citi-news letter · 2019-01-25 · 3 citi-news letter national: cmai to undertake size india...
TRANSCRIPT
Cotlook A Index - Cents/lb (Change from previous day)
23-01-2019 82.55 (-0.75)
22-01-2018 94.10
23-01-2017 82.45
New York Cotton Futures (Cents/lb) As on 24.01.2019 (Change from
previous day)
Mar 2019 73.53 (+0.39)
May 2019 74.66 (-0.19)
July 2019 75.98 (-0.13)
25th January
2019
CMAI to undertake Size India Project
Cabinet clears amendment to currency swap framework for
SAARC countries
JSW Group inks MoU with APEDB to invest `3,500 cr in Prakasam
district
China exchange to launch cotton options on Jan. 28
Vietnam, India seek ways to remove obstacles to trade ties
Cotton and Yarn Futures
ZCE - Daily Data (Change from previous day)
MCX (Change from previous day)
Jan 2019 20610 (-70)
Cotton 15915 (-60) Feb 2019 20920 (-70)
Yarn 24745 (0) Mar 2019 21190 (-70)
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- CMAI to undertake Size India Project
MSMEs need reforms to solve pressing problems
Cabinet clears amendment to currency swap framework for
SAARC countries
Why India needs its own size chart for the right fit
Deadline for new FDI policy in ecommerce may be deferred
Why Indian industry needs more than MSME sops
JSW Group inks MoU with APEDB to invest `3,500 cr in
Prakasam district
Madhya Pradesh seeks global investment as India’s ’emerging
economic tiger’
National honour for official for solar policy
------------------------------------------------------------------------------------------------ China exchange to launch cotton options on Jan. 28
Vietnam, India seek ways to remove obstacles to trade ties
Policy signals for greening Bangladesh’s RMG
The costs of India’s participation in the RCEP
Illegal low pay ‘rife’ in UK textiles industry, MP warns
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NATIONAL
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GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
CMAI to undertake Size India Project
(Source: ANI News, January 24, 2019)
Retail is one of the driving forces that is propelling India’s Economic surge in recent Years.
Its total Size is Approx. USD 820 Bn and its Share in India’s GDP is 28%. Apparel Retail
is one of the Important Drivers of Modern Retail, with its total Size estimated to be
Approx. USD 72 Bn. Retail, and more so apparel retail, is thus playing a vital role in
transforming India into a major economic super power in the coming years. Rahul Mehta,
President stated that it is CMAI’s proud privilege to work with the Ministry of Textiles
and Govt of India to undertake this Project. It will provide immense Benefit to the
Consumers by getting Standardized Sizes, far better Fitting Clothes, and avoiding Wrong
and Wasteful Purchases. It will benefit the Manufacturers Retailers, and Brands by
eliminating Consumer Returns and Wasteful Inventory. Mehta also stated that this will
also help them Reduce Overall Prices which again Benefits the Consumers. It will help in
Increasing Investment in the Industry by Improving Returns, and Increase Consumption
as a result of more satisfied Consumers. It will help us to Increase our Exports by offering
Indian Sizes to the Indian diaspora across the World.
CMAI Congratulates the Minister of Textiles for taking this Historic Step which will put
the Indian Industry on par with all the Developed Countries like US, UK, EU etc which
have provided its Consumers with the Facility of having a Standard Size.
Home
MSMEs need reforms to solve pressing problems
(Source: The Hindu Business Line, January 24, 2019)
Micro, small and medium enterprises (MSMEs), the second largest employment
providing sector, need radical reforms to solve its pressing problems and to utilize its
potential.
This is the findings and recommendations of the latest 'Development Report' on MSMEs,
brought out by the Kochi based Institute of Small Enterprises and Development. 'India
Micro, Small, and Medium Enterprises Report 2018, the twenty- first volume in the series,
was released in Bengaluru at the South India MSME Summit 2019.
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The report pointed out that several studies on India's MSMEs have brought out emerging
challenges of the sector, especially against the phenomenon of 'jobless growth', that the
country is experiencing today. MSME associations have also come up with issues relating
to finance and taxation. The Union Government came up with a new turnover-based
definition of MSMEs, which the associations consider it as an inroad into their
constituency by large players.
However, the RBI, on the other hand, has taken a serious note on the issues relating to
finance and taxation, and has set up an expert committee to identify causes and top
propose long term solutions. While the mainstream debates on MSME problems confine
to the limited areas of technology, finance, start-up support etc, the impact of more crucial
external influences such as policy failures (demonetization and GST implementation)
remain unanswered. In such a situation, piece-meal solutions to MSME problems may
not be effective, the report warns.
Quoting an RBI study, the report said that the credit growth for MSME declined
significantly and turned negative during November 2016 to February 2017. However the
growth in credit had recovered after February 2017 to reach an average 8.5 per cent. The
share of credit extended to MSMEs in overall bank credit, declined steadily to around 14
per cent from about 17 per cent. Additionally, within credit to the industrial sector, the
share of medium enterprises has dropped significantly as compared to micro and small
enterprises. The credit growth to MSME exports has also been affected.
ISED advocates an 'entitlement approach' that can have the potential of compelling all
related stake holders to work on a common national agenda and solutions under a
scientifically structured framework. Such an approach would demand identification and
analysis of major security threats to the MSMEs, and entrepreneurship at the grass root
level.
Home
Cabinet clears amendment to currency swap framework for SAARC
countries
(Source: SME Times, January 24, 2019)
The Union Cabinet on Wednesday gave its ex-post facto approval for amendment to the
"Framework on Currency Swap Arrangement for SAARC Member Countries" to
incorporate a 'standby swap' amounting to $400 million.
The standby swap was operated within the overall size of the facility which amounts to
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$2 billion.
In an official statement, the government said that due to heightened financial risk and
volatility in global economy, short-term swap requirements of SAARC countries could
be higher than the agreed lines and the amendment builds in flexibility with respect to
modalities of its operation, such as period of swap and roll over.
"The incorporation of 'standby swap' within the approved SAARC Swap Framework
would provide necessary flexibility to the framework and would enable India to provide
a prompt response to the current request from SAARC member countries for availing
the swap amount exceeding the present limit prescribed under the SAARC Swap
Framework," it said.
The Cabinet gave its approval after due consideration of conditions of requesting
SAARC member countries and domestic requirements of India, it said.
It had approved the framework on March 1, 2012 with the intention to provide a line of
funding for short term foreign exchange requirements or to meet balance of payments
crises till longer term arrangements were made or the issue resolved in the short-term
itself.
Under the facility, RBI offers swaps of varying sizes to each SAARC member country
depending on their two months import requirement and not exceeding $2 billion in
total. The swap amount for each country has been defined, subject to a floor of $100
million and a maximum of $400 million.
Home
Why India needs its own size chart for the right fit
(Source: Live Mint, January 24, 2019)
Union minister of textiles Smriti Irani announced on Sunday that the country would soon
have its own standard clothing measurement chart under the Size India
project. Mint looks at the need for an India-specific size chart and how the move will help
retail brands.
What’s the need for Size India initiative?
The Size India initiative is an effort to establish a standardized size chart for clothing in
India. Both international and homegrown brands operating in the country have so far
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6 CITI-NEWS LETTER
used measurements from the US or the UK for garments, such as “Small", “Medium" and
“Large"; only a few brands used their own size charts. However, the differential sizing
standards caused confusion for Indian body types, which have significant
anthropometric differences with Western standards in terms of height, weight or specific
measurements of body parts such as the shoulders and bust.
Is the initiative the first of its kind in India?
The Size India project is not new. In February 2018, the National Institute of Fashion
Technology (NIFT) announced that it would start the process of creating a standardized
size chart for the Indian population. NIFT began the project with a funding of ₹30 crore
from the ministry of textiles. The research team at NIFT surveyed the body
measurements of 25,000 people aged between 15 and 65 across six cities—Kolkata,
Mumbai, New Delhi, Hyderabad, Bengaluru and Shillong—taking into account a cross-
section of the population along the length and breadth of India. It measured the types
using 3D whole-body scanners.
Which countries have their own size charts?
The UK and the US have their own standardized sizes, while Germany and Spain use the
European size chart. China, Australia and Mexico also have their own measurements.
How long will the project take and why?
Irani did not announce a specific timeline to pass the resolution for the project to be
implemented. In 2018, NIFT said the project was likely to be completed by 2021, given
its ambitious scale. Earlier, PTI reported that Noopur Anand, faculty member at NIFT
Delhi and principal investigator of the project, said that approximately 120 elements
such as height, weight, waist size, hip size and bust size would be included in the survey.
The size chart will also include detailed dimensions that will apply to clothing separates.
How will this move help retail brands?
So far, brands offering customized measurements for garments had limited potential to
cater to India’s large population. The Size India initiative will help streamline the process
and make it possible for brands to assign sizes to garments specifically addressing the
differences. An India-specific measurement chart will make it possible for brands to not
only apply accurate sizes to clothing, but also modify their production patterns to create
sizes that are more suitable for Indian body specifications.
Home
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Deadline for new FDI policy in ecommerce may be deferred
(Source: Anindita Singh Mankotia, Economic Times, January 24, 2019)
The government is considering extending the deadline of February 1 by when recently
announced changes in the foreign direct investment policy for ecommerce are to take
effect, said people with knowledge of the matter.
“The government is considering giving an extension, but no final decision has been
taken,” said a senior official. Amazon and Walmart-owned Flipkart have sought a
deferment and industry sources said the government is weighing an extension of at least
two months.
Executives of Amazon and Flipkart have met senior government officials and asked for an
extension and review of two key clauses.
The first bars marketplaces and their group companies from having equity participation
in any of their vendors and the second prohibits marketplaces and group companies from
having control over inventory sold on the platforms, said the people cited above. An
extension of two months, if granted, would mean the rules take effect at around the time
of general election, said the people. While Amazon has sought a deferment of four
months, Flipkart is said to have proposed a six-month extension. The two companies have
also written to the Department of Industrial Policy and Promotion (DIPP) seeking a delay.
Amazon India said it will comply with all local laws, rules and regulations, but is awaiting
clarification from the government on the policy changes, which were announced on
December 26.
“As we seek clarity, we have written to the government requesting an extension of four
months,” a spokesperson said. “With over 4 lakh sellers and hundreds of thousands of
transactions happening daily on the Amazon India marketplace, we need adequate time
to understand the details of the policy.”
“We are working diligently to assess all aspects of the Flipkart business in an effort to
ensure full compliance with the new rules, but believe an extension is appropriate in order
to ensure that all elements of the new Press Note are clarified and a smooth transition for
marketplace participants occurs without any disruption for customers and small sellers,”
the firm had told ETon January 15.
The clauses cited above necessitate sweeping changes to the business models of
ecommerce marketplaces such as Amazon India and Flipkart. The inventory of a vendor
will be deemed to be controlled by the marketplace if more than 25% of the vendor’s
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8 CITI-NEWS LETTER
purchases are from the marketplace entity, including its wholesale unit. The marketplace
entity or its group companies cannot have control over inventory under FDI rules.
Amazon and Flipkart both control inventory directly or indirectly. They purchase goods
in bulk at cheap rates from manufacturers through their wholesale entities — Amazon
Wholesale and Flipkart India Pvt Ltd — and sell them on their marketplaces through
preferred sellers, which are companies in which the ecommerce company or a group
entity may have an equity stake. The preferred sellers account for 70-80% of the total
sales of the marketplaces. Both companies are betting heavily on the Indian market.
Amazon has committed an investment of $5 billion, of which a large chunk has been put
into wholesale, marketplace and payments. Walmart has paid $16 billion to take over
Flipkart.
The government’s next move is being keenly watched in US trade circles, especially with
US commerce secretary Wilbur Ross scheduled to visit India on February 14. The USIndia
Strategic Partnership Forum had termed the amendments “regressive”.
Home
Why Indian industry needs more than MSME sops
(Source: Live Mint, January 24, 2019)
With few months left for the 2019 general elections, the Union government has unveiled
a slew of measures to woo India’s small and medium scale businesses, which have
ostensibly been hurt the most because of the double whammy of demonetization and the
goods and services tax (GST).
The steps announced in recent weeks ranging from doubling the exemption limit for GST
registration to restructuring stressed loans for the sector may be well-intentioned but may
be too little, too late to address the industrial sector’s woes.
Data from the Centre for Monitoring Indian Economy (CMIE’s) Prowess database—
which tracks the performance of more than 40,000 companies across India— suggests
that the performance of the MSME sector has been broadly in line with the rest of the
corporate sector, and have shown signs of a recovery in the past fiscal year. Net sales for
both set of firms fell between fiscal 2012 and fiscal 2016 before improving slightly since
then
In this analysis, the enterprises are classified on the basis of their average annual turnover
in the last five years. Companies with revenue of up to ₹5 crore in FY14-FY18 are
considered ‘micro enterprises’, those with turnover between ₹5 crore and₹75 crore as
‘small enterprises’ and those with turnover between ₹75 crore and ₹250 crore as
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9 CITI-NEWS LETTER
‘medium enterprises’. The classification is in line with the proposed new definition of the
MSME sector, which was approved by the Union cabinet last year.
The improvement in net sales growth of these enterprises is almost entirely led by the
manufacturing units. Sales growth in the services sector, on the To be sure, the improvement
in net sales of manufacturing firms does not necessarily suggest an improvement in profits. The
data on aggregate profits suffers from extreme volatility and it is therefore difficult to identify a
conclusive trend.
Data on bank credit sourced from the Reserve Bank of India, which classifies the MSME
sector as per the current official definition based on investments of enterprises in plant,
machinery and equipment, shows that industrial credit growth has also improved in
recent months, with the entire improvement led by credit growth to medium-sized
enterprises other hand, declined for the third consecutive year in 2017-18
The trends in sales growth and credit flow largely represent the health of companies in
the organized MSME sector but it is worth noting that the relief measures of the
government are also aimed precisely at this sector since firms in the unorganized sector
are outside the purview of regulatory controls and formal lending channels. The one area
which seems to be of concern is jobs. The small and medium-sized enterprises (based on
turnover) cut jobs for the seventh straight year in 2017-18, even as the corporate sector as
a whole witnessed rising employment in recent years, Prowess data shows.
While demonetization and GST are blamed for the financial distress of these enterprises
due to which many were said to have laid-off employees or shut operations, the fall in
employment was the least in the demonetization year of 2016-17, according to Prowess
data. Instead, the declining growth in employment in smaller-sized companies has been
an ongoing trend since FY10
Some relief for the MSME sector may therefore seem warranted given their contribution
to overall employment but it is worth noting that size-based policy relief measures may
end up being counter-productive over the long run. Such measures could discourage firms
to grow by creating strong incentives to operate beneath the official size category.
There is some evidence to suggest that size-dependent labour regulations encourage
smaller firms to employ non-permanent workers, and make them sub-contract output to
other firms .
A recent survey conducted by IDFC Institute in collaboration with the government’s
think-tank NITI Aayog shows that larger firms face more regulatory obstacles, which
possibly explains why firms in India fail to grow big.
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Policymakers would do well to focus on the structural bottlenecks holding back Indian
industry—including regulatory red tape, uncertainties in tax and investment policies,
and infrastructural deficits—which hurt both small and big firms, and limit growth.
Home
JSW Group inks MoU with APEDB to invest `3,500 cr in Prakasam district
(Source: Indian Express, January 24, 2019)
The firm also evinced interest to set up an integrated steel
plant, a textile park and a electric vehicles manufacturing
in Andhra Pradesh.
VIJAYAWADA: JSW Group, one of the biggest
conglomerates in the country, has entered into a
Memorandum of Understanding (MoU) with Andhra
Pradesh Economic Development Board (APEDB) to invest `3,500 crore in Andhra
Pradesh. As per the pact, the firm, which is into steel, cement, energy, infrastructure and
other sectors, proposes to develop two jetties at Ramayapatnam Port in Prakasam district
and lay a slurry pipeline.
The firm also evinced interest to set up an integrated steel plant, a textile park and a
electric vehicles manufacturing in Andhra Pradesh.The MoU was signed and exchanged
between JSW Group chairperson Sajjan Jindal and APEDC CEO J Krishna Kishore on the
sidelines of the World Economic Forum in Davos in the presence of IT Minister Nara
Lokesh on Wednesday.
According to an official release from APEDB, two jetties would be developed in 200 acres
of land at Ramayapatnam Port with `1,000 crore as part of JSW’s plans to expand their
logistics footprint in South Asia. The slurry pipeline, expected to build synergies and
linkages to Prakasam district, will be laid with `2,500 crore estimated investment for the
group’s plant in Bellary district in Karnataka. The MoU is expected to generate 250 direct
jobs.
It may be recalled that Chief Minister N Chandrababu Naidu, earlier this month, unveiled
a pylon marking the launch of the Ramayapatnam Port works.When Lokesh invited JSW
Group to establish an integrated steel complex in the coastal areas in Prakasam district to
take advantage of logistics and supporting infrastructure in AP, Sajjan Jindal expressed
interest and said he would visit the State soon. Jindal is also said to have evinced interest
to explore the opportunities to establish a textile park and e-vehicle manufacturing
facility, when Lokesh explained to him about the e-mobility policy rolled out by the
government.
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11 CITI-NEWS LETTER
Earlier in the day, Lokesh held meetings with delegations from firms, including Marsh
and McLennan, Genpact and others. Marsh and McLennan chairperson Alexander
Moczarski informed the minister that the firm was looking to invest in India and that he
would visit the State soon.The firm offers services insurance brokerage, risk management,
reinsurance services, talent management, investment advisory, and management
consulting.
Lokesh also interacted with other investors and explained to them the industry-friendly
policies in AP. He addressed an interaction luncheon with top investors on ‘Technologies
for Tomorrow’ held at AP Lounge and elaborated on the e-governance initiatives adopted
by the State government.
Later in the day, the IT Minister interacted with the executive vice-president and CEO of
Nestle, Chris Johnson. Citing the example of Araku Coffee, Lokesh said a target was set
to promote 5,000 brands from AP on global platforms and sought the cooperation of
Nestle Group. He invited the Nestle CEO to AP. Reacting to this, the firm’s CEO said that
the Nestle Group was ready to work with AP and assured cooperation for rural brand
marketing. He said a Nestle team would visit the State soon.Principal Secretary Ajay Jain
and APIIC MD Babu Ahmed were also present.
Home
Madhya Pradesh seeks global investment as India’s ’emerging
economic tiger’
(Source: Financial Express, January 24, 2019)
Terming job creation and agriculture as his main focus areas, the senior Congress leader
said he wants to ensure that agriculture is linked to the industrial growth in the state and
the new industries that come up create employment in a big way.
Promoting itself as “India’s emerging economic tiger”, Madhya Pradesh government
Thursday invited global investors to the country’s biggest state with promise of all
necessary infrastructure and a favourable business ecosystem. Chief Minister Kamal Nath
said Madhya Pradesh is not a fully urbanised state and it was largely rural-focussed
mainly on agriculture.
Terming job creation and agriculture as his main focus areas, the senior Congress leader
said he wants to ensure that agriculture is linked to the industrial growth in the state and
the new industries that come up create employment in a big way. He said there is a deep-
rooted frustration over jobs, not just in Madhya Pradesh but in the entire country, and
this can create a big social problem if not tackled immediately.
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12 CITI-NEWS LETTER
He was addressing investors at a session here on the sidelines of the WEF annual meeting.
The ‘Invest Madhya Pradesh’ session was organised by the Madhya Pradesh government
and leading industry chamber CII to promote the state as “India’s emerging economic
tiger’. Nath has been a regular at Davos as a union minister in the past, but has come for
the first time as chief minister this time. He urged investors to look at his state differently
than they did earlier, saying he was doing his best and the investors should also do their
best now.
Nath said several states have set up pavilions here, but he has none as he wants the
investors to talk about the business opportunities available in in the state. Madhya
Pradesh’s Chief Secretary S R Mohanty said, “apart from being biggest state, it has been
blessed with a whole lot of minerals, is a power surplus state and has a huge road network
and even the Narmada water is reserved for the industry there.”
He also promised a round the clock single-window business facilitation service for the
industry and investors. He said the state intends to do much better in terms of ease of
doing business (it is ranked seventh right now) and the Kamal Nath government is
committed to resolve whatever issues are there coming in way of industrial growth of the
state.
Mohanty further noted that airlines have increased their flights to the state soon after
Kamal Nath became the new chief minister and intend to further increase their
connectivity in the coming weeks and months. In what he described as a unique benefit
available to the investors, he said Madhya Pradesh is the only state in the country with a
‘tax-delinked policy’.
The main focus industries include agriculture, automobile, textiles etc and now the state
wants to focus on next generation technologies such as nano technology and artificial
intelligence to make up for the state having lagged behind some others in the area of
software and technology businesses. The chief minister is committed in creating an
extensive skill development framework in the state, the senior official said.
Our basic focus is on job creation while embarking on an industrial development path, he
said. He promised land at competitive rates for the industries and all necessary steps to
improve business ecosystem in the state. The session was also addressed by CII Director
General Chandrajit Banerjee and representatives of companies that already have a
presence in Madhya Pradesh. It was also attended by those having made commitments to
invest in the state.
Home
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National honour for official for solar policy
(Source: Times of India, January 24, 2019)
A policy drafted by a textile department official from the region on providing solar power
to small power looms has earned a national-level honour.
G Kummaravel, assistant director, regional office of the textile commissioner, Coimbatore
region, has been felicitated by vice president M Venkaiah Naidu for framing a policy on
'Solar Energy Scheme for Power looms'. The policy seeks to provide solar power systems
to small weavers who have up to eight power looms. Kummaravel said small power loom
weavers can get roof-top solar power panels installed. "If weavers enter a net-metering
system, where surplus solar power can be re-routed to the grid, the cost would be reduced
from the monthly power tariff," he said.
Home
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GLOBAL:
China exchange to launch cotton options on Jan. 28
(Source: Xinhua, January 23, 2019)
The Zhengzhou Commodity Exchange has released details on cotton options contracts
and listing, with the options to be open on Jan. 28.
The future contracts of the cotton options are CF1905, CF1907, CF1909 and CF2001.
There will be 104 options contracts to be released on Jan. 28.
The China Securities Regulatory Commission has also given the nod to the launch of
options contracts for rubber and corn on January 28 as part of the government's drive to
promote more complex agricultural trading tools.
Home
Vietnam, India seek ways to remove obstacles to trade ties
(Source: Vietnam News, January 24, 2019)
Officials from Việt Nam and India discussed specific measures to remove obstacles to
trade and promote investment co-operation between their businesses during the fourth
meeting of the Joint Sub-committee on Trade in Hà Nội on Wednesday.
The event was co-chaired by Vietnamese Deputy Minister of Industry and Trade Cao
Quốc Hưng and his Indian counterpart Anup Wadhawan.
Delegates compared notes on solutions to tighten economic relations, expand export
markets and take advantage of their strengths and resources to aid development in both
countries.
In his remarks, Hưng called on India not to impose anti-subsidy measures against
stainless steel pipes and copper wire rods imported from Việt Nam, and to consider not
expanding anti-dumping measures when they expire.
He also urged India to issue official documents allowing the import of Vietnamese
dragon fruits and speed up the process to pave the way for other fresh fruits of Việt Nam
– including longan, pomelo, rambutan and durian – to enter the South Asian market.
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The official voiced his concern over India’s imposition of the Minimum Import Price
(MIP) on pepper and suggested the country reverse the measure and abide by
regulations of the World Trade Organisation (WTO) and the ASEAN Trade in Goods
Agreement (ATIGA).
He proposed India further support Vietnamese delegations joining trade promotion
activities in the country, encourage local enterprises to visit Việt Nam to scope out the
market and invest in the areas of their strength and help budget carrier Vietjet open
direct flights between the two countries.
Wadhawan raised issues in India’s interest, such as the granting of licences to facilities
processing buffalo meat to be exported to Việt Nam.
The free trade agreement between the Association of Southeast Asian Nations (ASEAN)
and India was also discussed.
Statistics show trade between Việt Nam and India reached US$10.7 billion in 2018, up
39 per cent from 2017.
India has, to date, run 208 FDI projects in Việt Nam with total registered capital of
about $878 million, ranking 26th out of 129 countries and territories investing in the
Southeast Asian nation.
Home
Policy signals for greening Bangladesh’s RMG
(Source: Dhaka Tribune, January 24, 2019)
Elaborate plans and projects that can reduce pollution in Bangladesh. This is the second
part of a four-part series on greening the RMG sector
Although buyer pressure remains one of the key motivators for RMG industry greening -
the government’s role in promoting cleaner production remains significant - especially in
regard to RMG companies where buyer pressure for greening is comparatively less.
Bangladesh has a rich and diverse mixture of policies and regulations covering water
pollution management. The strengthening of regulatory provisions for groundwater
monitoring, licensing, and charging as part of the rules supporting the 2013 Bangladesh
Water Act by the Ministry of Water Resources (MOWR) would be a step towards
promoting smarter water use by industries.
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16 CITI-NEWS LETTER
Buyer codes and Leadership in Energy and Environmental Design (LEED) certification
prioritizes water efficiency. Water conservation and rainwater harvesting could be
promoted more - which can be used in certain washing dyeing or toilet facilities within
the RMG factories.
It could be made compulsory in factories above a certain size, or a utility bill discount
could be given to companies using a certain amount of rainwater. On the punitive side,
banning the drilling of uncontrolled deep tube wells by private companies, groundwater
pricing, fee structure (for different types of water use), strict licensing, and use fees for
RMG companies could also be explored for sustainable management of the groundwater
aquifers in Dhaka.
A Zero Discharge policy by the Department of Environment (DoE) is under process and
will go towards relieving some of the groundwater pressure. Dhaka and Chittagong water
municipalities (DWASA and CWASA) could review groundwater licensing arrangements
for the larger RMG companies, including a revision of water jurisdiction in the growing
industrial clusters around Dhaka and Chittagong.
Revising the DoE’s volumetric tariffs to reflect environmental externalities, and
developing effective environmental compliance systems are all high priority actions for
the DoE. RMG factories are either classified as Red category (if they have a dyeing unit)
or Orange B category (if they have a washing unit) - depending on their production
process and potential pollution load - determining the extent of environmental evaluation
the company must undertake, and the kind of ETP and pollution management system
they must design before the DoE grants them environmental clearances.
Previously, RMG factories that were “cut and sew only” were classified as Green category
- requiring minimal environmental assessments for certification. In 2008, the ministry
amended its rules so that “cut and sew” factories no longer needed any form of DoE
clearance. However, cutting and sewing sections use high amounts of artificial lights and
generate a fair amount of heat transfer.
These factories usually produce air pollution and solid waste that is disposed of without
regulation. The DoE can only penalize them upon receiving written complaints from
locals - about solid wastes incorrectly disposed of in local waterways -- causing a blockage.
For greening to occur in all segments of the RMG industry, attention must be paid to the
“cutting and sewing only” segment as well.
It may be noted that RMG companies are now used to compliance scrutiny of an
international standard. As of July 1, 2018, building safety audits have been completed in
3,780 factories under the work plan formulated by a tripartite body comprising
International Labour Organization, Ministry of Labour and Manpower and factory
owners (as mentioned in the Budget Speech 2018). In addition, a Public Accessibility
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Database has been prepared to contain information of 3,743 export-oriented RMG
factories; another database with information of another 27,000 factories is underway.
The government and the industry believe this has given a strong signal to the international
market.
The DoE could selectively share positive results achieved by companies among their
peers, buyers in Bangladesh, and on the DoE website for international audiences. A
voluntary benchmarking program could be started in collaboration with interested RMG
factories - possibly from the RMG high achievers - and their buyers.
This could be done with GCF funding since this involves climate adaptation. The DoE
could also start publishing details of court cases brought to the environmental courts, and
statistics on environmental fines charged and collected.
Water quality emissions standards are set out in the ECR, Schedule 12. The schedule sets
out the maximum amounts of a pollutant (volumetric concentrations) that may be
discharged by a factory (or other sources), based on available abatement technology or
the impacts of the emissions on the ambient environment.
While such standards are important to ensure the wastewater generated in industrial
processes is adequately treated - such traditional “concentration based” environmental
standards do not provide textile factories with incentives to conserve water and to reduce
the number of chemicals used in the production process.
It is mandatory under the ECR 1997 for Orange B and Red category factories to have ETPs.
Several reports and government documents note that many RMG owners do not run their
ETPs regularly, and often run them prior to DoE visits. The government might consider
clarifying the Public Interest Litigation laws to make it easier for citizens living near
factory outfalls to bring cases against companies that do not run ETPs.
Currently, the fines for violation are too small and irregularly imposed, allowing
noncompliant companies to pay the fine as a cost of doing business rather than purchase
and run ETPs. The DoE’s mandate as it stands is not designed to encourage greening
outside of the environmental clearances. Recently, they have been drafting guidelines to
encourage factories to go for a Zero Discharge model for their air and water emissions.
Once the guidelines are finalized, the DoE will request the factories to submit a Zero
Discharge plan on a voluntary basis.
The Ministry of Environment, Forests and Climate Change is in the process of finalizing
an update to the ECR 1997 (Draft Environmental Protection Rules 2017). The update will
replace the ECR 1997. The update contains revised emissions standards.
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Once the draft is adopted, a technical advisory project could address the staffing gap to
increase their capacity to monitor cleaner production targets. A new partnership with the
DoE and the most proactive buyers could open new opportunities for scaling up cleaner
production in the RMG industry.
The papers in this series are a part of a paper for the DFID supported
Economic Dialogue on Green Growth (EDGG) project, implemented by
Adam Smith International.
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The costs of India’s participation in the RCEP
(Source: Nilanjan Ghosh, ORF, January 24, 2019)
The suspense with India’s participation in the proposed 16-member mega-trade deal,
Regional Comprehensive Economic Partnership (RCEP), the first trade bloc that groups
large economies of the developing world in Asia-Pacific, still continues despite many
rounds of negotiations. While it is thought that the RCEP negotiations are on the verge of
conclusion, the Indian government has engaged three consultants -- ICRIER, the Centre
for Regional Trade housed in the Indian Institute of Foreign Trade (IIFT), Delhi, and the
IIM, Bangalore -- to hold stakeholder consultations on India’s strategy in goods, services
and investment negotiations.
Within India, the sentiments with the RCEP are quite divided. The first point of objection
with the RCEP is that India’s trade deficits have always widened with nations after signing
free-trade-agreements (FTAs) with them. The same is true for India’s FTAs with the
ASEAN, Japan, Korea, and Singapore, most of which are RCEP nations. On this note, I
had raised serious concerns earlier in one of my published papers stating that trade deficit
should not be the only lens through which FTAs should be judged. One also needs to look
at the impacts on the participants in the various nodes of the commodity value-chain. The
second point of contention lies with exposing vulnerable sectors to market forces and the
vagaries of competition emerging from global trade.
As far as the RCEP is concerned, there are feelings in certain corners in India, like the
Swadeshi Jagran Manch (SJM), that it will worsen the condition of India’s agriculture and
dairy sectors, which are not in positions to compete with Australia and New Zealand.
On the other hand, there are trade economists and free trade proponents who believe that
the RCEP is beneficial for the Indian economy. In a very compelling argument
in The Hindu Business Line (7 January, 2019), Geethanjali Nataraj and Garima Sahdev
infer that the long-term benefits of joining the bloc far outweigh the short-run costs. The
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authors state, “…if India wants its ‘Make in India’ to become a global success, it must
participate positively to become a part of the Asian value and supply chain which either
begins or ends in India”.
I begin my argument from this point. My contention is: Regional trade agreements like
the RCEP need not always be beneficial from the “Make in India” perspective. From here,
I raise concerns with the RCEP from two other perspectives: impacts on value chain, and
issues of complementarity. I raise these issues notwithstanding the geo-strategic issue of
existence of China in this trading bloc, which I am leaving out for the time being.
My very first concern is that while “Make in India” is definitely the flagship project to
attract foreign investment, this was never conceived of at the cost of domestic industry.
Even after more than quarter of a century of economic reforms, Indian manufacturing are
yet to mature to be competitive enough to face the vagaries of competition brought about
by international trade. This situation prevails also because of a host of unimplemented
reforms in the product and the factor of markets. While the introduction of GST was
thought of to be a major step in this regard by rationalising supply-chains, and removing
the fragmented nature of the markets, multiple rates of GST often cause problems of
compliance across the value-chain of a commodity. On the input side, critical reforms
need to take place in the labour market. Despite low relative labour cost, labour
productivity in India in manufacturing is still one of the lowest in the world, and spatially
fragmented labour laws escalate costs of transaction. Under such circumstances, the
Indian industry is hardly in a position to compete in a level playing ground in a free-trade
region. “Make in India” is meant to create enabling conditions for both domestic and
foreign businesses to thrive. If domestic industry has to thrive, it needs protection as also
the enabling conditions created by factor and product market reforms. Mega-trade deals
like the RCEP may derail the timing and coordination of such plans.
At the same time, it is being continuously argued that the RCEP will facilitate India’s
Micro, Small and Medium Enterprises (MSMEs) to effectively integrate into the regional
value and supply chains.
To a large extent, the opportunity indeed exists, and so are the threats! It is important
that complementarities in trade be looked at while getting into any form of FTA. Whether
this complementarity really exists is a working hypothesis without any solid empirical
analysis or evidence. Rather, things may simply work the other way round. It needs to be
looked at whether the RCEP will really lead to cheaper intermediate goods, or cheaper
final goods. So far, the rise in Indian trade deficit with its FTA partners has occurred due
to cheap imports of final products that have led to an increase in consumer surplus (or
consumer well-being), but adding to the angst of the domestic producers. Cheaper
intermediate goods can rather help in making Indian exports competitive.
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Trade liberalisation of the RCEP partners with respect to services has been a thorny issue
from the Indian perspective. In the cases of FTAs with East and Southeast Asian
economies, beginning with Singapore in 2005 to the last one signed with South Korea in
2011, India has been insisting on capitalising on its pool of 'skilled' labour force to gain
from improved access to employment opportunities in these economies. This has been
expected to come about by increasing the ease of movement of professionals through the
liberalisation of what is called Mode 4 in services trade. To this end, India has been willing
to trade up its remaining tariff policy manoeuvrability in the manufacturing industry (and
even in the agricultural sector). In the context of the RCEP, this again raises a matter of
concern. Whether promoting services at the cost of manufacturing in the trade pact acts
as a boon or a lost opportunity needs a more deliberate cost-benefit analysis.
The literature on international trade claims that for “small” economies (ones that do not
influence the prices of goods and services traded in the global economy) “preferential
trade agreements” (PTA) are not really the best moves for such nations. India, despite its
huge population and increasing income leveles, is a price-taker, rather than “price-maker”
in the global trade. When a country preferentially reduces trade barriers with its partners
in a PTA, it is raising the relative trade barrier against countries that are not members of
the agreement.
On the other hand, the RCEP in the long run goes far beyond trade liberalisation. In its
attempt to harmonise foreign investment rules, intellectual property rights (IPR) laws
and several other laws and standards beyond what has been agreed by developing
countries at the WTO, it takes away an economy’s ability to customise trade policies
according to the needs of specific time periods. This will be another long-term cost that
the Indian economy has to bear.
My treatise is not against India’s signing of the trade deal. One needs to remember that
this will be the first mega-trade deal of such comprehensive nature that India is engaged
with. From that perspective, I intend to raise some cautionary statements so that the costs
of moving to this deal are considered. Therefore, the ToR of the three consultants should
not be confined to merely holding stakeholder consultations. They should place a more
comprehensive report on the benefits and costs at spatial and temporal scales of India’s
participation in the RCEP, including the geo-strategic concerns of China’s existence in the
bloc that I didn’t take up here. Now that bilateral negotiations are being pursued under
the umbrella, India has to find the right equation to extract the maximum benefits from
this mega-trade deal. The challenge is huge, but so are the opportunities, if analysed and
implemented in the right way.
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Illegal low pay ‘rife’ in UK textiles industry, MP warns
(Source: Financial Times, January 24, 2019)
Payment of illegally low wages is “rife” in the UK’s textile industry and goes hand in hand
with a “culture of fear and intimidation”, a senior MP has warned. Mary Creagh, chair of
the Commons environmental audit committee, was speaking after her panel received
evidence from HM Revenue & Customs about its investigations into non-payment of the
national minimum wage to textile workers. The evidence was part of the committee’s
inquiry into the sustainability of the fashion industry, driven partly by Financial Times’
reporting on abuses in factories serving the “fast fashion” sector in Leicester. In a letter
to the committee published on Friday, Janet Alexander, HMRC’s director of Individuals
and Small Business Compliance, said that over the six tax years to 2017-18, her
organisation had started 93 investigations over failure to pay the minimum wage in textile
factories. It had identified arrears totalling £87,158 owed to 126 workers for pay levels
below the minimum wage in 24 of those investigations. Nearly half the arrears identified
— £42,787 — were identified in the 2017-18 tax year alone. The committee said separately
that it had been told 14 investigations into under-payment were still under way. Unofficial
garment factories have sprung up rapidly in the UK, especially in Leicester, in recent years
to service fast-changing demand for cheap clothing. The factories can supply goods faster
to UK retailers than those in Asia that serve most of the world’s clothing needs.
Pressure to cut costs to the absolute minimum has exacerbated the tendency for the
factories to pay workers less than the legal minimum. Ms Creagh said the “Made in the
UK” label should mean workers were paid at least the minimum wage. “It has been 20
years since the introduction of the minimum wage but in our inquiry we heard that
underpayment is rife and goes hand-in-hand with a culture of fear and intimidation in the
UK’s textile industry,” she said. Ms Alexander’s letter added to the “scandalous and
growing evidence” of workers’ being criminally underpaid in the UK, said Ms Creagh.
“This must stop. We need government action to end these 19th-century practices in 21st-
century Britain.” HMRC is one of several government bodies that oversee workplace
abuses. Ian Waterfield, director of operations at the Gangmasters and Labour Abuse
Authority, another of the bodies, recently told the Financial Times the apparel sector was
one of those industries where conditions most concerned his organisation.
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