery.
I am beginning to see a fashion renaissance of Indian textiles. Rohit Bal is experimenting with dyes sourced from black carrots, which are used to make kanji, a North Indian drink; it gives a lovely saffron colour to the cloth. Last heard, Rakesh Thakur is looking at yarns dyed in indigo. I am yet again seeking the genius of the kalamkari artistes from Machillipatnam who created the exquisite flowers and shoots that initiated the chintz rage in Europe. I hope, in this way, in India at least, fashion will become more organic and sustainable.
The real problem then lies with the marketing of these handicrafts. The textile ministry is making a conscious effort at documenting the crafts of the country. I sincerely hope that there are enough start-ups that can make these available in the virtual world. Websites don’t need retail space or middlemen to sell India’s rich legacy of handicrafts.
They can introduce India’s vast treasure trove of luxury goods to the world. They can connect buyers with the craftsmen who make these rare luxury goods. This will revive interest in crafts. We have to think of innovative solutions to save our heritage. We owe this to future generations and to our craftspeople.
Source: The Hindustan Times
Cotton subsidies have remained a contentious issue in international trade and negotiations at the World Trade Organization (WTO). Farmers of developing and least-developed countries (LDCs) complain that the massive support provided by developed countries, especially the United States, has rendered cotton production uncompetitive in the Global South, leading to a disastrous impact on agricultural growth, export earnings and farmers’ welfare.
The impact is particularly palpable in countries like India, where the crop plays a crucial role in livelihood, reducing poverty and agricultural development. Hence, the implications of the US’ massive support to its cotton farmers and the failure of WTO rules in disciplining cotton subsidies merit a discussion.
Let’s compare the US and India. The US has some 8,100 cotton farmers with an average farm size of 624 hectares (ha). By comparison, India has 9 million cotton farmers with an average farm size of 1.2 ha. Despite the prevalence of small and fragmented landholdings, the cost of cultivation here is less than that of the US.
Yet, the US is a significant player in global cotton production and exports. In 2020, its share in global production was 14.5 per cent; with 85 per cent of output exported, the US share in global exports was even higher — 35 per cent.
The artificial comparative advantage the US enjoys can be gauged from the fact that its per-farmer cotton support is a massive $117,494 (over Rs 85 lakh) compared to India’s $27.
American cotton producers have, in fact, received substantial support through several programmes under 18 farm laws since 1933. The first, the Agricultural Adjustment Act, 1933, was enacted in response to the low prices and farm income during the Great Depression of the 1930s, and provided price support to cotton farmers. Gradually, support grew through market loans, deficiency payments, direct payments, insurance subsidies and budgetary support, among others.
The US disbursed $40.10 billion in cotton subsidies during 1995-2020. Surprisingly, distribution was skewed in the favour of large farmers and corporations — they formed 10 per cent of the total subsidy recipients and garnered 82 per cent of the subsidy. For example, large farming conglomerates Tyler Farms, Kelley Enterprises and Balmoral Farming Partnership each received over $20 million as subsidies during 1995-2020.
Such high levels of subsidies have depressed the international price of cotton over the years, which witnessed a steep decline from $0.981 per pound (0.45 g) in 1995 to $0.48 per pound in 2001. Even in 2020, it was only $0.70 per pound, significantly lower than the price 25 years ago.
In the last decade, especially under the 2014 Farm Act, the major support to cotton farmers was provided through massive insurance subsidies. However, with declining international prices, especially after 2016, and mounting pressure from cotton farmers, it has initiated several support measures like the cotton ginning cost share (CGCS) programme, price loss coverage (PLC) for seed cotton, the market facilitation program (MFP) and the coronavirus food assistance program (CFAP).
Under CGCS, the government provided $3.26 billion to cotton growers to reduce cotton ginning cost. PLC provided a safety net in the form of deficiency payments to mitigate the adverse impact of price fluctuations, while MFP aimed to compensate farmers for losses arising out of the US-China trade war. During the pandemic, cotton farmers were provided additional protection from price fluctuation due to economic uncertainty under CFAP.
Clearly, government intervention plays a vital role in viability of the US cotton sector.
Why WTO fails to fix
Given the crucial role of cotton in livelihood security, export earnings, poverty reduction and farm income, a group of cotton-producing African countries — Benin, Burkina Faso, Chad and Mali, dubbed Cotton-4, or C-4 — have been demanding substantial reductions in cotton subsidies since 2003. The C-4 has consistently highlighted in agriculture negotiations how the asymmetrical and biased WTO rules have been ineffective in disciplining the US cotton subsidies. But it has not helped.
The current flexibility accorded to countries to provide agriculture support is mainly determined based on subsidies prevailing during 1986-88. The higher the subsidies provided during that time, more is the policy space for a country to support its farmers now. Therefore, it was advantageous for countries to inflate their base subsidy.
The Uruguay Round of negotiations under the General Agreement on Tariffs and Trade aimed for large-scale reforms of multilateral trading regime. It included, among other things, commitments to reform highly distorted and sensitive agricultural trade, thus leading to the establishment of WTO.
At the start of the negotiations, in 1986, US cotton subsidy was $2,348 million — 85 per cent of the total monetary value of cotton produced (VoP). On the other hand, support in most developing countries was negative or negligible. For instance, cotton-specific support was (-)$1,084 million in India as the minimum support price was below international prices in 1986-88.
Very few know that the US inflated its base subsidy by considering data only for 1986 rather than taking an average for 1986-88, for many agricultural products in the name of voluntary reforms undertaken during the Uruguay Rounds. In fact, cotton subsidy in the US based on 1986-88 data was $1,702 million, much lower than that declared only for 1986.
By this approach, the US was able to secure an inflated policy space of $19.1 billion to provide trade-distorting subsidies to farmers. Had the calculations been based on 1986-88 data, this policy space would have been limited to $16.81 billion only.
Additional flexibility because of these historical asymmetries means the US can expand support without violating WTO rules, which do not impose any restrictions on the concentration of subsidies among various products. This means if the US uses its whole policy space only on cotton, it can provide subsidies to the extent of more than 200 per cent of VoP. In fact, the US provided more than 60 per cent of VoP as cotton subsidy in some years.
On the other hand, as agriculture support during the base period was negligible for most developing countries, they cannot provide support of more than 10 per cent of VoP.
The C-4 countries’ demand is not unique. Even India, in 2017 and 2018, demanded elimination of additional flexibilities available to the US and other developed countries by limiting their policy space to 5 per cent of voP. However, the US turned the tables in 2018 by questioning India’s own price support programme for cotton at WTO, and alleging that India is providing trade-distorting support to its cotton sector.
This is just an attempt by the US to gain market access for its subsidised cotton sector in developing countries. This unfinished agenda of disciplining cotton subsidies must now be a priority for developing countries at the 12th WTO Ministerial Conference in Kazakhstan, to be held later this year.
Source: Down to Earth News
Indian ambassador to Colombia Sanjiv Ranjan said that there is a huge potential for Indian apparel exporters in Colombia, particularly in its “resilient and innovative” fashion industry with domestic sales of about US 7 billion dollars.
Speaking at ‘India-Colombia Synergies in Apparel and Textiles’, a virtual B2B meeting organized by Apparel Export Promotion Council (AEPC) and Embassy of India, Bogota, Colombia, on Monday evening, Mr Ranjan said that the readymade garment exports from India were limited to around US 21 million dollars in 2019.
“India’s apparel exports to Colombia is just 3 per cent of its global imports. This does not really reflect the strength of what our sector stands for. We have a huge untapped potential in this sector which requires to be explored and utilized by our exporters,” he said.
Highlighting the growing popularity of Indian apparels in Colombia, Ranjan said that the apparel exporters should focus on Colombia’s fashion industry that accounts for 9.4 per cent of the country’s industrial GDP and employs about 600,000 people. The annual household expenditure on fashion in Columbia is roughly 24.3 trillion Columbian peso.
“It is one of the most vibrant sectors of the region. Columbia has a robust network of almost 14,000 companies in the fashion industry, mostly in the small and medium sized categories. Even during the peak of the pandemic in June 2020, clothing accounted for nearly 57 per cent of the total fashion spending followed by jewelry. While the government is trying at its level, the private sector should find out how to contribute to this resilient and innovative sector,” the ambassador said.
Ranjan congratulated AEPC for setting up a virtual exhibition platform to showcase Indian apparels to overseas buyers at a time when physical presence is restricted.
“I am sure that this virtual, 24x7 platform offers more experience at one place, with the flexibility for importers to zoom in and look at the various products on offer. This will go a long way in further energizing our bilateral engagement in the apparel sector,” he said.
AEPC Chairman Dr A Sakthivel informed the attending Colombian brands and buyers that AEPC through its virtual platform will work as a bridge between the Indian apparel exporters and Colombian apparel importers. About 320 apparel exporters have already put up their products for exhibition on the platform, he said.
“On our request, the government has come out with a Production Linked Incentive (PLI) scheme for manmade fibre (MMF) based garments. We do 85 per cent cotton garments and only 15 per cent MMF garments, while the global apparel demand is exactly the opposite. Very soon we will see a rise in exports of MMF garments from India,” Dr Sakthivel said.
Sudhir Sekhri, Chairman (Export Promotion), AEPC, said, “Of the top 10 apparel imports from India to Colombia, only two are in the MMF category and the rest are cotton garments. Perhaps this is where Bangladesh and Vietnam are scoring ahead of us. This is one area that we are trying to address very quickly along with the help from the government.”
Source: KNN News
The Southern African Clothing & Textile Workers’ Union (SACTWU) welcomed the textile rebate recently announced by the deputy minister of finance on February 5. “It represents one of the most significant positive developments for local procurement, jobs and domestic industrialisation promotion in many decades,” the union said in a press release.
This is an important concrete implementation component flowing from the signature of the Retail, Clothing, Textile, Footwear & Leather (R-CTFL) Masterplan, which was signed by the industry's social partners on November 6, 2019, at the 2nd Presidential Investment Conference, SACTWU said.
The announcement followed a request by clothing industry employer organisations and major retailers.
The publication of the rebate was preceded by an intense four-month period of industry negotiations between SACTWU and other stakeholders.
The rebate provides for woven fabric to be imported duty free for the local manufacturing of garments, provided procurement commitments are made to local textile producers. Such imported fabric can only be used by companies that are signatories to the R-CTFL Masterplan and are compliant with minimum labour standards.
Source: Fibre2Fashion News
On the occasion of EU Industry Days, EURATEX asks the European Commission and Member States to set the right conditions for the competitiveness and resilience of its industrial base, in
particular the textile and clothing industry.
The T&C industry is a pillar of Europe with its savoir-faire and excellence, counting 160,000 companies (mainly SMEs), employing 1,500,000 people, generating 162,000 billion euros. 38% of such industry’s turnover is sold on global markets, whereby SMEs cover more than 50% of those global sales.
If the European Commission and Member States do not want to lose such asset, they should take a series of measures:
- Europe should put in place effective market surveillance, avoid unfair competition and guarantee level playing field. The continent has the stringiest social and environmental standards, and it should protect the quality of its products. We hear too often that products made in other countries do not attain these standards, such is the case of non-complainant face masks, and it is time to act upon it.
- Europe should support the transition towards a more sustainable and digital industry through specific funds and programs. Indeed, SMEs, due to their size and capacities, do not have the power to innovate their products and processes in the short-term. Moreover, the sector should reduce future risks by diversify its supply chains and promote nearby production. Europe can again play a fundamental role in the development of a new trade policy.
- Europe should have a market proof approach when moving towards sustainability & circular economy. The green transition should carefully balance the cost of this transition process and the long-term benefits. The green and digital transition is challenged by the economic crisis. Business and citizens may rapidly loose interest If the transition does not provide any short/mid-term benefit.
- Europe should help education systems and institutes to develop comprehensive and leading-edge T&C knowledge. It can do so through LongLife Learning, Erasmus + and the Pact for Skills Initiative. Our industries suffer from an aging workforce and it is fundamental to reskill/upskill it. Most importantly, the sector should attract young generation to renew itself and drive the change.
- Europe should have a coherent approach when legislating in different areas. All policies, from the Green Deal to the Sustainable Chemicals strategy, from the EU Trade strategy to the EU Industrial one, should be consistent and not hamper industry. If not, consequences will be fatal.
Source: BGFN Magazine
Bangladesh became the largest denim exporter to the US last year, in what can be viewed as a bright spot for the country’s beleaguered garment sector that has been hit hard by the global coronavirus pandemic.
In 2020, Bangladesh exported denim products worth $561 million to the US, down by nearly 4 per cent from a year earlier, according to data from the US Office of Textiles and Apparel.
However, it was enough to give Bangladesh a market share of about 20 per cent, up from 15.7 per cent from a year earlier.
“This was a result of our relentless and collaborative efforts,” said Faruque Hassan, managing director of Giant Group.
Mexico, which became the market leader in the US for denim products in 2019, saw its share contract to 16.7 per cent from 21.5 per cent last year.
China, which was in pole position until 2018, saw its share of the US’s $2.8 billion-denim market shrink further to about 11.9 per cent from 18.6 per cent a year earlier.
Vietnam, which is biting at Bangladesh’s heels in the global apparel trade, saw its share of the market increase steadily over the past five years. It now stands at number three position, a notch above China.
In the last few years, Bangladesh witnessed a huge amount of investment in denim fabric manufacturing, which increased the country's production capacity to reduce import dependency for fabrics, said Sayeed Ahmad Chowdhury, director of Square Denim.
As denim manufacturers now can purchase denim fabrics from local sources easily, the lead time to ship products came down drastically from the previous years.
“This helped a lot to manufacturers to attract more buyers, which is also an opportunity for us to grab more market share in export destinations,” he added.
In the last couple of years, Bangladesh's capacity to meet the demand for denim fabrics rose to nearly 50 per cent from 30 per cent a few years ago, according to industry people.
There are 32 mills producing denim fabrics for the export-oriented denim manufacturers, according to the Bangladesh Textile Mills Association.
“On the other hand, we were able to start production after the Covid-induced lockdown earlier than Mexico. Mexico lost the market and we gained from their losses, but it is not an ideal situation to compare,” Chowdhury said.
In addition, the US-China trade conflict and the relocation of Chinese investment helped Bangladesh to grab more market share.
The US policy on banning procurement of cotton and even raw materials from China's Xinjiang region was a blessing for Bangladesh, said Sharif Zahir, managing director of Ananta Denim Technology.
“Since we are strong in denim manufacturing, buyers were diverted here and placed more orders.”
Besides, the trade war and the then uncertainty caused by the Trump administration also compelled buyers to relocate their businesses.
However, the prices of goods is a big concern for the exporters: the raw material prices have gone up but the buyers are not calibrating their prices, Zahir added.
“To attract buyers' attention and present your products to global consumers, you need to promote through exhibitions. For the last few years, I did it through several expos focusing only on denim products,” said Mostafiz Uddin, founder of the Bangladesh Denim Expo.
The expos informed the local manufacturers of the latest trends and also brought in technological know-how.
“Today's success is a result of our nurturing of the last six years. As a manufacturer, we spent a lot to innovate and develop new products.”
For instance, the washing technology developed locally helped manufacturers to produce value-added items, said Uddin, also the managing director of Denim Expert, a leading denim manufacturer.
To retain the momentum, promotional activities and research and development must continue, he said, adding that the government and sector leaders can come forward.
“As a business leader, in the days to come, my focus would be promoting the sector by paving ways for high-value products. To this end, knowledge-based solutions must be looked into,” said Hassan, who is leading the Sammilita Parishad panel in the upcoming biennial polls of the Bangladesh Garment Manufacturers and Exporters’ Association.
Source: Dhaka Tribune
The State Council on Monday released a guideline for all-levels of governments to accelerate the development of a green and low-carbon circular economy, aiming to hit peak carbon emissions at around 2030 and carbon neutrality by 2060.
The guideline urged efforts to develop green and environmental protection industries, upgrade current industrial, agricultural and service sectors, strengthen the recycling and utilization of renewable resources, accelerate the green upgrading of infrastructure, promote green technology and improve environmental protection laws and regulations.
The paper also called for establishing a green and circular development production system. Industries such as iron and steel, petroleum, chemical, nonferrous metals, building materials, textiles, paper making, leather production should be upgraded as soon as possible, it said, adding that centers for the comprehensive utilization of resources should be built across the country to promote the reuse of industrial solid waste.
Governments should also fully implement the national regulation on the administration of pollutant discharge permits. The regulation, which will officially come into effect on March 1, is expected to standardize permit application procedures, tighten supervision and clarify the responsibilities of enterprises and public institutions.
Under the regulation, institutions or businesses involved in the discharge of pollutants must apply for permits. They will also be classified based on factors, including the amount of pollutant emissions and environmental impact.
The guideline also promotes the green development of the agriculture sector. For instance, the country will improve crop stalk and livestock waste utilization, reduce the pollution caused by thin plastic film and pesticides, and advocate water-saving technologies.
The paper also urges governments to further promote the energy sector’s transformation, giving priority to energy conservation and greatly increasing the proportion of renewable energy, such as wind and photovoltaic power, while developing hydro, geothermal, marine, hydrogen and biomass power based on their local application.
Governments are also asked to speed up their efforts to improve living conditions in urban and rural areas. For example, communities in cities will be upgraded with energy-saving facilities while those in rural areas will be renovated with toilets, household garbage processing centers and sewage treatment bases.
The guideline also stressed that all governments should provide financial and policy support to public organizations, companies, universities and other institutions to foster and develop green technologies, such as energy-saving, recycling and waste management and wastewater treatment.
Energy and resource utilization efficiency in key industries and for key products is expected to reach an internationally-advanced level by 2035, with the green lifestyle deeply planted in people’s minds and a steady decline in carbon emissions, the paper said.
Source: CGTN
Foreign direct investment in Pakistan has seen a 27 per cent decline in the first seven months of the current fiscal, owing mainly to the fall in investment from its close ally China, a media report said on Tuesday.
The Foreign Direct Investment (FDI) in Pakistan during the first seven years fell by 27 per cent compared to the same period last fiscal year, Dawn newspaper reported, quoting the State Bank of Pakistan (SBP) as saying.
The SBP, the central bank, on Monday said that the FDI during July-January FY-21 was USD 1.145 billion against an inflow of USD 1.577bn in the same period last fiscal year.
The inflow during January was USD 192.7 million compared to USD 219 million in the same month of the previous fiscal year, registering a 12 per cent decline.
However, the seven-month decline was mainly due to a decline in net FDI from China and increase in net outflow to Norway, the report said.
The country-wise details showed that net inflow of FDI from China was USD 402.8 million against USD 502.6 million in the same period of last fiscal year.
So far, the net FDI from China is the highest in the list of inflows from other countries.
The inflows from China were USD 707.2 million during the seven months but the outflow of USD 304.4 million in the same period reduced the net FDI to USD 402.8 million.
Others from where over USD 100 million net FDIs were received were the Netherlands and Hong Kong, as they invested USD 122 million and USD 105 million, respectively, during the first seven months of FY21.
The inflows of FDI from the UK (USD 83.8m), the US (USD 73.5m) and Malta (USD 60.6m) were also significant during the seven months.
However, a drastic change in the inflows from Norway affected the overall inflow of FDI this year.
The SBP data shows that during the seven months of the previous fiscal year, the inflow from Norway was USD 288.5 million, while in the seven months of the current financial year a net outflow of USD 25.8 million was noted instead of any inflow from the Scandinavian country.
The power sector attracted the highest investment of USD 475.8 m against USD 373 m in the same period of last financial year; an increase of 27.6 per cent.
Source: The Business Standard
Negotiations are currently underway between member states of the African Continental Free Trade Area (AfCFTA) to complete rules of origin for the agreement by the June 2021 deadline.
The remarks were made by Ehab Fathy, Head of Rules of Origin Department for African Countries at the Ministry of Trade and Industry, during a virtual seminar on Tuesday.
During the seminar, organised by the Egyptian Furniture Export Council, Fathy added that rules of origin have been finalised for more than 81% of the total commodity items.
Fathy added that 18%-19% of rules of origin are currently being negotiated, which relate to some commodity items that have not been agreed upon, namely fish and crustaceans, leather, clothes and textiles and cars.
This also includes some other items that have not been agreed upon, including: dairy products; vegetable and animal oils and fats; meat or fish preparations; sugar; preparations of vegetables and fruits; food residues; tobacco; cotton; and clothing and textiles.
All rules of origin for the wooden and furniture industries sector have been completed, he disclosed, adding that the foreign component does not exceed 60% of value of product.
Fathy said that the aim of the rules of origin rule is to expand the integration of markets at the regional and continental levels, and to promote intra-African trade. They also seek to strengthen regional and continental value chains, and to encourage economic transformation across the continent through industrialisation.
Noha Nofal, Head of Regional Agreements at Egypt’s Ministry of Trade and Industry, said that 82% of the furniture and wood products sector come on the first list of non-sensitive goods.
This will be gradually exempted from customs duties over a period of five years under the AfCFTA agreement.
Nofal pointed out that the implementation of the agreement was started on 1 January 2021 according to the principle of reciprocity.
She noted that the commodity trade was divided into three lists, with the first list relating to non-sensitive goods and comprising 90% of customs tariff items. For these, countries will gradually reduce for a period of five years for developing countries, and 10 years for the least developed countries.
She added that the second list for sensitive goods includes 7% of customs tariff items, and is represented in goods that countries need to protect their industries. The gradual increase in customs duties will be over 10 years for developing countries and 13 years for the least developed countries.
Meanwhile, the third list includes excluded goods, which represent 3% of customs tariff items, which will be reviewed every five years.
Source: The Daily News
