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India should push exports, as its share in world trade is low
NITI Aayog Vice-Chairman Rajiv Kumar said on Tuesday that he was more concerned about the rising trade deficit than the falling rupee, and called for efforts to push exports.
“I don’t believe in strong rupee… Rupee should remain in its natural value, some countries depreciate their currency deliberately, this is wrong. It will be very difficult for India to try and push up the rupee,” Mr. Kumar said at an event organised by industry body CII.
“There is a constituency that benefits from strong rupee…The constituency should be put on back foot,” he added. The rupee on August 16 had slumped to life-time low of 70.32 on strong demand for the U.S. dollar.
Mr. Kumar further said that economic policy making should not focus only on fiscal deficit number, arguing that large economies like USA, China and European Union do not give much importance to fiscal deficit.
“Nobody is playing by rules, so we should learn to play as it suits our requirements,” he said.
He pointed out that at a time when private investment is low, then the aggregate demand can be brought up by public spending. He said however that some revenue expenditure can be just be brought to zero. The main worry, he added, is trade deficit. “I think it will be much better to try and push exports, as our share in world trade is low. Even our share in services sector in world trade is lower than China’s,” he noted.
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The Central government is likely to meet its fiscal deficit target on the back of robust economic growth, higher tax compliance and “zero” revenue loss in Goods and Services Tax (GST), a senior Finance Ministry official said on Tuesday.
“There will be no shortfall in fiscal deficit target. We will meet the fiscal deficit target. Income tax collection is robust, first quarter results of the corporate world is absolutely delightful. I don’t see any reason for any concern on fiscal deficit,” the official said here.
The 2018-19 fiscal deficit — the difference between revenue and expenditure — has been pegged at Rs 6.24 lakh crore, as compared to the revised estimates of Rs 5.94 lakh crore for the previous fiscal.
On the GST, the official said: “I believe tax compliance and revenue buoyancy because of demand growth will almost result in ‘zero’ revenue loss despite the recent deductions in rates done to protect and promote sectors like textile, exports and handicrafts.” The government has targeted a monthly revenue of Rs 1 lakh crore from the GST collection. The Finance Ministry had earlier announced that the revenue collection under GST crossed the Rs 95,000 crore-mark for the second month in a row and stood at Rs 96,483 crore for the month of June (collected in July).
In a relief for common man, the GST Council in its meeting last month reduced tax rates on over 50 items including refrigerators, washing machines and small televisions, which would now be taxed at 18 per cent, down from the current 28 per cent.
Further, the official said that state governments have shown reluctance to include petrol and diesel in the GST basket, as they predict the move to curtail their overall revenue streams.
According to the official, the state governments are not willing to include petrol and diesel under the GST ambit as they would like to retain certain financial autonomy.
Besides, the official said that some state governments also utilise the taxes generated from petroleum products for infrastructure development. The Central government is open to the idea of including the two main transport fuels in the GST basket as it will aid in bringing down prices and the overall inflation.
Recently, the prices of the two key transport fuels have risen due to higher crude oil prices and the rupee depreciation. On August 14, the data on the Wholesale Price Index (WPI) furnished by the Commerce Ministry showed that price of high-speed diesel rose by 22.84 per cent on a Year-on-Year basis in July, petrol by 20.75 per cent and LPG by 31.68 per cent.
On July 18, Petroleum and Natural Gas Minister Dharmendra Pradhan informed the Rajya Sabha that GST Council which includes Finance Ministers of all states would decide when petrol, diesel etc can be brought under its regime. Pradhan had pointed out that the petrol and diesel prices have been made market determined by the government effective from June 26, 2010 and October 19, 2014 respectively.
Vietnam has been considered an attractive destination for investors who are keen on the garment and textile sector, thanks to benefits brought about by the bilateral and multilateral free trade agreements (FTAs) that the country has signed and is about to sign.
Looking back more than one year ago, many domestic garment firms were facing significant hardships as orders were being shifted to countries with low labour costs and tariffs, such as Cambodia, Myanmar, and Bangladesh.
However, in just a short period of time, after investing in technology and adjusting costs and inappropriate policies, Vietnam regained investors’ confidence, with a lot of large orders now returning to the country.
The Vietnam Textile and Apparel Association (VITAS) explained that Vietnam is well-known for its high quality of garment and textile products and quick delivery turnaround for sophisticated products.
Therefore, partners have returned to Vietnam after discovering that product quality and delivery times were not always ensured in other countries.
Recently, Japan’s Itochu Group spent 5 billion JPY (47 million USD) buying an additional 10 percent of shares in the Vietnam National Textile and Garment Group (VINATEX). The purchase raised Itochu’s stake in Vinatex to 15 percent, making it the second largest stakeholder behind the Ministry of Industry and Trade.
In March, the southern province of Binh Duong granted an investment licence to a garment and textile project by Taiwan’s Apparel Far Eastern Co., worth 25 million USD.
Singapore’s Herberton Ltd., also recently carried out the Nam Dinh Ramatex Textile and Garment Factory project worth 80 million USD in the northern province of Nam Dinh. The factory is expected to become operational next year with a capacity of 25,000 tonnes of fabric of various kinds and 15 million clothing items a year, creating jobs for around 3,000 labourers.
According to Chief Representative of VITAS in Ho Chi Minh City Nguyen Thi Tuyet Mai, together with efforts to regain investors’ confidence, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and other free trade agreements (FTAs) have attracted investors to Vietnam.
Currently, Vietnam is involved in 16 bilateral and multilateral FTAs, including two next-generation ones, namely the CPTPP and the EU-Vietnam Free Trade Agreement (EVFTA). Once they become effective, more opportunities will be created for the garment and textile sector, Mai added.
Vietnam is among the world’s five biggest garment-textile exporters and producers. The country’s garment-textile export turnover hit 16.5 billion USD in the first six months of 2018, up 16.49 percent year-on-year. Last year, the sector raked in 31.2 billion USD from exports, a year-on-year rise of 10.23 percent.
LAHORE: Pakistan’s export woes are not new, and as compared with regional economies, the country has performed poorly in exports during the last 25 years. To change the situation, it is the need of the hour to provide the same incentives to all sectors as was done by India.
Since 1992, exports from Bangladesh and India increased 17 and 15 times, respectively, whereas from Pakistan the exports went up by only three times. Unfortunately, Pakistan’s export culture has not fully developed yet. In 1992 the exports of Bangladesh were $2.098 billion. During the same period exports from Pakistan totalled $7.3 billion that was over three times the exports from Bangladesh.
Indian exports in 1992 stood at $19.628 billion, a little less than three times Pakistan’s exports. At that time, textiles were the main exports of all the three countries. Bangladesh, during the preliminary stage exported only value-added textiles; India exported both value-added and basic textiles, while Pakistan’s exports were mainly from the basic textile sector.
The data quoted in this article has been retrieved from the World Bank. Twenty five years later in 2017, exports from Bangladesh increased to $35.965 billion. India’s exports reached $298.376, while Pakistan managed exports worth $21.569.
Bangladesh is still in value-added textiles, graduating to high value garments. It is the second largest exporter of garments after China. Textiles account for around 60 percent of its exports, half of which are low value-added basic textiles.
India has graduated out of textile dominance in the last 25 years and has diversified its export products. It is a major exporter of IT services, auto-parts, pharmaceuticals and light engineering goods. The share of textiles in its exports has reduced to 16 percent.
The 25 years journey of three close neighbours shows that exports increased constantly in India and Bangladesh but were inconsistent in Pakistan.
The exports of Bangladesh more than doubled during 1992-97 period from $2,098 to $4.842 billion. Indian exports that were $19.628 in 1992, which increased to $35.437 billion in 1997. In 1992, Pakistan’s exports were $7.3 billion that inched up in the next five years to $8.47 billion.
This reflects that either there was flaw in government policies or the private sector in Pakistan was lethargic and looked towards the government for subsidies. Growth in Pakistan exports matched that of Bangladesh from 1998-2003. Bangladeshi exports reached $6.990 billion in 2003, while India’s jumped to $58.93 billion.
Pakistan’s exports increased to $11.53 billion, an increase of over $3.5 billion compared with the increase of only $1.1 billion in the previous five years. The next five years saw phenomenal export growth.
Bangladesh’s exports reached $15.37 billion in 2008 that was 2.5 times higher than exports in 2003. Exports from India increased threefold to $194.828 billion. Pakistani export growth, though less than its two neighbours, almost doubled to $20.323 billion.
The constant increase in the exports of India and Bangladesh was at the expense of Pakistan.
India while excelling in other sectors also continued to increase its value-added textile exports, and Bangladesh was exclusively in value-added garments. Pakistan predominantly depended on low value-added basic textiles.
By 2013 Bangladesh was well ahead of Pakistan in exports. Against Bangladeshi exports of $29.114 billion, Pakistani exports were $25.121 billion. This was the first year since 1992 that Bangladesh overtook Pakistan in total exports. Indian exports in the same year reached $314.848 billion.
In 2017 the exports from Bangladesh reached $35.96 billion, Pakistan exports dropped to $21.569 billion, and Indian exports eased to $298.37 billion. An interesting point in this regard is that from 1992 except one year till date, Bangladesh always registered growth in exports.
There have been ups and downs in exports from India, but exports from Pakistan have always remained unstable – going up for a year or two and then coming down. The notion that Bangladesh surged ahead after easing of textile quotas in 2005 is not true as this country was showing constant growth in exports in the previous 13 years.
If we analyse Pakistan’s export performance, it would be found that we never diversified our exports like India, and remained textile centric. Despite giving importance to textiles in our trade policies, we ended up exporting the lowest value-added textile, while Bangladesh that started almost 40 years later in textiles, has overtook us. A country like Pakistan needs a transparent export policy that provides the same incentives to all sectors.
Pakistan’s textile exports dropped 16.1% to $1.002 billion in July 2018 compared to shipments recorded in June, which stood at $1.194 billion.
On a year-on-year basis, textile exports in July did not show any improvement. In fact, they fell half a per cent as exports were slightly better at $1.007 billion in July 2017.
The market had been expecting better performance from textile exporters following 18% rupee depreciation in the past nine months, but exports dropped significantly on a month-on-month basis and nominally on a year-on-year basis. Textile exports roughly make up 60% of Pakistan’s total exports.
Textile exports drop 2% as production cost rises
All Pakistan Textile Mills Association (Aptma) Patron-in-Chief Gohar Ejaz said the government had recently halved tax rebates that stood at 4-7% and therefore things turned unviable for textile producers.
Ejaz said Pakistan had only adjusted its exchange rate by letting the rupee weaken, but it won’t impact national exports. The rupee had been artificially stabilised at Rs105 per dollar for the past five years, he said.
He pointed out that textile was a very competitive industry internationally and after 4-7% rebate the industry operated at 5% profitability and “if the government reduces the rebate, then operating the industry will be unviable.”
He added that many of the textile players had started closing operations as it had become difficult to run their businesses due to stiff competition in the international market.
However, according to Pak-Kuwait Investment Company AVP Research Adnan Sami Sheikh, textile exports tend to fall in July as exporters try to increase exports in the closing month of earlier fiscal year, which is June.
He added that Pakistan’s textile production faced high input costs due to imports, which diluted the impact of rupee depreciation on the textile industry.
“High quality raw material is imported by brands. Chemicals are imported while energy requirement is also generally fulfilled by consuming diesel which is also imported. So the impact of rupee devaluation is not convincingly passed on to the industry as people generally think,” he told The Express Tribune.
Textile industry demands extension in PM’s package
However, he added that the impact of rupee depreciation could not be gauged during summer as it was an off-season for the industry. The impact may be assessed and hopefully the textile group will show better exports in winter when consumption increases in the west due to cold weather and Christmas.
Sheikh said textile exports could be improved by improving localisation and quality of raw material as better brands import better quality cotton to meet their requirement.
Pakistan’s annual requirement stands at 15 million bales of cotton, but it has recently been producing just 10 to 11 million bales.
Pakistan’s textile exports dropped 16.1% to $1.002 billion in July 2018 compared to shipments recorded in June, which stood at $1.194 billion.
On a year-on-year basis, textile exports in July did not show any improvement. In fact, they fell half a per cent as exports were slightly better at $1.007 billion in July 2017.
The market had been expecting better performance from textile exporters following 18% rupee depreciation in the past nine months, but exports dropped significantly on a month-on-month basis and nominally on a year-on-year basis. Textile exports roughly make up 60% of Pakistan’s total exports.
Textile exports drop 2% as production cost rises
All Pakistan Textile Mills Association (Aptma) Patron-in-Chief Gohar Ejaz said the government had recently halved tax rebates that stood at 4-7% and therefore things turned unviable for textile producers.
Ejaz said Pakistan had only adjusted its exchange rate by letting the rupee weaken, but it won’t impact national exports. The rupee had been artificially stabilised at Rs105 per dollar for the past five years, he said.
He pointed out that textile was a very competitive industry internationally and after 4-7% rebate the industry operated at 5% profitability and “if the government reduces the rebate, then operating the industry will be unviable.”
He added that many of the textile players had started closing operations as it had become difficult to run their businesses due to stiff competition in the international market.
However, according to Pak-Kuwait Investment Company AVP Research Adnan Sami Sheikh, textile exports tend to fall in July as exporters try to increase exports in the closing month of earlier fiscal year, which is June.
He added that Pakistan’s textile production faced high input costs due to imports, which diluted the impact of rupee depreciation on the textile industry.
“High quality raw material is imported by brands. Chemicals are imported while energy requirement is also generally fulfilled by consuming diesel which is also imported. So the impact of rupee devaluation is not convincingly passed on to the industry as people generally think,” he told The Express Tribune.
Textile industry demands extension in PM’s package
However, he added that the impact of rupee depreciation could not be gauged during summer as it was an off-season for the industry. The impact may be assessed and hopefully the textile group will show better exports in winter when consumption increases in the west due to cold weather and Christmas.
Sheikh said textile exports could be improved by improving localisation and quality of raw material as better brands import better quality cotton to meet their requirement.
Pakistan’s annual requirement stands at 15 million bales of cotton, but it has recently been producing just 10 to 11 million bales.
Multi Commodity Exchange of India Ltd (MCX) signed a MoU with Indian Cotton Federation (ICF) at a conference ‘Gobal Cotton Scenario’ jointly organised by ICF and Indian Cotton Association (Bathinda). ICF, formerly known as SICA, the South India Cotton Association is a premier organization representing the Textile Industry, Cotton Brokers & Cotton Growers of India.
The MoU with MCX will enable ICF’s members to effectively participate in the Exchange’s knowledge-sharing initiatives to understand the benefits, techniques and strategies of risk management using cotton futures contracts. The agreement is further designed to facilitate potential collaboration in areas such as organising awareness events for cotton value chain participants, including farmers across the southern belt; installation of price ticker board at Textile parks; and joint representation to Ministries & Regulators for further development of the sector, among other activities. India is the leading producer of cotton in the world, followed by China and the US. As per the Governments third advance estimates, Indian cotton production in 2017-18 (July-June) is estimated at 3.6 crore bales, higher than last years production of 3.4 crore bales. According to Cotton Association of India (CAI), the country’s cotton exports are estimated to be around 100 lakh bales (of 170 kg each) during the 2018- 19 (marketing year) period. The overall cotton shipment is likely to cross 70 lakh bales during the ongoing 2017-18 marketing year (October to September).
The affected farmers have requested the state to order a special girdawari to sanction compensation Some farmers of Dharampura village, 11 km from here, have started uprooting cotton plants that did not bear flowers. Farmers Rajinder Kumar, Dharamvir, Rameshwer and Hari Ram said ‘narma’ cotton plants had been damaged as the irrigation authorities could not make adequate canal water available to the villages which were fed by the Daulatpura minor and those located at the tail-end of the canal system in the subdivision.
Drought-like conditions were primarily responsible for the losses suffered by farmers, said Sahib Ram, another farmer. Sources in the Irrigation Department said funds were not released for the reconstruction of sub-canals for the past few years, adding that cleaning was also delayed due to late allocation of funds. This affected water supply to some of the villages. “When the cotton crop needed water instantly, the rotation system was enforced, citing a fall in the water level in dams. Many farmers missed their turn to irrigate fields due to this system. They have suffered due to repeated closure of sub-canals from April, when experts had advised to sow cotton,” said Devi Lal. The affected farmers have requested the state government order a special girdawari to sanction compensation.
As per the latest update from United States Department of Agriculture (USDA), Indias cotton area for MY 2018/19 is being forecasted at 11.8 million hectares, 100,000 hectares lower than the official USDA estimate. The reduction in area is primarily in the two major cotton growing states of Gujarat and Maharashtra. Deficit rains and pest pressures have prompted farmers to either plant alternate crops, or delay/abandon planting altogether. According to the Ministry of Agriculture and Farmers Welfare (MOAFW), planted area reached 11.26 million hectares as of August 9, 2018 compared to their final estimate of 11.71 million hectares in MY 2017/18. Although planted area is 4 percent lower than last year, it is still 2 percent higher than the 5-year average of 11.05 million hectares.
Central Maharashtra indicates a significant part of cotton area has shifted to soybeans and fodder maize. Farmers have reduced cotton area, but continue to plant BT cotton despite issues of pest resistance, as it remains a remunerative crop. The plants are in the early vegetative stage, with farmers mostly undertaking weeding operations. The number of rainy days in July in major cotton districts have ranged between 5-15 days (refer to Table 1) prompting farmers to either delay planting or plant alternate crops. Farmers indicated that input costs related to fertilizers and insecticides have increased from last year, but that labor costs have a significant impact on the overall cost of production. USDA forecasts lower cotton area planted than last year in Maharashtra, but expects similar yields as last year, as resurgence in the second half of monsoon season will improve crop development.
Saurashtra region in Gujarat indicates that farmers have replanted cotton in major cotton growing districts as lack of adequate moisture in July led to crop failure. Farmers have shifted acreage from groundnut (peanut) to cotton due to poor price realization from groundnuts last year. While there is a marginal increase in cotton acreage, the prolonged dry spell is affecting the plant development, and is expected to have a significant impact on cotton yields if rains are not received in the next 15 days. According to the Gujarat State Agriculture Department, cotton sowing as of August 6, has reached 2.66 million hectares as compared to 2.65 million hectares last year. The normal area (previous three years average) planted during the same time is 2.6 million hectares. The percentage of non-BT cotton planted in the state has increased by 34 percent compared to last year, and the overall share of non-BT cotton area has risen from 15 percent to 20 percent. But farmers continue to prefer planting BT cotton due to its relative drought tolerance over competing crops, and wide planting window.
A fresh spell of rain on Monday disrupted normal life across the erstwhile district of Warangal. As a result, several low-lying areas in the region were under a sheet of water. Rainwater entered into residential area of Bhavani Nagar in Hanamkonda forcing the people to stay in knee deep waters.
In Jayashankar-Bhupalpally district, streams and rivulets continue to overflow for the last six days disrupting road links to several villages. With the Kappavagu in full flow, Mangapet-Ramachandrunipet road taken a dent. In Mangapet mandal, farmers appeared gloomy due to washing away of paddy transplantations in their fields.
Narasimha Nagar, Gandhi Nagar, Sanagakunta, Puredpally and Narendraraopet villages remained cut off with the overflowing of streams.
In Warangal Rural district, heavy rain left cotton fields in Atmakur, Shayampet and Damera mandals under a sheet of water.
Meanwhile, Godavari river continues to receive huge inflows. The water level at Ramannagudem under Mangapet mandal has reached 8.25 meters.
With the water entering the open cast sector 1 and 2 areas, Singareni authorities suspended mining operations. About 48,000 tonnes of coal production was affected, it’s learnt.
