citi-news letter · 2020-05-04 · punjab’s textile industry in dire straits need to renew...
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Cotlook A Index - Cents/lb (Change from previous day)
30-04-2020 66.50 (+1.25)
29-04-2019 87.20
17-04-2018 92.45
New York Cotton Futures (Cents/lb) As on 04.05.2020 (Change from
previous day)
May 2020 57.83 (-0.23)
July 2020 55.80 (-1.53)
Oct 2020 58.39 (+0.88)
04th May
2020
PM Modi holds key meeting with Amit Shah, Nirmala Sitharaman
on steps for financial sector
Government to set up panel to give clearances in 3-month time
frame for businesses: Nitin Gadkari
12 sectors identified to make India a manufacturing hub
RCEP nations offer India package to return to negotiating table
Cotton and Yarn Futures
ZCE - Daily Data (Change from previous day)
MCX (Change from previous day)
May 2020 16330 (+110)
Cotton 11220 (+90) June 2020 16600 (+160)
Yarn 17505 (+120)
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- PM Modi holds key meeting with Amit Shah, Nirmala Sitharaman on steps for financial sector
Government to set up panel to give clearances in 3-month time frame for businesses: Nitin Gadkari
12 sectors identified to make India a manufacturing hub
Finance Ministry sees FY21 economic growth at 2-3% amid Covid-19 outbreak
Shri Arvind Kumar Sharma Assumes Charge as Secretary, Ministry of Micro, Small and Medium Enterprises
RBI holds meet with banks; may consider moratorium extension
RCEP nations offer India package to return to negotiating table
I-T dept, GSTN, CBIC caution people against phishing emails promising refunds
Lockdown 3.0: Tamil Nadu allows industries to start ops with restrictions
Initiate immediate measures to attract investments: KTR urges Centre
Industry hails Andhra CM Jagan extending helping hand to MSMEs to tide over lockdown crisis
Statsguru: Key indicators point to grim economic outlook amid lockdown
Bombay HC allows manufacturing units to cut salaries of those who don’t report for work
India-Vietnam harnessing strategic regional cooperation
DGS has to take a call on waiving detention charges
Apparel industries told to get permission from Collector
We have a narrow window to enact fiscal relief measures, says Former Secretary, Economic Affairs and Dy Governor, RBI
India plans a more employer-friendly apprenticeship to cater to MNCs
Business activities significantly hit; recovery may take over a year: Survey
Analyst Corner: Grasim Industries rating – ‘hold’; COVID-19 has worsened outlook for VSF business
Change in rating outlook for Arvind Fashion, Edelweiss Fin
Punjab’s textile industry in dire straits
Need to renew industrial growth: Modi 1.0 launched Make in India, now is the chance for renewal
To attract industry, stop hurting industry
----------------------------------------------------------------------------- Philippine: PPE shortage highlights need to revive textile industry
Textile firm switches to face mask fabric production
Bangladesh reopens its biggest textile market amid coronavirus lockdown
Indonesia: Textile makers could go out of business because of COVID-19
Pakistan textile exporters get new orders
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NATIONAL
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GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
PM Modi holds key meeting with Amit Shah, Nirmala Sitharaman on steps
for financial sector
(Source: Financial Express, May 04, 2020)
Prime Minister Narendra Modi held a crucial meeting with home minister Amit Shah and
finance minister Nirmala Sitharaman to firm up strategies for the financial sector in the
aftermath of the Covid-19 outbreak.
Prime Minister Narendra Modi on Saturday held a crucial meeting with home
minister Amit Shah and finance minister Nirmala Sitharaman to firm up strategies for
the financial sector in the aftermath of the Covid-19 outbreak, amid mounting
expectations of a stimulus package following the extension of the lockdown. The meeting
also dwelt upon the need to usher in long-term structural reforms in infrastructure, credit
offtake and corporate governance.
In a late night statement on Saturday, the Prime Minister’s Office (PMO) said he also
discussed “strategies and interventions to support MSMEs and farmers, enhance liquidity
and strengthen credit flows”. “PM also discussed ways and means to ensure financial
stability in the wake of COVID-19 and measures taken to enable businesses to recover
quickly from the impacts,” according to the statement.
Modi pointed out the need to generate gainful employment opportunities by helping
businesses overcome difficulties. He stressed the need to expedite work on new
infrastructure projects to make up for the time lost due to the lockdown. He wants the
projects taken up under the National Infrastructure Pipeline (NIP) be reviewed at the
highest level frequently so as to avoid time delays and enable job creation.
A government task force on April 29 firmed up a road map for capital investments of Rs
111 lakh crore in infrastructure over six years through FY25, pledging 71% of the
expenditure for energy, roads, urban development and railways, and envisaging a key role
for private investors.
The government on March 26 last announced a Rs 1.7-lakh-crore relief package for the
poor and the vulnerable. However, a package to prop up the economy is yet to be
extended.
Official sources earlier indicated that the total fiscal intervention could be to the tune of
3-4% of GDP (or Rs 6-8 lakh crore). However, the government will come out with several
rounds of measures to respond to the evolving situation, instead of declaring one big-bang
package. The NITI Aayog has projected the need for an even higher fiscal stimulus of Rs
10 lakh crore.
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The Prime Minister has already held a series of meetings over the past week on sectors –
including MSME, agriculture, aviation, power, coal, mining, defence and aerospace – with
the focus on wooing foreign investments and tiding over the Covid-19 outbreak.
Home
Government to set up panel to give clearances in 3-month time frame for
businesses: Nitin Gadkari
(Source: Economic Times, May 03, 2020)
The government will set up a panel to provide necessary clearances needed by businesses
within a time frame of three-months in a bid to attract foreign investment in MSMEs,
Union Minister Nitin Gadkari said on Sunday. Addressing Chartered Accountants
Association of India, the minister informed that a Joint Secretary level officer has already
been appointed to look after the foreign investment in micro, small and medium
enterprises (MSMEs). "We are going to formulate a committee where we will give all types
of clearances within 3 months and at the same time, there will be no red tape, full
transparency, time bound decision making process, qualitative approach and no
corruption," Gadkari said.
The committee will be set up in coordination with states and the central government as
stakeholders, and a policy will be framed in this regard, the minister added. Earlier in the
day, addressing the Dalit Industries Chamber of Commerce of India, he said the
government was making efforts towards decentralisation of the industry. "There is a
centralisation of industry in areas like Mumbai, Noida, Gurugram, Bengaluru, Chennai.
We need to diversify this and that is the need of the hour," Gadkari said. He said the
government was formulating a policy on how investment can be made more attractive in
backward and tribal areas.
Gadkari said that he was willing for a leather cluster to be set up on the Delhi-Mumbai
highway. "We will also give plots and residential accommodation to people residing in
Dharavi slums, create a Smart City with airport, port and station connectivity," he said,
and asked leather industry representatives to take up the initiative with the help of the
Maharashtra government. He also urged people to move out of Dharavi, observing that
the situation there was grim. Gadkari suggested the leather industry to prepare a plan for
the proposed cluster on the Delhi-Mumbai highway. The minister said he will also talk to
the Maharashtra government in this regard. The cluster will provide a good alternative to
people to shift out of Dharavi, he added.
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12 sectors identified to make India a manufacturing hub
(Source: Telangana Today, May 04, 2020)
Several meetings have taken place with stakeholders, including industry chambers, to
identify those sectors which have the potential to become global winners and make India
a strong manufacturing hub
The Commerce and Industry Ministry is working to identify certain key sectors — like
capital goods, leather and chemicals — with a view to establish India as manufacturing
hub, according to sources. Several meetings have taken place with stakeholders, including
industry chambers, to identify those sectors which have the potential to become global
winners and make India a strong manufacturing hub, the sources said.
“There are 12 champion sectors which can be looked upon. These include modular
furniture, toys, food processing like ready-to-eat food, agro-chemicals, textiles like man-
made fibres, air conditioners, capital goods, pharma and auto components,” one of the
sources said. Groups and sub-groups have been constituted on the matter by engaging
representatives from industry chambers like CII and Assocham.
The core group would identify specific implementable policy based on issues like
technological capability, employment potential, and global as well as domestic demand,
they added. Commerce and Industry Minister Piyush Goyal has recently stated that in the
post-Covid era, there is going to a be perceptible change in the global supply-chains, and
Indian industrialists and exporters should be looking to capture significant share in the
world trade. He has said that the Ministry is working on identifying the specific sectors
which can be taken forward in the immediate future for the exports purpose.
Promoting manufacturing will help in creating more jobs and pushing India’s dwindling
exports. Manufacturing sector contributes about 15 per cent in the country’s economy and
the government is aiming to increase it significantly. The output of eight core
infrastructure industries shrank by a record 6.5 per cent in March due to significant dip
in production of crude oil, natural gas, fertiliser, steel, cement and electricity amid the
coronavirus lockdown. Exports too contracted by a record 34.6 per cent in March on
account of the lockdown due to Covid-19 outbreak.
Home
Finance Ministry sees FY21 economic growth at 2-3% amid Covid-19
outbreak
(Source: Arup Roy Choudhury, Business Standard, May 04, 2020)
The internal projections of 2-3% are based on the Finance Ministry's current assessment
of the economic impact of the nationwide lockdown, which is in its sixth week
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The Centre is yet to announce its new economic growth and budgetary estimates for 2020-
21 (FY21) in light of the Covid-19 pandemic and the resultant lockdowns. But the Finance
Ministry is internally projecting FY21 GDP growth to be around 2-3 per cent, down from
the 6-6.5 per cent predicted in the 2019-20 Economic Survey, Business Standard has
learnt.
The new projections were said to be given by Chief Economic Advisor Krishnamurthy
Subramanian in a presentation he made to the 15th Finance Commission’s advisory
council. The council, comprising Finance Commission members, ...
Home
Shri Arvind Kumar Sharma Assumes Charge as Secretary, Ministry of Micro,
Small and Medium Enterprises
(Source: Press Information Bureau, May 01, 2020)
Shri Arvind Kumar Sharma (IAS) today assumed charge as Secretary, Ministry of Micro,
Small and Medium Enterprises. Starting the work on war footing, he held a held
important meetings with senior officers to review the work of the Ministry and discussed
pressing issues especially in the light of the impact of COVID -19 pandemic. Shri Sharma
has emphasized that MSME sector is very crucial for the society and the economy. Laying
out his priorities, he has emphasized that after we have dealt with the urgent situation,
we need to work on creating Global Champion companies from MSMEs
Prior to this appointment, Shri Sharma was serving as Additional Secretary, Prime
Minister's Office (PMO). He is 1988 batch IAS officer of Gujarat cadre.
Shri Sharma has also worked in the Government of Gujarat at various positions including
field and policy level and has extensive experience of handling the portfolios of regulatory
and developmental administration, disaster management, Corporate Management,
industrial/investment promotion and infrastructure development.
Home
RBI holds meet with banks; may consider moratorium extension
(Source: CNBC TV 18, May 04, 2020)
The Reserve Bank of India (RBI) on Saturday held two separate meetings with heads of
several public and private banks over video conferencing to review the current economic
situation, the regulator said in a statement on its website.
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7 CITI-NEWS LETTER
Issues relating to "credit flows to different sectors of the economy, including liquidity to
non-banking finance companies (NBFCs), housing finance companies (HFCs), mutual
funds, etc, post lockdown credit flows including provision of working capital, with special
focus on credit flows to MSMEs; Implementation of three months moratorium on
repayment of loan instalments announced by the RBI; Monitoring of overseas branches
of banks in view of the slowdown in economies across the globe; Stability of the financial
sector" were discussed during the meeting, RBI said in its statement.
CNBC-TV18 spoke to several banks present in the meeting about the discussions that took
place today.
With the central government announcing an extension of the nationwide lockdown, and
businesses facing turbulence, banks have requested RBI to permit them to grant another
three months of moratorium relief to their borrowers, said three banks present in the
meeting today. In addition, the people quoted above said, banks are also seeking the
regulator’s nod for a one-time restructuring of loans across segments, without
downgrading the asset classification to a non-performing asset.
Currently, RBI norms do not permit restructuring of a loan account without first
categorising it as a non-performing asset and making the necessary higher provisions.
“RBI said it is looking into the issue of an extension of the moratorium, but restructuring
is one word RBI is not very comfortable with because we all know this scheme has been
exploited by banks in the past,” said one of the bankers present in this meet.
“We will go by the spirit of the June 7 circular (on resolution of stressed assets), but we
need a few changes. We should be permitted to restructure with the existing promoter,”
added another banker who was also part of the meeting. He said that finding buyers for
stressed assets in this environment may result in value destruction, and therefore
restructuring with existing promoters was the only solution to the current problem.
“We are okay if RBI puts in strict terms for restructuring, we will abide by them, but they
must allow restructuring of loans,” said the head of a large public bank, citing recent
examples of delays in resolution due to the lockdown.
On the much-debated issue of moratorium relief for NBFCs, RBI made it very clear in
today’s meeting that banks would have to take the call on extending this relief on a case
to case basis, as per their own board approved policies. CNBC-TV18 had earlier reported
that the Indian Banks Association held a meeting over the issue but banks could not reach
a consensus on the matter. With the largest lender, State Bank of India, taking the stance
to not extend the benefit to NBFCs, many banks were in a flux, and had now decided to
present their case to RBI.
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Now, even as the banks remain divided on the issue of allowing NBFCs the benefit of a
three month moratorium, RBI has put the ball bank in the banks’ court, and told them
that the regulator will not prescribe rules for how banks take these commercial decisions.
In the past few weeks when RBI announced liquidity lines for support to NBFCs, MFI and
mutual funds, banks showed a very poor response, barely coming forward to borrow from
RBI’s window. Banks have been parking large sums of money over Rs 7- 7.5 lakh crore
with RBI instead of utilising funds for lending, and their risk aversion in the current
environment has meant that RBI’s TLTRO 2.0, or the Special Liquidity Facility for Mutual
Funds did not achieve the desired objective.
“We have given the feedback to RBI that we do not want more liquidity,” said one of the
bankers. Instead, what banks have asked for is an expansion in the scope of the TLTRO
2.0.
“Small NBFCs and MFIs don’t always use the bond route, it is the large ones that typically
use this route to raise money, and we believe the direct loan route is better suited for these
smaller companies,” explained a banker, adding that banks have asked RBI to allow direct
lending via TLTRO 2.0 funds with the same regulatory benefits- similar to tweaks made
by RBI in the scheme for mutual funds.
Currently, TLTRO 2.0 funds can only be used by banks to invest in investment grade
bonds issued by MFIs and NBFCs, but not for direct lending.
RBI also sought feedback from banks on their preparedness for lending once the economy
reopens. “We think the green and orange zones may see some activity starting May 4 and
there may be some credit requirements there which banks are fully prepared to meet,”
said a banking executive.
Home
RCEP nations offer India package to return to negotiating table
(Source: Dipanjan Roy Chaudhury, Economic Times, May 03, 2020)
Members of the Regional Comprehensive Economic Partnership have offered India a
package to return to the negotiating table, taking into account the country’s concerns over
tariff base rates and special trade safeguards. Members of the trade bloc urged India to
convey its initial response to the package by May 15 as the Indo-Pacific region braces for
a post-Covid-19 economic order, ET has learnt. The package comes after RCEP members
said last month they would welcome India’s return to the negotiating table for entering
the regional trade bloc. The RCEP package recognises India’s preference to use more
recent most-favoured nation tariff rates than the 2014 base rates.
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9 CITI-NEWS LETTER
“The proponents would welcome updated market access offers from India using 2019
MFN tariffs on a limited number of products of concern to India to be negotiated
bilaterally with RCEP Participating Countries… This is offered on the understanding that
the outcome on market access, which will be achieved through bilateral negotiations, will
remain balanced and that India’s tariff commitments will be acceptable to all,” according
to the RCEP note on the package. India opted out of the RCEP negotiations last year after
the group did not assuage its concerns over getting swamped by imports and putting its
domestic industry and agriculture at risk. “The present form of the RCEP pact does not
fully reflect the basic spirit and the agreed guiding principles of RCEP,” Prime Minister
Narendra Modi had said in his address at the RCEP summit in Bangkok last November.
India has a trade deficit with 11 of the 15 RCEP countries. The RCEP agreed in principle
to incorporate a volume-based safeguard mechanism and would welcome an indication
of the products to which India would seek to apply the special safeguard. “The proponents
understand the importance of identifying mutually satisfactory solutions on these issues,
while noting that progress made to date in market access negotiations as a whole should
be preserved as much as possible and that requests on products of specific interest should
be accommodated where possible,” according to the package offered to India. India does
not have free trade agreements with Australia, China and New Zealand. These three RCEP
members remain committed to negotiating a mutually satisfactory outcome with India on
special safeguards that preserves the interests of all members, according to the package.
Home
I-T dept, GSTN, CBIC caution people against phishing emails promising
refunds
(Source: Economic Times, May 03, 2020)
The two apex tax bodies - income tax department and CBIC - on Sunday asked taxpayers
to beware of phishing emails promising refund. Separately GST Network, the company
handling the technology backbone for Goods and Services Tax, cautioned against a fraud
website onlinefilingindia.in asking taxpayers not to reveal personal and bank details.
"BEWARE of FRAUD website onlinefilingindia.in. It is trying to BAIT taxpayers to reveal
personal and bank details. DO NOT respond to messages, mails and lookalike websites
which ask for your personal details," GSTN tweeted.
It further said that some fraudulent messages are being circulated on WhatsApp, Email
and SMS claiming to process refund. "Miscreants are attempting to take undue advantage
of COVID-19 crisis by sending out fake messages with phishing links. One such link takes
to a portal claimed to have been developed by GSTN. the same is fake," GSTN tweeted.
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10 CITI-NEWS LETTER
Fraudsters may also pose as tax officials or GSTN personnel and send fake email asking
to urgently verify or update account. Taxpayers are advised to remain cautious against
such messages, it added. GSTN also issued a list of Do's and Don'ts and asked taxpayers
to call GST help desk 1800-103-4786 in case of any query. Earlier in the day, the tax
department had tweeted: "Taxpayers Beware! Please do not click on any fake link which
promises to give refund. These are phishing messages and are not sent by the Income Tax
Department".
Similarly, the Central Board of Indirect Taxes and Customs (CBIC) in a late evening tweet
asked taxpayers not to click on any fake link which promises to give refund. "These are
phishing messages and are not sent by CBIC or @Infosys_GSTN. Visit gst.gov.in for
online filings related to GST," the CBIC tweeted. The Finance Ministry had on April 8 said
it will fast track issuance of pending income tax refunds up to Rs 5 lakh which will benefit
around 14 lakh taxpayers, to provide relief to individuals and businesses hit by COVID-19
outbreak. As per latest data, between April 8-20, the department had issued nearly 14
lakh refunds involving an amount of over Rs 9,000 crore to various taxpayers -- including
individuals, HUFs, proprietors, firms, corporate, start-ups, MSMEs.
The CBIC too had cleared over Rs 10,700 crore worth refunds in GST and Customs duty
between April 8-23. The ministry has decided to issue all pending GST and Custom
refunds which would benefit around 1 lakh business entities, including MSME. The total
refund granted will be approximately Rs 18,000 crore, it had said.
Home
Lockdown 3.0: Tamil Nadu allows industries to start ops with restrictions
(Source: Gireesh Babu, Business Standard, May 03, 2020)
Construction, textile, leather, IT and IT enabled services, SEZs among others are permitted
to operate in certain locations with limited employees while adhering to social distancing
and other standards.
Tamil Nadu government has extended the lockdown from May 4 to May 17, 2020, with a
limited easing of restrictions on construction and other industries, provided thet take the
necessary precautions. Public transport, all kinds of functions and gatherings, cinema
halls, malls, air-conditioned jewelleries and textiles are not permitted during this period.
Construction, textile, leather, IT and IT enabled services, SEZs among others are
permitted to operate in certain locations with limited employees while adhering to social
distancing and other standard operating procedures advised by the government. The
order was issued after the Union Ministry of Home Affairs announced the extension
of lockdown till May 17. All the relaxations are not applicable in the containment zones.
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11 CITI-NEWS LETTER
The state has allowed the following activities: construction activities by utilising services
of labourers who are at the sites and by bringing workers from outside on a one-time
basis; all construction activities and road constrction work by the government and public
sector undertakings; SEZ and Export Oriented Unites and export units except industrial
estates, with 25 per cent workers (a minimum of 20 persons); IT and IT enabled services
with 10 per cent employees or a minimum of 20 persons will be allowed to function in
Greater Chennai region. Shops selling essential goods can function from 6 am to 5 pm.
All standalone and neighbourhood shops except salons, spa and beauty parlours etc;
shops selling construction hardware, cement, construction materials, sanitaryware,
electrical materials and standalone shops selling and servicing mobile phones,
computers, house hold applicances and sepctacles have been allowed to function from 11
am to 5 pm. Self-employed workers like plumbers, electricians, AC mechanics, carpenters
and home care providers including household workers have also been allowed to work
after obtaining necessary permissions from city police commissioner or the district
collector.
In locations other than Greater Chennai, all industries located outside the corporations
and municipal limits, including textile industries are allowed to work with 50 per cent
workers or a minimum of 20 persons. In town panchayats, where population is more than
15,000, the district collector may permit the operation of textile industries with 50 per
cent workers based on local conditons. SEZs, industrial estates, industrial townships,
including private estates, in rural and urban areas can operate with 50 per cent workers,
adhering to strict control.
Spinning mills in villages and town panchayats shall be permitted to function with 50 per
cent workers. Leather and textile industries in municipalities and town panchayat areas
shall be permitted to function on shift basis after taking the necessary precautions, with
30 per cent workers. IT hardware manufacturing units are allowed to operate with 50 per
cent workers, while IT and IT enabled services with 50 per cent employees or a minimum
of 20 persons.
Agricultural and allied activities, plantations, marine and inland fishing, animal
husbandry, poultry, milk and milk processing, are exempted from the lockdown.
While the Central government has suggested some relaxations when it decided to
continue lockdown until May 3, Tamil Nadu has decided not to implement the relaxations
in the state. On Sunday, the state saw the total number of Covid-19 positive cases crossing
3,000 with 266 new cases reported in 24 hours. Out of this, 203 cases reported today were
from Chennai, which currently has 1,458 reported cases. The total number of active cases
is 1,611, while 1,379 patients have been discharged. The death toll increased to 30, after a
44 year old male from Coimbatore died on Sunday.
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12 CITI-NEWS LETTER
Initiate immediate measures to attract investments: KTR urges Centre
(Source: Telangana Today , May 01, 2020)
In a series of tweets to Union Minister for Commerce and Industry Piyush Goyal, he
proposed several measures that the Union government may consider to reboot and
energise Indian economy to attract investments in the post-COVID scenario. IT and
Industries Minister KT Rama Rao on Friday urged the Centre to constitute an empowered
strategy group to identify and follow up on investment opportunities. In a series of tweets
to Union Minister for Commerce and Industry Piyush Goyal, he proposed several
measures that the Union government may consider to reboot and energise Indian
economy to attract investments in the post-COVID scenario.
Rama Rao said the empowered strategy group should comprise representatives from the
Central and State governments besides industry leaders, bankers, economists and policy
experts. He pitched for a coordinated strategy to revitalise the economy on par with the
combat against novel Coronavirus. “India has a great opportunity, let’s grab it
aggressively,” he said. The Industries Minister stressed for bold and essential reforms at
the earliest including imbibing all best practices in Ease of Doing Business (EoDB) to
propel India into top 20 in the world rankings. He proposed for updating old labour laws
and brankruptacy laws apart from providing a guarantee and honour consistency in the
State policies to investors.
He emphasised the need to focus on creating world-class industrial infrastructure in a
mission mode over the next one year which includes large self-contained industrial parks
and corridors, besides developing world-class ITIs and polytechnics (at least two-four for
every State). “Capacity building in Infra and skills is vital,” he said. Further, Rama Rao
wanted the Centre to aggressively improve export competitiveness in priority sectors like
pharma, aerospace, textiles, leather, IT and food processing. To achieve export
competitiveness, he suggested certain measures including active scouting of markets,
creating better deal than offers by competing nations, soft loans for procuring quality
machinery, international training of staff, and attractive incentives on exports.
The Minister also requested the Centre to initiate measures to bailout micro, small and
medium enterprises (MSMEs). He suggested for direct financial assistance for MSMEs in
worst affected sectors. He proposed for easy and very soft credit for others, deferment of
dues, and priority to MSMEs in government orders among other measures. Rama Rao
reiterated the need to scale up efforts to compete for opportunities in manufacturing
sector and strongly felt that economies of scale will help the nation giving a competitive
edge. He wanted the Union government to promote mega industrial parks like Hyderabad
Pharma City and Kakatiya Mega Textile park as projects of national importance.
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13 CITI-NEWS LETTER
Industry hails Andhra CM Jagan extending helping hand to MSMEs to tide
over lockdown crisis
(Source: The New Indian Express, May 02, 2020)
In a press statement issued on Friday, he said the CII had requested the State government
to waive the minimum power demand charges for the industry in view of the lockdown.
The State government’s decision to clear all the pending dues from government will help
the industries to have the working capital to resume their operations after the lockdown,
said Confederation of Indian Industry (CII)-Andhra Pradesh chairman D Ramakrishna.
In a press statement issued on Friday, he said the CII had requested the State government
to waive the minimum power demand charges for the industry in view of the lockdown.
“The Chief Minister’s decision to waive the minimum power demand charges of MSMEs
for April, May and June is a commendable decision at this critical time,” he said.
“The government decision to provide Rs 200 crore as input capital to firms at low-interest
rates will help ease the working capital requirements of the industries, which are affected
due to the lockdown.
"In fact, these measures are in line with the CII recommendations to the government to
improve the working capital,” Ramakrishna added.
The CII also appreciated Minister for Industries M Goutham Reddy for announcing
much-required measures for fostering the growth of MSMEs and other industry
segments.
Sri City industrial community also hailed the Chief Minister’s decision to waive the
minimum power demand charges for three months.
“The CEOs of the industrial units consider this a boon during the present crisis,” he said.
Thanking the government on behalf of all the industrial units in the industrial
park, Ravindra Sannareddy, Founder Managing Director, Sri City, said they were very
much thankful to Minister for Industries M Goutham Reddy for providing a lifeline to
thousands of MSMEs in the State by deciding to release incentives due for several years.
“This decision will certainly help MSMEs situated in Sri City too, which are badly affected
due to the nation-wide lockdown,” he said.
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14 CITI-NEWS LETTER
Statsguru: Key indicators point to grim economic outlook amid lockdown
(Source: Indivjal Dhasmana & Shreya Jai, Business Standard, May 04, 2020)
PMI's services did contract, with trade, hospitality coming to a grinding halt, though the
pace of fall in the index was not as steep as that of the core sector
March saw just 10 days of the lockdown due to Covid-19, and lead indicators point at the
weakening economic activity.
The crucial eight-industry core sector output fell the sharpest in the new series in the
month (chart 1). This is likely to have a dampening impact on the index of industrial
output (IIP), which will be released on May 12. The purchasing managers' index (PMI)
for manufacturing did not contract but was the lowest in four months (chart 2). The figure
to be released on Monday will tell the grimmer story ahead as many vehicle
manufacturers, including Maruti Suzuki India and MG Motor India, reported zero sales
in the domestic market.
PMI's services did contract, with trade, hospitality coming to a grinding halt, though the
pace of fall in the index was not as steep as that of the core sector (chart 3) April data
would show the real position. With the external world facing the same situation and even
worse in some markets, exports declined the sharpest since 1994-95 (chart 4).
However, the situation on the external account is not as worrisome due to the fall in
global oil prices and many economists expect small surplus or minor deficit in the current
account balance.
The demand for petrol in the domestic market reflected the same trend. As economic
activity came to a virtual halt, the consumption of petrol fell in the month, for the first
time in 2019-20 (chart 5).
The effect of lockdown was evident on power demand as well with the industry not
allowed to work except for essential goods. The demand never rose since March 22, year
on year. It was falling on earlier days of the month as well, but it was not a secular decline
Home
Bombay HC allows manufacturing units to cut salaries of those who don’t
report for work
(Source: Free Press Journal, May 01, 2020)
Taking note of the fact that the Maharashtra government has relaxed lockdown rules in
certain industrial regions in the state, the Aurangabad bench of the Bombay High Court
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15 CITI-NEWS LETTER
has ordered all manufacturing units to pay full wages to workers who report for work. The
High Court has also granted liberty to these units to deduct the salaries of those employees
who do not attend work.
The bench of Justice Ravindra Ghuge passed the significant order while dealing with a
clutch of petitions filed by manufacturers and other employers, challenging the March 29
orders of the Union government. The Union government, while invoking the Disaster
Management Act of 2005, had ordered all employers and manufacturing units to pay full
wages to their labourers or employees, considering the peculiar situation on account of
coronavirus.
The manufacturers claimed that they would be unable to make payments as their work
had been stalled. They had, however, offered to pay minimum 50 per cent of the wages to
workers for the lockdown period.
During the course of the hearing, Justice Ghuge was informed that the Supreme Court is
already seized of an identical issue and has issued notices to relevant authorities to
respond. The Supreme Court has, however, not granted any interim relief.
Having heard the contentions, Justice Ghuge said, "I am of the view that since the apex
court is dealing with a similar cause of action, I would not be inclined to interfere with the
impugned order. But I would expect the manufacturers to pay the gross monthly wages
to the employees, save and except conveyance and food allowance, if being paid on
monthly basis, in the cases of those workers who are not required to report for duties."
The bench noted that the state has partially lifted the lockdown in certain industrial areas.
"Thus, the workers would be expected to report for duties as per the shift schedules,
subject to adequate protection from Coronavirus being provided by the employer," Justice
Ghuge said.
"In the event such workers voluntarily remain absent, the management would be at liberty
to deduct their wages for their absence, subject to the procedure laid down in law while
initiating such action. This would apply even to areas where there may not have been a
lockdown," Justice Ghuge clarified. The bench has posted the matter for further hearing
on May 18.
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India-Vietnam harnessing strategic regional cooperation
(Source: Gitanjali Sinha Roy, English Khabarhub, May 04, 2020)
India and Vietnam are witnessing deepening ties in recent times. On 10 February 2020,
officers from the Vietnam People’s Army (VPA) and the Indian Armed Forces gathered
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16 CITI-NEWS LETTER
for an activity in Vietnam’s capital, Hanoi, for an activity aimed at strengthening friendly
ties between the two nations.
The motive of this event was to enhance a mutual understanding and trust among the
armies, which would help in strengthening the Comprehensive Strategic Partnership
between India and Vietnam and pave way for further engagements in the Indo-Pacific.
Another motive of the event was to actively promote the Joint Vision Statement between
India and Vietnam for defense cooperation (2015-2020) and work on the agreements
which were reached on by the respective defense ministers for collaborations among
young officers.
The countries aimed to enhance experience-sharing in the armed forces, exchange
military art, devise policies for soldiers and martyrs, and engage in UN Peacekeeping.
India and Vietnam have built a firm foundation of diplomatic ties on close cultural,
historical and civilizational links, which are also marked by mutual trust and
understanding.
India expressed its determination to maintain and promote cooperation between the
countries, their armed forces and their young officers. India also pledged that the young
Indian officers would support education and training to raise the capacity of the VPA in
various fields.
Vietnamese Vice President Dang Thi Ngoc Thinh met the Indian Vice President Venkaiah
Naidu on 12 February 2020 and emphasized on the importance of the long-standing
friendship between the two countries.
They also spoke about bilateral relations and maintaining regular exchanges in the
political, defense, economic and security sectors.
India and Vietnam have built a firm foundation of diplomatic ties on close cultural,
historical and civilizational links, which are also marked by mutual trust and
understanding.
In the economic and trade ties, India and Vietnam have agreed to work on a two-way
trade target of USD 15 billion in 2020.
They further deliberated on the specific measures to be taken in bilateral trade
cooperation and assigned relevant ministries and departments to remove the technical
problems being faced both sides.
Vietnam has been facing severe issues because of the closing down of factories in China,
which has halted the supply chains for the country.
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17 CITI-NEWS LETTER
New Delhi and Hanoi aimed to launch a direct air route between the two capitals to
facilitate trade activities and tourism. They aimed to strengthen the coordination with one
another within regional and international forums, and promote peace and stability in the
East Sea while emphasizing upon international law, including the 1982 United Nations
Convention on the Law of the Sea (UNCLOS).
Vice President Thinh also thanked the Indian Government for supporting Vietnam in the
past years, especially when Vietnam assumed the position of the ASEAN Chair in 2020
and a non-permanent member of the UNSC for the year 2020-2021.
India and Vietnam have a major partnership potential in the field of commodity trade.
They can exchange the commodities that are the strengths of their respective markets,
and this would help the comprehensive strategic partnership and their large purchasing
powers.
The Deputy Ministers of Industry and Trade of both countries aimed at discussing
strategies on how to bolster bilateral trade through a working session.
A roundtable meeting was also held between the Vietnamese Minister Dung and many
Indian businesses like Essar, HCL and Mahindra, on the invitation of the National
Institution for Transforming India (NITI Aayog).
There was another working session with leaders of the Ministry of Commerce and
Industry, Confederation of Indian Industry (CII), and individuals from Indian tech giants
like Nasscom and Wipro.
All these meetings aimed to increase the trade outputs and overall investments in the two-
way trade policy between India and Vietnam, which would ultimately help in skill
development and job creation of the citizens.
The strategic and dynamic relationship with Hanoi is a major pillar of strength for India’s
Indo-Pacific strategy, as Vietnam has been building and renewing its relations with the
United States, and has been playing an active part in the US Indo-Pacific strategy, which
is in line with India’s version.
Vietnam is a hub of high-quality and competitive products like agro-fishery, specializing
in basa fish and fresh fruits like dragon fruit, lychee, longan and rambutan, which paved
the way for business opportunities with Indian businesses and consumers.
They have been facing difficulties in exporting these products because of the outbreak of
the COVID-19. Vietnam has developed a garment-textile industry and has asked India for
assistance in this field in the wake of COVID-19, as China has suspended its
manufacturing operations.
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18 CITI-NEWS LETTER
Vietnam has been facing severe issues because of the closing down of factories in China,
which has halted the supply chains for the country.
This is a major jolt to the economy of Vietnam. Therefore, India is now being preferred
by Japan and South Korea as their new manufacturing hub, the country should also be
able to garner support from Vietnam and help its industries.
If Vietnam wants, it can also prefer India as a destination for its manufacturing
investments, which would in-turn boost their two-way trade process in the post-COVID-
19 times.
There is also a potential for both the countries to work towards building low-cost goods,
healthcare, artificial intelligence, agricultural food processing, and combined research in
Science and Technology.
India has agreed to boost bilateral trade with Vietnam and has also agreed to work to
promote trade activities and business exchanges especially in the year 2020, as it marks
the 48th anniversary of their diplomatic ties.
Vietnam, as the ASEAN Chair, hosted the Special ASEAN COVID-19 Conference and has
done a phenomenal effort in fulfilling its duties as a responsible and inclusive Chair.
India’s position in the international arena has reaffirmed its relations with Hanoi. The
strategic and dynamic relationship with Hanoi is a major pillar of strength for India’s
Indo-Pacific strategy, as Vietnam has been building and renewing its relations with the
United States, and has been playing an active part in the US Indo-Pacific strategy, which
is in line with India’s version.
Hanoi has also been building and strengthening its relations with Japan and Australia,
who are also US allies and members of the Quad. Vietnam’s newfound regional and
international face is important for its relations with India, as both have common goals
and common friends, and hopefully, a future filled with other such commonalities.
(The writer is is a Ph.D candidate at the Department of East Asian Studies, University
of Delhi. Currently, she is a Visiting Scholar at the University of Tokyo, Japan)
Home
DGS has to take a call on waiving detention charges
(Source: TNC Rajagopalan, Business Stanadard, May 03, 2020)
The CBIC has also instructed field formations to make special efforts to dispose of all
pending refund and drawback claims through a "special refund and drawback disposal
drive"
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19 CITI-NEWS LETTER
The Central Board of Indirect Taxes and Customs (CBIC) has issued guidelines for
conduct of personal hearings through videoconferencing by various authorities, in respect
of any proceedings under the Customs, Central Excise and Service Tax laws.
The guidelines include consent of the parties, either as appellant or respondent,
communication of the date and time of personal hearing to the parties concerned, filing
authorisation letter along with identity proof and contact details, marinating appropriate
dress code and decorum, and videoconferencing through available applications or other
...
Home
Apparel industries told to get permission from Collector
(Source: The Hindu, May 01, 2020)
Apparel industries that want to take up design and sample preparation in Tiruppur town,
can do so after getting permission from the District Collector and operating with 30 %
workers, an official press release said.
In the release, Tiruppur Collector K. Vijayakarthikeyan said that industries in rural and
town panchayats could operate with 50 % workforce.
Town panchayats
Those in SEZs, export oriented units, industrial townships, and industrial estates in rural
and town panchayats could operate with 50 % workers.
For the exporting units in the town, the Collector would inspect and permit them to
function with 50 % workers.
Spinning mills
Spinning mills and hardware manufacturers in rural areas could operate in shifts with 50
% workers and after following all the mandatory precautionary measures. MSMEs in rural
areas could re-start operations if they followed the precautionary measures. These
permissions would not apply to industries in containment areas. Industries that need
permission and passes could apply online through https://tnepass.tnega.org, the
release added.
In Coimbatore, industry sources said Municipal Administration Minister SP Velumani
would hold discussions on Monday with representatives of 15 industrial associations.
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20 CITI-NEWS LETTER
We have a narrow window to enact fiscal relief measures, says Former
Secretary, Economic Affairs and Dy Governor, RBI
(Source: Anil Padmanabhan, Live Mint, May 03, 2020)
Each sector will have to figure out how to phase in manufacturing taking account of
developments in the demand side, so that what they produce gets transported and bought;
it is interconnected.
Rakesh Mohan has for the most part of his career always been in the policy hot seat, first
as an economic adviser during the 1991 crisis—when he authored the policy proposal
dismantling the ‘licence raj’—which set the stage for an accelerated burst of economic
reforms and later as the Reserve Bank of India (RBI) deputy governor overseeing
monetary policy. Mohan, currently a senior fellow at the Jackson Institute for Global
Affairs, Yale University, spoke to Mint on the fallout from the covid-19 pandemic and the
desired steps, including the need for an urgent fiscal stimulus, to revive the
economy. Edited excerpts:
The Union government has ended all speculation and announced a staggered
withdrawal. Surely this would alleviate some pressure on the economy?
I would hope that it would relieve some pressure on the economy but it would depend on
what kind of withdrawal it would be. What will be allowed? Which activities will start? It
is a welcome sign though, from the economic point of view.
The lockdown in the last 40 days has caused a major demand shock, among
other things. How do you revive demand?
That’s a very important question. Revival of demand has two levels to it. First, that as the
lockdown is lifted, people who have enough cash to spend, depending on what is open can
start spending. These are people who have reserves of cash which they have not spent;
those in the upper classes, whose incomes were not affected or affected mildly. These
categories would include people whose incomes have not been greatly affected by the
lockdown: which includes salaried people of all kinds—government, public sector, private
sector and other employees, such as university and school teachers, who have regular s Second, I presume, is the vast majority of people who have not received incomes during this
period. Revival of their demand does mean transfer of some kind of cash grants to them—to the
extent that has not happened at all in the past 40 days. There would be a need to devise modalities
for a period of a month or six weeks of doing certain kind of cash transfers which will be spent. I
am not in a position to suggest how that can be done and how we select the people who get such
transfers, except that obviously the priority has to be the lower-end workers who have lost their
livelihoods as a consequence of the lockdown.
With the kind of information that does exist in the system, I do feel that it should be
possible to devise such measures. Here I am talking about the urban areas which includes
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21 CITI-NEWS LETTER
all the informal sector workers, daily workers, etc. Through consumption surveys and
other information, it ought to be feasible to estimate the kind of demand that exists in
income groups and then get a sense of what needs to be done. We have the capacity to do
it.
alaries which have kept flowing.
However, I have been living in the US for the last four years and presently in lockdown
mode here. Hence all my remarks have to be discounted to a certain extent since I do not
have ground level knowledge.
Any thoughts on the magnitude (in the US)?
People have been deprived of incomes for 40 days. Sitting here in the US, one can just
gauge the magnitude of this suffering. The new unemployment numbers that have just
come out in the US show that almost 30 million people have applied for unemployment
insurance which is just about 18 % of the total labour force. This is after the huge fiscal
package that they did which is actually giving loans to enterprises to keep people
employed. During the 2008-09 financial crisis, the maximum unemployment claims
amounted to about 800,000.
Given the informal nature of the economy in India, there must be a larger percentage of
people who have not received any income during this period. I don’t have a good enough
sense of the rural areas and the effect of the lockdown there. In rural areas also, there is
now a large proportion of incomes that are derived from non-agricultural activities so they
would also have been affected. The cash transfer schemes would need to address such
segments of the population who need help.
How do you see the revival of demand playing out in this new normal where
social distancing will have to be a part?
That is exactly the difficulty that one is foreseeing. Going sector by sector and starting
with the most obvious large sector: airlines. We don’t have any sense when we will start
operating flights—domestic and international. This is one sector where supply is clearly
being impacted. Even if we start certain flights, for some time to come there will be very
low demand because people will be scared of flying.
Second, is the tourism sector which includes large hotels, small hotels, restaurants and so
on. Supply here will also be impacted for quite some time. I would presume there are ways
on how to phase in activities in these sectors. For example, for hotels it ought to be feasible
to operate them at some capacity while practising physical distancing. In the case of hotels
it ought to be feasible for them to operate to cover their fixed costs, assuming travel is
permitted.
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22 CITI-NEWS LETTER
Third, it ought to be feasible to allow some degree of restaurant opening even if it is
through a much greater emphasis on take-out and deliveries. There are a large number of
people employed in that sector as well across the country.
Third, construction sector where there is both a problem of supply and demand. Given
the impact that incomes have taken, I would presume that the real estate sector will go
through some difficulty in the short and medium term. If they are under construction, it
ought to be feasible to start getting people in and get activity going. There will be a
problem there because of the labour disruption that has taken place. None of these things
are easy.
If you connect all the dots, clearly the economic recovery is going to be
excruciatingly slow and not V-shaped as some argue.
Yes.
If you look at the manufacturing sector, because of the lockdown there will be large
inventories that exist. The first job for small, medium and large companies is to get
inventories going. There is no point manufacturing if you can’t sell and that is connected
to the whole logistics system. It will depend on how well we are able to open goods
transportation both by rail and trucks. The rail system has of course been operating where
freight is concerned, but the rail share of non-bulk freight movements is very small in
India. So as the lockdown is lifted, special attention will need to be given to facilitating
truck freight movement.
Each sector will have to figure out how to phase in manufacturing taking account of
developments in the demand side, so that what they produce gets transported and bought;
it is interconnected. Each company will be trying to figure out how to increase activity
while taking precautions.
It needs to be done sector by sector, region by region, area by area and therefore cranking
up the economy will take time.
Given these circumstances it is clear that a massive fiscal stimulus will be
required to kick-start the economy. And in this we can only look at the Union
government. Thoughts?
In order to clear our thinking, it should be called a fiscal relief programme and not a fiscal
stimulus. My view seems to be somewhat different from many other economists. I feel
that both the government and many economists are exaggerating the negative impact of
a rise in fiscal expenditure, and the possible upward trend of sovereign debt burden that
would result.
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23 CITI-NEWS LETTER
First, we do need to act quickly to safeguard livelihoods, help economic activity and
businesses of all sizes to weather the downturn, and maintain access to essential public
services. As we all know, large segments of the Indian population make their living in
informal jobs, which means that they live from day-to-day dependent on their daily
earnings for keeping their body and soul together. So I would imagine that effective
unemployment urban India must be much higher because the lockdown than it is in the
US. Further, most of our labour force lack any kind of a safety net, to even survive very
temporary disruptions of their livelihoods as is happening at present. And, unlike
developed countries we don’t have the luxury of unemployment insurance. So the loss of
employment and earnings suffered by this large number of informed workers we need to
be compensated by the government. What has been highlighted is the plight of migrant
labour in urban areas: similar problems must have arisen for resident labour as well,
which have not come to light since they are presumably dispersed across our cities. If
quick relief is not given to maintain some minimum semblance of livelihoods, this could
have somewhat medium-term impacts in terms of their ability to recover and resume
economic activity as the lockdown is lifted.
Second, small- and medium-sized firms tend to be the mainstay of economic activity in
our country, but they typically lack access to working capital, which means a liquidity
problem for these firms arising from the extended lock could quickly turn into insolvency.
If they do not have borrowings from banks, they may just go under and have difficulty
resuming their activities. If they do have bank relationships there insolvency will then
affect banks’ balance sheets. In either case they will need assistance during this lock down
period to be able to pay their employees. Larger firms, which may be expected to have
somewhat higher staying power in terms of available liquidity, are expected to continue
paying their workers. In their case also the cessation of or significant reductions in their
revenues could also lead to difficulties in their ability to continue paying the workers and
other fixed costs. Thus there could be increasing incidence of insolvency, depending on
how severely the lock down has affected particular businesses.
For example, the longer the unemployment rate is elevated, the more people experience
profound dislocation from their previous employment, the more their skills become
dated, the more their connections to former colleagues weaken, etc. This is a classic
problem of hysteresis, when a cyclical shock produces structural change.
So we do need a well-designed package of fiscal relief to tide over, the immediate problems
arising from the lockdown with an eye to enabling a quick recovery as the lockdown is
eased and lifted.
Care would obviously have to be taken to minimize the cost of such a relief. It would have
to be decentralized in nature and therefore will need to be done through both state and
local governments with the cooperation of local business associations. Those enterprises
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24 CITI-NEWS LETTER
that have banking relationships could be helped through the banking system with
conditional loans which have the possibility of becoming grants on the basis of fulfillment
of certain conditions.
Third, there are a number of sectors, such as hotels and airlines, logistics, automobile
industry, construction, textiles, which are suffering 50% or more erosion in their earnings
and output. Unless fiscal help is given to these sectors in an organized and timely manner,
there could be permanent damage which would prevent them from restarting operations
as the lockdown gets lifted. Even when consumer spending begins to pick up, consumers
may still be reluctant to undertake certain activities (e.g. travelling long distances,
attending events with large crowds, etc.). We could also be looking at the emergence of
very large non-performing assets (NPAs) leading to significant difficulties in the financial
sector as a whole. This has to be avoided.
Why do you feel so?
Let us first recall some recent instances of high fiscal deficits. First, it is worth recalling
that the government’s debt to GDP (gross domestic product) ratio had increased to almost
85% in the early 2000s. Despite a less than stellar record of fiscal probity over the last
decade or so, this ratio has remained broadly stable at just under 70% since 2013. So there
has clearly not been a lasting negative impact of that episode.
Second, similarly, the overall fiscal deficit of the country had indeed gone up to over 11%
of GDP in 2003 and was just under 10% after the financial crisis in 2008-09. The state of
the economy was much better in 2008-09, but perhaps somewhat similar to the present
in the early 2000s when we had recorded low rates of economic growth and somewhat
higher ratios of NPAs in the banking system at that time. But we recovered from that
period after 2002.
Third, during these periods of higher fiscal expenditure and deficits there was a very
negligible resort to external government financing. In none of these instances was there
any resort to central bank financing either, on a direct basis. All the extra financing was
done through the domestic market.
Fourth, hence this experience suggests that India has the potential capacity for sustaining
high temporary fiscal deficits and then recovering by restoring relatively healthy
economic growth. It won’t happen in a hurry. Assuming that globally also that things start
to become normal in a year from now, then we ought to be looking at restoring reasonable
growth from 2021-22 onwards.
Fifth, it is true, however, that the excess fiscal and monetary stimuli in 2008 and beyond
did result in both continuing high fiscal deficits and a spike in inflation to around 2013.
But that was in different circumstances when the high fiscal expenditures and tax cuts did
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25 CITI-NEWS LETTER
constitute a significant fiscal stimulus. They came on top of an economy that had been
humming along at high capacity. There were a number of actions done in 2009 which
were partly election related. That was a real fiscal stimulus along with excessive monetary
stimulus which led to high fiscal deficits and excess aggregate demand, which didn’t
correct quickly enough. The result was high inflation of over 10% for the next three-four
years. I can perceive that that hangover is what is possibly inhibiting policy makers from
taking more fiscal relief measures that are urgently needed now.
Why would it be different now?
This time around, the fiscal expenditures would be much more in the nature of fiscal relief
rather than stimulus. This is just substituting the expenditures which would otherwise
have been made. They need to be made because people have no incomes. Of course, care
will need to be taken to ensure that the demand is not higher than the increase in supply.
Those are the considerations.
So it can be done much more safely, as long as India returns to prudence after the covid-
19 pandemic subsides. This is the important point: fiscal relief expenditures must be seen
as substitutes to private expenditure which is currently constrained because of the
lockdown and will continue to be restrained even after it is lifted on a gradual basis.
What about the size of fiscal relief?
Current calculations suggest that we need a fiscal relief programme of around 5% of GDP.
The longer we delay the announcement and rollout of the measures the larger will the
need become. So time is of the essence.
We also need to understand that, in any case, this year’s deficit will be higher because of
loss of economic activity resulting in lower tax and non-tax revenues. Hence my broad
quantitative assessment is that the India’s debt-GDP ratio, in the present unusual
circumstances, could well go up to about 90% of GDP in this fiscal year, if we undertake
such fiscal relief. The guiding framework here would have to be some assessment of the
fiscal actions that may be needed to restore economic activity juxtaposed against possible
injections necessary to restore the financial sector in the absence of fiscal action now.
So the architecture of this fiscal relief package has to be very strong on
design.
Yes. While these are not easy things to do, there must be conceptual clarity.
Should this fiscal relief package be announced immediately or later?
It should be immediate. Sooner the better; we have already lost six weeks. And the
lockdown period has already been extended by another two weeks. We could end up
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26 CITI-NEWS LETTER
shouldering an even higher burden of fiscal expenditure and debt if we don’t do things
now.
What I am saying is by not doing something now or doing something slowly, you might
actually end up worse just in terms of fiscal expenditure and debt. It may be needed to
restore economic activity so that you don’t have a problem later.
The obvious follow up question is how do you fund this kind of stimulus?
First, it is not a stimulus, but a fiscal relief! The injection of extra liquidity in the system,
so far as I understand it is nearly Rs7 trillion, and is being parked by banks with the
Reserve Bank of India on a daily basis. So there is a reasonably high degree of liquidity
available for the union government to borrow through the normal processes. This is
obviously because demand has contracted and the risk averse banks are not lending; so
you will get subscriptions to any kind of bond options. The 10-year bond yields are still
around 6.1% and have not shot up because of Reserve Bank of India’s (RBI’s) actions in
easing liquidity.
What about monetising part of the fiscal deficit?
These are totally exceptional times when we have to think out-of-the-box but prudently.
If found necessary in view of developments in the financial markets, and excessive
pressure on government securities yields, the Reserve Bank will need to use all the tools
at its disposal to support government financing as necessary. If it is feasible to finance the
deficit without resort to RBI, while keeping the long-term bond yields under control as at
present, that would be preferable. That will enable appropriate price discovery, and the
RBI could conduct almost back to back OMOs.
I am glad to see that it has already expanded its WMA (ways and means advances) limit
to the central government significantly to Rs2,00,000 crore, and has also increased the
state governmentt limits to 60%. This is a very good move. It reduces the cost of
borrowing for the government; it helps the bond market from spiking in terms of yield;
and gives government and the RBI time to see if further financing is needed from the RBI
without disturbing the bond market significantly.
But this may not be enough. State governments are bearing the brunt of many
expenditures required to protect the livelihoods of the poorest while suffering significant
declines in their revenues. Thus they will also need significant support from the central
government and the Reserve Bank combined. Various measures that can be thought of
are OMOs in state government securities, the inclusion of state government securities in
SLR provisions for banks, central government borrowing and onward lending to states…
And so on.
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27 CITI-NEWS LETTER
One discussion I’ve not seen so far relates to the needs of local governments. I assume
that their relief expenditures must have grown significantly and wonder how they are
being financed?
This is a once in a lifetime pandemic and hence there is little or no
institutional memory, and consequently there is a need to create a new
playbook. If you were back in government what is the out-of-the-box advice
you would proffer?
I would suggest one measure. Unlike the US or other developed countries where policy
interest rates are zero or even negative, even if we reduce the policy rates to below the
current level, the likelihood of lending rates going below the current levels is very low.
That is what we also experienced in 2008-09. So my suggestion is that the government
should contemplate and across the board interest-rate subsidy of 2 to 3% for on lending
by banks, and possibly NBFCs (non-banking financial companies) for a specified period
of time. I had made a similar suggestion in 2008 also but it was not accepted then. The
cost of this is quite low in the current circumstances. So additional lending Rs1,00,000
crore would mean a fiscal cost of only Rs2,000 crore. The modalities of such a measure
would need to be worked out in some detail but I do feel that this would be much more
effective than any further attempts to reduce policy rates. What this does is to keep
deposit interest rates at reasonable real rates, borrowers get the benefit of more interest
rates, while protecting bank balance sheets and thereby financial stability of the system.
Pretika Khanna and Anuja contributed to this story.
Home
India plans a more employer-friendly apprenticeship to cater to MNCs
(Source: Yogima Sharma, Economic Times, May 03, 2020)
India is planning to strengthen its apprenticeship framework via measures including
introduction of new courses to cater to the needs of multinational companies looking at
relocating part of their manufacturing to the country. The skill development and
entrepreneurship ministry has received multiple queries from firms abroad on
apprenticeship norms in India as they scout for new destinations under their ‘one plus
one strategy’ of having at least one manufacturing facility outside China. Many of these
queries are from companies in the US and EU for sectors such as textiles, homeware,
ceramic tiles, engineering goods and furniture.
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28 CITI-NEWS LETTER
The government wants to make its apprenticeship system on a par with
the best in the world, said officials.
“The plan is to make apprenticeship provisions employer friendly and at
par with other countries,” said a senior official, who did not wish to be
identified. “This will help India create more job opportunities for
millions of its youths, besides ensuring that a more trained workforce is
available for ramping up domestic production for key sectors like
electronics where India has huge dependence on China.”
Home
Business activities significantly hit; recovery may take over a year: Survey
(Source: Economic Times, May 04, 2020)
The lockdown has brought economic activity to a grinding halt, CII said on Sunday, citing
findings from its CEOs survey, which indicated that 65 per cent of the firms expect
revenues to fall more than 40 per cent in April-June quarter. The survey results reveal
that the country may experience a protracted slowdown in economic activity, as 45 per
cent of the CEOs polled feel it will take over a year to achieve economic normalcy once the
lockdown ends. The snap poll saw the participation of more than 300 CEOs, of which
nearly two-thirds belonged to MSMEs.
On the career and livelihoods front, more than half of the firms foresee job losses in their
respective sectors after the lockdown. A significant share of respondents (45 per cent)
expect 15 per cent to 30 per cent cut in jobs. However, allaying some concerns, nearly two-
thirds of the respondents reported that they have not experienced a salary/ wage cut in
their firms so far. The country-wide lockdown imposed on March 25, while necessary, has
had deep ramifications on economic activity, CII said.
For the full financial year 2020-21, the expectations of a fall in revenue are staggered, with
33 per cent of the firms anticipating a revenue fall of more than 40 per cent, closely
followed by 32 per cent of firms expecting a revenue contraction ranging between 20 per
cent to 40 per cent.
While three out of four firms have identified that a 'complete shutdown of operations' was
a major constraint being faced by business, more than half of them have also indicated
'lack of demand for products' as a hindrance to business activity. "While the lockdown
was necessary to mitigate the coronavirus impact on the population, it has had dire
implications for economic activity. At this hour, the industry awaits a stimulus package
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29 CITI-NEWS LETTER
for economic revival and livelihood sustenance besides calibrated exit from lockdown,"
CII Director General Chandrajit Banerjee said.
Additionally, it is pertinent to note that according to a large proportion of the firms, a
recovery in domestic demand, for their product or services, may precede the recovery in
foreign demand for the same.
Home
Analyst Corner: Grasim Industries rating – ‘hold’; COVID-19 has worsened
outlook for VSF business
(Source: Financial Express, May 04, 2020)
There’s absence of catalysts to narrow holdco and conglomerate discount that has risen of
late; ‘Hold’ retained with TP of Rs 550.
We spoke with Lenzing (LNZ AV, EUR49.50, not rated), a leading global VSF producer,
to better understand the current demand and pricing environment for viscose staple fibre
(VSF). The key takeaways from our discussion were: COVID-19 has severely impacted
apparel demand
With retail stores accounting for 75% of apparel sales in the US and Europe, textile and
hence fibre demand has been significantly impacted due to COVID-19. Physical store sales
in the US have completely evaporated in the last four weeks. Although online sales have
been resilient, it has only partially offset the impact of physical stores being shut.
Lenzing believes apparel demand in the APAC region should reach pre-COVID levels by
Q3CY20, while Europe and North America will reach those levels only in January 2021.
However, given the uncertainty surrounding the pandemic any assessment of the impact
is fraught with risks. Lenzing had earlier guided for its 2020 results to be below 2019.
However, current uncertainty has resulted in Lenzing suspending its guidance for 2020.
China VSF inventory at record levels
VSF inventory in China, which accounts for more than 50% of VSF production, has
reached record levels with current inventory at 45 days; three times the long-term average
of 15 days. Prices have fallen further in the last two weeks in China with standard VSF
currently trading at RMB9,200/t. Lenzing believes the situation remains dire for several
VSF producers in China as they are making cash losses of more than RMB2,000/t at spot
prices.
As a result, capacity utilisation continues to decline from 80% in January 2020 to 65%
currently. Lenzing believes there is a high probability of 500kt (c8% of global VSF
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30 CITI-NEWS LETTER
capacity) expansion in 2020 getting deferred. However, the outlook for VSF prices looks
challenging unless there are further capacity cuts or a sharp recovery in demand, as per
Lenzing.
Negative read-across for Grasim’s VSF business; reiterate Hold
Our discussion with Lenzing further reinforces our negative outlook for the VSF business,
as highlighted in our recent note. We believe COVID-19 has further deteriorated the
already fragile outlook for VSF and the Caustic Soda business. We fail to see any catalysts
that can narrow the holding company (holdco)/conglomerate discount that has risen by
10% in the past year. We maintain our Hold rating on Grasim Industries’ stock with an
unchanged target price of Rs 550. We continue to value the standalone business at 7x
FY22e Ebitda. We apply a conglomerate discount of 55% to Grasim, in line with the spot
discount.
Home
Change in rating outlook for Arvind Fashion, Edelweiss Fin
(Source: Financial Express, May 02, 2020)
The ratings for long-term bank facilities for Arvind Fashion was reaffirmed CARE A- with
outlook revised from stable to negative.
CARE Ratings on Thursday revised the outlook of bank facilities of Arvind Fashions from
stable to negative. The revision in the outlook on the long-term rating of Arvind Fashion’s
reflects the rating agency’s expectation of adverse impact on the credit profile of the
company due to the temporary closure of its retail outlets on account of the outbreak of
Covid-19. Data from Bloomberg showed that total debt of Arvind Fashion stood at `2,256
crore as on September 2019. The ratings for long-term bank facilities for Arvind Fashion
was reaffirmed CARE A- with outlook revised from stable to negative and for short- term
bank facilities rating was reaffirmed at CARE A2+. The ratings for Arvind Fashions
continue to remain constrained on account of deterioration in debt coverage and leverage
indicators arising from net loss of `191 crore incurred by it on a consolidated level during
9MFY20 which also remained higher than previously envisaged, according to CARE
Ratings.
In another release, CARE Ratings also revised outlook from stable to negative for NCDs
of Edelweiss Financial Services and reaffirmed the ratings at CARE AA-. The rating for
commercial papers was reaffirmed at CARE A1+. According to the rating agency, the
outlook has been revised to negative from stable on account of the heightened risk profile
of the overall credit book of Edelweiss Financial Services due to the current outbreak of
Covid-19.
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31 CITI-NEWS LETTER
Punjab’s textile industry in dire straits
(Source: Vikas Vasudeva, The Hindu, May 03, 2020)
Losses because of lockdown, economic slowdown pegged at ₹2,000 cr. so far
Amid the economic slowdown during the ongoing nationwide lockdown, Punjab’s textile
industry has pegged losses at around ₹2,000 crore so far.
“The collective turnover of the textile industry here (Amritsar) is between ₹7,000 crore
and ₹8,000 crore yearly. The global and domestic shutdown for the last two months due
to the pandemic had huge cascading impact on textile trade. The complete closure of
wholesale and retail markets across all continents have dismayed the clothing sector,
which is facing a bleak and uncertain future. The industry in Amritsar has already suffered
a loss to the tune of not less than ₹2,000 crore,” Amit Kandhari, senior member of
Amritsar Textile Processor Association (ATPA), told The Hindu.
Mr. Kandhari said that the current year is a total washout with payments as well as new
orders have been put on hold by customers, which has virtually created a debt trap for the
entire clothing and garment business.
“We are unable to operate our units under the current fluid situation due the spike in
COVID-19 cases in India and other countries and very precarious financial conditions.
This segment can only be revived back provided all supply chains including all textile
outlets and retail showrooms start operation in full swing that too in next two months,
otherwise it would not be possible to redeem their payment stuck at various level across
the board,” he said.
‘Open weaving units’
P.L. Seth, a prominent shawl manufacturer, said that the government must ensure
protection of the outstanding dues.
“In case the lockdown is further extended for next two more months, this sector would
not only become sick but a majority of the units would come under “NPA” category,” he
said.
“The State and the Centre should allow the opening of small weaving units to operate the
night shift with limited labour and staff,” said Mr. Seth, who is also president of the Shawl
Club.
Another textile mill owner Sandeep Sajdeh said that with blocked orders and funds, it
would be extremely hard to pay wages and salaries.
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32 CITI-NEWS LETTER
“The exports orders for woollen fabrics are in the pipeline but the constraints of reopening
of mills is a huge task with supply chains under current lockdown was making it very
difficult to operate,” Mr. Sajdeh said.
“My export shipment is stuck at Bangladesh border awaiting clearance for last one month.
I am hoping lockdown will ease and the consignment would reach Bangladesh,” he added.
“Amritsar, which is a thriving textile business hub for the last one century producing
woollen fabrics, shawls, blankets besides having large number of nylon knitting and
embroidery mills is on its throes as the opening of this segment is facing uncertainty with
depressing economic situation,” Mr. Sajdeh said.
‘Devise exit strategy’
Ashok Sethi, a member of the task-force constituted by the Punjab government to devise
an exit strategy from the lockdown has sought an immediate financial stimulus by way to
total waiver of bank interest for minimum of six months and deferment of term loan EMIs
for at least one year.
“The governments should open up the ESI and PF corpus worth over several thousand
crores and come to the rescue during huge payment crisis as the industry has literally no
resources to pay wages at present. On the GST front at least 50% relief be provided which
would help the industry not only to survive but also grow,” he said.
Home
Need to renew industrial growth: Modi 1.0 launched Make in India, now is
the chance for renewal
(Source: Meghnad Desai, Financial Express, May 03, 2020)
The need is for a temporary unemployment benefit scheme for up to 100 days a year
similar to the MNREGS so that urban workers do not suffer during short periods of
unemployment.
As and when it is over and we are out of the lockdown, the first desire everywhere will be
to return to what we had, the Old Normal, regardless of its many problems. Everyone will
need to feel that the dreaded epidemic has been eliminated and they can live again as they
used to.
This is Repair. It involves helping many groups of people whose lives have been severely
disrupted. All the people laid off due to the economy being shut down will need help with
resuming their old life. Governments at the state level cannot help as they have been hit
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33 CITI-NEWS LETTER
by loss of revenue due to the shutting down of alcohol shops and the drop in petrol sales,
two sturdy sources of revenue. Only the Centre can help here.
The Old Normal was a phase of growth recession. The Budget had already acknowledged
the need for a fiscal stimulus. Now, as all other economies are doing, a massive reflation
will be necessary to accomplish the tasks of repair, restoration and renewal. Restoration
will be the urgent step which will take the economy back to a growth path.
The most needy group is the urban workers in the informal sector, especially the migrants.
These migrants have returned to their native areas lately with help from their ‘original’
states. Now to bring them back should be the Centre’s task as far as financing is
concerned. Ideally, the Centre should compensate the states which have paid to bring
‘their’ migrants back home.
The next task is to build a welfare state suitable to Indian conditions. Modi 1.0 began the
task of providing health care, financial inclusion, digital access. MUDRA provided
financial help for businesses run by women, Dalits, tribals. The need now is to address
the biggest gap left by 70 years of economic policy — the large pool of the unemployed.
The need is for a temporary unemployment benefit scheme for up to 100 days a year
similar to the MNREGS so that urban workers do not suffer during short periods of
unemployment. This will establish parity between rural and urban poor.
Modi 1.0 also provided for rural housing on a large scale. The plight of migrant workers
points to the need for urban housing. A massive programme of urban housing at
affordable rents for eligible working families is needed across the large and small cities.
Dharavi has been much romanticised in books and films. It should be a blot on Mumbai
and India. The advantage of housing as a public infrastructure investment is its capacity
for job creation as well as tackling homelessness. Given the large unfulfilled demand, this
will have to be a multi-year investment project.
This housing programme will help resume growth and sustain it over a long period. But
there is a need to renew industrial growth. Over the last 70-plus years, India has frittered
chances to become a centre of manufacturing on the scale of other Asian countries. This
was due to labour laws which protected the small formal sector. This has led to the
overhang of unemployment. The disruption of global supply chains during the pandemic
creates tremendous opportunities to reindustrialise India. No previous government has
been equal to this challenge. Modi 1.0 launched Make in India. Now is the chance for
renewal.
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34 CITI-NEWS LETTER
To attract industry, stop hurting industry
(Source: Financial Express, May 04, 2020)
To attract investors, the govt needs to address their pain points; that requires the PM to
take some basic decisions.
Going by the series of meetings prime minister Modi held last week, it would appear he is
quite worried—and rightly so—about how his government is putting off investors. Given
there is yet another China opportunity, as foreign investors there are looking to leave, the
anxiety is understandable. It is to be hoped that, this time around, Modi’s ministers will
act upon what he wants, but some basic rules will help: Keep It Simple, Stupid (KISS).
And, since the prime minister is probably meeting as many doctors as economists in this
coronavirus season, he probably recalls the part of the Hippocratic oath that says “first,
do no harm”.
The ministry of power, to cite a recent example of government policies that don’t quite
address the issue, has just come up with an elaborate new plan to bring state electricity
boards (SEBs) on track after the last bailout (Uday) failed—expectedly, given it had more
carrots than sticks. Some parts of the old policy that fostered competition—like open
access and separation of ‘carriage and content’—have inexplicably been watered down or
dropped, with there being a new focus on the franchisee model and the state paying
subsidies on time, as well as tariffs that reflect costs.
Given the complete failure to fix SEBs for decades despite a series of bailouts, it is not
clear this one will work, but why not opt for a simpler solution? Empower RBI to
automatically deduct SEB dues from the bank account in which the Centre deposits the
states’ share of taxes. With their revenues at stake, states will automatically pay subsidies
on time, ensure tariffs are raised, cut losses, and find other ways to raise efficiency.
Indeed, a good example of how government policies are so convoluted is the spate of
announcements and funds set up to help beleaguered real estate firms/NBFCs etc over
the past year or two.
If Modi asks, he will find the funds have achieved little because there were so many
caveats attached, in which case, why even announce a relief package? While this
newspaper routinely gives examples of how performing investors have been repeatedly
hit by government policy, the most recent example of this is the mindless rule—under the
Disaster Management Act—that prevents industry from laying off workers or cutting their
salary. When industry has no turnover, how can it survive with such a stipulation? And,
it is to the Supreme Court’s discredit that it has not even stayed such a draconian and
illogical order. Equally draconian was the order put out by various states that an FIR
would be filed against the CEO of a firm if there was any Covid-positive employee! In a
generally anti-industry atmosphere, it is easy for such policies to get through.
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If nearly 75 years after independence, the PM doesn’t realise that India’s rigid labour laws
have pushed industry away to China, Vietnam, and Bangladesh, there is little point in him
asking his ministers to pro-actively woo industry. And, how can he hope to boost the coal
and mining sector when Indian royalties and other levies are so high compared to other
countries, to say nothing of the never-ending environment and other clearances?
Instead of constantly touting, as he does, India’s progress in the meaningless Ease Of
Doing Business rankings, Modi needs to promise not to impose sapping price controls.
Just see how much of Indian pharma production is exported as a result, and how this has
prevented agriculture exports from realising their potential. If something as basic as a
telecom package hasn’t been finalised despite the sector being on its knees for so long—
and with such clear evidence of government policy being rapacious—it is really ambitious
to expect India will be able to woo the bulk of the investment seeking to leave China.
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GLOBAL
Philippine: PPE shortage highlights need to revive textile industry
(Source: Roy Stephen C. Canivel, Inquirer, May 04, 2020)
Without a local textile industry, apparel, and garment factories have to import the
materials they need to make personal protective equipment (PPE) like medical gowns,
and this is not necessarily sustainable, an official from an industry group said.
A member of the board of trustees at the Philippine Exporters Confederation Inc. said the
country needed to revive its local textile industry, which he said used to be one of the best
in Asia 10 to 15 years ago.
Now, it is the only country in Asia without its own textile industry, said Robert Young,
Philexport trustee for the textiles sector.
During a recent online forum, he said they received calls for help from factories that have
run out of materials to produce PPE and masks.
“We are willing but where are the fabrics? Where are the materials? We can’t get
anything,” added Young, who is also the president of the Foreign Buyers Association of
the Philippines (Fobap).
“If we have factories nearby, or domestic, we can get supplies from these textile
companies,” he said.
The COVID-19 pandemic has shown to more people the structural inefficiencies that had
persisted before the outbreak. The local clothing industry is no exception.
While local garment factories are currently making PPE, there is still a gap in the supply
chain equivalent to the size of an entire textile industry. For now, that gap is being filled
by imports.
“We cannot continue importing. We have to be self-reliant because we don’t know what
will happen next,” Young said.
He said there should be a serious study on the revival of the textile industry, which is
important as it provides the basic human need for clothing.
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Textile firm switches to face mask fabric production
(Source: Daily Business Group, May 04, 2020)
Scottish textiles business Don & Low is to manufacture filters used in the production of
the highest quality face masks recommended by the World Health Organisation and NHS.
The Forfar plant has received funding from Scottish Enterprise for equipment to make
fabric for the FFP3 face masks.
These are the top grade of respirator coverings to protect against virus and bacterial
infection when the contagion is spread through coughing and sneezing (such as with the
coronavirus).
They are also often used by healthcare professionals when handling hazardous p The
Scottish Government, via Scottish Enterprise, has agreed to provide the company with up
to £3.6 million of financial support towards the £4.5m purchase, import and installation
of the equipment.
Once the machine is operational, Don & Low will be one of a handful of companies in
Europe capable of supplying the filter material used to make the respirator masks.
Trade Minister Ivan McKee said: “COVID-19 isn’t going away any time soon, so while we
have enough masks to protect our frontline health and social care workers now, we are
also taking a long-term view to build PPE manufacturing capability in Scotland to meet
future needs.
“During these challenging times it’s encouraging to see so many Scottish businesses
quickly diversify their product lines and invest in new equipment to help us deliver what
is needed, when it’s needed.”
Colin Johnson, director at Don & Low, said: “We are pleased to be supported in making
this new investment that will allow us to use our existing expertise to address the
shortages of these key materials during the COVID-19 pandemic and beyond.”
Pharmaceutical chemicals as they can block both liquid and solid aerosols.
Linda Hanna, managing director, Scottish Enterprise, added: “The unprecedented
demand for face masks has highlighted the fragility of existing global supply chains.
“Investing in this equipment alongside Don & Low will simultaneously boost domestic
manufacturing and supply while creating export opportunities.
“Most importantly, it means the highest-grade medical face masks will continue to be
produced for those who need them most.”
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38 CITI-NEWS LETTER
Bangladesh reopens its biggest textile market amid coronavirus lockdown
(Source: BD News, May 04, 2020)
It is one of the traditional sales hubs of local fabrics in Bangladesh, an hour's drive from
the capital. Several indigenous fabrics of the market, including gamchha and lungi, are
famous across the country and exported as well.
Thousands of traders and clothing workers depend on the market for their livelihoods.
Daily turnover during the Eid festival usually stands at Tk 10 billion, but the traders and
workers are worried about the sales this year as they have already suffered a big blow.
The workers have lost their livelihoods while the traders are also facing a crisis to repay
the loans they have taken from banks. Usually, the sales witness a robust growth a month
or 15 days before the Eid, but more than 10 days of Ramadan has already passed.
Trading continued after the nationwide shutdown was imposed in March, but the market
was totally closed when the authorities put Narsingdi on complete lockdown on Apr 9
following a surge in coronavirus cases.
It resumed operations on Sunday following an application by Baburhat Traders’
Association and Narsingdi Chamber of Commerce and Industry after the reopening of
apparel factories in Bangladesh, the district’s Deputy Commissioner Syeda Farhana
Kawnine said.
The traders have been told to maintain physical distancing and trade online while no more
than three customers will be allowed in a shop at a time.
But Narsingdi Chamber of Commerce and Industry president Ali Hossain Shisir said most
of the traders do not have the skills to run shops online.
“We will shut the market down again if the traders fail to follow the rules,” the DC said.
Law enforcers, led by an executive magistrate, will monitor the market, she said.
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Indonesia: Textile makers could go out of business because of COVID-19
(Source: Mardika Parama and Dzulfiqar Fathur Rahman, The Jakarta Post, May 04, 2020)
As COVID-19 continues to batter the Indonesian economy, 70 percent of textile and textile
product (TPT) companies face permanent closure as a result of plunging domestic and
export demand, an industry group has warned.
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39 CITI-NEWS LETTER
At the moment, 80 percent of textile companies have halted operations temporarily while
facing cash flow issues, so financial support from the government is urgently required
according to the Indonesian Filament and Fiber Producers Association (APSyFI).
“We have cash flow difficulties because even though we have no income, we still have to
pay penalties to the state electricity and gas companies while also paying our workers’
social security fees,” APSyFI secretary-general Redma Gita Warawasta said in a press
release on Wednesday.
The association warned that massive business closures could cause a spike in
unemployment, as around 1.8 million TPT industry workers are already furloughed or
laid off because of the pandemic.
According to the Industry Ministry’s latest estimate, the TPT industry employs around
135,000 workers annually, making up 22.5 percent of the total 600,000 workers in the
industrial sector.
Redma said APSyFI and the Indonesian Textile Association (API) had conveyed their
request for relaxation policies from the government but without any significant
development.
One of the associations’ requests includes penalty fee waivers from state electricity firm
PLN and state gas company PT PGN for textile companies with electricity and gas
consumption below the minimum threshold.
“Our request for penalty fee waivers is reasonable because the government has declared
[COVID-19 pandemic] a national disaster. But in reality, neither PLN nor PGN regard the
pandemic as a national disaster and they are still imposing penalty fees,” the APSyFI
statement reads.
The association also complained about the financial sector not providing credit
relaxations to textile companies, even though the Financial Services Authority (OJK) has
issued regulation No.11/2020 on credit restructuring for companies impacted by the
pandemic.
“There could be a spike in nonperforming loans from the TPT industry if the situation
continues,” Redma said.
Meanwhile, Coordinating Economic Minister Airlangga Hartarto said on Thursday that
15,000 manufacturing companies were still operating at present out of a total of 40,000
in normal times.
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40 CITI-NEWS LETTER
Nearly 4.7 million workers in the manufacturing sector are still working out of the usual
17 million in the sector, which contributes around 20 percent of the country’s GDP, the
minister added.
“We hope companies will be back in operation when the situation returns to normal,”
Airlangga told an online briefing on Thursday, referring to the COVID-19 pandemic.
Many businesses in the country have temporarily shut down or are functioning at
minimum capacity to comply with the government’s stay-at-home order to contain the
fast-spreading coronavirus, which has infected over 10,800 people nationwide.
As a result, the country’s Purchasing Managers’ Index, a monthly survey of trends in the
manufacturing sector, recorded a contraction to 45.3 from 51.9 between February and
March, the steepest decline since the survey began in 2011.
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Pakistan textile exporters get new orders
(Source: Salman Siddiqui, The Express Tribune, May 03, 2020)
Pakistan’s exports may not suffer so badly, but moderately as textile manufacturers – the
country’s single largest export industry – have reported receipt of new buying orders from
different countries after the world slowly softened lockdown imposed to contain the
coronavirus pandemic.
“A significant development has taken place (in the textile export sector of Pakistan). We
have received new export orders for those textile products which are mainly used in
hospitals like white bed-sheets, white gowns and white t-shirts,” All Pakistan Textile Mills
Association (Aptma) former vice-chairman Asif Inam confirmed to The Express Tribune.
Aptma chairman Gohar Ejaz has briefed on the developed the other day, he said.
“Interloop, the Faisalabad-based textile industry which manufacturer mainly hosiery
products like socks for the global brand Adidas, has resumed production,” he replied.
“Things are getting normal as Europe – a major buyer of Pakistan’s textile goods – is
gradually softening lockdown,” he added.
Pakistan has received the world buying orders in the middle of the ongoing global health
crisis as “we manufacture and export low-cost products in all categories of textiles like
readymade garments, bed-sheets and hosiery instead exporting high-end branded
products,” he said.
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41 CITI-NEWS LETTER
The orders are a mix of new ones and the ones which were put on hold and got temporarily
suspended after the world imposed lockdown to contain the virus.
“Many world buyers, who had put the previously placed orders on hold, have now opted
to take delivery from Pakistan,” he said. The share of textiles in total exports stood at 60%
($10.41 billion) of the total exports at $17.45 billion in the first nine-months (Jul-March)
of the current fiscal year ending June 30, 2020, according to the Pakistan Bureau of
Statistics (PBS). In the month of March alone, the exports, however, slipped 4.46% to
$1.03 billion compared to $1.08 billion in the same month of the last year. Topline
Research said it was previously expecting exports of goods to clock-in at around $26
billion in the current year FY20, which “we believe is likely to reach around $22.3 billion
– resulting in a loss of $3.7 billion during Mar-Jun 2020.”
The receipt of the new export orders much earlier than the expectation may, however,
help in booking lower export losses than the one initially estimated following the outbreak
of the virus in the country. Pakistan’s textile industries had received additional export
orders and were running over the installed capacity following the outbreak of the virus in
China – the second world largest economy – in end of December 2019.
However, the virus spread fast around the global and emerged in Pakistan in late March.
“Some 30% textile industries, including value-added ones like readymade garments –
have resumed production in Pakistan after the government allowed export industries to
return to work under the strategy to crate balance while dealing with economic and health
crises,” Inam said. It is, however, very difficult to estimate the value of the new export
orders and those for which the world buyers have started taking deliveries, he said.
He said Pakistan did not get impact so badly from the spread of the virus like Italy, Spain,
the UK and the US did. “The situation may help Pakistan return to work earlier than the
estimated timelines. It, however, remained uncertain when the crisis would completely
get over around the globe,” he said. Spain, Italy and other countries around the world are
softening the lockdown. The situation would help to attract exports, he said.
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