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

04-11-2019 75.05 (-0.20)

06-11-2018 88.35

06-11-2017 79.50

New York Cotton Futures (Cents/lb) As on 06.11.2019 (Change from

previous day)

Dec 2019 63.74 (-0.07)

Mar 2020 66.11 (+0.23)

May 2020 66.66 (-0.03)

06th November

2019

We will not miss the bus again, next wave of reforms soon: FM

India exploring trade agreements with USA & E U; FTAs with Japan, Korea &

ASEAN being reviewed; No trade agreements in a hurry says Piyush Goyal

Govt may change new base year for GDP to 2017-18; decision likely soon

ICRA maintains 'negative’ outlook on domestic cotton amid weak demand

Donald Trump invites Xi Jinping to sign phase 1 of trade pact: Official

Will resolve outstanding issues raised by India for not joining RCEP: China

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

Nov 2019 19420 (-70)

Cotton 13045 (-15) Dec 2019 19370 (-70)

Yarn 21065 (+15) Jan 2020 19530 (-140)

www.citiindia.com

2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- We will not miss the bus again, next wave of reforms soon: FM

India exploring trade agreements with USA & E U; FTAs with Japan, Korea &

ASEAN being reviewed; No trade agreements in a hurry says Piyush Goyal

Govt may change new base year for GDP to 2017-18; decision likely soon

Digital tax on MNCs: India seeks changes in OECD math

Asean may soon conclude review of FTA with India

Open to join RCEP in future if we get favourable offers: Govt

Exporters, industry laud India’s decision to pull out of RCEP

View: Opting out from RCEP hurts India's interests

A retreat from RCEP

ICRA maintains 'negative’ outlook on domestic cotton amid weak demand

Tech tailor: How AR, VR will impact the fashion industry

MNCs eyeing Punjab amidst US-China trade tension

Weaves textile fair in Erode from November 27

------------------------------------------------------------------------------ Donald Trump invites Xi Jinping to sign phase 1 of trade pact: Official

Will resolve outstanding issues raised by India for not joining RCEP: China

Vietnam's garment export up 10.4 pct in 10 months

Germany introduces Green Button textile seal

Restore zero-rating facility: Pak textile businesses

Obaseki seals $200m investment for textile industry

Prada makes new bags from recycled nylon

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

NATIONAL

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

GLOBAL

www.citiindia.com

3 CITI-NEWS LETTER

NATIONAL:

We will not miss the bus again, next wave of reforms soon: FM

(Source: Economic Times, November 06, 2019)

Finance minister Nirmala Sitharaman on Tuesday said the government will soon use its

strong electoral mandate to usher in the next wave of reforms, and not to miss the bus

this time.

Without naming the reform measures unsuccessfully attempted by the Modi government

in its first term, and in an apparent hint at land acquisition reform attempts by NDA1, she

said government's efforts last time were thwarted by the poor numbers in the Upper

House.

It can be noted that many analysts have been calling for urgent reforms in the factor

markets, especially regarding land and labour, to get the economy out of the trough, citing

the strong political mandate the government enjoys.

"...I am sure we will now show the commitment for reforms happens fast. That is where

the mandate given to Modi 2.0 will help," Sitharaman said, speaking at The Indian

Express' 'Adda'.

"We will push forward with those reforms which have missed the bus last time, but won't

miss the bus now," the minister asserted. Her comments come on the heels of the BJP

failing to improve its tally in the just concluded Maharashtra and Haryana elections

despite the party playing the nationalism card to the full. Many pollsters have opined that

hard economic realities such as the deepening agrarian crisis and rising joblessness have

trumped the nationalism card of the ruling BJP in both the states.

When asked whether economics has trumped politics in the recent elections, she it is not

possible for any political party, particularly those in power, to delink any subject. "It is

not possible for any government, be it at the Centre or in the states, to say give me your

vote on nationalism and I do not want to talk about economic issues. Is the voter going to

be indulgent enough to say 'alright, the prime minister doesn't want to talk about

economy so we won't talk about the economy'," she said.

Hitting out at those who blocked government from carrying out reforms in its first term,

she admitted that the numbers were limited (in the Upper House) and the country paid

the price for that. She said the manufacturing sector competitiveness is still pulled down

by "extraneous" factors such as high cost for land, electricity and also changes in land use,

which are beyond the ambit of individual companies, but which the government now

wants to ease them all.

www.citiindia.com

4 CITI-NEWS LETTER

Everything has a long way to go in terms of becoming actually easy to do business," she

said. With dozens of companies leaving China and opening shops in other emerging

countries like Vietnam and Bangladesh following the USChina trade wars, Sitharaman

said the government has created a list of potential players who will be tapped and added

that some conversations are already on in this regard.

She also pointed out Vietnam's weaknesses, including a saturation in its labour market

and also low domestic demand due to its low population base & pointed to the huge

domestic market that our 1.34 billion population offers. About companies to committing

new investments and using the space created by the corporate tax cut for deleveraging,

she said it is fine for a corporate to use the space for the purposes it wishes and exuded

confidence that over the long-term, they will invest. "I would not say deleveraging is

wrong, if you want to come out of some stress," she said.

Home

India exploring trade agreements with USA & E U; FTAs with Japan, Korea &

ASEAN being reviewed; No trade agreements in a hurry says Piyush Goyal

(Source: Press Information Bureau, November 05, 2019)

Union Minister of Commerce and Industry & Railways Piyush Goyal assured that India

will never finalize any trade agreement in a hurry. During trade negotiations the focus will

be on India first said the Minister while addressing a press conference, on the decision

taken by India on the Regional Comprehensive Economic Partnership (RCEP), in New

Delhi today.

He said that India’s economic interests and national priorities come first and theconcerns

of the farmers, dairy sector, MSMEs and domestic manufacturing will be addressed and

these sectors will be protected. Commerce and Industry Minister informed that

throughout the seven year long negotiations in RCEP India has consistently stood its

ground to uphold its demands particularly over controlling trade deficit, stronger

protection against unfair imports and better market opportunities for Indian goods and

services.The opening up of the Indian market must be matched by openings in areas

where our businesses can benefit and India will not allow its market to become a dumping

ground for goods from other countries said the Minister.

Commerce and Industry Minister further informed thatthe Free Trade Agreements

(FTAs) with Japan, South Korea and ASEAN countries are being reviewed. The review of

the FTA with South Korea,which began 3 years back,is being fast tracked. He further

informed that India has already secured agreement in ASEAN for a review of the FTA and

a Joint Working Group (JWG) is discussing the issues to be addressed in Japan FTA.

www.citiindia.com

5 CITI-NEWS LETTER

Replying to questions Commerce and Industry Minister informed that at present India is

exploring trade agreements with the USA and European Union, where Indian industry

and services will be competitive and benefit from access to large developed markets.

Home

Govt may change new base year for GDP to 2017-18; decision likely soon

(Source: Business Standard, November 05, 2019)

MoSPI secretary said that earlier when new series with 2011-12 base year was being

worked out, the ministry thought of revising it to 2009-10

The Ministry of Statistics and Programme Implementation will decide on a new base year

for the GDP series in a few months, a senior official said on Tuesday.

The ministry is working to bring in a new series of national accounts which would result

in change in the existing base year of 2011-12.

Though the ministry is considering 2017-18 as the new base year, no decision has been

taken as the committees of experts are awaiting some more data before finalising their

opinion.

"The decision to change the base year (of GDP) would be taken in next few months. We

are waiting for Annual Survey of Industries and the Consumer Expenditure Survey. All

the preparatory work is getting ready for that.

"Once the result is out, we will place it before the respective committees (to decide about

the base year)," MOSPI Secretary Pravin Srivastava told reporters at a FICCI conference

adding that the decision has to be taken considering global and national scenario as well.

He also said that earlier when new series with 2011-12 base year was being worked out,

the ministry thought of revising it to 2009-10.

But then the economists decided that 2009-10 was not a good year globally and

domestically and finalised 2011-12 as the base year for new series of GDP.

On whether the economy will see recovery he said, it is too early to comment on it because

lot of inputs for tabulation depend upon the IIP (index of industrial production), CPI and

WPI data, which would come in the first fortnight of November.

The economic growth slowed to over six-year low of 5 per cent in April-June this fiscal.

The government has been taking steps to boost investment and perk up the sagging

economy.

www.citiindia.com

6 CITI-NEWS LETTER

Regarding experts' views that industrial production for September will see a decline after

core sector output contracted 5.2 per cent during the month, Srivastava said, "We do not

speculate data. We wait for data to come because the data will tell us."

When asked about the need for new GDP base year, he said the change in base year

actually captures the change in structures of the economy.

Home

Digital tax on MNCs: India seeks changes in OECD math

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

India has sought changes in the Organisation for Economic Cooperation and

Development (OECD) proposal on digital taxation, saying it would deny the country its

proper share of taxes from multinationals such as Google, Facebook, Uber and Netflix,

which generate substantial revenues locally.

The government has proposed a

more balanced principle for the

taxation of such companies based on

place of revenue generation.

“We want a fair share in revenues

that accrue to the company from the

country,” said a government official

aware of the development. India has

submitted its concerns to the body.

The OECD had on October 9

released a draft on taxing digital

companies for public comment. Discussions on the proposal are to be held on November

21-22. All countries have to agree for the rules to be enforced.

India imposed a 6% equalisation levy on online advertising in 2016. Under this, the levy

is withheld by the recipient of services from the payment it’s making for services.

The proposed OECD formulation will mean India getting little revenue despite the large

digital and business presence of companies, the official said. This is because only “residual

profit” will be apportioned among the countries where a company has its markets. The

government is of the view that multinational companies derive large revenues from

countries such as India via their digital presence, without having a physical one, and has

www.citiindia.com

7 CITI-NEWS LETTER

questioned the distinction between “routine profit”— which accrue due to physical

presence — and “residual” profit.

We cannot back this formulation,” the official said. For example, a cab aggregator

operating via a mobile app has its core technology base in one country and software base

in another but makes money in countries such as India.

Size of Business

The latter will only get a small part of the profit under the OECD proposal, the government

argues. There is also the matter of how the size of business will be determined — using

employees, assets or sales. The Indian method focuses on revenue, wherein income is

apportioned to each jurisdiction in line with operations there, which the official said

would be fair to everyone and simpler to operate.

On the other hand, in the case of outbound business from India — IT and software

companies that export their services and products to developed markets, for instance —

it is possible that residual profits will be attributed to markets there, thereby reducing

taxable profits in the home country. There are also questions about the kind of businesses

that will be covered, the official said. Companies basing themselves in low-tax

jurisdictions for tax avoidance is referred to as base erosion and profit shifting (BEPS).

The term Google tax refers to measures aimed at combating this and ensuring that

companies pay what they owe in line with revenue generated locally.

“Requirements of both developed and developing nations should be kept in mind, while

arriving at a unified approach to ensure that divergent interests are adequately aligned

and protected,” said Vikas Vasal, national leader tax, Grant Thornton in India.

“Consensus will be driven by how these formulae reallocate the non-routine profit to the

market countries,” said Rohinton Sidhwa, partner, Deloitte India.

Home

Asean may soon conclude review of FTA with India

(Source: Dipanjan Roy Chaudhury, Economic Times, November 06, 2019)

The Association of South East Asian Nations (Asean) may soon conclude FTA (free-trade

agreement) review with India. The aim is to balance China in the Indo-Pacific.

www.citiindia.com

8 CITI-NEWS LETTER

The grouping will work with India for early conclusion of the review of

Asean-India FTA to keep momentum in the partnership, a senior Asean

diplomat told ET. PM Narendra Modi, while addressing 10 Asean leaders,

on Sunday welcomed the decision to have a relook at the free-trade

agreement between India and the 10-member grouping. Last month, India

and Asean initiated a review of the free-trade agreement in goods to make

it “user-friendly, simple and trade facilitative”.

After India’s decision to stay out of RCEP, some Asean nations, including

Thailand, are keen for early conclusion of the FTA review.

In 2003, India and Asean signed a Framework Agreement on

Comprehensive Economic Cooperation to establish an Asean-India

Regional Trade and Investment Area, which would provide a basis for

subsequent FTAs covering goods, services and investment. The Asean-India Trade in

Goods Agreement (AITIGA) was signed in 2009 and it is this that both sides have agreed

to review.

Modi said he welcomed “the decision to re-examine the India-Asean FTA. “This will make

our economic links stronger and will make our trade more balanced,” he said. Bilateral

trade between the two sides increased to $80.8 billion in 2018 from $73.6 billion in 2017.

India has its concerns, given that its FTA with Asean is stacking up trade deficits with

several Asean partners.

Home

Open to join RCEP in future if we get favourable offers: Govt

(Source: Subhayan Chakraborty, Business Standard, November 06, 2019)

Piyush Goyal said India was exploring trade agreements with the United States and the

European Union to allow manufacturing and services sectors to benefit from access to

large developed markets

A day after opting out of the Regional Comprehensive Economic Partnership (RCEP) deal,

the government on Tuesday said it was open to being part of the grouping in the future if

it got favourable offers addressing India’s concerns.

“Every government is always open to discussions and negotiations, but at present, the

final decision is to stay out of RCEP,” Commerce and Industry Minister Piyush Goyal said.

“Should the other countries come up with better offers in the interest of India’s industry

and people, we will discuss it and do what is good for our farmers, industry, and the

services sector.”

www.citiindia.com

9 CITI-NEWS LETTER

Goyal also said India was exploring trade agreements with the United States and the

European Union to allow the manufacturing and services sectors to benefit from access

to large developed markets. “We always talk to countries. The doors never shut for

anybody,” he said, referring to RCEP.

He said reconciliation would follow if the 15 RCEP nations made sincere efforts to address

India’s concerns, gave it confidence, and helped it balance this trade inequality.

“At present, the final decision is to stay out of RCEP...(We will) do what is good for our

farmers, industry and services sector”- Piyush Goyal

While the other RCEP nations have gone ahead with the deal after concluding the talks in

Bangkok, they have also left the door open for India — the largest untapped consumer

and industrial market. Negotiations, which started in 2012, will now culminate in a final

deal being signed by 2020.

India had a long list of pending issues till Monday night.

Goyal said that of the 70-odd issues that had held up the deal, around 50 were India’s

concerns. Prime among these is a proposed import cap for China and a mechanism to

raise tariffs on Chinese imports if it crossed certain threshold.

This has been furiously refused by Beijing.

India’s hope of greater trade in services, which would have allowed cross-border

movement of Indian information technology, medical workers, and teachers was also

impeded by opposition from the Asean bloc and developed economies such as Australia.

Goyal also raised the issue of other nations pushing for 2014 as the base year for tariff

reduction, while New Delhi had pushed for 2019. New Delhi’s demands for assurance on

preferential market access to Indian goods in Chinese and Asean markets and removal of

non-tariff barriers also proved difficult to secure.

On Tuesday, the Federation of Indian Exports Organizations (FIEO) welcomed the

decision on RCEP.

“Duty-free imports from China, which has an economy of scale, backed by huge inventory,

could have jolted the manufacturing beyond recovery and thus crippling exports,” said

FIEO President Sharad Kumar Saraf.

Goyal blamed the previous United Progressive Alliance government for compromising its

negotiating position during the RCEP talks.

Home

www.citiindia.com

10 CITI-NEWS LETTER

Exporters, industry laud India’s decision to pull out of RCEP

(Source: The Hindu, November 05, 2019)

‘Reflects majority of stakeholders’ views’

The industry has lauded India’s decision not to join the Regional Comprehensive

Economic Partnership (RCEP) and has said their concerns over a surge in imports from

China have been soothed.

“The government has had extensive consultations with the wide-spectrum of

stakeholders,” Vikram Kirloskar, president, Confederation of Indian Industry said. “The

objective was to get the first-hand inputs from industry stakeholders and based on that

India articulated its position in the last round of negotiations and Ministerial meetings

thereafter.”

“Unfortunately, that didn’t find favour with majority of RCEP members,” Mr. Kirloskar

added. “The decision taken by India at Bangkok to pull out from RCEP reflects the views

of majority of Indian stakeholders.”

Indian industry’s reservations against joining RCEP has come from a number of sectors,

including agriculture, dairy, steel, rubber, and textiles, and all of these apprehensions

were communicated to the government over a series of consultative meetings the

Commerce Minister held in New Delhi and Mumbai.

“In recent months, serious apprehensions and reservations on RCEP have been expressed

by a large number of sectors including steel, plastics, copper, aluminium, machine tools,

paper, automobiles, chemicals, petro-chemicals and others,” Federation of Indian

Chambers of Commerce and Industry (FICCI) president Sandip Somany said. “Further,

there were not enough positive developments in the area of trade in services, including

easier mobility for our professionals and service-providers.”

Exporter bodies too have lauded the decision to stay out of RCEP. “We welcome the

decision in opting out of RCEP,” Engineering Export Promotion Council of India

chairman Ravi Sehgal said. “Our MSME unit members were concerned about the possible

opening up to Chinese imports; and hence it is a wise decision and will provide certainty

to the MSME sector.”

“Vibrant manufacturing holds the key to exports,” Federation of Indian Export

Organisations president Sharad Kumar Saraf said. “Duty-free imports from China, which

has economy of scale, and sitting on huge inventory and capacity could have jolted the

manufacturing beyond recovery and thus crippling exports.”

www.citiindia.com

11 CITI-NEWS LETTER

However, Mr. Saraf called on the government to make manufacturing competitive by

reducing the cost of credit, bringing down logistics costs and addressing the inverted duty

structure.

Home

View: Opting out from RCEP hurts India's interests

(Source: Puja Mehra, Economic Times, November 05, 2019)

Fears that China’s gains would exceed India’s made the Narendra Modi administration

hold out on the Regional Comprehensive Economic Partnership (RCEP) deal in Bangkok

on Tuesday. The decision has generated both cheer and sneer. Arguments on both sides

have some merit. RCEP was launched in November 2012 “to achieve a modern,

comprehensive, high-quality and mutually beneficial economic partnership agreement

among the Asean [Association of Southeast Asian] member states and Asean’s FTA [free

trade agreement] partners”, that would “cover trade in goods, trade in services,

investment, economic and technical cooperation, intellectual property, competition,

dispute settlement and other issues”.

The negotiations that began in May 2013 were stalling. But they picked up after the US,

driven by protectionism, exited the Trans-Pacific Partnership (TPP) and ratcheted up a

tariff war with China. At the heart of RCEP is not free trade but South Asian countries’,

especially China’s, keenness to safeguard their economic growth by accessing newer

markets in face of growing US and European protectionism.

Does RCEP in its current form represent mutual gain for India, the odd one out in the

grouping? For, Southeast Asian countries are competitive vis-à-vis India for merchandise

products, while India is more competitive in professional services categories. Clearly, if

potential losses in the Asean market on the merchandise front were going to get

compensated for by the gains in services, then the RCEP deal could be mutually beneficial

for India.

For India, greater openness in services with these trade partners is essential to counter

the challenge of global resistance to immigrants in the US and Europe. Commitments

from India for lower tariffs on merchandise imports should be reciprocated with

commitments from RCEP countries for lower barriers to Indian exports of services, and

easier and more work visas for its pool of skilled labour.

India’s experience of negotiating for removing barriers to trade in services in Indo-Asean

trade following the FTA in merchandise products is instructive. The sluggish pace of those

negotiations has forced India to seek access for services to key Asean markets through

www.citiindia.com

12 CITI-NEWS LETTER

bilateral agreements. But is staying out of trade pacts a good strategy? India does not have

trade agreements with the EU or the US. The exports category of T-shirts and singlets

demonstrates how staying out of trade pacts is not sustainable. The US, a key market for

India, imposes 32% tariff rate on India’s exports in this category, but nothing on exports

from South Korea, as it enjoys zero tariffs under the US-Korea FTA. South Korea, a key

competitor of Indian apparel exports, also enjoys zero tariffs under the EU-Korea FTA.

So does Turkey. Not having trade agreements, thus, puts India at a disadvantage by

impacting price competitiveness of its exports. Further, because of their FTAs, the

competitors’ exports remain immuneto the growing threat of tariff hikes as protectionism

grows in the US and Europe. Under the provisions of the trade agreements, countries such

as South Korea and Mexico can seek compensations from the US if it extends its

protectionist tariffs to their exports.

India has no such cushion. In fact, earlier this year, the Donald Trump government in the

US withdrew the preferential treatment India enjoyed under its Generalised System of

Preferences (GSP). But can India gain competitiveness merely by signing FTAs? As

research (bit.do/ff4uN) by Arpita Mukherjee, Angana Parashar Sarma and Soham Sinha

of the Indian Council for Research on International Economic Relations (ICRIER) and

Anusree Paul of the Indian School of Business and Finance shows, preferential tariffs

don’t automatically boost apparel exports from India. Japan, a major apparel importer,

operationalised the Comprehensive Economic Partnership Agreement (CEPA) with India

from August 1, 2011. Both countries dropped tariffs on apparels to zero. But India’s share

in the Japanese market remains an abysmal 0.09%. While competing economies like

China, Vietnam and Bangladesh have cornered shares of 6.46%, 1.17% and 0.34%

respectively.

This is because Indian exporters tend to underutilise trade agreements. The FTA

utilisation rate, at under 25%, is among the lowest in Asia, according to the Asian

Development Bank. As a result, India’s trade deficit with Asean nearly trebled from under

$8 billion in FY10 to $22 billion in FY19 after the Comprehensive Economic Cooperation

Agreement (CECA) was signed in 2010. The trade deficits with South Korea and Japan

have expanded similarly after India operationalised trade agreements with them. The

reasons for underutilisation include faulty commitments and strict rules of origin.

Logistics, compliance and transaction costs twice as high than in other countries erode

competitiveness of Indian exports. It’s, therefore, imperative for the policy objective to

graduate from mere ease of doing business to ease of being globally competitive. Rather

than simply run away from trade agreements.

(The writer is author of Lost Decade (2008-18): How India’s Growth Story Devolved

into Growth Without a Story)

Home

www.citiindia.com

13 CITI-NEWS LETTER

A retreat from RCEP

(Source: A K Bhattacharya, Business Standard, November 06, 2019)

India seemed set to join the new trading bloc but at the eleventh hour, India pulled out.

What went wrong?

It was a big surprise that the Narendra Modi government on Monday decided not to join

the Regional Comprehensive Economic Partnership (RCEP) trade deal. The prime

minister was present in Bangkok to take part in the deliberations during the third RCEP

Summit and India seemed set to join the new trading bloc.

But almost at the eleventh hour, India pulled out of it saying that the terms of the new

group would adversely affect its national interest. What went wrong at the last minute?

The RCEP was conceived as the world’s largest trading bloc of 16 countries (10 members

of the ...

Home

ICRA maintains 'negative’ outlook on domestic cotton amid weak demand

(Source: Sutanuka Ghosal, Economic Times, November 05, 2019)

With pressures building up on credit profiles of domestic cotton spinners as they continue

to grapple with challenges on the demand front, ratings agency ICRA has maintained a

'negative’ outlook on the sector. Furthermore, the agency’s note released on Tuesday adds

that performance of domestic cotton spinners is likely to weaken considerably in FY2020,

with operating margins for the year being estimated to correct by 300-400 bps vis-a-vis

previous year. As a result operating profitability is expected at multi-year lows, closer to

the level last witnessed in FY2012 when most players suffered sizeable losses on inventory

due to steep unexpected correction in cotton prices.

Commenting on this, Jayanta Roy, Senior Vice-President and Group Head, Corporate

Sector Ratings, ICRA, said, “The challenges this time around are multifaceted. While the

export demand remains weak amid a global economic slowdown, as well as trade related

uncertainties in the international markets, domestic cotton spinners have been facing

additional challenges of preferred trade access available to competing nations (such as to

Vietnam and Pakistan in China) and higher raw material costs. Despite more than 10 per

cent correction in the domestic cotton fibre prices since June 2019, which narrowed the

premium over international cotton, domestic cotton continued to be expensive till

October 2019 (2 per cent premium in October 2019, vis-a-vis 7 per cent premium in the

quarter ended September 2019) affecting competitiveness of domestic spinners. It is

pertinent to note that the spread between domestic and international cotton fibre prices

typically remains at around 5-7 per cent, with international cotton mostly trading at a

www.citiindia.com

14 CITI-NEWS LETTER

premium. Furthermore, as a result of the reversal in the relative price trend this year,

imports of cotton fibre also surged (126 per cent YoY increase during five months of

FY2020). This is despite the fact that domestic cotton fibre is currently trading below the

minimum support price (MSP).”

As for the outlook, even though the cotton crop outlook for the domestic cotton year

ending September 2020 remains favourable, competitiveness of the Indian spinners

could be hurt if there is a significant market intervention by The Cotton Corporation of

India (CCI) which triggers a relative increase in domestic fibre prices, vis-a-vis

international prices. This is more so as the cotton prices are likely to remain soft globally

amid a healthy crop outlook for CY2020.

India’s cotton yarn export quantity fell by 35 per cent YoY during H1 FY2020 as a result

of the aforesaid factors. Whereas markets other than China, which has been the largest

cotton yarn market for India in the past few years, had supported demand during FY2017

and FY2018 when exports to China fell; pressure is more broad-based now. In comparison

to a 57 per cent YoY decline in cotton yarn exports to China during 5M FY2020, exports

to the other major markets have declined by over 20 per cent YoY, led by a 42 per cent

and 27 per cent YoY decline in exports to Bangladesh and Pakistan respectively. Overall,

based on the current trends, ICRA expects India’s cotton yarn exports to decline to an

eight-year low during FY2020.

Apart from this, demand trends from downstream segments of the textile value chain

(fabrics, apparels and home textiles) in the domestic market also remain discouraging.

While on one hand the prevailing economic slowdown and pressure on discretionary

consumer spending is affecting demand for apparel and home textiles in the domestic

market, on the other trend in apparel exports has also remained subdued, thereby

affecting domestic consumption of yarn. Besides, increasing imports of apparels and

textile made-ups continue to pose an additional challenge. During 5M FY2020, imports

of fabrics, apparels and textile made-ups increased by more than 10 per cent YoY.

As the sharp fall in exports and subdued domestic demand significantly affected sales

volumes of yarn, several domestic spinners resorted to production cuts during Q2

FY2020, particularly from August 2019 onwards, to cope with tough market conditions.

As a result, India’s cotton yarn production volumes declined by around 5 per cent YoY

during 5M FY2020, with a more than 35 per cent YoY fall in August 2019 itself. Cotton

yarn realisations also started correcting from July 2019 onwards amid declining cotton

fiber prices and continued demand-side pressures. Real contribution levels (in percentage

terms) in Jul-Aug’19 stood at multi-year lows.

“Pressure on volumes together with shrinkage in contribution margins is expected to get

reflected in a significant decline in profitability of domestic spinners in Q2 FY2020,

particularly for companies that had booked sizeable quantities of cotton fibre in the

www.citiindia.com

15 CITI-NEWS LETTER

previous harvest season at prices higher than the prevailing prices. This is expected to

result in moderation in debt coverage metrics of the spinning entities, with impact likely

to be more pronounced for leveraged companies with sizeable repayment obligations”,

Roy added.

However, it ought to be noted that a large proportion of spinners have not undertaken

capacity expansions in the recent years. Accordingly, impact on their debt coverage

metrics and liquidity could be lower despite industry pressures. Though some respite is

likely Q3 FY2020 onwards with softening in domestic cotton fiber prices, the recovery

could be gradual. The improvement would remain contingent on cotton fibre price

movement, vis-a-vis international market, and demand trends in export markets, besides

domestic consumption patterns.

Home

Tech tailor: How AR, VR will impact the fashion industry

(Source: Nitin Kapoor, Financial Express, November 06, 2019)

The just-in-time garment manufacturing process is based on the

Augmented Reality concept

Like all other industries, the fashion industry relies heavily on Artificial Intelligence (AI)

to upgrade its services. The sector is on the verge of merging with the technological

revolution. This initiative will not only enhance the consumer experience but also redefine

the standards of the industry. One of the notable aspects of this progression is that it can

restructure the production, marketing, and customer services.

The high demand for clothes in the global market has adversely impacted the

environment. The textile segment utilises excessive water and electricity for their

production. The dyes and chemicals used for the dresses cause pollution and disrupt the

natural ecosystem. Companies and research institutions are continually working on

various techniques to minimise the damage. This has also led to the invention of efficient

machinery that would lower resource consumption and deliver quality products. This

equipment is AI-enhanced and can improve the production process. There is a constant

analysis of technologies like Augmented Reality (AR), Virtual Reality (VR), Animation,

Social Shopping, Machine Learning, etc.

Leading companies across the globe have undertaken the responsibility to identify an

ideal solution for this issue. They have developed a JITGM (Just in time garments

manufacturing) process, which is also copyrighted with the government that can address

these concerns. This technique has been thoroughly analysed and experimented in

www.citiindia.com

16 CITI-NEWS LETTER

production, distribution, and sales. This innovation is based on the Augmented Reality

concept. Consumers can use this technology to analyse the different elements such as

fabric, colour, prints, style, via AR images. The application will provide different variants

of the finished products. The final order will be placed based on their approval and

selection. The companies can print, cut, sew and dispatch the garment within 48 hours

and make the delivery to the consumers. This is expected to the next most prominent

change in the textile industry. This will reduce the wastage of the resources and also

provide a unique product to the consumers. Just in time technology would be a feasible

option for all stakeholders.

The future of the apparel industry is expected to attain the perfect infusion of online and

offline stores. The current gap between them will be bridged with the assistance of

technological advancements. Changes will be implemented to reduce production costs

and pollution. Various steps would be taken to improve the efficiency of the process and

deliver a quality and economical product to the consumers. The online to offline model

will be influential in uplifting the fashion segment to the next level.

The writer is founder, Indian Beautiful Art (IBA), an online seller of Indian products

globally

Home

MNCs eyeing Punjab amidst US-China trade tension

(Source: KNN India, November 05, 2019)

Amid US-China trade tension, Multi National Company (MNCs) are eying Punjab for the

investment and are likely to firm up their investment plans during the upcoming investor

summit 2019 scheduled on December 5-6 at Mohali.

Major industrial groups from Japan, Taiwan and Germany will participate during the two

day event where the state plans to showcase manufacturing skill of Punjab based Micro

Small and Medium Enterprises (MSME) during the third edition of the event.

Japan is one of the partner countries for Progressive Punjab Submit and event is expected

to unveil new investment plans in pipeline.

A slew of companies from Taiwan are companies is also likely to ink their plans to invest

in Punjab.

“Many global companies feel that they are over-invested in China and now seeking

investment in India,” Vini Mahajan, additional chief secreatry,

According to media reports, world's leading contract manufacturers of electronics,

Taiwan based Foxconn is likely to invest in a cycle tyre manufacturing plant in Punjab,

www.citiindia.com

17 CITI-NEWS LETTER

while a plastic products manufacturing park is also being mooted in Bathinda to benefit

from existing HPCL-Mittal Energy Limited (HMEL) refinery.

Punjab’s top companies including Trident Group, Nahar Group are also likely to unravel

their expansion plans. On display during the event would be expertise of Punjab based

companies that have successfully build global value chains in partnership with

international players including Sonalika Tractors, Aarti Steels, Savi International, Hero

Cycles, Shingora Textiles etc.

Home

Weaves textile fair in Erode from November 27

(Source: The Hindu, November 05, 2019)

Event will focus on promoting the power loom and handloom industry and

will feature over 250 exhibitors, organisers say

Weaves, South India’s premier textile fair, will be held from November 27-30 at Texvalley,

the largest wholesale textile market in Erode district.

The four-day event is being jointly organised by the Confederation of Indian Industry

(CII) and Texvalley. Over 4,000 to 5,000 weavers are expected to participate in the fair.

The event will focus on promoting the power loom and handloom industry and will

feature 250 plus exhibitors from across Tamil Nadu showcasing their products. The

exhibitors will be from processing and finishing, ethnic wear and knit fabric, handlooms

and khadi, home textiles, textile accessories and machinery segments.

“This year, we have met the Ambassador of Sri Lanka, Vietnam, Cambodia, Jordan,

Ethiopia and Bangladesh and invited them and the trade delegates from the respective

countries to participate in the WEAVES 2019 event B2B meetings and to set up country

pavilion in the exhibition,” said, C. Devarajan, Vice-Chairman, Texvalley.

He said that Texvalley will, shortly, provide a Common Facility Centre (CFC). This CFC

will provide design development, product sampling, quality testing and certification,

fabric library and meeting cabins for the buyers/ sourcing professionals.

S. Chandramohan, chairman, CII Tamil Nadu, said that the Indian textiles and apparel is

a $100 billion plus industry providing direct employment to over 45 million people and

accounts for 14% of India’s industrial production.

www.citiindia.com

18 CITI-NEWS LETTER

“Tamil Nadu is the leading state in the country which provides direct employment to

around 31 lakh people, more than Rs 50,000 crore exports and 1/3 of textile business in

the country,” Mr Chandramohan said.

The four-day fair would see participation from brands including Birla (Liva), Reliance,

Arvind, Jockey, Fazo, Loyal Textiles, KG Fabriks, BKS – Swass, Jansons Group, Ramraj

Cotton, Chennai Silks – SCM, KPR Mill, VSM Weaves, Mothi Spinners, Lenzing, Twin

Birds, KG Denim, MCR, Hi-life Labels, Lucky Yarn, Balavigna, KIBS, Green Ware India,

Paramount looms, Symphony, etc.

In addition to the above brands, handloom from Kannur, Kancheepuram, Arni, Madurai,

Pochampalli, Chirala and major cooperative societies would also be participating in the

expo.

Home

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

www.citiindia.com

19 CITI-NEWS LETTER

GLOBAL

Donald Trump invites Xi Jinping to sign phase 1 of trade pact: Official

(Source: Agencies, November 05, 2019)

Meanwhile, China is seeking the roll back of US tariffs on as much as $360 billion of

Chinese imports before President Xi agrees to go to the US to sign a partial trade deal with

Trump

US President Donald Trump has invited his Chinese counterpart Xi Jinping to sign the

phase one of a bilateral trade deal when it is agreed upon, according to a top White House

official. “President Trump has invited President Xi to the US if we are able to get that deal

to sign phase one trade agreement, we'll have to see if that comes to pass or not. I am

optimistic about it, I may actually say I'm cautiously optimistic about it,” US National

Security Advisor Robert O’Brien said. Meanwhile, China is seeking the roll back of US

tariffs on as much as $360 billion of Chinese imports before President Xi agrees to go to

the US to sign a partial trade deal with Trump, according to people familiar with the

matter.

Home

Will resolve outstanding issues raised by India for not joining RCEP: China

(Source: PTI Beijing/ Business Standard, November 06, 2019)

China also said it would welcome India joining the deal at an early date

China said on Tuesday that it will follow the principle of "mutual understanding and

accommodation" to resolve the outstanding issues raised by India for not joining the

Beijing-backed mega Regional Comprehensive Economic Partnership (RCEP).

China also said it would welcome India joining the deal at an early date.

Prime Minister Narendra Modi on Monday conveyed India's decision not to join

the RCEP deal at a summit meeting of the 16-nation bloc, effectively wrecking its aim to

create the world's largest free trade area having half of the world's population.

"The present form of the RCEP Agreement does not fully reflect the basic spirt and the

agreed guiding principles of the RCEP. It also does not address satisfactorily India's

outstanding issues and concerns. In such a situation, it is not possible for India to join

RCEP Agreement," Modi said.

www.citiindia.com

20 CITI-NEWS LETTER

India has been forcefully raising the issue of market access as well as protected lists of

goods mainly to shield its domestic market as there have been fears that the country may

be flooded with cheap Chinese agricultural and industrial products once it signs the deal.

Asked for China's comments on India not joining the RCEP deal over concern of cheap

Chinese products potentially harming its domestic industry, Chinese Foreign Ministry

spokesman Geng Shuang told the media here on Tuesday that China welcomes India

joining the deal.

"The RCEP is open. We will follow the principle of mutual understanding and

accommodation to negotiate and resolve those outstanding problems raised by India and

we welcome an early joining by India," he said.

He said the RCEP is a regional trade agreement and mutually beneficial in nature.

"If it is signed and put into implementation it is conducive for the Indian goods entry into

China and other participating countries. In the same vein, it will also help Chinese goods

to enter the markets of India and other participating countries," he said.

"This is two-way and complementary (deal) and I should point out that China and India

are both emerging major developing countries. We have a huge market of 2.7 billion

people and there is a big potential in the market," he said.

Geng said, "over the past five years' Chinese imports from India have been increased by

15 per cent. We do not deliberately pursue trade surplus against India. We can expand

and increase our cooperation in investment, production capacity and tourism and make

a bigger pie out of cooperation for sustainable and balanced development."

Asked whether India's decision not to sign the deal would dent the RCEP deal, Geng

reiterated that China is willing to work with all parties on the principle of mutual

understanding and accommodation and continue to solve the outstanding issues.

"We welcome India joining at an early date," he said and referred to the joint statement

issued after the RCEP summit on Monday which stated "India has significant outstanding

issues, which remain unresolved. All RCEP Participating Countries will work together to

resolve these outstanding issues in a mutually satisfactory way. India's final decision will

depend on satisfactory resolution of these issues".

Chinese President Xi Jinping also referred to the RCEP deal in his address on Tuesday at

Shanghai while inaugurating the China International Import Expo but skirted India's

decision to opt out of the deal.

"I am happy to note that yesterday, 15 countries taking part in the Regional

Comprehensive Economic Partnership (RCEP) concluded text-based negotiations, and I

www.citiindia.com

21 CITI-NEWS LETTER

hope the agreement will be signed and enter into force at an early date. China will be

happy to conclude high-standard free trade agreements with more countries, Xi said.

The RCEP negotiations were launched by ASEAN (Association of Southeast Asian

Nations) leaders and six other countries during the 21st ASEAN Summit in Phnom Penh

in November 2012.

"India conveyed its decision at the summit not to join the RCEP agreement. This reflects

both our assessment on the current global situation as well as fairness and balance of the

agreement. India had significant issues of core interests that remained unresolved,"

Secretary (East) in the Ministry of External Affairs, Vijay Thakur Singh, told reporters in

Bangkok on Monday.

The negotiations for the proposed free-trade agreement included 10 member countries of

the ASEAN and six of the bloc's dialogue partners -- China, Japan, South Korea, India,

Australia and New Zealand. (Ed the above paras from PTI story of Monday).

Home

Vietnam's garment export up 10.4 pct in 10 months

(Source: Xinhua, November 05, 2019)

Vietnam reaped nearly 27.4 billion U.S. dollars from exporting garments and textiles in

the first 10 months of this year, posting a year-on-year rise of 8.7 percent, according to

the country's General Statistics Office on Tuesday.

Its largest export markets included the United States, the European Union, Japan, South

Korea and China. In October alone, Vietnam's garment and textile export turnovers

totaled some 2.8 billion U.S. dollars, up 9 percent year-on-year.

Despite the export growth, many local firms have reported decrease in long-term orders

due to importers' concerns over global situations, said the Vietnam Textile and Apparel

Association, warning that it may be difficult to reach the export turnovers target of 40

billion U.S. dollars this year. Vietnam, among the world's five biggest exporters and

producers of garments and textiles, made garment and textile export turnovers of over

30.4 billion U.S. dollars in 2018, up 16.6 percent from 2017.

However, Vietnam had to spend more than 12.9 billion U.S. dollars importing cloth last

year, up 13.5 percent, the association said, noting that most of local cloth has yet to satisfy

the quality requirements of the country's key garment export markets.

Home

www.citiindia.com

22 CITI-NEWS LETTER

Germany introduces Green Button textile seal

(Source: Home Textiles Today, November 05, 2019)

The label is meant to promote supply chain transparency

Twenty-seven companies are participating in the launch of Germany’s Green

Button textile seal, having passed the requirements for earning the label.

In announcing the initiative, German Development Minister Gerd Müller said,

“Globalization began in the textile industry in the 19th Century, and now it is time to start

equitable globalization in the textile industry. With the Green Button, we set a high

standard and show that fair supply chains are possible.”

In addition to the 27 companies tied to the launch, another 26 were in the review process.

Products ranging from bed sheets to backpacks will have to meet social and

environmental standards such as wastewater limits, banning hazardous chemicals and

meeting minimum wages.

At its start, the Green Button is focused on criteria related to sewing and dyeing, but will

extend into further production steps such as cotton cultivation and social and

environmental standards. The advisory board is made up of business, science and civic

groups.

Home

Restore zero-rating facility: Pak textile businesses

(Source: Fibre2Fashion, November 05, 2019)

Textile businessmen in Pakistan recently urged restoration of the zero-rating facility for

the sector if billions of rupees in sales tax refunds cannot be released. Pakistan Hosiery

Manufactures & Exporters Association (PHMA) central chairman Haji Salamat Ali said

the pending tax refund claims of exporters for July-August 2019 should be immediately

released. As the textile industry is badly affected by liquidity crunch, Ali criticised the

Federal Board of Revenue (FBR) for not releasing the refund amounts to exporters despite

promises.

FBR chairman Shabbar Zaidi had been reminded through a letter about the commitment

the board had made to the exporters that refunds would be made within 72 hours of filing

of claims.

The exporters are also facing difficulties in filing tax refund claims (Annexure-H) under

the new FASTER system, according to Pakistani media reports.

www.citiindia.com

23 CITI-NEWS LETTER

Faisalabad Chamber of Commerce and Industry senior vice president Zafar Iqbal Sarwar

said Rs 80 billion are regular claims pertaining to July 2019 to October 2019. Another Rs

10 billion and Rs 30 billion are pending respectively under section 66 (Pending since

2014) and deferred since 2012, he said. On other pending refunds include Rs 15 billion

from the head of duty drawback, Rs 19 billion from income tax, Rs 15 billion from income

tax credit and Rs 5 billion from the head of provincial sales tax, he added.

Chairman of All Pakistan Textile Processing Mills Association (APTPMA) Muhammad

Pervez Lala suggested reduction in the sales tax rate from 17 per cent to 5 per cent to save

the sector from total collapse.

Home

Obaseki seals $200m investment for textile industry

(Source: New Telegraph, November 06, 2019)

In furtherance to the Central Bank of Nigeria (CBN) determination to revive the nation’s

ailing Cotton, Textile and Garment (CTG) industry sub-sector, the Edo State Governor,

Mr. Godwin Obaseki has secured a $200 million investment for a cotton-weaving and

spinning industry at the Benin Enterprise and Industrial Park in Benin City. The

governor, who disclosed this during the maiden convocation of the Edo University

Iyamho, said the CBN had been instrumental to the economic growth being recorded in

the state, especially in the areas of industrialisation and agriculture. The governor said:

“A $200 million deal had been struck with a reputable, world-renowned textile company

to establish a cotton-weaving and spinning industry at the Benin Enterprise and

Industrial Park, where construction is expected to begin next year.” Obaseki, however,

added that the initiative was in line with the CBN’s plans to revamp textile industry in the

country with a view to reducing importation of textile.

While noting that the state government was promoting investment and real growth in the

agricultural sector so as to get people out of poverty, he said the CBN’s N5 billion

Commercial Agriculture Credit scheme in the state had led to employment of about 5,000

people and cultivation of 5,000 hectares. Therefore, the governor advised that the CBN’s

monetary policies be followed up with robust fiscal policies, especially infrastructural

development to ease the movement of locally produced goods and services.

He commended the CBN for having a specialised window to support the entertainment

and tourism industry, adding that the state is solidly behind the apex bank’s policies.

Meanwhile, the Governor of CBN, Mr. Godwin Emefiele, said that the apex bank’s

unconventional monetary policies have yielded positive results, helping to stabilise the

Nigerian economy.

www.citiindia.com

24 CITI-NEWS LETTER

Emefiele noted: “The favourable outcomes and strengthening outlook of the Nigerian

economy is traceable to the timeous adoption of unconventional monetary policy tools.

The CBN has been able to reduce inflation, build the forex reserves, maintain forex market

stability and foster real growth. “Nonetheless, challenges still remain. The pace of

population growth at about 2.6 per cent still outstrips real growth rate while inflation is

outside our tolerance band. Unemployment rate and incidence of poverty remain at

unacceptable levels.

Our economy still faces headwinds from expected declines in global growth and its

resulting impact on oil prices and capital flows to emerging market countries.”

Home

Prada makes new bags from recycled nylon

(Source: Home Textiles Today, November 05, 2019)

The Re-Nylon initiative is a collaboration between Prada and Aquafil

With a goal of converting all of its virgin nylon into regenerated nylon by the end of

2021, Prada’s Re-Nylon initiative is resulting in a designer collection that is sustainable.

The fashion brand is working with Italian textile yarn producer Aquafil and

its Econyl recyclable nylon to produce textiles for a line of six bag for men and women.

Econyl yarn is made from materials such as fishing nets, discarded textiles and old carpets

that are regenerated and purified. For every 10,000 tons of Econyl raw material created,

70,000 barrels of petroleum are saved, which reduces CO2 emissions by 57,100 tons.

Econyl can be recycled an indefinite number of times without affecting the quality of the

material.

“This project highlights our continued efforts toward promoting a responsible business,”

said Lorenzo Bertelli, head of marketing and communications for Prada Group. “This

collection will allow us to make our contribution and create products without using new

resources.

Home

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