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

05-11-2019 74.70 (-0.35)

06-11-2018 88.35

06-11-2017 79.50

New York Cotton Futures (Cents/lb) As on 07.11.2019 (Change from

previous day)

Dec 2019 63.64 (-0.17)

Mar 2020 66.11 (+0.23)

May 2020 66.66 (-0.03)

07th November

2019

FM to review state of economy at FSDC meeting on Thursday

Finance ministry now notifying authority for any change in FDI policy

RCEP members will work with India to sort its sensitivities: New Zealand

Trade Minister

Khadi gets separate unique HS code, export to get a boost

Kenya aims to eliminate import of cotton raw materials in next five years

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

Nov 2019 19360 (-50)

Cotton 13090 (+45) Dec 2019 19290 (-90)

Yarn 21095 (+30) Jan 2020 19400 (-140)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- FM to review state of economy at FSDC meeting on Thursday

Finance ministry now notifying authority for any change in FDI policy

RCEP members will work with India to sort its sensitivities: New

Zealand Trade Minister

India may be looking at a dry spell for FTAs if RCEP falls through:

Experts

RCEP pull-out: India right in sticking to its terms and conditions

RCEP: No competition please, this is India

Export and reform: If RCEP failed, look to other trading blocs.

Isolationism is not an option

Govt likely to extend 15th Finance Commision's term by six months

Khadi gets separate unique HS code, export to get a boost

Cotton Corporation starts procuring at MSP

Govt may create a regulator to settle e-commerce disputes: Report

Mudra boost to employment: Beneficiaries of the scheme create 11 mn

jobs

India gained $755 mn in additional exports to US: UNCTAD

------------------------------------------------------------------------------ Legislative leaders of Vietnam, Armenia vow to boost cooperation

Tough times for Bangla apparel sector: BGMEA

Kenya aims to eliminate import of cotton raw materials in next five

years

Sri Lanka turns eyes to Ethiopia's Industrial Parks

Retail trade in Europe speeds up: 2.5% rise in September

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

NATIONAL

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

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

FM to review state of economy at FSDC meeting on Thursday

(Source: Economic Times, Novemeber 06, 2019)

Finance Minister Nirmala Sitharaman will review the state of economy at a meeting of the

Financial Stability and Development Council (FSDC) on Thursday to be attended by

sectoral regulators, including RBI Governor Shaktikanta Das.

The FSDC is the apex body of sectoral regulators, headed by the finance minister.

According to sources, the meeting will take stock of various measures taken by the

government to boost the sagging growth which hit a six-year low of 5 per cent in the first

quarter of the current fiscal.

The meeting will review the current global and domestic economic situation and financial

stability issues, including those concerning banking and NBFCs, sources added. Besides

RBI Governor, Securities and Exchange Board of India chairman Ajay Tyagi, Insurance

Regulatory and Development Authority of India(IRDAI) chairman Subhash Chandra

Khuntia, Insolvency and Bankruptcy Board of India (IBBI) chairman M S Sahoo and

Pension Fund Regulatory and Development Authority Ravi Mittal will attend the meeting.

This would be the second meeting of the FSDC after the Modi 2.0 government assumed

office. The government has announced several short and long-term measures to boost the

economy in three phases between August 23 and September 14. Out of the total 44

measures announced, 16 have been fulfilled while the rest of the announcements are

under consideration by relevant ministries. Further, it said action on one out of three

announcements made for the housing sector has been completed and the other two are

being taken up. According to experts the slowdown is primarily due to moderation in

demand and steps are being taken to infuse liquidity in the financial system to aid loan

growth.

Sources said the FSDC meeting will also be attended by Minister of State for Finance

Anurag Singh Thakur, Finance Secretary Rajiv Kumar, Economic Affairs Secretary Atanu

Chakraborty, Revenue Secretary Ajay Bhushan Pandey and other top officials of the

finance ministry.

Home

Finance ministry now notifying authority for any change in FDI policy

(Source: Deepshikha Sikarwar, Economic Times, November 06, 2019)

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4 CITI-NEWS LETTER

The government has notified a new rules framework for investments through nondebt

instruments making it clear that finance ministry will be the notifying authority for any

change to foreign direct investment policy instead of the Reserve Bank of India.

Four years after the Foreign Exchange Management Act, 1999 (Fema) was amended to

switch control on equity inflows from the central bank to the North Block, the finance

ministry has finally notified Foreign Exchange Management (Non-debt Instruments)

Rules, 2019 that deals with all forms of non-debt investments, including equity, mutual

funds that are dominantly equity oriented, depository receipts issued based on equity

instruments, and immovable property.

“RBI and the finance ministry had reached an agreement after which the rules have been

issued,” said a person privy to the development. The latest set of rules under Fema,

notified on October 17, lists in detail permitted sectors for foreign investment, countries

allowed, and also various entities and instruments covered.

The finance ministry will consult RBI on any changes to the rules in future, people familiar

with the development said. Experts said it needs to be ensured that the consultation

process between RBI and the government does not impede the process timelines.

“Government will have the responsibility of drafting rules for non-debt investments and

RBI shall be responsible for granting approvals in consultation with government,” said

Akash Gupt, partner at PwC. “Further, coherence in approach and policy interpretation

would be required between RBI and government, since one will be responsible for policy

making and the other for monitoring and adjudication.”

THE TRIGGER

The amendment was carried out in the 2015-16 budget, putting the government in charge

of all capital flows after differences widened between the central bank and the finance

ministry over pricing regime governing exits in quasi-equity instruments in the backdrop

of the Tata-DoCoMo case. In this particular case, DoCoMo had sought to exit its joint

venture with Tata Group at predetermined price stated in the contract, which was not

permitted by the policy. Besides, there were instances of delays in notification of changes

in the FDI policy by RBI after issuance of press notes.

“Capital Account Controls is a policy, rather than a regulatory, matter,” the then finance

minister Arun Jaitley had said in his budget speech in 2015. “I, therefore, propose to

amend, through the Finance Bill, Section 6 of Fema to clearly provide that control on

capital flows as equity will be exercised by the government in consultation with the RBI.”

Foreign investment policy is managed by three entities — the finance ministry, RBI and

the Department for Promotion of Industry and Internal Trade

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5 CITI-NEWS LETTER

RBI has been notifying the FDI policy changes under Fema, operationalising it. But now

this would be done by the finance ministry.

Home

RCEP members will work with India to sort its sensitivities: New Zealand

Trade Minister

(Source: Amiti Sen, The Hindu Business Line, November 06, 2019)

New Zealand’s Minister of State for Trade Damien O’Connor has said that his country

would love to see India as part of the Regional Comprehensive Economic Partnership

(RCEP) agreement and all fifteen countries had agreed to work with New Delhi to sort out

its sensitivities before a final agreement is reached.

“We understand sensitivities of India (on RCEP) domestically. All fifteen RCEP countries

are committed to work with India through those (sensitivities) before final agreement can

be reached,” he said talking to the media following an interaction organised by CII on

Wednesday.

India announced on Monday, after the RCEP Leaders Summit in Bangkok, that it had

exited the RCEP agreement being worked out by sixteen countries as its core concerns

were not being addressed. The RCEP includes the ASEAN, India, China, Japan, South

Korea, Australia and New Zealand.

India’s External Affairs Ministry’s statement came as a surprise as the RCEP Leaders joint

statement, endorsed by the leaders of all sixteen countries including Prime Minister

Narendra Modi, stated that other members would continue discussions with India to sort

out its differences. A decision can be taken later based on the results of the talks, it said.

Explaining the statement, Commerce and Industry Minister Piyush Goyal at a press

conference on Tuesday said that while India’s decision to quit RCEP was final at the

moment, India was open to further discussions if its problems are addressed.

O’Connor assured that New Zealand’s dairy industry would not pose a direct challenge to

India’s dairy sector.The proposed opening up of the dairy sector to New Zealand by

lowering/ eliminating tariffs was one of the issues strongly opposed by Indian farmers

and the dairy industry.

“India’s dairy industry is larger than New Zealand’s. We have exported dairy products to

India only to complement Indian dairy sector in times of drought and times when our

products were needed,” he said.

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6 CITI-NEWS LETTER

The biggest challenge to Indian industry and farmers from the RCEP pact comes from

China which runs a trade surplus of over $ 50 billion with India annually. India wants

adequate rules of origin and safeguard duties in place to protect the domestic sector from

import surges.

The 15 RCEP countries (not counting India) have agreed to sign the pact sometime next

year. All sixteen members together account for 39 per cent of global GDP, 30 per cent of

global trade, 26 per cent of global foreign direct investment flows and 45 per cent of the

total population.

Home

India may be looking at a dry spell for FTAs if RCEP falls through: Experts

(Source: Subhayan Chakraborty, Business Standard, November 07, 2019)

Talks with major economies like the EU and US, among others, on trade and investment

deals are stuck on similar issues

The government’s strategy to secure bilateral deals with the United States, the European

Union (EU) and other economies may be a difficult exercise if talks with the Regional

Comprehensive Economic Partnership (RCEP) fall through, say experts.

Commerce and Industry Minister Piyush Goyal has batted for a bilateral deal with the US,

while also stressing that India is keen to restart free-trade agreement (FTA) talks with the

EU. But with institutional reform being a slow process and domestic industry unwilling

to adjust to foreign players in the domestic market, India may be looking at a long dry

spell for these FTAs, experts contend.

“The RCEP drama may lead to many déjà vu experiences for the government if the

domestic scenario doesn’t change drastically, as the same issues have and will continue

to creep up,” trade expert and Jawaharlal Nehru University professor Biswajit Dhar, said.

Even if domestic industry is brought on board, the government has to deal with the

unenviable task of deciding which exports can be leveraged to boost outbound trade with

so few sectors commanding an export advantage, he added.

Case in point, traditionally strong export sectors such as textiles, gems and jewellery and

leather continue to face sectoral challenges and low competitiveness because of

competition from emerging economies such as Vietnam and Bangladesh, he added.

A full FTA — one of the key demands of the Donald Trump administration — has seen

Washington DC pushing for lower duties for high-value US goods such as electronics,

wine and motorcycles. It also wants fewer restrictions on American medical devices and

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7 CITI-NEWS LETTER

solar panels. The talks with the EU on a trade and investment pact are also stuck on

similar issues.

Bilateral talks with trade partners such as China have also hit roadblocks on Beijing’s

demand to open up India’s lucrative consumer market.

Slow pace

The government has clarified that India will remain out of the RCEP pact for now, until it

gets better offers from other participating nations that safeguards its national interest.

This includes protection for domestic industry from import shocks, and gradual tariff

reduction. But experts point out that foreign partners have pushed for tariff reduction

aggressively in all current trade negotiations. On the other hand, in all its engagements

India has pushed for more market access for a narrow category of products.

In the first term of the Modi government, New Delhi has initiated FTA talks with only a

single economy, the small nation of Georgia. Situated in the Caucasus region, the nation

had a total trade of only $132 million in 2018-19. Even then, discussions had stalled more

than three years since the beginning.

On the other hand, export promotion councils as well as industry bodies like Swadeshi

Jagran Manch have repeatedly objected to new FTA engagements arguing that existing

pacts haven’t helped India.

They have pointed to a NITI Aayog report which showed that the utilization rate of current

trade deals by Indian exporters remain very low (between 5 per cent and 25 per cent). As

a result, the trade deficit with the proposed RCEP nations has increased from $7 billion

in 2004 to $78 billion in 2014.

In July, the Finance Ministry started assessing the shortcomings of each existing FTA

deal, which have led to revenue being foregone due to spiraling trade deficit. India’s major

FTAs constituted only 11 per cent of the total trade and up to 23 per cent of trade deficit.

Good or bad

But this view has been countered by experts.

“The current narrative that FTAs are inherently

disadvantageous for India’s exports is false. The

fact remains that India’s trade (and exports)

have gone up with every FTA partner, albeit at a

slower pace than imports,” Sachin Chaturvedi,

director general at the Research and Information

System for Developing Countries (RIS), a foreign

trade think tank, said.

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8 CITI-NEWS LETTER

The RCEP experience may lead to lower appetite for trade talks, he said.

“Negotiations don’t only focus on tariff reduction. They also talk about market access, non

tariff barriers and standard, all of which are guided by institutions which need to back

reforms in the domestic space as well,” Chaturvedi added.

The question remains whether India can effectively counter the might of Chinese exports

independently or by being a part of a bloc like RCEP, he stressed.

Home

RCEP pull-out: India right in sticking to its terms and conditions

(Source: VK Saraswat, Prachi Priya & Aniruddha Ghosh, Financial Express, November 07, 2019)

Citing “significant outstanding issues, which remain unresolved”, India decided to walk

out of the proposed Regional Comprehensive Economic Partnership (RCEP) trade

agreement. Had India joined, the trade bloc, comprising ASEAN, Australia, China, Japan,

Korea and New Zealand, would have accounted for 25% of global GDP, 30% of global

trade, 26% of FDI flows and 45% of the world population. RCEP countries account for

almost 27% of India’s total trade. Exports to RCEP account for about 15% of India’s total

exports, and imports from RCEP comprise 35% of India’s total imports. Given, the

magnitude of numbers involved, India’s decision to not be a part of this deal is brave and

warranted to a great extent. The trade deal has been under negotiation for the last eight

years.

Reciprocity is the key to FTAs. The biggest driver for trading partner countries to sign an

FTA with India is access to a big and booming consumer market. So, it was quite logical

for India to assess returns from the deal. Many pain points compelled the country to walk

out of the China-led trade deal, and rightly so.

First, to start with India’s trade deficit with the RCEP bloc of over $100 billion is almost

64% of its total trade deficit, of which China alone accounts for over 60%. China’s

manufacturing overcapacity and dumping of goods has compelled countries across the

world to take action against its imports. As a result, China is the recipient of the highest

number of ADD measures in the world with almost a 1,000 ADD (Anti-Dumping Duty)

measures against it since 1995, this amounts to almost a quarter of all ADD measures

globally. China’s penetration in the Indian market dominates both in terms of value-

added import items as well as labour-intensive industry imports. Overall, India has

almost 20% of its non-oil imports from China. Almost 60% of India’s electric machinery

imports, 36% of machinery and equipment imports, and 37% of organic chemical imports

are from China. Due to its massive overcapacity and financial and non-financial

government support, China is able to create a significant edge over its trading partners.

Second, appropriate framework against circumvention of rules of origin is still lacking

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9 CITI-NEWS LETTER

when it comes to trade deals. Under invoicing of imported goods to show higher value

addition, re-routing through other FTA partner countries to gain preferential access is

quite common. India’s demand for stricter value addition norms in the RCEP received a

lot of backlash during negotiations. Lax rules of origin norms would have led to a surge

in imports from various trading partners into India. India’s concerns in this regard were

not addressed by member nations.

Third, India’s concerns on non-tariff barriers were also not delved into during the

negotiations. NTBs like complex product certification process, labelling standards,

customs clearance, pre-shipment inspection and import licensing have hindered India’s

access to other markets. Dealing with NTBs is costly and negates the impact of duty

reduction under FTAs. This happens, especially with respect to China, as market access

in the country is restricted despite low duty rates. Despite a promised 92% preferential

access by China into its market under RCEP, India wouldn’t have really gained access into

it.

Fourth, as per media reports there have been various other concerns such as lack of

appropriate safeguard clauses in case of impact on the domestic market, insignificant

attention to the services chapter and reluctance of trading partners to move the base year

for MFN from 2014 to a recent one so that recent duty changes could be incorporated.

Lastly, India’s not-so-remarkable performance with respect to its previously signed FTAs

has also been an eye opener for the policymakers. A NITI Aayog note on Free Trade

Agreements and Their Costs, 2018 details that the combined trade deficit with FTA

partners like ASEAN, Japan and South Korea has doubled in the last eight years, while

the quality of trade has also deteriorated. A case in point is the India-ASEAN FTA where

India’s trade balance has worsened (deficit increased or surplus reduced) for 13 out of 21

sectors including value-added sectors like—chemicals and allied, plastics and rubber,

minerals, leather, textiles, gems and jewellery, metals, vehicles, medical instruments and

miscellaneous manufactured items. These account for approximately 75% of India’s

exports to ASEAN.The paper concludes that joining the RCEP could be disastrous for

India.

Thus, in terms of reciprocity in an FTA, Indian policymakers have rightly assessed that

the Indian manufacturing sector will not be able to gain reciprocal access in other

markets, specially China due to significant overcapacity, use of NTBs, and other financial

and non-financial support available to its domestic industry. As for other RCEP trading

partner countries India already has FTAs either in force or under negotiation. However,

to be clear, it wasn’t the presence of China that led to India’s walkout from the deal, but

the lack of safeguards and reciprocity built in RCEP as well as the current state of the

manufacturing industry in the country.

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10 CITI-NEWS LETTER

Despite India’s commitment to free trade and a more connected world, the decision is

right. For the time being, we do miss out on being part of this mega trade block, but the

costs of being part of such an agreement could potentially have been disastrous. This also

gives us a chance now to concentrate our energies and synergies on propping up the

economy. This is the right time to set things in motion with a New Industrial Policy that

creates the necessary incentives for MSMEs to be an active part of this process. Going

forward, these are necessary complements for ensuring maximum leverage out of our

trade deals like RCEP. The doors to trade deals are still open and a New India will be a

part of it, but on its own terms and conditions.

Saraswat is member, NITI Aayog, Priya is a Mumbai-based economist and Ghosh is a

PhD candidate, Johns Hopkins University, USA.

Home

RCEP: No competition please, this is India

(Source: Amitendu Palit, Financial Express, November 07, 2019)

The vision of making India a global manufacturing hub depends on getting access to

global and regional production networks. For that, it needs FTAs like RCEP

India’s backing off from RCEP is not surprising. What is surprising is that it took it so

long to do so. As a reluctant participator, India hardly had a constructive strategy for the

talks. For several years, and most of the early rounds, it relied on the old strategy of

lingering the process. But, as other countries started piling up pressure for concluding

talks from about a couple of years ago, India realised it was being pushed into a corner.

The deal was to be concluded in the last ASEAN Summit itself, in 2018. But, India’s

general election, as well as those in other RCEP members like Indonesia, Thailand, and

Australia, came to India’s rescue. The group decided to defer the conclusion to this year’s

ASEAN Summit at Bangkok.

It is only during the last one year or so that India got serious about RCEP. Elaborate

consultations took place in the past few months, along with extensive engagements with

other members. The deal, though, was already at a substantially advanced stage. Other

countries were not sympathetic to reopening discussions on India’s ‘core’ demands:

bringing up the base year for cutting tariffs to 2019 from 2014, automatic safeguard

trigger for stopping surge in imports, and the insistence on greater market access for its

professionals. At the end, India was left with little choice but to back out.

India’s opportunity to return to RCEP remains. The joint statement of RCEP ministers

mentions other members working with India for resolving outstanding issues. But, this

would require India being realistic about its ‘own terms,’ and ‘core demands’. It has been

excessively reliant on its large economic size, and the hope that size matters so much that

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11 CITI-NEWS LETTER

it can demand and obtain the impossible. It must note that RCEP is a multi-country,

regional trade agreement, where interests of individual members can be accommodated

only up to certain extents. It must also note that its paranoia over Chinese imports is not

shared by other members. The rest are unlikely to be overtly sympathetic to India’s

insistence on special protection against Chinese imports.

Why is the Indian industry, and other stakeholders, so defensive on RCEP? It is

interesting that the same defensiveness is hardly visible with respect to efforts of an FTA

with the US. The answer is obvious. RCEP includes Southeast Asia, China, Japan, and

Korea—countries that are miles ahead of Indian producers on competitiveness in

manufacturing. The gaps are so much that even with high customs duties, Indian

consumers, in many cases, prefer imports from these countries as opposed to domestic

substitutes. The same lack of competitiveness prevents Indian exporters from penetrating

deep in Asia-Pacific markets in spite of zero or low tariffs. Exports from Vietnam,

Philippines, and Malaysia would be more competitive in larger RCEP consumer markets

like Japan, Australia, and Korea, compared with those from India.

The competitiveness problem doesn’t arise for the US. Indian industry is confident of

diving deep in the US market. The post-GSP scenario might be different though, since

other GSP-receiving competitors from Asia and Africa are getting their act together by

reducing business costs. The US imports also don’t threaten Indian manufacturers, except

in high-end pharma, and automobiles. The shock, though, will be in dairy and other

agricultural products. If Indian dairy producers prefer being hit by American milk

imports as opposed to those from Australia and New Zealand, then one needs to see what

logic supports such preference!

The overarching sentiment in pulling out of RCEP is Indian industry’s fear of imports.

But, will a longer phase-out period, and painfully slower cut in tariffs—as India is

demanding—get rid of this fear? It won’t. For most of Indian industry, the urge to become

competitive doesn’t exist as long as it is protected. Growth of exports requires being

competitive and matching up to better quality standards. From an industry perspective,

rather than export, it is better to focus on the protected domestic market, where the

miserable Indian consumer will have to accept whatever is cheaply available, regardless

of quality and price.

The vision of making India a global manufacturing hub depends on getting access to

global and regional production networks. For that, it needs FTAs like RCEP. The logic of

engaging in such FTAs only after domestic industry is competitive is fallacious. It will

never be competitive unless exposed to competition, which it won’t be.

RCEP members might concede more to India if they really value India’s economic and

geo-strategic might. There is talk of India pursuing bilateral FTAs with some RCEP

members like Australia. Unfortunately, rubbing shoulders on the security platform of

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12 CITI-NEWS LETTER

Quad won’t guarantee special visas for Indian professionals through a bilateral FTA with

Australia. The dairy sector would need to be stripped of protection, as would more of

agriculture. That, though, might be more than a handful to handle. Getting shallow FTAs,

as India has done in the past with Bhutan and Sri Lanka on geopolitical grounds, is very

different from working out deep, modern, comprehensive FTAs with advanced

economies. Even if India gets FTAs with the US and the EU, getting higher shares of these

markets would mean competing with beneficiaries of deep non-reciprocal preferences

like EBA. Competitiveness would matter there—a parameter where Indian producers

would fall short.

The commerce minister’s recent lament on FTAs not needing to create a fear psychosis is

unlikely to serve its purpose. However supportive the government is, industry is unlikely

to act towards becoming more competitive. Once protected, always protected. No wonder,

the relief is so palpable after the pullout from RCEP!

The author is senior research fellow and research lead, NUS

Home

Export and reform: If RCEP failed, look to other trading blocs. Isolationism

is not an option

(Source: Times of India, November 07, 2019)

India’s long negotiations over Regional Comprehensive Economic Partnership (RCEP)

may be over for the moment. But the search for a fruitful conclusion to other long standing

negotiations such as the proposed free trade agreement with EU must continue.

Isolationism is not an option. From a practical standpoint, it’s not realistic to turn inwards

in the search for efficiency before opening up again. Being plugged into the global

economy through trade agreements and enhancing domestic competitiveness are

interrelated. Therefore, government must pursue domestic reforms simultaneously with

negotiations to expand India’s basket of trade agreements.

India has trade agreements of some sort with about 54 countries. This is the global norm.

Of the 164 WTO members, most are members of one regional trade agreement or the

other. These trade agreements cover more than half of international trade. Given this

backdrop, India’s decision making should be guided by a major feature of international

trade: regional trade agreements can lead to trade diversion. To illustrate, even if India is

the most efficient exporter of a certain kind of apparel, a new regional trade agreement

which excludes India can lead to a diversion of our exports to a less efficient producer.

Consequently, sitting on the sidelines is not an option.

Thus, if Indian manufacturing is weak compared to China and east Asian countries, there

is greater economic complementarity with the EU, or the US, or Australia – and this

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13 CITI-NEWS LETTER

deserves to be explored. Moreover there is greater strategic complementarity with the

latter than with China, and better trade ties could cement this. For example, rules and

decision making in China are opaque and it tends to offer market access based on strategic

considerations. As long as it continues to consider India a systemic rival in Asia, it will

never offer unimpeded access to Indian goods and services.

However, the bottomline is that India needs to shore up its sagging competitiveness

through domestic reform, which has been neglected for far too long. Prime Minister

Narendra Modi may have acted in India’s immediate interest by refraining from joining

RCEP now. But he should enhance India’s long term economic strength by unshackling

rigid markets and simultaneously accelerate negotiation of other trade agreements. With

a clear majority in Parliament, nothing prevents the government from taking decisions

that are in India’s medium- and long-term economic interest.

Home

Govt likely to extend 15th Finance Commision's term by six months

(Source: Arup Roychoudhury, Business Standard, November 07, 2019)

Officials say there have been discussions on whether the treatment given to J&K will be

unfair to Delhi and Puducherry

The term of the Fifteenth Finance Commission (15th FC) could be extended by around six

months, primarily due to uncertainty regarding how to treat any devolution of resources

to the newly formed union territories of Jammu and Kashmir (J&K) and Ladakh, Business

Standard has learnt. This implies that the 15th FC could submit an interim report before

the Union Budget 2020-21 to enable Finance Minister Nirmala Sitharaman and her

officials to prepare the Budget.

The final report could be submitted at a later date. If the Union Cabinet, headed by Prime

Minister Narendra Modi, approves the ...

Home

Khadi gets separate unique HS code, export to get a boost

(Source: Press Information Bureau. November 06, 2019)

Khadi has once again come out of its customary veil, marking its presence in the exclusive

HS code bracket, issued by the central government on 4th Nov’19 to categorize its products

in export. In a long awaited move to make export of Khadi, exclusively categorized from

the general league of textile products, the ministry of commerce and industries has

allocated separate HS code for this signature fabric of India this week.

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14 CITI-NEWS LETTER

Khadi and Village Industries Commission (KVIC) Chairman Vinai Kumar Saxena said

that this decision of government will open a new chapter in the field of Khadi export.

Earlier, Khadi did not have its exclusive HS code. As a result, all the data regarding export

of this signature fabric used to come as a normal fabric under the textile head. Now, we

will be able to keep a constant eye not only on our export figures, but it will also help us

in planning our export strategies.

HS Stands for Harmonized System and it is a six digit identification code. It was

developed by the WCO (World Customs Organization) and custom officers use HS Code

to clear every commodity that enters or crosses any international border.

Khadi and Village Industries products are eco-friendly and natural, and are in great

demand in the International Markets. Recognizing its potential to generate exports and

its eco-friendly importance, the Ministry of Commerce had accorded deemed Export

Promotional Council Status (EPCS) to KVIC in 2006, to boost the export of Khadi

products. However in the absence of separate HS code, the export of Khadi products was

difficult to categorize and calculate.

The KVIC Chairman added that getting exclusive HS code would have remained a mirage

for KVIC, had Union MSME Minister Shri Nitin Gadkari, Union Commerce Minister Shri

Piyush Goyal and Union Finance Minister Smt Nirmala Sitaraman not taken personal

interest in it.

Home

Cotton Corporation starts procuring at MSP

(Source: M Soundariya Preetha, The Hindu, November 05, 2019)

Farmers to get ₹5,450-₹5,550 a quintal

The Cotton Corporation of India (CCI) has started procuring cotton at minimum support

price (MSP) in Punjab, Rajasthan, Haryana and Gujarat.

In Punjab and Haryana, the arrivals have started early this season (October 2019 to

September 2020).

The CCI had always been present in all the four States in the past too. But farmers got

higher market prices and were not offering the cotton to the CCI.

Farmers were offering the cotton now after nearly four years in Punjab and Haryana

which meant they were not getting good market prices now.

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15 CITI-NEWS LETTER

In Rajasthan, too, the CCI did not have MSP operations for the last couple of years, says

P. Alli Rani, CMD, CCI.

The MSP ranges between ₹5,450 and ₹5,550 per quintal and the market price in many

places is lower than that, she said.

“This is just the beginning of the season and rains are continuing in several areas. Farmers

are expected to bring higher volumes of cotton to the market only after the rains stop. We

have purchased just 1% of the arrival, which is estimated to be approximately 12 lakh

bales. We cannot say now how the prices will be as the arrivals increase,” she said.

The CCI has operations in more than 100 centres in Punjab, Haryana, Rajasthan, and

Gujarat. But it is not buying at MSP at all the centres.

Last cotton season, which ended on September 30, the CCI had purchased nearly 10 lakh

bales at MSP. Its total purchase was 10.7 lakh bales and had sold two lakh bales. “We have

gone in for value- based pricing and the quality of the cotton stock with us is high,” she

said.

Home

Govt may create a regulator to settle e-commerce disputes: Report

(Source: Shruti Srivastava, Bloomberg, November 07, 2019)

Modi govt is under pressure from small traders, a traditional support base for the ruling

BJP, to act against the big online retailers

India is examining the feasibility of setting up a regulatory authority to settle disputes

related to e-commerce, a top government official said, amid a raging battle between big

online retailers and mom-and-pop stores.

The proposal being considered comes after small

traders approached the government with

allegations of predatory pricing and deep

discounting by Amazon.com Inc.

and Walmart Inc. They allege that the U.S. giants

are pricing them out of the market.

“We are examining the need for a regulator to

look into e-commerce issues once the policy is implemented,” Guruprasad Mohapatra,

secretary of the Department for Promotion of Industry and Internal Trade, told

Bloomberg News in an interview in New Delhi. “We plan to implement the policy within

this financial year.”

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16 CITI-NEWS LETTER

Prime Minister Narendra Modi’s administration is under pressure from small traders, a

traditional support base for the ruling Bharatiya Janata Party, to act against the big online

retailers. In their defense, online retailers say e-commerce has the potential to create

millions of jobs in India and give opportunities to smaller businesses.

Data Protection, Privacy

The policy will also address with use of data generated by the retailers and its storage on

servers in India, Mohapatra said.

The new policy is in the works for over a year now and has become a contentious issue in

trade-talks between the U.S. and India. In the past too, online retailers have been on the

receiving end when the South Asian nation implemented new rules that prohibited

exclusive product offerings and deep discounts on them.

U.S. secretary of commerce Wilbur Ross, during his visit early last month said India

needed to balance the interests of small retailers and companies operating in the sector.

The Confederation of All India Traders, a supporter of the ruling party, has been seeking

tough laws for e-commerce operators in the country in the new policy. It has been

spearheading the move for a regulator and is canvassing for heavy penalties for violations.

Home

Mudra boost to employment: Beneficiaries of the scheme create 11 mn jobs

(Source: Somesh Jha, Business Standard, November 06, 2019)

After taking benefit of the scheme, jobs increased by around 11 mn in these establishments

Loans availed through the Pradhan Mantri Mudra Yojana (PMMY), also known as Mudra

loans, led to a 28 per cent rise in jobs generated by establishments which had taken

benefit of the scheme, according to an official survey conducted by the government.

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17 CITI-NEWS LETTER

The report on PM Mudra Yojana, prepared by the Labour

Bureau under the Ministry of Labour and Employment,

showed that around 39.3 million people were employed

in establishments prior to availing Mudra loans, which

increased to 50.4 million after these took benefit of the

scheme.

The PMMY was launched in April 2015 to give unsecured

loans of up to Rs 10 lakh, with the objective of boosting

self-employment. As a result, a total of 11.2 million new

jobs, 55 per cent of which accounted for self-employment,

were created through Mudra loans between 2015 and

2018, the survey report showed.

Mudra loans led to the creation of 5.1 million new entrepreneurs — much below the

government’s estimates.

Prime Minister Narendra Modi had said in Parliament in February that 42.5 million new

entrepreneurs availed Mudra loans leading to job creation.

The labour ministry had constituted an expert committee, led by principal labour and

employment advisor B N Nanda, to help design and conduct a survey on employment

generation in all non-farm economic activities under PMMY. The report, which has been

approved by Labour and Employment Minister Santosh Kumar Gangwar and will be

made public shortly, surveyed around 94,000 beneficiaries between April and November

2018.

According to sources, the government had withheld the release of the report, which was

slated to be made public before the Lok Sabha election results, as the results of the survey

were “below expectations.” The government is set to release the survey reports after

“thorough re-validation,” the source said.

The report has thrown some important trends related to Mudra loans. Only one-fifth of

the beneficiaries (20.6 per cent) who took Mudra loans utilised the money towards setting

up a new establishment and the remaining used it to expand their existing businesses.

Significantly, 89 per cent of beneficiaries found Mudra loans to be sufficient for

expanding their business or setting up a new unit and the remaining 11 per cent had to

avail loans from other sources, as per the survey report. Out of the people who found

Mudra loans to be insufficient for their business, a majority of them (around 52 per cent)

took additional loans “for the same economic activity” from their relatives.

Home

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18 CITI-NEWS LETTER

India gained $755 mn in additional exports to US: UNCTAD

(Source: Millenium Post, November 06, 2019)

United Nations: India gained about $755 million in additional exports, mainly of

chemicals, metals and ore, to the US in the first half of 2019 due to the trade diversion

effects of Washington's tariff war with China, a study by the UN trade and investment

body has said.

The study named 'Trade and Trade Diversion Effects of United States Tariffs on China'

shows that the ongoing US-China trade war has resulted in a sharp decline in bilateral

trade, higher prices for consumers and trade diversion effects - increased imports from

countries not directly involved in the trade war.

The study puts the trade diversion effects of the US-China tariff war for the first half of

2019 at about $21 billion, implying that the amount of net trade losses corresponds to

about $14 billion.

The US tariffs on China have made other players more competitive in the US market and

led to a trade diversion effect. These trade diversion effects have brought substantial

benefits for Taiwan (province of China), Mexico, and the European Union.

"Trade diversion benefits to Korea, Canada and India were smaller but still substantial,

ranging from $0.9 billion to $1.5 billion," it said. The remainder of the benefits were

largely to the advantage of other South East Asian countries.

The US tariffs on China resulted in India gaining $755 million in additional exports to the

US in the first half of 2019 by selling more chemicals ($243 million), metals and ore

(USD181 million), electrical machinery ($83 million) and various machinery ($68

million) as well as increased exports in areas such as agri-food, furniture, office

machinery, precision instruments, textiles and apparel and transport equipment,

UNCTAD said.

While it does not consider the impact of Chinese tariffs on US imports, the study indicates

that qualitative results are most likely to be analogous: higher prices for Chinese

consumers, losses for US exporters and trade gains for other countries.

Of the $35 billion Chinese export losses in the US market, about $21 billion (or 62 per

cent) was diverted to other countries, while the remainder of USD14 billion was either

lost or captured by the US producers.

The study found that tariffs imposed by the United States on China are economically

hurting both countries and that consumers in the US are bearing the heaviest brunt of

Washington's tariffs on Beijing, as their associated costs have largely been passed down

to them and importing firms in the form of higher prices.

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19 CITI-NEWS LETTER

However, the study also finds that Chinese firms have recently started absorbing part of

the costs of the tariffs by reducing the prices of their exports.

"The results of the study serve as a global warning. A lose-lose trade war is not only

harming the main contenders, it also compromises the stability of the global economy and

future growth," UNCTAD's director of international trade and commodities Pamela Coke

Hamilton said.

"We hope a potential trade agreement between the US and China can de-escalate trade

tensions."

The analysis shows that US tariffs caused a 25 per cent export loss, inflicting a $35 billion

blow to Chinese exports in the US market for tariffed goods in the first half of 2019. This

figure also shows the competitiveness of Chinese firms which, despite the substantial

tariffs, maintained 75 per cent of their exports to the US.

The office machinery and communication equipment sectors were hit the hardest,

suffering a $15 billion reduction of US imports from China as trade in tariffed goods in

those sectors fell by an average of 55 per cent.

Though the study does not examine the impact of the most recent phase of the trade war,

it warns that the escalation in summer of 2019 is likely to have added to the existing losses,

UNCTAD said. "US consumers are paying for the tariffs in terms of higher prices," said

Alessandro Nicita, an economist at UNCTAD. "Not only final consumers like us, but

importers of intermediate products firms which import parts and components from

China. "Since mid-2018, the US and China have been locked in a trade confrontation that

has resulted in several rounds of retaliatory tariffs. Over the course of 2018, the US

administration started implementing a series of trade measures to curtail imports, first

targeting specific products (steel, aluminum, solar panels and washing machines) and

then specifically targeting imports from China.

Home

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20 CITI-NEWS LETTER

GLOBAL

Legislative leaders of Vietnam, Armenia vow to boost cooperation

(Source: Nhan Dhan Online, November 06, 2019)

Vice Chairwoman of the National Assembly Tong Thi Phong and her Armenian counterpart

Vahe Enfiajyan agreed that the two countries should bolster collaboration through party,

state, parliamentary, business and people-to-people exchange channels.

The two reached the consensus during their talks in Hanoi on November 5 on the occasion

of a working visit by the Vice President of the Armenian National Assembly and Chairman

of the Armenia-Vietnam Parliamentary Friendship Group.

Phong expressed her delight over the thriving political relations between the two

countries, as seen in their close coordination at multilateral forums.

She recalled that during an official visit to Vietnam in July this year, Armenian Prime

Minister Nikol Pashinyan and Vietnam’s NA Chairwoman Nguyen Thi Kim Ngan had

shared the determination to develop the two countries’ relations in a more effective,

practical and sustainable fashion in various sectors.

Phong took the occasion to thank the Armenian State and people for their whole-hearted

support for Vietnam during the cause of national liberation in the past and construction

and development nowadays. She described it as a valuable asset and a solid foundation

for the cooperative ties between the two countries.

Regarding economy-trade cooperation, Phong said both sides need to take advantage of

tariff incentives in the Free Trade Agreement between Vietnam and the Eurasian

Economic Union so as to increase bilateral trade.

Vietnam has strengths to export garment and textiles, telephones, coffee, farm produce

and processed food, among others, to Armenia, and also wants to import more from the

South Caucasus country, she added.

She stressed that the Vietnamese National Assembly always supports, and create

favourable conditions for Armenian enterprises to branch out their business in Vietnam,

and hopes the Armenian side will enhance trade promotion activities to connect

businesses of both nations.

Vahe Enfiajyan, for his part, believed that his visit to Vietnam will make contributions to

enhancing the traditional friendship and all-round cooperation between the two

legislative bodies, states and peoples.

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21 CITI-NEWS LETTER

He wished that both National Assemblies will enhance the exchange of visits to share

legislative experience and inform each other of their parliamentary activities in the

coming time.

Home

Tough times for Bangla apparel sector: BGMEA

(Source: Fibre2Fashion, November 06, 2019)

Fifty-nine garment factories closed and 25,900 workers lost their jobs in the last seven

months, according to Bangladesh Garment Manufacturers and Exporters Association

(BGMEA) president Rubana Huq, who said most of these were small and medium

enterprises that failed to strictly maintain compliance strictly and pay their workers under

the new wage structure.

Bangladesh’s apparel export has declined in recent months whereas its competitors have

seen a rise in the field, she said.

In the first quarter of the current fiscal, garment export from Bangladesh dropped 1.64

per cent year-on-year to $8.05 billion when earnings from the sector fell 11.52 per cent

short of the quarter’s target of $9.10 billion.

On the other hand, garment shipment from Vietnam increased by 10.54 per cent between

July and September. It was 2.2 per cent for India and 4.74 per cent for Pakistan.

“The inflow of investment in the garment sector is also slow both in terms of new

entrepreneurship and expansion as the buyers are not paying good prices,” Rubana told

journalists.

Buyers are now trying to cash in on the presence of an unhealthy price competition among

the local garment makers and less production of value-added items in Bangladesh, Bangla

media reports quoted her as saying.

“We think the sector will continue to show negative growth in the coming months. At the

end of this fiscal year, we may lose our second position to Vietnam in the global apparel

market, if we cannot turn around soon from this declining trend,” she said.

Poor product diversification, rising online businesses, closure of retail outlets in the

western world, and a 1.2 per cent fall in global apparel consumption as predicted by the

World Trade Organisation (WTO) are primarily responsible for the declining trend in

Bangladesh, Rubana said.

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22 CITI-NEWS LETTER

Moreover, Bangladesh is more dependent on cotton fibre whereas the demand for the

garment items made from the man-made fibre is increasing worldwide.

The BGMEA chief said small and medium-sized factories are getting closed due to a lack

of assistance from banks.

BGMEA’s analysis showed that garment export declined 17.68 per cent year-on-year to

$572 million in the first quarter while prices increased only by 2.54 per cent.

On the US-China trade war, Rubana said Bangladesh is yet to benefit from the global

dispute, while others are using it on the back of their diversified products. On the other

hand, Bangladesh is losing its basic garment business and Vietnam, Myanmar,

and Ethiopia are getting those work orders now.

BGMEA has submitted a set of proposals to the Bangladesh Bank for the revival of the

garment sector, she added.

The BGMEA demanded the government devalue the local currency by Tk 2,

implementation of which will cost the country nearly Tk 1,850 crore.

It also called for 1 per cent incentive on exports with immediate effect, retrospective effect

of 0.25 per cent source tax from July, doubling the loan rescheduling period for the

existing 133 sick garment factories, and fund allocation for modernisation and tech

upgrade of factories.

The association will soon meet with the government high-ups to place its demands,

Rubana said.

Home

Kenya aims to eliminate import of cotton raw materials in next five years

(Source: Shi Yinglun, Xinhua, November 06, 2019)

Kenya plans to revive the cotton industry in order to boost the overall performance of the

textile sector, aiming to eliminate the import of cotton raw materials in the next five years,

an official said on Wednesday.

Rajeev Arora, cotton, textile and apparel value chain advisor to the Cabinet Secretary of

the Ministry of Industry, Trade and Cooperatives, said that farmers used to produce over

30,000 tons of cotton in the 1980s but production has declined to approximately 7,500

tons currently.

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23 CITI-NEWS LETTER

"We hope to increase cotton production to 10,000 tons by the end of 2020, through

increasing area under cultivation," Arora said on the sidelines of the launch of the Kenya

Investment Policy.

The key driver of reducing cotton output is the increasing cost of production that has

made the cash crop to become unprofitable.

Arora said the government plans to leverage the cooperative model to revive the cotton

industry and create additional jobs for the youth. "We have a pilot project in the coastal

county of Kwale where farmers have formed a cooperative, which we hope to replicate to

22 counties across the country," said Arora.

He said that farmers will be provided with certified seeds to ensure they achieve optimum

yields.

Arora said that Kenya is keen to use locally produced cotton to supply textile factories that

export most of their products to foreign markets and the government aims to eliminate

import of cotton raw materials in the next five years.

"Kenya loses about 150 billion shillings (1.5 billion U.S. dollars) annually in lost value

addition opportunities due to over-reliance on imports of intermediate cotton products

that are converted into finished textile products," said Arora.

Home

Sri Lanka turns eyes to Ethiopia's Industrial Parks

(Source: Solomon Aynishet, Walta, November 06, 2019)

In his exclusive interview with Walta TV, Sri Lanka’s Ambassador to Ethiopia, Sumith

Dassanayake, said that Sri Lanka is already participating in Hawassa Industrial Park in

apparel textile industries.

He noted that Sri Lanka is keen to build strong relations with many nations, and Ethiopia

comes in the forefront. At present, over 800 Sri Lankans are working in Ethiopia.

Issabella and Hydramani Sri Lankan companies have established their operations in

Hawassa Industrial Park in textile sector.

Currently, Sri Lanka’s textile companies have created job opportunities for 4,000

Ethiopians. "This cordial relation of Sri Lanka and Ethiopia has now become more

advanced in political and economic cooperations symbiotically," he added.

According to him, Sri Lanka has comprehensive experiences in textile, agro-processing,

tea production and tourism industries; in this regard, he has planned to arrange a visit to

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24 CITI-NEWS LETTER

Ethiopian delegates to Sri Lanaka so that they can draw lessons and bear fruits from these

sectors as Ethiopia has untapped potential.

Ambassador Sumith has called up on Africans and others to visit and enjoy in Sri Lanka

and in turn use the possible and favorable opportunities that Ethiopia has offered to

investors.

The Embassy of Sri Lanka in Addis Ababa held its first ever Mobile Consular Service for

about 400 Sri Lankan community members living and working in Hawassa to create

conducive, successful atmosphere in Ethiopia and make life easier during their time in

Ethiopia.

The 2019 Nobel Peace Prize that Prime Minister Abiy Ahmed won is a huge boost to

contribute to consolidate peace initiatives in the African continent, according to

Ambassador Sumith Dassanayake. The prize is for Ethiopians, Africans and the entire

peace devotees of the world.

The award is a recognition to the Prime Minister’s commitment to maintain peace and

sustain prosperity in the region. It is also a prize of trust and hope to the outstanding role

he played in ending decades of Ethio-Eritrea border conflict and efforts to realize

multifaceted regional cooperation, he added.

Sri Lanka is to conduct presidential election on 16th November 2019; meanwhile, Ethiopia

is set to conduct national election in 2020, this is a coincidence that the two countries are

at a great ambition to realize and experience democracy. He wished a successful election

for both countries.

He is also thankful for Ethiopians for their hospitality at large.

Walta has learnt that diplomatic relation between Ethiopia and Sri Lanka was

commenced in 1972. The Embassy was officially established in February, 2017 in Addis

Ababa.

Home

Retail trade in Europe speeds up: 2.5% rise in September

(Source: The MDS, November 06, 2019)

Fashion retail in the eurozone climbs even more after 0.2% rise in August, according to the

latest data published by the European statistical agency Eurostat.

Fashion sales in Europe on the rise. Fashion retail in the nineteen countries of the

eurozone rose 2.5% in September compared to the same month of the previous year. The

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25 CITI-NEWS LETTER

growth occurs after increasing only 0.2% in August, according to the latest data published

by the European statistical agency Eurostat.

The sector started 2019 with a 0.3% drop in January to grow 2% in

February and advance 2.2% in March. In April, fashion sales in the region fell 4.8%,

while in May it moderated its fall with a decrease of 2.4%. In June, the sector advanced

4.7% to increase 0.1% in July.

In the European Union, the textile, clothing and footwear trade also

advanced in the ninth month of the year, with a growth of 2.8% compared to the

1.1% increase in August. On the whole of retail in Europe, on the other hand, retail sales

have registered an increase of 3.1%, up a march compared to August, when it advanced

2.7%. In the European Union as a whole, retail sales advanced 3.2%. By countries, only in

Slovakia and Latvia recorded a negative evolution of retail trade revenues, with falls of

2.7% and 0.4 %%. The biggest increase was Romania, with a 7% increase.

Home

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