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DHAKA – The Bangladesh office of the International Labour Organisation (ILO) has said it is encouraged by the government’s decision to revisit the minimum wages for ready-made garment workers through an agreement made by a special tripartite committee.
Negotiations between worker representatives and the state were ongoing throughout last year in order to agree a first mandatory minimum wage increase since the Rana Plaza collapse of 2013. Between that year and 2018 the lowest wage a garment worker could legally receive was 5,300 taka per month.
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China’s exports unexpectedly fell the most in two years in December, while imports also contracted, pointing to further weakness in the world’s second-largest economy in 2019 and deteriorating global demand.
Adding to policymakers’ worries, data on Monday also showed China posted its biggest trade surplus with the United States on record in 2018, which could prompt President Donald Trump to turn up the heat on Beijing in their bitter trade dispute.
Softening demand in China is being felt around the world, with slowing sales of goods from iPhones to automobiles, prompting warnings from the likes of Apple and from Jaguar Land Rover, which last week announced sweeping job cuts. The dismal December trade readings suggest China’s economy may have cooled faster than expected late in the year, despite a slew of growth-boosting measures in recent months ranging from higher infrastructure spending to tax cuts.
Some analysts had already speculated that Beijing may have to speed up and intensify its policy easing and stimulus measures this year after factory activity shrank in December.
The Ministry of Micro, Small and Medium Enterprises (MSME) will develop 20 technology centres, along with extension centres across the country in another 3-5 years.
According to Sudhir Garg, Joint Secretary of the Union Ministry of MSME, these centres would come up at an investment of Rs. 200 crore each. There are plans to have about 100 extension centres, each at an investment of Rs. 20 crore. “We are identifying locations. These will come up in the next three to five years. The aim is to ensure that maximum [number of] units are benefited from the facilities,” he said.
As many as 18 tool rooms are operational in the country and 15 more are in different stages of development or have started functioning. These tool rooms are specific to electronics, general engineering and high-end engineering sectors. They have modern technology machinery and testing equipment and the services are offered to industries at a competitive price.
With the development of technologies such as virtual reality and augmented reality, the manufacturing units in the MSME sector need to have access to these. The Ministry is creating trained manpower in virtual reality through the National Small Industries Corporation (NSIC). It has also developed training modules that use virtual reality and these will be launched across the country through the NSIC in a couple of months.
“We are training people in augmented reality too,” he said.
The Reserve Bank of India (RBI) has raised a red flag over spike in non—peforming assets (NPAs) under the government’s flagship scheme to support micro enterprises in the country — the Pradhan Mantri Mudra Yojana.
Finance Ministry sources said, the RBI has cautioned that the scheme might turn out to be the next big source of NPAs that have plagued the banking system. RBI said that bad loans under PMMY had risen to Rs. 11,000 crore. The caution comes at a time when the country’s financial system is reeling under severe stress due to IL&FS crisis.
Overall government spend is projected to decelerate to 7.4% in H2, from 10.5% in H1, while an even sharper deceleration can be expected if the deficit target is to be met
Attempting forecasts (“nowcasts” as they are now called) of most economic variables for a contemporary year based on data available at best for 8 months out of 12 is anyway a fairly heroic and sanguine exercise. Applying this process to a system as complex as India’s, with sparse data capture, under-enumerated, is a fraught exercise. The process for the official projections should be understood prior to an attempt at interpreting the data. The first advance estimates (AE) for a fiscal year (FY) are released on January 7, followed by provisional estimates (PE) for the prior year (i.e. FY18) on the 31st of the same month and then the second AE on February 28. These estimates are based on extrapolations of the data relevant for individual sectors, available variably from April to October or November, but adjusted for H2 to H1 ratios of the previous few years. FY19 GDP growth is expected at 7.2%, and the underlying measure of economic activity, gross value added (GVA, which we think is the better measure of economic activity), is estimated at 7%. This was the market consensus, and our own forecast as well. For us, though, our internals were wrong; the actual manufacturing sector growth was lower than expected, but higher construction segment sector growth offset that, balancing each other out. Trends in the three main components of GDP growth—agriculture, industry and services—are shown in the attached graphic. While services have been the most consistent contributor to growth, industry, particularly manufacturing, seems to be reviving in FY19.
However, the more interesting narrative of the GDP estimate is from the demand side, which is an even more difficult exercise, as it comes with multiple assumptions. Three aspects are notable.
Firstly, the contribution of fixed investment (gross capital formation, or GCF) is estimated to rise significantly, contributing 4 percentage points of the total 7.2% in FY19 (vs 2.9 points of the total 6.7% in FY18). This contribution was 3.6 points of the 7.7% growth in H1FY19, implying that contribution is likely to be 4.4 points of the implied 6.7% in H2FY19 growth. GCF growth was 10.8% in H1. Which sectors might the high capex (GCF) spends be emanating from? Matching growth estimates from the output and demand projections suggest that this might be construction, electricity, and to an extent, manufacturing. That is an expectation of a strong and accelerating capex activity. A capex recovery in selected sectors was indeed becoming more visible (engineering, electrical equipment, pumps, motors, bearings, abrasives, etc), and was corroborated by the capital goods component of the Index of Industrial Production (IIP) data till October. However, the prospect of it accelerating in H2 is somewhat open to scepticism, particularly given concerns of a global slowdown (via weaker trade), little room for a fiscal stimulus given constrained capacity of governments to spend and rising interest rates increasing borrowing costs. Secondly, the growth of net exports (i.e. exports minus imports) is projected to be -2.2% in FY19, much better than the -6.8% in FY18. However, net export growth is projected to be 1.4% in H2FY19 vs -5.9% in H1. The bulk of this change is forecasted to be from lower import growth. Might part of this be emanating from expectations of lower crude prices? The rationale for this is not clear. One, these real growth numbers are deflated with the appropriate inflation indices. Two, with lower pump prices, consumption of petrol products might actually increase. Overall, higher net exports are adding 0.7points to the 7.2% growth forecast.
Thirdly, government consumption growth is also projected to slow down in H2 to 8.1% from 10.1% in H1, while overall government spends are projected to decelerate even more sharply to 7.4% in H2FY19 from 10.5% in H1. This is indeed likely to happen, with an additional concern being an even sharper deceleration than expected, if the Centre’s fiscal deficit is to be held at 3.3% of GDP.
Hence, based on the three factors above, there is a marked downside risk to the FY19 projections. There is yet another puzzle on the deflators, which are inflation measures that translate nominal (real + inflation) growths to real. Roughly, the (non-agriculture) GDP deflator is comprised of 40% WPI, 30% CPI and 30% volume indicators. The GDP deflators have tended to move more closely with the WPI inflation over the past couple of years, introducing a bias (admittedly small) in the real GDP growth. Although in FY19, this bias is downwards, and growth should actually be a few percentage points higher.
The nominal growth is projected to be 12.3% in FY19 (vs 10.1% in FY18), implying a GDP deflator of 4.8% in FY19 vs 3.1% in FY18. One implication is that this implies a higher FY19 nominal GDP level than the FY19 budget estimate (based on a 11.5% projected nominal growth) projected in February 2018. This will allow the Central government to spend a bit more—probably around Rs 4,000 crore—while adhering to the 3.3% fiscal deficit, but this is nowhere close to a stimulus which might now be needed.
The Government may extend the Remission of State Levies (RoSL) to sectors including chemical and engineering as part of the proposed incentive package for exporters to boost the country’s outbound shipments, an official said.
Currently , RoSL, which is to offset indirect taxes levied by states such as stamp duty, petroleum tax, electricity duty and mandi tax that were embedded in exports, is provided to textile exporters.
The Commerce Ministry is working on an incentive package for labour intensive sectors to promote shipments and address issues of exporters. It is holding meetings with the finance ministry on the matter.
As part of the package, the ministry is proposing several steps such as funds for rebate of levies, creating system for online refund of GST and expansion of Niryat Bandhu Scheme, the official said.
Under this Scheme, mentoring is provided to the first- generation entrepreneurs.
Recently. Commerce and Industry Minister Suresh Prabhu said the ministry would provide support to exporters are they facing several challenges.
We are preparing a package which will ensure that exporters woes are addressed properly. They have been challenges for the export sector over a period of time and one big challenge is creidt he said.
He also said the package would focus on labour -intensive sector as it would help in creating jobs.
The FIEO president ganesh Kumar Gupta said incentives would help promote exports, which is expected to touch USD 350 billion in 2018-19.
“Steps like online ITC (input tax credit) refund, one -time amnesty for fulfilling export obligation under Advanced Authorisation and EPCG and MEIS benefit for fabrics and yarn would boost exports.
During Apr-Nov this fiscal exports rose 11.58% to USD 217.52 bn.
Since 2011-12 the country exports have been hovering at around USD 300bn during 2017-18 the shipments grew by about 10% to USD 303bn.
Promoting exports helps a country jobs, boost manufacturing and eran more foreign exchange.
Stressing the need for Indian industry tapping global supply chains, Prabhu said, “Manufacturing cannot happen end to end in one geography. It has to be part of a global value chain and global supply chain. That is why we are discussing a new industrial policy which is awaiting Cabinet approval, focusing on how to develop mutually beneficial value chain and supply chains.”
Union Minister of Commerce, Industry and Civil Aviation Suresh Prabhu on Saturday said the government is coming out with a new industrial policy which will link the country with the global supply-chain that will be mutually beneficial. The new industrial policy, aimed at developing global value chains and boosting India’s manufacturing competitiveness, is awaiting the Cabinet approval, he said while addressing the CII Partnership Summit.
Stressing the need for Indian industry tapping global supply chains, Prabhu said, “Manufacturing cannot happen end to end in one geography. It has to be part of a global value chain and global supply chain. That is why we are discussing a new industrial policy which is awaiting Cabinet approval, focusing on how to develop mutually beneficial value chain and supply chains.”
Growth in India’s merchandise exports slumped to 0.8 per cent in November from 17.86 per cent in October, the result of an unfavourable base effect, as the trade deficit narrowed benefitting from a sharp fall in crude oil prices. World Bank last week said India is expected to remain the fastest growing emerging market economy. It has kept India’s growth forecast unchanged at 7.3 per cent in FY19 while the economy is expected to grow at 7.5 per cent in the next 3 years.
After identifying 12 ‘champion sectors’ which can attract investments, the government has prepared a list of 150 global companies sitting with huge cash balance which will be targeted to get investments, Prabhu said.
Textile and clothing exporters, especially those in the Micro, Small and Medium-scale Enterprises (MSMEs) category, have welcomed the GST relaxations announced on Thursday.
K.V. Srinivasan, chairman of the Cotton Textiles Export Promotion Council, has said in a press release that the expansion of the Composition Scheme from the turnover threshold of Rs. 1 crore to Rs. 1.5 crore will be a relief to several small-scale tax payers.
They would now have to pay the tax on a quarterly basis and file the returns annually. The small-scale tax payers who were so far unable to file the returns on time would benefit from this. The GST exemption limit had also been increased from Rs. 20 lakh to Rs. 40 lakh. This would help the small or medium scale textile exporters and encourage growth in the textile sector.
According to A. Sakthivel, vice-chairman of the Apparel Export Promotion Council, the increase in GST exemption limit will benefit the knitwear industry and the MSMEs in Tirupur.
Units catering to the domestic or export market and have turnover of less than Rs. 40 lakh will now be exempted. There are many such units in the knitting, embroidery, and stitching activities and these do job work for larger units, he said.
The Reserve Bank of India (RBI) on Friday notified that the Government has decided to include merchant exporters under the ongoing Interest Equalisation Scheme for Pre and Post Shipment Rupee Export Credit with effect from January 2.
This move will allow merchant exporters interest equalisation at the rate of three per cent on credit for export of products covered under 416 tariff lines identified under the Scheme.
Under the scheme, banks will reduce the interest rate charged to the eligible exporters as per RBI’s extant guidelines on interest rates on advances by the rate of interest equalisation provided by Government of India.
The interest equalisation benefit will be available from the date of disbursement up to the date of repayment or up to the date beyond which the outstanding export credit becomes overdue.
District may attract investments worth ?1,000 crore
Leading fabric manufacturers Reliance Industries, Raymond Ltd., Siyaram Silk Mills, Wadia Group and Valji Group have expressed interest in investing in garment stitching units in Solapur district of Maharashtra to capitalise on the demand for ready-made uniforms from schools and corporates, an industry official said.
“They all are keen to invest in Solapur,” said Amit Kumar Jain, joint secretary, Solapur Garment Manufacturers’ Association. The association recently organised a fabric manufacturers’ fair to attract investments.
“Of late, Solapur has been gaining prominence as a sourcing hub for ready-made school and corporate uniforms. We expect Solapur to attract investments of ?1,000 crore by 2022,” he said.
Mafatlal Industries had already started a stitching unit with 200 machines to make ready-made uniforms in Solapur, he added.
“Reliance, Raymond, Siyaram Silk Mills, Wadia Group, Valji Group and Mumbai-based Qmax World, Rupam Exports Amber Home, which make shirts for the European market, are next in the line,” he added.
Making uniforms
Currently, Solapur has about 400 stitching units making school and corporate uniforms. The association’s target is to scale it up to 2,000 units by 2022.
According to S.R. Gaikwad, Director of Textiles, Government of India, Solapur has the potential to become the uniform hub of the country.
“The Central government will extend all support in achieving the goal set by the Maharashtra (government),” Mr. Gaikwad said.
H.K.Govindraj, Principal Secretary, Textiles Department, Maharashtra said, “Maharashtra government has chalked out plans for cluster parks and textile parks for Solapur which will help the Solapur industry to achieve its goal.”
