Cotlook A Index - Cents/lb (Change from previous day)

19-08-2019 71.40 (+0.50)

08-08-2018 97.85

08-08-2017 80.85

New York Cotton Futures (Cents/lb) As on 21.08.2019 (Change from

previous day)

Oct 2019 59.98 (-0.10)

Dec 2019 60.12 (+0.50)

Mar 2020 60.49 (-0.23)

21st August

2019

Finance ministry reviewing India’s free trade agreements

Indian textile sector losing edge in international market: CITI

Slowdown bites textile sector, industry body urges govt to prevent job losses

Egyptian govt allocated EGP 21 bn to boost cotton

Pakistan: Government urged to devise effective export promotion policy

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

Aug 2019 21080 (+170)

Cotton 12865 (0) Oct 2019 19880 (+100)

Yarn 20610 (+40) Nov 2019 19500 (+120)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Finance ministry reviewing India’s free trade agreements

Indian textile sector losing edge in international market: CITI

CITI demands RoSCTL for yarn & fabric exports

Slowdown bites textile sector, industry body urges govt to prevent

job losses

1.2 lakh textile jobs in Tamil Nadu lost in one year?

Sugarcane, cotton, apple crops hit by late rainfall pan-India

Post-GST polyester fabric production in Surat falls by 40%

Trade war can help MMF exports

Govt. pulls out all stops to promote over 40 Karnataka GI products

Drop in orders across sectors worries MSMEs

India needs to gear up for stronger economic partnership with old

ally Vietnam

Post-GST polyester fabric production in Surat falls by 40%

Textile value chain facing liquidity issues: ITF

-------------------------------------------------------------------------------

Egyptian govt allocated EGP 21 bn to boost cotton

Pakistan: Government urged to devise effective export promotion

policy

Traders, loom owners not ready to give ID card: Aptma

Kenya: Increase investments in the Export Processing Zones

Smart textile industry terms defined under new standard

---------------------------------------------------------- ----------

NATIONAL

---------------------

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Finance ministry reviewing India’s free trade agreements

(Source: Economic Times, August 21, 2019)

Move follows negative feedback from industry and view that FTAs have hurt Indian

Manufacturing.

The finance NSE -0.99 % ministry

has initiated a review of India‟s free

trade agreement framework to

assess the impact of such pacts on

the overall economy. The view has

been gaining ground among

policymakers and industry that

these free trade agreements (FTAs) brought little tangible benefit to India, while helping

the partner country.

There is also a sense that FTAs have adversely impacted India‟s manufacturing, which

the government is trying to boost through „Make in India‟. “The idea is to assess how

these agreements really benefitted the country‟s economy,” said a government official

aware of the development. The review is being carried out by the department of

economic affairs along with the departments of commerce and revenue, among others.

The move comes as India is engaged in talks on the proposed Regional Comprehensive

Economic Partnership (RCEP), which comprises the 10 Asean members (Brunei,

Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos

and Vietnam) besides China, Japan, South Korea, Australia and New Zealand.

The review could decide how India negotiates FTAs. The government is keen to ensure

trade agreements don‟t undermine its efforts to step up manufacturing. It aims to lift the

share of manufacturing in the economy to 25% from about 16% (at current prices) by

2022. Additionally, the authorities have found that sometimes imports are being

diverted from the normal domestic tariff route to FTAs after the government has raised

customs duty. This has run counter to the government‟s policy steps aimed at

discouraging imports of a particular good. Industry has pointed out that FTAs have a

broad impact on manufacturing and investment in the country. “The objective is to look

at concerns expressed by industry and the impact on these agreements on investment,”

said the official.

Blatant Violation

The departments of economic affairs and revenue have in the past flagged concerns over

the impact of these trade agreements on revenue and manufacturing. A particular

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4 CITI-NEWS LETTER

concern highlighted by the revenue department relates to blatant violations of rules of

origin and value addition norms under these trade agreements to export products to

India. Essentially, imports from non-FTA countries are labelled as originating from such

nations to claim treaty benefits. Intelligence agencies and customs authorities have in

the past highlighted how the rules were violated even by large companies, undermining

the „Make in India‟ initiative. In 2013, the department of economic affairs had asked the

Indian Institute of ManagementAhmedabad to study the impact of FTAs after the

currency crisis highlighted the country‟s vulnerability on account of the widened current

account deficit.

Separately, commerce minister Piyush Goyal has already reviewed individual FTAs with

Japan, South Korea, Asean and Sri Lanka.

Home

Indian textile sector losing edge in international market: CITI

(Source: The Hindu, August 20, 2019)

‘The space vacated by China is largely occupied by the least developed countries’

India ranked fifth in the global textile and clothing exports in 2018 though it was in the

second position between 2014 and 2017, according to the Confederation of Indian

Textile Industry.

Sanjay K. Jain, chairman of the Confederation, has said in a press release that the space

vacated by China was largely occupied by the least developed countries, including

Vietnam and Bangladesh. India has not been able to tap the opportunities because of its

competitive disadvantages and trade barriers in the international markets.

Meanwhile, textile and clothing imports by India are increasing. Between 2015 and

2019, Indian imports grew 22.8 %, he said.

Analysing the export and import data of the textile sector, Mr. Jain pointed out that in

July this year, apparel exports grew 7.06 % compared to the same month last year.

However, cotton yarn and cotton fabric exports declined 9.98 % and 10.54 %. This is

mainly because the Central Government announced in March this year a scheme for

Rebate of State and Central Taxes and Levies for the apparel and made-up sector. This

helped the garment exporters be competitive in the global market.

“It is pertinent to note that some categories like cotton yarn has seen a year-on-year fall

of 35 % in exports,” he said.

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5 CITI-NEWS LETTER

The reasons include lack of export competitiveness in the international mraket because

of high cost of raw materials and embedded taxes that these exporters pay. It is

estimated that cotton yarn and cotton fabric have nearly 5% of FOB value as non-

refunded taxes.

The immediate competitors including China, Vietnam, Indonesia, Sri Lanka, and

Bangladesh have the 5 % cost advantage over Indian exporters.

Hence, the Union Government should extended the benefits of the scheme to the yarn

and fabric segments and boost the competitiveness of the Indian textile sector, Mr. Jain

said.

Home

CITI demands RoSCTL for yarn & fabric exports

(Source: KNN India, August 20, 2019)

The confederation of Indian Textile Industry (CITI) has made a strong appeal to the

Government to extend the benefits of currently announced Rebate of State and Central

Taxes and Levies (RoSCTL) to the yarn and fabric segments.

In addition, CITI requested the Government along with Prime Minister Narendra Modi

to help the textile industry to boost up its export competitiveness in the international

markets to achieve higher growth trajectory and generate more employment

opportunities to the masses, especially youths and women workforce.

The Indian textile and apparel industry, the largest industrial employer of the Indian

economy today suffering from various infirmities and thus lack export competitiveness

in the international markets, said Sanjay K. Jain, Chairman, CITI.

He stated that CITI analysis of the quick estimates of exports of textiles & apparels for

July 2019 shows that there is an increase in the exports of apparel while exports of

cotton yarn and fabrics have declined by 9.98% and 10.54%, respectively on Year-On-

Year and cumulative basis.

He further pointed out that the change in the trends of exports of apparel and cotton

yarn/ fabrics is mainly due to the Scheme RoSCTL announced by the Government of

India in March 2019 for the apparel and made-ups.

RoSCTL scheme has been introduced to provide reimbursement of Central and State

Taxes to make sure that taxes are not exported along with the products.

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6 CITI-NEWS LETTER

However, yarn and fabric segments have been kept out of the same, hence both the

sectors are at present suffering badly and exports are declining while others for which

RoSCTL is granted have shown growth, CITI added.

It said that some categories like cotton yarn has seen a Year-On-Year fall of 35% in

exports in the first quarter of the Financial Year while in June month only it was at a

staggering 50% low.”

Home

Slowdown bites textile sector, industry body urges govt to prevent job losses

(Source: Business Today, August 20, 2019)

India's cotton-spinning industry has been struggling with profitability over the years

due to a sharp decline in yarn exports, cheaper import, state and central level taxes on

export and high interest rates, said Northern India Textile Mills Association (NITMA)

The Indian cotton-spinning sector is in dire straits and is facing a crisis not seen in the

past one decade, according to an apex body representing the industry. The Northern

India Textile Mills Association (NITMA) has said that textiles industry is facing

slowdown, which has forced spinning companies to cut down their production and shut

down their mills, resulting in huge job losses.

According to the industry body, excess spinning capacity in the country and poor

demand for yarn from overseas markets has led to accumulation of yarn stocks and

liquidity crisis in the industry.

The industry body claimed that India's cotton-spinning industry has been struggling

with profitability over the years due to a sharp decline in yarn exports, cheaper import,

state and central level taxes on export and high interest rates. Adding to the woes, the

recent spurt in cotton prices has resulted in higher input costs for the spinning sector in

the country leading to financial stress.

According to NITMA, the cotton and blends spinning industry is witnessing biggest

crisis in the past 9 years. The previous such crisis was seen in 2010-11, the textile mills

association said.

The textile industry was hit by sharp decline in export of cotton yarn in the last few

months. During April-June period of this fiscal, export of cotton yarn fell by 34.6% to

$696 million as compared to $1,063 million in the same period last year.

The slowdown in the textile industry, which provides employment to about 10 crore

people directly and indirectly and accounts for 2% of GDP, have resulted in closure of

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7 CITI-NEWS LETTER

ginning factories, spinning mills and handloom units due to heavy losses. The industry

has sought government intervention to prevent job losses and avoid the spinning sector

from turning into non-performance assets (NPAs).

Textile spinning mills have cut down its production which have resulted in closure of

nearly one-third of spinning capacity across India, said NITMA. The mills are incurring

huge losses and are not in a position to buy and consume the Indian cotton, it added.

The association warned that upcoming cotton crop of about 40 million bales, which is

valued at Rs 80,000 crore, would not find buyer in domestic and overseas market as the

Indian market was not market-driven since the government directly supports farmers

with minimum support price (MSP) level.

Here are some of the issues that are holding the Indian cotton-spinning sector back:

Higher taxes: The industry body alleged that a multi-stage tax is levied on every

value addition. State and central taxes, plus levies are resulting in Indian yarn

becoming non-competitive in global markets.

High cost of raw materials: Compared to its global competitors, Indian

spinning mills have to spend more on raw materials, which directly affects its cost

of production, and hence the country's competitiveness in the global market. The

cost of raw materials is much higher as compared to global prices, which results

in loss of Rs 20-25 per kg to Indian mills.

Cheaper Import: The cotton-spinning industry has been hit by cheaper import

of garments and yarn from Bangladesh, Sri Lanka and Indonesia. This is because

of lower cost of their raw materials as compared to India.

Home

1.2 lakh textile jobs in Tamil Nadu lost in one year?

(Source: Indian Express, August 20, 2019)

The textile industry, which is the second-largest employer in the country, is reeling under

a severe crisis similar to the one witnessed in the automobiles sector across India.

The textile industry, which is the second-largest employer in the country, is reeling

under a severe crisis similar to the one witnessed in the automobiles sector across India.

In the April-June quarter, export of cotton yarn plunged steeply to (-)34 per cent.

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8 CITI-NEWS LETTER

“In the past one year alone, 300 spinning and open-end mills in Tamil Nadu have shut

down for various reasons. Some of them have been sold out,” says M Jayabal, president

of TN Open-end Spinning Mills Association (OSMA).

As per Jayabal‟s estimates, close to 1.20 lakh workers have lost jobs due to the crisis in

the last one year. While many of them have found work in other sectors, a good chunk

are still struggling for employment. “As per official data, till March 2017, 605 spinning

mills shut down across India, of which 225 were in Tamil Nadu. There are many

spinning mills up for sale, but no one is coming forward to buy them as it costs around

Rs 500-Rs 1,000 crore. Equipment in these mills are now lying unused,” says Jayabal.

“The industry is witnessing a crisis similar to the one in 2010-11,” says the Northern

India Textile Mills Association (NITMA), while blaming it on the high State and Central

taxes and levies, which have made the Indian yarn „non-competitive‟ in global markets.

The high cost of raw materials and the import of cheap yarn from countries such as

Bangladesh, Sri Lanka and Indonesia have also affected the business, resulting in an

approximate loss of Rs 20 - Rs 25 per kilogram for Indian mills.

Combined, these factors have allegedly resulted in the closure of one-thirds of spinning

mills across India in the last one year, says NITMA. The ones that have managed to

survive are incurring huge cash losses.

NITMA has appealed to the centre to extend the scheme for rebate of State and Central

taxes and levies (ROSCTL) to cotton and blended yarns, and an interest subvention on

yarn exports. It has also appealed to the government to pay the difference between

minimum support price and the market price of seed cotton to farmers via direct

transfer.

China, Pakistan have a role to play

Industrialists from Tamil Nadu say that under normal circumstances, a minimum of

100 million kilos of cotton yarn is exported every month. However, in June this year,

only 57 million kilos were exported, the lowest in the last two years. Sector specialists

attribute the slump in demand to the trade standoff between the US and China, and the

free-trade agreement between China and Pakistan.

Betting big on the demand from Chinese markets, major industrial expansion activities

were carried out in the recent past. However, over the last decade, China has switched to

buying from Bangladesh and Vietnam, cutting off the supply from India almost fully,

pushing the sector here into a state of chaos.

Despite the slump in exports, production of cotton yarn witnessed an increase of 6.3 per

cent this year. Production of blended and 100 per cent non-cotton yarn grew 18 per cent.

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9 CITI-NEWS LETTER

Overall, production of spinning mill yarn grew 9.6 per cent this year. “The high cost of

raw materials is affecting Indian yarn in export markets,” says D Prabhu, convenor of

Indian Texpreneurs Federation.

“India must use the US-China trade standoff to its advantage, and aggressively push our

apparel exports to US markets. That apart, banks must be directed to pass on full

benefits of cuts in key lending rates by RBI, to industries. These measures could revive

the sector,” says Prabhu, adding that festival season could boost demand in domestic

markets in October.

Home

Sugarcane, cotton, apple crops hit by late rainfall pan-India

(Source: Jayashree Bhosale, Economic Times, August 19, 2019)

Damage yet to be assessed but economists feel rain may have positive overall impact.

Torrential rains have swamped sugarcane fields in Maharashtra and Karnataka, which

will reduce production and cause losses to farmers but won‟t impact the heavily-stocked

sugar market.

The spurt in monsoon has also inundated oilseed and cotton fields in western and

central India, and affected apple production in the north around the time the fruit has

matured to the plucking stage. Rainfall in August has been about onethird more than

average across the country, while the north has seen exceptionally heavy showers in

recent days. The good news from the weather office is that rainfall will now moderate in

northwest, southern and central regions. Preliminary estimates by Maharashtra‟s

agriculture department show 4.17 lakh hectare — about half of which is in Kolhapur,

Sangli and Satara — was flooded this season. This has damaged sugarcane, horticulture

crops and turmeric. Cane cultivation was already down 28% in the state because of dry

weather earlier in the season, and the flood will further reduce availability. “Sugar mills

from these districts will definitely face shortages of sugarcane. But we cannot quantify it

right now as the surveys are still being carried out,‟ said Sanjay Khatal, managing

director, Maharashtra State Cooperative Sugar Mills Association.

PG Medhe, honorary adviser at Shri Chhatrapati Rajaram SSK, Kolhapur, said, “The

sugarcane crop that has been submerged till the top for many days is unlikely to survive.

I have not seen floods like this in 73 years.” Ankush Chormule from Ashta in Sangli,

said, “It is a loss of minimum Rs 30,000 per acre for those farmers who had planted

cane recently.” Indian Sugar Mills Association had earlier estimated a 20% drop in

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10 CITI-NEWS LETTER

production to 28.2 million tonnes, after a record output of around 33 mt in the 2018-19

season.

“Now the output will further decline with two major sugarcane producing states hit by

floods. We have not yet estimated the exact losses. But there will be no shortage of sugar

as we have enough stock,” said an industry executive. Waterlogging in Punjab‟s cotton

fields is likely to hit production as the crop has been submerged for days on the eve of

the harvest. “We had conducted meeting of officials in cotton area to spread advisory to

farmers to salvage crops from heavy rain and message had been sent through WhatsApp

to ensure necessary precautions,” said Sutantra Kumar Airy, director, Punjab

agriculture department. Floods in parts of Bihar, West Bengal, Assam and Odisha have

damaged paddy but remedial measures can be taken.“In these flood-prone states,

farmers can compensate the loss with late varieties cultivated in nurseries. So, it is

unlikely to affect output,” said a senior agriculture ministry official, adding that states

had not reported crop damage. He said floods can help rejuvenate degraded soil. The

planting of soya bean and cotton in Madhya Pradesh and Maharashtra also suffered due

to excessive rains. However, there is no report of much damage to groundnut sown in

Kutch and Saurashtra regions of Gujarat, which also received heavy rainfall during last

week. “Overall, late surge in rainfall after a dry June has done good to agriculture.

Output is likely to be marginally better than last year,” said DK Joshi, chief economist,

Crisil.

Home

Post-GST polyester fabric production in Surat falls by 40%

(Source: Fibre2Fashion, August 20, 2019)

The production of polyester fabric in the country‟s largest man-made fabric (MMF) hub

of Surat has decreased by 40 per cent from 13,000 metric tonnes (MT) to 7,500 MT per

annum after the central government imposed the goods and service tax (GST) in 2016,

according to the textile committee of the Southern Gujarat Chamber of Commerce and

Industry (SGCCI).

An SGCCI report said the higher cost of raw material, including yarn, is posing a major

challenge to the MMF sector. Adding to the problem is the import of cheap fabrics from

China, Bangladesh and other Asian nations, a top English-language newspaper

reported.

The quantum of investment in the MMF sector has significantly reduced under the

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11 CITI-NEWS LETTER

Amended Technology Upgradation Fund (ATUF) scheme due to the drastic cut in

subsidy provided by the central government. About seven approved projects under the

Group Workshed Scheme (GWS) have backed out due to the reduction in subsidy under

ATUF.

Restoration of 30 per cent subsidy under the ATUF scheme is needed to maintain

modernisation in the MMF sector, according to experts.

The committee has submitted the report to textiles minister Smriti Irani seeking her

intervention.

Home

Trade war can help MMF exports

(Source: Asian Age, August 20, 2019)

Man-made textile is one among the products from China upon which Trump

administration has levied additional tariff recently.

The trade war between India and China has opened up a big opportunity for Indian

man-made textile industry to help stagnant exports to grow by double-digits. However,

the government will have to be proactive to help the industry grab this opportunity.

Man-made textile is one among the products from China upon which Trump

administration has levied additional tariff recently. Though the new tariffs were

supposed to be levied from September, the US has postponed them to December. In the

next few months, the industry can prepare itself to grab this opportunity.

“The trade war has opened up an opportunity, which will help our stagnant exports grow

by 10 to 12 per cent in one-and-half years if some of the issues faced by the industry are

taken care of,” said Ronak Rughani , Chairman of Synthetic & Rayon Textiles Export

Promotion Council.

Indian MMF exports have been stagnating for the past four years. At $6 billion, the

exports had grown by a marginal 1.9 per cent in FY19.

On the other hand, China exports $7 billion worth man-made textiles to the US. Even if

India manages to grab a portion of these exports and manage to grow by 10 per cent, the

$6 billion man-made textile exports will move up to $6.6 billion.

However, in order to grab this opportunity, the industry needs support of the

government.

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12 CITI-NEWS LETTER

“Chinese government heavily subsidises the industry and circumvents some of the WTO

norms which makes their products competitive in the international market. Countries

like Vietnam and Bangladesh have signed free trade agreements and preferential trade

agreements with some of the key markets like the US and the Europe. Indian industry

does not enjoy these benefits,‟ said Rughani.

Inverted duty structure for the imports of raw materials and finished products is one of

the main factors that impede the production and exports of man-made textiles. While

the raw materials attract import duty of around 18 per cent, finished products attract

only 5 per cent. Duty-free import of apparels from Bangladesh has been rising in the

recent months.

Home

Govt. pulls out all stops to promote over 40 Karnataka GI products

(Source: Suchith Kidiyoor, The Hindu, August 20, 2019)

Karnataka has the distinction of securing the highest number Geographical Indications

in the country

A mobile app that will help artisans promote GI products, easy availability of products

on online retail platforms, a thriving brick and mortar marketplace that will showcase

the best of what Karnataka has to offer. These are just some of the goals of the

Karnataka State Geographical Indications Policy, which aims to promote and market the

more than 40 registered GI products from the State.

From handicraft to textiles and horticulture to agriculture products, Karnataka has the

distinction of securing the highest number Geographical Indications (GI) in the country.

While some like Channapatna toys and dolls and Mysore Sandal Soap had strong

brand recall and a huge consumer base even before getting the GI tag, others are still to

find a wider market.

Gunjan Krishna, Commissioner, Industrial Development and Director of Industries and

Commerce, said, “The policy is also aimed at protecting the rights of artisans and

farmers as authorised users of the GI tag. For example, weavers of Ilkal sarees are

authorised users of GI for Ilkal Sarees. They will have a mechanism as per the rules to

initiate action against those who project and market some other saree as Ilkal sarees.

We are already working at the ground level to sensitise artisans and weavers as well as

consumers on importance of GIs.” There are also plans to increase their visibility on e-

tail platforms. “We are already in talks with Amazon, Flipkart and other platforms on

how to showcase GI products from the State online,” Ms. Krishna added.

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13 CITI-NEWS LETTER

The government is also contemplating setting up „design clinics‟ across the State for the

benefit of artisans. On the legal front, the department has reached an agreement with

National Law School and other institution on how to protect the interest of GI users at

ground level and dissemination of information on GIs.

As per the police, the State government will come up with a GI facilitation centre (GIFC)

to implement all the schemes. The other objectives of the policy include a scheme for

product standardisation and implementation of a quality control mechanism.

S.R. Satheesha, MD, Visvesvaraya Trade Promotion Centre (VTPC), which has been

appointed as the nodal agency for the promotion of GI products, said the institute has

already facilitated the registration of 126 artisans, farmers and groups as „users‟, those

who produce GI products in the State. “We have already started working at the ground

level interacting with the artisans and farmers producing GI products in the State. We

have to go a long way in protecting and promoting many of the GI products that have a

strong legacy,” said Mr. Satheesha.

Safeguarding dying arts

Some GI handicraft like Udupi sarees, Navalgund durries and Kinhal toys have only a

few families to carry on the craft as the younger generations have shifted to other more

lucrative or sustainable jobs. “Artisans or farmers must get the right price for their

effort. That will happen only when consumers are aware of the legacy of the products

and how much labour goes into their making. Some NGOs are supporting artisans in

promoting their GI products,” Mr. Sateesha added.

But awareness campaigns are slowly making an impact. He cited the example of some

producers GI products like Mattu Gulla (Brinjal) in Udupi district where farmers know

the importance of the tag and have taken the measures to protect their interest.

Listing new products for GI registration

The policy has also given impetus for new and prospective GI filings from the State. It

states that new products which can be explored for registration include Gokak Toys,

Vijayapura Raisins, Sagar Sandalwood carvings, Dharwad cotton sarees, Melkote

Panche (Dhoti), Lavancha Craft in Coastal Karnataka, Savanur Betel leaves, Belagavi

Kunda, Kadakola mats and others.

Financial assistance

The policy also talks about giving financial assistance to artisans to showcase their

products in national and international fora by absorbing the cost of their (economy)

plane ticket up to a maximum of ₹10,000 or reimbursing II Tier AC by Rail when they

attend domestic exhibitions or fair. The State government will also provide up to

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14 CITI-NEWS LETTER

₹25,000 as stall rent and a dearness allowance for a a maximum of 15 days. For

international exhibitions, artisans will get an economy airfare of up to ₹1.25 lakh, stall

rent to a maximum of ₹1 lakh, and DA of $100 per day for a maximum of five days.

Home

Drop in orders across sectors worries MSMEs

(Source: The Hindu, August 20, 2019)

‘All sectors are facing a 30 % drop in production’

For the Micro, Small and Medium-scale Enterprises (MSMEs) that are hit by the slump

in the auto sector, the other sectors too do not offer any hope.

“It will take six to nine months to prepare for an entirely different product line. The

automobile sector might revive by then. So, it is a risk to invest and diversify now,” says

a foundry owner in the city.

A small-scale job working unit at the Kurichi SIDCO Industrial Estate was machining

components for the automobile sector. With the slowdown in the sector, machines

remain idle at the unit. “We tried to get orders from other sectors. But even textiles is

facing a slowdown. So it is not easy. It is just that the slowdown in automobile sector is

known to all now. Other sectors are also facing problems,” says the unit owner.

MSMEs that were so far focusing on the automobile sector can look at other sectors in

Coimbatore - valves, textiles, and general engineering verticals. But, prices will have to

be competitive and the volume of orders may not be high. All sectors are facing a 30 %

drop in production, says president of Coimbatore District Small Industries‟ Association

R. Ramamurthy.

The industry can make a turnaround with the right policies of the government. The

MSMEs were hit hard in 2008 when there was an economic slowdown. The government

came out with a special package to improve fund flow to the units. This government

should also come out with a scheme. What the industry needs now is funds to manage

the situation, he added.

Home

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15 CITI-NEWS LETTER

India needs to gear up for stronger economic partnership with old ally

Vietnam

(Source: Dr Malancha Chakrabarty, Economic Times, August 20, 2019)

India puts great emphasis in developing closer economic ties with the Association of

South-East Asian Nations (ASEAN)because the region is a major hub of manufacturing

activities and its share in global output, foreign direct investments, exports, and imports

have grown consistently. Within the ASEAN, Vietnam, a small country with a population

of only 95.4 million persons, is an export powerhouse and has often been dubbed as a

miracle economy. Its gross national income per capita (in PPP terms) trebled from

$2,160 in 2000 to $6,460 in 2017 and there was a massive reduction in poverty (at

$1.90 a day) from 38% to 2% during the same period.

The country has achieved enormous economic success in the last few decades on

account of a booming manufacturing sector. It is currently the third-largest garments

exporter after China and Bangladesh with an export turnover of over US$ 30 billionand

has emerged as the preferred choice of electronics and mobile phone companies trying

to move out of China due to the US-China trade war.

India and Vietnam have historically shared friendly relations and India enjoys

substantial goodwill in the country. In 2016, the Strategic Partnership between the two

countries was upgraded to Comprehensive Strategic Partnership. Defence ties form the

bedrock of India‟s relations with Vietnam because of convergence in strategic interests

and mutual concerns about China but economic relations remain much below potential.

India‟s total trade with Vietnam currently stands at about US$ 12.2 billion. Meat and

fish products are India‟s largest export items to Vietnam and electrical machinery and

equipment are India‟s main import items from Vietnam. India currently ranks 27th

among all foreign investors in Vietnam with a total investment capital of US$ 756

million. Indian investments are much smaller in magnitude as compared to other Asian

countries like China, Japan, and South Korea and only a handful of large Indian firms

such as ONGC Videsh, Marico Industries, TATA Groupetc dominate India‟s portfolio.

India has undertaken several initiatives in recent years to boost its economic ties with

Vietnam under the Mekong-Ganga Cooperation and its engagement with the CLMV

(Cambodia, Laos, Myanmar, and Vietnam) sub-region. Several delegations from India

have also visited Vietnam to explore investment opportunities and held consultations

with Vietnamese officials to develop closer ties in the textiles and garments industry.

Such efforts have not met with much success. This is largely because the Indian textile

and garments industry is in bad shape. Many Vietnamese officials and researchers

interviewed by this author during her field work, revealed that textiles and garments

industry is not an appropriate sector for collaboration between India and Vietnam

because the Indian textile sector is not globallycompetitive. India‟s product quality is not

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16 CITI-NEWS LETTER

at par with other countries and Indian firms typically fail to meet the tight schedule of

the value chain. Given the importance of the textile sector in India‟s organised sector

employment, this is bad news.

To facilitate Indian investments in the CLMV countries in the manufacturing sector and

help Indian companies get integrated with the regional value chains, the Indian

government set up the Project Development Fund worth Rs 500 crore in 2016. This was

undoubtedly the most important initiative by the Indian government but many analysts

have expressed their anguish over the operationalisation this fund. Also, data from the

EXIM Bank reveals that so far only one project, the possibility of setting up a

pharmaceutical manufacturing unit, has been identified in Vietnam. Textiles and

manufacturing sector, one of the main sectors in which India sought to engage with

Vietnam has been ignored.

India‟s development cooperation strategy in Vietnam has also not been very helpful in

promoting India‟s economic engagements in the country. The Exim Bank of India has

extended concessional credit lines worth US$ 691 million to Vietnam for various

infrastructure projects. The largest project is the US$ 500 million credit line to procure

defence equipment from India. Although defence cooperation is an essential component

of India‟s relations with Vietnam, this project has suffered from many delays. One of the

main reasons behind the delay is Vietnam‟s concern about its rising public debt. The

country‟s current public debt-to-GDP ratio is about 63.9% which is close to the ceiling of

65%. Moreover, Vietnam finds India‟s lines of credit programme unattractive because of

the relatively higher rate of interest of 1.75% and the mandatory procurement of 75% of

the materials from India. The country can access funds from China, Japan, and South

Korea at much cheaper rates.

With an underperforming manufacturing sector, sluggish export growth, and job losses

in the manufacturing in the last couple of months, business as usual can not be an

option for India. To achieve the target of increasing manufacturing share in GDP to

25%, India needs to learn from the experience of other countries in Asia like Vietnam

which have industrialised very rapidly in a short span of time and get integrated into

regional value chains because over three-quarters of global trade takes place through

value chains. India should also try to make its development cooperation more effective

and make sure that instruments lines of credit deepen India‟s economic engagements

with partner countries like Vietnam. In a nutshell, stronger strategic partnership with

Vietnam is good news but we also need stronger economic partnership with Vietnam.

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17 CITI-NEWS LETTER

Post-GST polyester fabric production in Surat falls by 40%

(Source: Fibre2Fashion, August 20, 2019)

The production of polyester fabric in the country‟s largest man-made fabric (MMF) hub

of Surat has decreased by 40 per cent from 13,000 metric tonnes (MT) to 7,500 MT per

annum after the central government imposed the goods and service tax (GST) in 2016,

according to the textile committee of the Southern Gujarat Chamber of Commerce and

Industry (SGCCI).

An SGCCI report said the higher cost of raw material, including yarn, is posing a major

challenge to the MMF sector. Adding to the problem is the import of cheap fabrics from

China, Bangladesh and other Asian nations, a top English-language newspaper

reported.

The quantum of investment in the MMF sector has significantly reduced under the

Amended Technology Upgradation Fund (ATUF) scheme due to the drastic cut in

subsidy provided by the central government. About seven approved projects under the

Group Workshed Scheme (GWS) have backed out due to the reduction in subsidy under

ATUF.

Restoration of 30 per cent subsidy under the ATUF scheme is needed to maintain

modernisation in the MMF sector, according to experts.

The committee has submitted the report to textiles minister Smriti Irani seeking her

intervention.

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Textile value chain facing liquidity issues: ITF

(Source: Fibre2Fashion, August 20, 2019)

The textile value chain, particularly the cotton-based manufacturing value chain, in

India is facing liquidity issues due to slowdown in demand, according to Indian

Texpreneurs Federation (ITF). If the situation continues, there may be a need for

converting short-term loans in textile manufacturing sector to long-term.

"The prices of cotton in India are at higher level compared to international markets due

to higher level of minimum selling price (MSP). Secondly, high fluctuations in prices

along with tight liquidity situation in the market is resulting in slow buying of yarn and

fabrics, which is reflecting up to retail in domestic market," ITF convenor Prabhu

Dhamodharan told Fibre2Fashion.

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18 CITI-NEWS LETTER

In addition, India is not competitive at the moment at yarn stage in the export market

due to higher cost of raw material, resulting in lower level of exports, Dhamodharan

said. Currently, mills are running at below their capacity to match the demand and

supply, which in turn is increasing the manufacturing cost.

"To give a boost to the cotton value chain, the government should switch to direct

benefit transfer (DBT) mechanism to farmers in the upcoming season instead of

artificially higher level of MSP, and parallelly take steps on a war footing to increase the

cotton yield," he added.

Secondly, apparel makers should take advantage of the ongoing US-China trade war and

focus on exporting more to the US market.

Thirdly, the Reserve Bank of India (RBI) should direct all banks to pass on the interest

cut benefit to industries immediately. And if the situation does not improve, the banks

should be directed to reschedule loans given to textile manufacturing sector, and also

offer fresh working capital loans to manage the liquidity.

However, Dhamodharan hopes that there may be some improvement from the new

cotton season from October. "The upcoming festive season may give some boost to

demand in the coming days,"

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19 CITI-NEWS LETTER

GLOBAL

Egyptian govt allocated EGP 21 bn to boost cotton

(Source: Fibre2Fashion, August 20, 2019)

Egypt's ministry of public business sector has allocated EGP 21 billion to increase the

added value in the Egyptian cotton industry, as per the advice of international

consultant Warner, which prepared a comprehensive study on developing the country's

cotton sector. The government is making efforts to restore the status of Egyptian cotton

globally.

During a review of latest efforts in promoting Egyptian cotton, Prime Minister Mostafa

Madbouli said there is a great interest in developing and supporting the textile sector as

well as planting and selling the Egyptian cotton, Egypt's state information service said.

In March this year, the United Nations Industrial Development Organisation (UNIDO)

launched a multi-stakeholder pilot project in Egypt, to train cotton farmers on the

Better Cotton Initiative (BCI)‟s holistic approach to sustainable cotton production. The

pilot project is a part of a renewed drive in the country to increase sustainability and

improve conditions for Egyptian producers.

Funded by the Italian Agency for Development Cooperation, the project is implemented

by UNIDO in collaboration with the ministry of trade and industry, the ministry of

agriculture and land reclamation as well as with local and international textile private

sector stakeholders.

Approximately 5,000 smallholder cotton farmers will be involved in the initial pilot

project, receiving training on the Better Cotton principles and criteria.

Home

Pakistan: Government urged to devise effective export promotion policy

(Source: Business Recorder, August 20, 2019)

The PTI-led government is yet to come up with an effective export promotion policy

given the continued sluggish export growth during the last one year. The representatives

of different manufacturers and exporter associations told Business Recorder that

Pakistan exports would have increased to $26 billion instead of remaining stagnant at

$23 billion if export-friendly policies were introduced during the last one year.

They further challenged the government claims of giving incentives to the industrial

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20 CITI-NEWS LETTER

sector maintaining that the substantial increase in their input costs would result in a

further decline in exports.

The government has acknowledged that overall textile exports were $13.29 billion

during July-June 2018-19 - a -1.42 percent in comparison to the comparable period in

the year before.

Pakistan's exports netted around $23 billion last year while the trade balance improved

by 19 percent due mainly to lower imports as the rupee depreciated against the dollar;

the trade deficit declined from $37.6 billion to $30.6 billion.

Notwithstanding industry claims, the government announced rationalization of gas

price at Rs 600/mmbtu for export oriented sectors against Rs 1600mmbtu; RLNG price

for export oriented zero-rated sectors was reduced to $6.5/mmbtu from 10 to 12/

mmbtu and electricity at US cents 7.5/kwh for export oriented zero-rated sectors

whereas previously it was Rs 12 Kwh. Talking to Business Recorder Muhammad Zubair

Motiwala, Chairman Council of All Pakistan Textile Associations said that the

government has withdrawn all these incentives, adding that recently gas prices for

industry was increased by 31 percent, water rates by 29 percent while subsidy on

electricity has been withdrawn.

A 17 percent GST has been imposed on the export sector, alleged Motiwala, adding that

all these measures would result in high input cost and would render the exports sector

uncompetitive in the international market. The country's exports would witness a sharp

decline in coming months, he predicted.

Chairman Pakistan Readymade Garments and Manufacturers and Exporters

Association (PRGMA) Ijaz Kokar said that the incumbent government has yet to come

up with an aggressive marketing plan which would fuel export growth. The government

has recalled around 37 commercial counselors and most of the positions are vacant,

resultantly exporters are facing hardships, he added.

He further said that refund claims of around Rs 250 billion are still stuck and the

government has not yet devised any viable mechanism for early releases which is

resulting in liquidity crunch for export-oriented sectors. Kokar said that the government

has withdrawn zero-rating facility for the five-export sectors which would result in

further decline in exports in the coming months. The government is facing geopolitical

and economic challenges and has yet to take measures to deal with the crisis, he added.

Home

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21 CITI-NEWS LETTER

Traders, loom owners not ready to give ID card: Aptma

(Source: The Nation, August 21, 2019)

The All Pakistan Textile Mills Association (APTMA) Chairman Syed Ali Ahsan has said

that the sale of textile mills to domestic market has come to a halt, as both the traders

and loom owners are not ready to provide identity cards.

He said a good number of mills have either reduced production capacities or closing

down their operations.

Chairman APTMA said media reports suggest that the collection of tax revenue from

local sales has increased in the month of July which could possibly be due to the fact

that there was no condition of identity card.

Therefore, the industry kept dispatching sales during the month of July, which has

reflected in tax revenue data. However, dispatches of yarn and fabric from mills to the

domestic market are at standstill since the condition of identity card has been re-

imposed from 1st of August, he added.

Home

Kenya: Increase investments in the Export Processing Zones

(Source: Standard Media, August 20, 2019)

As the Export Processing Zone Authority (EPZA) celebrates confirmation that a global

textile manufacturing firm is set to begin operations in Kenya next year, the agencies

should not lose sight of the reality that the country will not attain Vision 2030 by relying

on foreign investors.

President Uhuru Kenyatta needs to appreciate, too, that whereas he might create

500,000 jobs in the growing of cotton, employment of 100,000 workers in the

manufacturing of apparel could prove a mirage unless the State sets up of the requisite

industries.

Reports that by investing Sh1.5 billion, the Sri Lankan firm will become the largest

apparel and textile manufacturing company in the country is a demonstration that lack

of money should not be an insurmountable problem as it has often been claimed.

This proposition is supported by the huge cash that Treasury dishes out to support ailing

State firms that should have been closed many years ago and fund projects whose costs

have been inflated beyond acceptable limits. It would be logical for Treasury to put a lid

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22 CITI-NEWS LETTER

on such disbursements and invest in industries whose products have a ready export

market.

Treasury might also consider raising the funds needed for such investments from the

public and the local money markets via special bonds in the same manner it raised funds

to finance infrastructure beginning with the time when the current president was the

finance minister.

History shows that those infrastructure bonds were hugely popular and were heavily

over-subscribed.

Co-operative movement

The Trade, Industrialisation and Cooperatives Minister might also be persuaded to

consider raising such funds from the country‟s co-operative movement. After all, in the

absence of such invests that could earn huge returns for co-operators, investment

decisions are left to the discretion of officials who routinely invest in property whose

prices are inflated.

There have also been incidents when the liquid co-operative societies have been lured

into investing in questionable financial institutions that become a drain on their

finances.

Past arguments that such enterprises would be mismanaged do not hold much sway as

firms in which the State has interests are making profits that are the envy of their peers

owned by the private sector.

Co-operative Bank, which has risen from the ashes of the terrorist bombing of the US

Embassy is a testimony that the co-operative movement has the potential to develop the

country.

Kenya should stop relying on foreign investors to create jobs because they leave can

leave the country worse off.

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Smart textile industry terms defined under new standard

(Source: Home Textiles Today, August 20, 2019)

The definitions cover terms such as “smart textile” and “wearable electronic”

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23 CITI-NEWS LETTER

A list of terms and definitions that can be used within the burgeoning smart textiles

community was the first standard approved by ASTM International‟s smart textiles

subcommittee.

“The textiles industry is currently experiencing a renaissance with the development of

novel and emerging materials that provide opportunities for new consumer applications

and markets,” said Carole Winterhalter, an ASTM member and textile technologist with

the U.S. Army Combat Capabilities Development Command Soldier Center. “This new

smart textile technology standard provides the ability to objectively classify and

differentiate some of these new materials and products.”

The terms, which are meant to be used by manufacturers, suppliers, retailers,

regulators, consumers, labs and military personnel, help define everything from “smart

textile” to “wearable electronic.”

“This standard is building a bridge between two very different industries—the textiles

industry and the electronics industry,” said Winterhalter. “It is helping to establish a

relationship that never really existed before.”

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