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

10-05-2019 80.70 (-1.20)

10-05-2018 94.35

10-05-2017 87.35

New York Cotton Futures (Cents/lb) As on 14.05.2019 (Change from

previous day)

May 2019 72.00 (-0.28)

July 2019 65.28 (-0.17)

Dec 2019 65.90 (-0.50)

14th May

2019

Cotton shortage prompts spinning mills to switch to

man-made fiber

Inaugural Session of WTO Ministerial Meeting begins

in New Delhi

Bangladesh now depends less on India for cotton

China slaps tariffs on $60 billion in U.S. goods

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

May 2019 20880 (-860)

Cotton 15405 (-320) June 2019 20980 (-870)

Yarn 23810 (-745) July 2019 21120 (-880)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Cotton shortage prompts spinning mills to switch to man-made fiber

Inaugural Session of WTO Ministerial Meeting begins in New Delhi

Bangladesh now depends less on India for cotton

Industrial output may not see quick recovery, say economists

CPI inflation quickens to six-month high of 2.92% on food, fuel

prices

TreDS platform charts explosive growth

USDA cuts cotton estimates for India by 20 lakh bales

Automated GST refund for exporters by next month

Developing countries, LDCs should work together to correct

imbalance in WTO reform agenda: India

India's manufacturing cost up in January-March: Survey

Trident: Intimation under the Regulation 30 of SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015

Raymond looks to cash in on trade war; may raise garmenting

capacity

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

China slaps tariffs on $60 billion in U.S. goods

Vietnam's cloth import up 8 pct in 4 months

Consumers may pay more for clothing, other textiles made in China

due to tariffs

MINTEX pays Rs52.5bn to textile sector under PM exports enhance

package

What to know about the Pakistan-IMF deal

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

NATIONAL

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

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Cotton shortage prompts spinning mills to switch to man-made fiber

(Source: Dilip Kumar Jha, Business Standard, May 13, 2019)

Cotton prices have jumped to Rs 13,200 per quintal now from Rs 11,800 per quintal about

a month ago

In a major boost to synthetic textile players, spinning mills have started increasing the

use of man-made fibre to keep their fabric cost immune to rising cotton prices.

Industry sources estimate that India’s use of man-made fibre in fabric blends has

increased to 45 per cent over the last few months from 40 per cent earlier. The use of

cotton in fabric blends has declined to 55 per cent from 60 per cent earlier. Despite the

shift, India is far below the global average of man-made fibre use of 70 per cent in

blended fabrics.

Cotton prices have jumped to Rs 13,200 per quintal now from Rs 11,800 per quintal

about a month ago. Comparatively, manmade fibres are 30-40 per cent cheaper.

India is gradually catching up with the global trend of a bigger share of man-made fibres

than natural fibres in textile blends. This will boost textile exports -- especially in the

sportswear segment in which the country has been almost absent and small countries

have gained a large market share.

Madhu Sudhan Bhageria, Chairman and Managing Director, Filatex India, said “The

preference of consumers is moving from cotton to man-made fibres like polyester, given

the increasing demand for casual-wear and sports-wear. The decreasing acreage of

cotton cultivation in the country is also contributing towards the shift. Recent capacity

addition by synthetic textile players is the biggest proof of an increase in demand for

polyester from both domestic and international markets.”

Echoing Bhageria's view, R K Dalmia, President, Century Textiles and Industries, said

“India is a cotton growing country with a favourable tropical weather. Hence, the use of

cotton in India is high compared to the rest of the world. Now, there's an increasing

demand for synthetic textiles among consumers, which is driving mills to produce more

of man-made fibre blended products.”

Cotton Association of India (CAI), the apex industry body, has revised downwards

India’s 2018-19 cotton output for the fourth time to 31.5 million bales (of 170 kgs each),

which is a decline of 14 per cent from the output of 36.5 million bales reported last year.

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4 CITI-NEWS LETTER

Atul Ganatra, President, CAI, said “Scarcity of water in states like Maharashtra, Madhya

Pradesh, Telangana and Andhra Pradesh, and uprooting of cotton plants by farmers in

about 70-80 per cent area without waiting for third and fourth round of pickings are the

main reasons for the decline in cotton crop output this year. With overall cotton

consumption estimated at 31.5 million bales, exports and carryover stocks are set to be

managed from carry forward stocks from the last year and imported."

Availability of quality cotton has been a major issue for Indian spinning mills due to

lower production in India following drought in its major cultivating states including

Maharashtra, Gujarat, Telangana and Andhra Pradesh last year. A lack of moisture

forced farmers to suspend picking of cotton in the field after the second of four rounds.

Quality of cotton was very poor due to sporadic picking in the third round in some parts

of the drought-ridden states.

Man-made fibre is derived from crude oil and, therefore, abundantly available across

the world. Moreover, man-made fibre is substantially cheaper than cotton. Consumers

opting for fabrics with synthetic blends find them cheaper.

Ujwal Lahoti, Chairman, Cotton Textile Export Promotion Council (Texprocil), said,

“Some spinning mills in the South Indian states including Tamil Nadu have started

using manmade fibre again after a wide gap of several years. Traditionally, they were

using manmade fibre but had shifted to cotton about a decade ago. They have again

switched to manmade fibre.”

Home

Inaugural Session of WTO Ministerial Meeting begins in New Delhi

(Source: PIB News, May 13, 2019)

Commerce Secretary, Dr.AnupWadhawan, welcomed senior officials of participating

delegations from Developing and Least Developed Countries (LDCs) who are meeting in

New Delhi over two days to discuss key issues and challenges facing the multi-lateral

trading system.

Speaking at the inaugural session, Commerce Secretary said that the existential

challenges to the multilateral rules based trading system are manifestina spate of

unilateral measures and counter measures, deadlock in key areas of negotiations and the

impasse in the Appellate Body. The logjam in the Appellate Body is a serious threat to

the dispute settlement mechanism of the WTO and the implementation function of the

Organization. The fundamentals of the system are being tested through a tide of

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5 CITI-NEWS LETTER

protectionism around the worldvitiating the global economic environment. The

situation does not bode well for developing countries, including the LDCs.

The harm that the institutional failure due to the collapse of the Appellate Body will

cause will be felt more in Developing Countries including LDCs who needthe protection

of the rules based system more than developed countries. There is an urgent need to

engage constructively to preserve the system and come up with constructive solutions to

the problem.

The situation in the WTO has spurred a strong discourse for reforming the WTO, which

unfortunately is characterised by a complete lack of balance. The reform agendabeing

promoted does not address the concerns of the developing countries. The discussions in

the meeting being held in New Delhi give a chance to reaffirm the resolve to keep

development at the centre of the reform agenda. The reform initiatives must promote

inclusiveness and non-discrimination, build trust and address the inequalities and

glaring asymmetries in existing agreements. These asymmetries are against the interest

of developing countries including LDCs. There is a need to work together to put issues of

importance for developing countries and their priorities in the reform agenda.

There has been no active engagement or movement on key issues of concerns for

developing countries including LDCs in the negotiating agenda. Agriculture remains a

key priority for a large membership of WTO representing the developing world.

However, there is a strong push to completely relegate existing mandates and decisions

and work done for the past many years, to the background.

Discipline on fisheries subsidies are currently under negotiation at the WTO with

intense engagement to understand the issues and work out a meaningful agreement by

December 2019. The MC11 decision on fisheries subsidies clearly mandates that there

should be an appropriate and effective special and differential treatment for developing

countries. It is important for developing countries including LDCs to collectively work

for a fair and equitable agreement on disciplines in fisheries subsidies, which takes into

consideration the livelihood needs of subsistence fishermen and ground realities in our

countries, and protects our policy space to develop capacities for harnessing our marine

resources.

India believes that developing countries need to work together to protect their interests

in the WTO negotiations through preservation of the core fundamental principles of the

WTO. The two-day meet gives an opportunity to the participating countries of

developing a shared WTO reform proposal on issues of priority and interest for

developing countries. This will help in building a common narrative on issues of

importance for Developing Countries including LDCs.

In two-day meeting following issues are likely to be discussed:

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6 CITI-NEWS LETTER

Finding a solution to the ongoing impasse in the Appellate Body on an urgent

basis.

Issues of importance and priority for developing countries including LDCs in the

reform agenda.

How to reinvigorate negotiating agenda on issues of critical importance for

developing countries?

How to ensure effective S&D for all developing countries including LDCs?

Today’s senior officials ‘discussions will feed into the Ministers’ deliberations

tomorrow,on 14th May 2019.

The two-day meeting is an effective move by developing countries to positively influence

the outcome of WTO reforms by making development at its core and exploring all

means of saving multilateralism.

Home

Bangladesh now depends less on India for cotton

(Source: Daily Star, May 13, 2019)

African nations have surpassed India to

become the largest source of cotton for

Bangladesh as local spinners and millers look

to cut down their dependence on a single

source for their vital raw material.

Last year, Bangladesh, the largest importer of

cotton in the world, met 37.06 percent of its

requirement for the white fibre from East and West African countries.

India accounted for 26.12 percent of the total cotton imports, down from more than 60

percent two years ago, according to data from the Bangladesh Textile Mills Association

(BTMA).

Last year, 11.35 percent of the cotton came from the CIS (Commonwealth of

Independent States) countries, 11.14 percent from the US, 4.65 percent from Australia

and 9.65 percent from the rest of the world.

The low quality of the Indian cotton is the main reason behind the falling imports from

the neighbouring country, said Monsoor Ahmed, secretary of the BTMA.

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7 CITI-NEWS LETTER

A section of Indian cotton traders also cannot maintain timely shipment and deliver the

right quantity of cotton as per agreement, said Mehdi Ali, president of the Bangladesh

Cotton Association.

For example, it is written in the letter of credit that there may be 3 to 4 percent less

cotton than the amount agreed upon when the imported fibre is weighed in Bangladesh.

But in many cases it is 10 to 15 percent less.

“This is a big loss for us. We can’t afford these kind of losses. This is another reason for

moving away from India,” Ali added.

The concentration of moisture in the Indian cotton is higher than in other countries’,

which makes it difficult to store in the warehouses for a long time.

Last year, Bangladesh imported 8.28 million bales of cotton (one bale equals to 282

kilogrammes). In dollar terms, the imports are worth $3 billion.

The country produced 1.65 lakh bales of cotton last fiscal year, which is less than 3

percent of the annual demand for 10 million bales.

In order to bump up local production, state-run Cotton Development Board is looking

for new farming lands in hilly and swamp areas in various districts along with the

existing farming areas in Jashore, Rangpur, Dinajpur, Rajshahi, Gazipur and

Mymensingh.

The board hopes to produce 2.5 lakh bales of cotton by 2021, which will meet nearly 5-7

percent of the local consumption.

Bangladesh’s cotton imports will continue to be commensurate with the expansion in

spinning, according to the latest report of the United States Department of Agriculture.

Global consumption is forecast to grow to a record of about 126 million bales.

Growth is slightly above the long-term average and is expected to remain the same in all

of the top 10 spinning countries except Indonesia, with continued strong growth

forecast for Vietnam and Bangladesh, the report added.

Home

Industrial output may not see quick recovery, say economists

(Source: Nachiket Kelkar, The Week, May 13, 2019)

Signs of slowdown in Indian economy have been visible for a few months now, with

automobile sales hitting speed bumps and volume growth slowing even in fast moving

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8 CITI-NEWS LETTER

consumer goods. India's factory output turning negative sends further signals of a

slowdown in consumption and investment, and analysts don't see a quick turnaround.

Data released by the Central Statistics Office shows the index of industrial production in

March contracted 0.1 per cent. In February, IIP had grown at just 0.1 per cent.

Manufacturing contracted 0.4 per cent in March. Capital goods production contracted

8.7 per cent.

"Contraction in capital goods and intermediate goods is worrisome as it is indicative of

the investment activity in the economy. Both the segments have been witnessing

negative growth rates since November 2018," said Manisha Sachdeva, associate

economist at CARE Ratings.

Consumer durables growth also contracted, symptomatic of the weak demand

conditions in the country.

A liquidity crunch, making credit availability difficult is one of the reasons behind falling

industrial production, say economists.

"While bank credit to industry has accelerated during FY19 (6.9 per cent in March 2019,

versus 0.7 per cent in March 2018), it remains well behind the overall credit growth (13

per cent on 26 April 2019). Credit growth is particularly unfavourable for MSME (micro,

small and medium enterprises) and medium industries (0.7 per cent and 2.6 per cent

respectively in March," said Sujan Hajra, chief economist at broking firm Anand Rathi.

Non-banking finance companies account for a sizeable portion of funding in sectors like

automobiles. Several of these NBFCs faced liquidity challenges in the backdrop of

defaults at IL&FS.

There is an expectation that there will be another round of interest rate cut by Reserve

Bank of India in a bid to boost growth and investment, as inflation remains well below

the central bank target.

However, Hajra feels that an interest rate cut may not be too helpful in lifting industrial

output as a slower deposit than credit growth is preventing transmission of rates to the

credit market.

Upasna Bhardwaj, senior economist at Kotak Mahindra Bank feels growth prospects

may remain muted in the current financial year ending March 2020.

"Growth in the economy had been supported primarily by consumption and

government's focus on affordable housing, roads and infrastructure...However, the fiscal

scope to support capex in FY2020 will be constrained given the tall ask from GST

collections and higher revenue expenditure," said Bhardwaj, adding, private sector

investment was also unlikely to see a sharp recovery given their weak balance sheets.

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9 CITI-NEWS LETTER

Sachdeva of CARE is not expecting any pickup in industrial output for at least a few

months due to increased likelihood of lower investment activity amid uncertainties

surrounding the general elections.

Home

CPI inflation quickens to six-month high of 2.92% on food, fuel prices

(Source: The Hindu, May 13, 2019)

Food and beverages segment accelerated to 1.38% in April

Retail inflation quickened to a six-month high of 2.92% in April, driven in large part by

accelerating food and fuel inflation, according to official data released on Monday.

Growth in the consumer price index (CPI) quickened in April from 2.86% in March.

Within the index, growth in the food and beverages segment accelerated to 1.38% in

April compared with 0.66% in March. Similarly, the fuel and light segment saw inflation

quickening to 2.56% from 2.34% over the same period.

Core inflation

“CPI headline inflation came slightly below expectations, with core inflation seeing a

welcome downside surprise, which is in tandem with the growing slack in the economy,”

B. Prasanna, group head — global markets – sales, trading and research, ICICI Bank

said.

“Moreover, food inflation continued to rise with sustained upward momentum in fruits

and vegetables. We expect this trend to continue over the summer months.”

Inflation in the pan, tobacco and intoxicants eased to 4.27% in April from 4.61% in

March. Similarly, the clothing and footwear segment saw inflation slowing to 2.01%

from 2.52% over the same period.

Housing segment

The housing segment saw inflation slowing to 4.76% in April from 4.93% in March.

“Based on this reading and the slowdown visible in industrial production, we maintain

our call of another rate cut in the August policy, with the action being dependent on

realised outcomes of monsoons and trajectory of oil prices,” Mr. Prasanna added.

Home

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10 CITI-NEWS LETTER

TreDS platform charts explosive growth

(Source: Narayanan V, The Hindu, May 13, 2019)

The Trade Receivable Discounting System (TreDS), an online bill discounting platform

that helps cash-starved micro, small and medium enterprises (MSMEs) raise funds by

selling their trade receivables to corporates, has been witnessing phenomenal growth

over the last two years.

Issues licence

The concept of TReDS to facilitate the financing of trade receivables of MSMEs was

introduced by the Reserve Bank of India (RBI) in 2014. Accordingly, the RBI, in 2017,

issued licence to three players: Receivables Exchange of India Ltd (RXIL), a joint

venture between Small Industries Development Bank of India (SIDBI) and National

Stock Exchange of India Limited (NSE); Invoicemart, promoted by A Treds Ltd (a joint

venture of Axis Bank and mjunction services); and M1Xchange, promoted by Mynd

Solutions Private Limited.

“The TReDS platform has been growing tremendously. In FY2017-18, all three

exchanges put together did business of about ₹800 crore, which has touched

approximately about ₹7,000 crore in FY19, which shows the size of growth,” said

Sundeep Mohindru, CEO, Mynd Solutions. He expects all three platforms to do

aggregate business worth ₹25,000 to ₹30,000 crore in FY 2019-20.

“One of the distinguishing features of TReDS is that the seller (MSMEs) of receivables

are not required to give any collateral, and will have no recourse to them in case of

defaults,” said Kalyan Basu, MD and CEO, Invoicemart.

Invoicemart, which crossed ₹3,000 crore recently, targets to add 45 bankers/FIs and

6,500 participants (buyers and sellers), and clock ₹10,000-crore disbursement by

March 2020.

The TReDS platform not only also ensures the regular flow of operational funds to

MSMEs at attractive interest rates, but also ensures that their working capital limits are

not affected as these are ‘off balance sheet finance’. It also helps corporates comply with

the MSME Act, under which a buyer has to pay the MSME supplier within 45 days.

“Our paper work has drastically come down and we are able to save more time,” said R

Selvaraj from Schnell Energy, an MSME supplier, which sells smart pump panels to CRI

Pumps.

On its part, the government has taken a host of initiatives to promote the platform.

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11 CITI-NEWS LETTER

Faces headwinds

In 2017, the Central government made it mandatory for public sector undertakings

(PSUs) to register on the platform. But this move has faced some headwinds. “The

process of approving an invoice in itself is a long drawn process in case of PSUs,” said

Mohindru. In such cases banks don’t come forward to fund the invoices, thereby

negating the benefits of the scheme.

In November 2018, Prime Minister Narendra Modi announced that companies whose

turnover exceeds ₹500 crore will have to be registered on the TReDS platform.

Besides, the RBI also classifies banks’ disbursement under this platform under priority

sector lending (PSL). For banks, advances under this platform is classified as PSL.

“This platform gives equal business opportunity to all banks, irrespective of their size.

With the vast amount of data available in the platform, banks can reach out to more

customers information about whom was hitherto unavailable,” said a senior official with

Karur Vysya Bank.

Home

USDA cuts cotton estimates for India by 20 lakh bales

(Source: Financial Express, May 14, 2019)

The United States Department of Agriculture (USDA), which had estimated the Indian

cotton production estimate for the 2018-19 crop year at 345 lakh bales (of 170 kg each),

have now reduced their latest estimate by 20 lakh bales to 325 lakh bales.

The United States Department of Agriculture (USDA), which had estimated the Indian

cotton production estimate for the 2018-19 crop year at 345 lakh bales (of 170 kg each),

have now reduced their latest estimate by 20 lakh bales to 325 lakh bales.

The USDA have made this reduction in their latest estimate, which has been released on

May 10, 2019 after extensive deliberations with the Cotton Association of India (CAI)

and also after considering all aspects and the prevailing situation in India, said Atul

Ganatra, president, CAI, in a statement.

CAI’s April estimate for the 2018-19 season has placed the Indian cotton crop at 321

lakh bales. The cotton body has reduced its production estimate for 2018-19 crop year,

beginning October 1, 2018, to 315 lakh bales, lower by 6 lakh bales, compared to its

previous estimate of 321 lakh bales released last month.

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12 CITI-NEWS LETTER

The cotton crop estimate released by the CAI for Maharashtra is lower by 2 lakh bales

compared to its previous estimate made last month while the cotton crop estimates for

the North Zone, Madhya Pradesh, Telangana and Andhra Pradesh, now made by the

CAI, are lower by 1 lakh bales each compared to the previous month estimate.

Water scarcity in some states and uprooting of cotton plants by farmers in about 70-

80% area without waiting for 3rd and 4th pickings are the main reasons for reduction in

the cotton crop this year, Ganatra had said.

The total cotton supply, estimated by the CAI during the period from October 2018 to

April 2019, is 314 lakh bales which consists of arrival of 278.73 lakh bales and imports of

7.27 lakh bales up to April 30, 2019 and the opening stock at the beginning of season on

October 1, 2018 at 28 lakh bales.

Further, the CAI has estimated cotton consumption during the months of October 2018

to April 2019 at 183.75 lakh bales while the export of cotton estimated by the CAI up to

April 30, 2019 is 42.5 lakh bales.

Stock at the end of April 2019 is estimated by the CAI at 87.75 lakh bales including 40

lakh bales with textile mills and remaining 47.75 lakh bales with CCI, MNCs and others

(MNCs, traders, ginners, among others).

Home

Automated GST refund for exporters by next month

(Source: Live Mint, May 13, 2019)

Exporters of goods and services as well as suppliers to SEZ units are likely to get GST

refunds automatically from June as the revenue department plans to introduce faceless

scrutiny of refunds and faster claim settlement, an official said.

Under GST, every person making a claim of refund on account of 'zero-rated' supplies

has two options. Either he can export without payment of integrated tax under Bond/

LUT and claim a refund of accumulated Input Tax Credit (ITC) or he may export on

payment of integrated tax and claim refund thereof.

Currently, the facility of automatic refund is available only for those exporters who have

paid Integrated Goods and Services Tax (IGST) while exporting goods. Since the GST

Network (GSTN) systems are integrated with Customs, hence, refunds are generally

transferred to the bank accounts of such exporters within a fortnight.

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13 CITI-NEWS LETTER

However, manufacturing exporters and suppliers to SEZ, who want to claim a refund of

ITC, have to file an application in Form GST RFD-01A on the common portal and

thereafter manually submit a print out of the form along with other documents to the

jurisdictional officer.

Once implemented, the time period for such refunds will come down to about a

fortnight from months at present.

"The revenue department and GSTN is working to make the process of seeking tax

refund by all exporters faceless by next month. It would make the process faster and also

help in eliminating fake refunds," an official told PTI.

GST refunds of exporters run into thousands of crores and any delay in the processing of

refund claims blocks working capital of exporters.

AMRG & Associates Partner Rajat Mohan said fully computerized tax refund in case of

export of services would be based on a comprehensively integrated GSTN system which

connects with RBI servers to track the receipt of payments and link them automatically

with invoice level information.

"Tax refunds for inverted duty structure could also be copiously automated in future,

however, it would require GSTN system to be loaded with HSN-enabled invoice level

information by every vendor, so that only eligible tax credits could be processed without

any human intercession," he added.

Home

Developing countries, LDCs should work together to correct imbalance in

WTO reform agenda: India

(Source: The Hindu Business Line, May 13, 2019)

2-day informal meet of poorer members of the WTO begins in New Delhi

India has said the reform agenda being promoted at the World Trade Organisation

(WTO) does not address the concerns of the developing countries, including Least

Developed Countries (LDCs), and poorer members must work together to correct this.

“The reform initiatives must promote inclusiveness and non-discrimination, build trust

and address the inequalities and glaring asymmetries in existing agreements. These

asymmetries are against the interest of developing countries, including LDCs. There is a

need to work together to put issues of importance for developing countries and their

priorities in the reform agenda,” Commerce Secretary, Anup Wadhawan, said at the

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14 CITI-NEWS LETTER

inaugural session of the meeting of developing countries and LDCs in New Delhi on

Monday.

Twenty-three countries, including India, are meeting in New Delhi over two days to

discuss key issues and challenges facing the multilateral trading system. Following the

meeting of senior officials on Monday, trade ministers, delegation heads and the WTO

Director-General will meet on Tuesday and try to agree on the ‘Delhi Declaration’

suggesting a way ahead at the WTO, including expectations for the forthcoming WTO

Ministerial Conference in Kazakhstan next June.

The Commerce Secretary pointed out that there was a strong push to completely

relegate existing mandates and decisions and work done for the past many years, to the

background, which was getting reflected in the on-going negotiations on fisheries

subsidies (to be concluded at the Kazakhstan meet), where some members were trying

to deny poorer countries special and differential treatment.

“The MC11 (ministerial conference 11) decision on fisheries subsidies clearly mandates

that there should be an appropriate and effective special and differential treatment for

developing countries. It is important for developing countries, including LDCs, to

collectively work for a fair and equitable agreement on disciplines in fisheries subsidies,

which takes into consideration the livelihood needs of subsistence fishermen and

ground realities in our countries, and protects our policy space to develop capacities for

harnessing our marine resources,” he said.

India further pointed out that the existential challenges to the multilateral rules based

trading system are manifest in a spate of unilateral measures and counter-measures,

deadlock in key areas of negotiations and the impasse in the Appellate Body.

“The harm that an institutional failure due to the collapse of the Appellate Body will

cause will be felt more in developing countries, including LDCs, who need the protection

of the rules based system more than developed countries. There is an urgent need to

engage constructively to preserve the system and come up with constructive solutions to

the problem,” he said.

India believes that developing countries need to work together to protect their interests

in the WTO negotiations through preservation of the core fundamental principles of the

WTO, he added. “The two-day meet gives an opportunity to the participating countries

to develop a shared WTO reform proposal on issues of priority and interest for

developing countries. This will help in building a common narrative on issues of

importance for developing countries, including LDCs,” he said.

Home

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15 CITI-NEWS LETTER

India's manufacturing cost up in January-March: Survey

(Source: Yurou, Xinhua, May 13, 2019)

India's production cost as a percentage of sales has risen during the January-March

quarter, as per the quarterly survey conducted by the industry body and released late

Sunday.

The rise is seen due to increased cost of raw materials, wages, power cost, rising crude

oil prices, increase in finance cost and rupee depreciation.

The quarterly survey is conducted to assess the sentiment drawn from responses of over

300 manufacturing units from both large and small segments with a combined annual

turnover of over 50 billion U.S. dollars.

As per the survey, 72 percent respondents saw a rise in manufacturing cost during the

quarter compared to 62 percent respondents last year.

High raw material prices, cost of finance, uncertainty of demand, shortage of skilled

labor, high imports, requirement of technology up-gradation, low domestic and global

demand, excess capacities among others were the reasons behind the rising production

cost, the release said.

Overall, India's cement and ceramics along with textiles are expected to report strong

growth while automotive, electronics, and leather and footwear will see low growth in

the quarter, as per the survey.

The rest of the sectors mentioned in the survey including chemicals, fertilizers,

pharmaceuticals, capital goods, metals and metal products, paper products and textile

machinery will see moderate growth during the quarter.

Home

Trident: Intimation under the Regulation 30 of SEBI (Listing Obligations

and Disclosure Requirements) Regulations, 2015

(Source: Economic Times. May 13, 2019)

The Board of Directors of the Company in their meeting held today i.e. May 13, 2019 has

approved the expansion of Yarn segment by installation of 1,62,432 spindles & 3,600

Rotors including other balancing equipment to manufacture approx 48482 TPA of 100%

cotton yarn at Budni, Madhya Pradesh.

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16 CITI-NEWS LETTER

Further, details as required under Regulation 30 the SEBI (Listing Obligations and

Disclosure Requirements) Regulations, 2015 and SEBI Circular no.

CIR/CFD/CMD/4/2015 dated September 9, 2015 are as follows:

Please follow the link for further information:

https://www.bseindia.com/xml-data/corpfiling/AttachLive/b778ac0c-c5d8-4cde-82a8-43e37efd849f.pdf

Home

Raymond looks to cash in on trade war; may raise garmenting capacity

(Source: The Hindu BusinessLine, May 14, 2019)

Eyes Telangana, Jharkhand and AP for investment

Gautam Hari Singhania-led textile major Raymond is exploring the possibility of

enhancing its garmenting capacity as the ongoing trade war between the US and China

opens up fresh opportunities for Indian textile companies.

Raymond Group, which manages garmenting business through its wholly-owned

subsidiaries — Silver Spark Apparel (suits), EverBlue Apparel (jeans wear) and

Celebrations Apparel (shirts) — is exploring opportunities in Andhra Pradesh,

Telangana and Jharkhand based on the incentives these States offer.

New segments

The company has lined up a capital expenditure of ₹ 250 crore for this financial year

and entering into new segments such ethnic wear through khadi brand and women’s

workwear. The company recently completed a project to produce 4.2 million metres

linen fabric per year in Amravati.

Sanjay Behl, Chief Executive Officer, Raymond, in an interaction

with BusinessLine, said the company has bagged an order from one of the US’ largest

bespoke players that had moved 20-25 per cent of its production from China. The

supply started three months ago and will be scaled up in the coming months, he said.

“I am actively evaluating Telangana and Andhra Pradesh for garmenting. About 95 per

cent of garmenting labour is done by women and it becomes the second income in a

household. A small facility can generate jobs for 3,000-5,000 women and it is good for

the State,” he said. Jharkhand offers attractive incentive for garmenting industry and a

few competitors have moved in and Raymond is also evaluating it, he added.

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17 CITI-NEWS LETTER

Though, he said, the focus now is on up-selling present capacity and improving value

realisation.

“As we are doing this, we are evaluating some more capacity if it comes at a lucrative

economic proposition,” he said.

Exports looking up

Portfolio buying for US retailers earlier was 90 per cent China and 10 per cent the rest of

the world but this has started moving to 65 per cent China and 35 per cent others, said

Behl.

India has managed to beat competition from countries such as Bangladesh, Vietnam

and Sri Lanka, which enjoy duty-free access to the US market.

Behl said the minimum wage in Bangladesh was almost half of that in India, but in last

six months it has gone up by 55 per cent. So, the relative advantage of duty is somewhat

negated, he added.

On the other hand, here the government has given 4-6 per cent export incentives to the

garmenting industry in the last two months. Earlier, this was subsumed into GST but

now it is given as incentive.

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18 CITI-NEWS LETTER

GLOBAL:

China slaps tariffs on $60 billion in U.S. goods

(Source: CBS News, May 13, 2019)

China has announced it is raising tariffs on $60 billion in U.S. goods in retaliation for

the latest levies on its exports announced last week by the Trump administration.

The Chinese finance ministry said Monday that it, effective June 1, it will impose duties

of 5% to 25% on hundreds of U.S. products. American-made goods subject to the tariffs

include batteries, household appliances, spinach, coffee, construction equipment,

rubber, and leather and cotton textiles. That followed Trump's increase Friday of duties

on $200 billion of Chinese imports from 10% to 25% in a dispute over Beijing's

technology ambitions and trade surplus.

According to Morgan Stanley economists, the tariff hike could trim China's annual

economic growth by 0.5 percentage points. That impact could grow if uncertainty

prompts companies to cut jobs or postpone investment, they said.

Stocks dive as trade dispute flares

U.S. stock markets tanked in opening trade Monday, following a downdraft in global

financial markets. The Dow dived 511 points, or nearly 2% with the broader S&P 500

and tech-heavy Nasdaq sinking more than 2%.

The dispute between the world's two largest economies is likely to get worse before it

gets better. Goldman Sachs analysts think the Trump administration will propose

another volley of tariffs on more than $300 billion in Chinese imports. But they note the

process to implement the measures would take roughly two months to complete,

offering a window for U.S. and Chinese negotiators to conclude a trade deal.

"Trade talks between the U.S. and China are likely to continue, despite the resumption

of tit-for-tat tariffs," Freya Beamish, chief Asia economist for Pantheon

Macroeconomics, said in a research note.

President Donald Trump say Americans benefit from such tariffs, crediting them in a

tweet on Monday for boosting U.S. economic growth. Over the weekend, however, White

House chief economic adviser Larry Kudlow conceded that U.S. companies and

consumers will also feel the pain.

"Both sides will suffer on this," Kudlow said on "Fox News Sunday."

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19 CITI-NEWS LETTER

Tariffs imposed by the Mr. Trump over the last year could cost an average family of four

around $767 a year, one study from advocacy group Trade Partnership estimated in

February.

The "costs of the tariffs have fallen entirely on U.S. businesses and households,"

Goldman Sachs said in a client note.

Home

Vietnam's cloth import up 8 pct in 4 months

(Source: Xinhua, May 13, 2019)

Vietnam poured nearly 4.1 billion U.S. dollars into importing cloth in the first four

months of this year, posting a year-on-year rise of 8 percent.

Its largest cloth import markets included China, South Korea, and Japan, according to

the Vietnamese Ministry of Industry and Trade on Monday.

In the four-month period, Vietnam also imported 530,000 tons of cotton worth 988

million U.S. dollars, down 2.5 percent in volume and down 0.6 percent in value.

Meanwhile, the country's yarn import totaled 800 million U.S. dollars, surging 11.2

percent on-year.

In 2018, Vietnam poured 12.9 billion U.S. dollars into importing cloth, up 13.5 percent;

over 3 billion U.S. dollars into importing cotton, up 28.5 percent; and 2.4 billion U.S.

dollars importing yarn, up 32.7 percent.

Vietnam reaped 30.4 billion U.S. dollars from exporting garments and textiles last year,

up 16.6 percent against 2017, mainly to the United States, Japan and China, according

to the country's General Statistics Office.

Home

Consumers may pay more for clothing, other textiles made in China due to

tariffs

(Source: Rachael Penton, Fox28, May 13, 2019)

On Friday, the Trump administration raised tariffs on Chinese imports

from 10% to 25%. China responded by placing similar tariffs on U.S.

exports such as batteries, spinach, and coffee on Monday morning.

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20 CITI-NEWS LETTER

Ben Brown, manager of Ohio State's Ohio Farm Management Program and expert on

the continuing trade war, has followed the trade war very closely because of his work

with Ohio’s farmers. He says consumers may eventually have to pay the price.

"We also know that some of those costs have been passed on to to us as consumers,"

Brown said. "We haven't seen a huge price increase of goods so far, but going from 10

percent to 25 percent is a pretty sizeable leap.”

The biggest hit to our wallets, likely won't be at the grocery store, but at the mall. Textile

items with that ‘Made in China’ tag could be the most noticeable items to go up.

"Clothing and material, anything to build and make fabrics is something that's heavily

impacted by this," says Brown.

When it comes to grocery shopping, you don't have to worry about fruits and vegetables

costing more, since they don't come from China.

"A lot of our produce we grow comes from the United States," says Brown. "If it's not

coming from the United States, it's coming from Mexico or South America.”

However, it's possible that other grocery store items could increase, but it's hard to say

exactly what and when.

“In the short term, if goods are coming from the Chinese and they're faced with this

higher tariff, then I think we could see an increase in the grocery store for those goods,"

adds Brown. "It's a matter of where they come from.”

One item that will increase, is pork, but that's not because of the trade war. Brown says

it's because up to 40% of China's hog population is infected by the African Swine Fever.

"We might see some increases in pork due to the decrease in world supply,” he said.

Electronics like cell phones aren't included in this latest round, but Brown says he'd

expect them to be included in the next one, which may have the biggest effect of all on

American wallets.

Home

MINTEX pays Rs52.5bn to textile sector under PM exports enhance package

(Source: Business Recorder, May 13, 2019)

The Ministry of textiles has so far paid Rs 52.5 billion to the local textile industry under

Prime Minister’s Exports Enhancement Package since July 2017, to help boost exports

from the country, senior official in the ministry told APP.

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21 CITI-NEWS LETTER

During the last 10 months, the ministry paid Rs10.5 billion to the textiles industry while

it intends to pay more Rs10 billion during the couple days, the official said.

During the upcoming year, the government would pay further Rs40 billion to the textile

sector for value addition, which the official said would boost country’s external trade.

The Exports Enhancement Package was aimed at bridging gap between exports and

imports by encouraging the export oriented industry and incentivising the industrial

sector for introducing the innovative, modern and cost cutting technologies, particularly

in the textile industry.

Replying to a question, he said that so far State Bank of Pakistan (SBP) has received the

Rs 26 billion refund claims under the package, which he said would be processed

accordingly.

He said in last seven months, the government had paid Rs 52.5 billion in terms of

outstanding claims, adding that pending liabilities of Rs. 20 billion would be paid off in

coming months.

“The government is committed for the execution of PM export enhancement package for

development and growth of the textiles sector for increasing country’s export,” the

official added.

He further said that increasing country’s exports and creating job opportunities for the

people were the top most priorities of the government.

Home

What to know about the Pakistan-IMF deal

(Source: TRT World, May 13, 2019)

Islamabad has once again been forced to approach the lender but the loan is a stopgap

measure and Prime Minister Imran Khan’s government has to take difficult steps to

resurrect the economy.

After months of back and forth talks, Pakistan has finally secured a badly needed $6

billion ‘bailout’ loan from the International Monetary Fund (IMF).

While exact details of the deal haven’t been spelt out, the lender wants Islamabad to

confront longstanding issues like low tax revenue collection and power sector reforms.

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22 CITI-NEWS LETTER

The government of Prime Minister Imran Khan, who took office last August, has been

criticised for dilly-dallying on IMF’s help for months in hopes that preferential loans

and aid from allies can avert a balance of payment crisis. That didn’t work.

Pakistan’s economy has slowed, prices of fruits and vegetables have shot up and

exporters in the key textile sector have struggled.

In sweeping changes to his cabinet last month, Khan removed finance minister Asad

Umar, a close aide, and replaced him with a technocrat Abdul Hafeez Shaikh.

This is the 13th time since the 1980s that Pakistan has entered an IMF programme,

which will run a course of three years.

Shaikh says Pakistan needs to come up with $12 billion this year to bridge the gap

between its foreign currency holdings and what is required to pay for loans and

imports.

Beyond the fund

Compared to Pakistan’s total foreign debt of $90 billion, the IMF loan comes to just

around $2 billion a year, which doesn’t add up to much.

But Saad Bin Ahmed, head of equities, at a Karachi-based brokerage house, says the deal

helps restore the confidence of foreign investors, which is more important than the

actual amount to be received from the fund.

“Entering the programme was essential because it would allow you to raise money from

the other avenues,” he told TRT World.

“It gives an assurance to all the other players in the market that now you can support

Pakistan because it’s getting disciplined.”

IMF loans usually come with stringent conditions. Officials indicate that Islamabad

would have to phase out subsidies from its power sector, go after influential tax evaders

and curb financing of militant organisations.

“Pakistan offers an opportunity to foreign investors in sectors such as food processing,

energy and autos. Demand for these products hasn’t receded,” Ahmed says.

Shaikh, the finance advisor, had taken Pakistan through its most successful privatisation

period in the early 2000s when he was responsible for divesting government's stake in

state-owned companies.

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23 CITI-NEWS LETTER

Raise the tax

One area where the IMF has put a lot of focus is tax collection. Pakistan has for years

struggled to raise its tax revenue and bring more people and organisations under the tax

net.

In the six months between June and December 2008, its fiscal deficit—the shortfall in

government revenue—increased to 2.7 percent of the GDP from 2.2 percent in same

period of previous year.

That was mainly because Islamabad is using more than half of its revenue to pay for

loans and defence spending, which are a major burden on the economy.

The deficit in the second half of last year was around $7 billion, which the government

bridged by borrowing from local banks and friendly countries such as Saudi Arabia and

China.

The reliance of Khan’s government on domestic borrowing not just crowded out the

private sector but also stoked inflation to more than 8 percent, which has raised tempers

in the month of Ramadan.

Earlier this month, Khan replaced the head of the country’s tax body, the Federal Board

of Revenue, and appointed a reputed tax consultant to oversee the system.

Let it float

Under the agreement, the IMF is pushing Pakistan to let market forces decide the value

of the rupee against the US dollar.

The Pakistani Rupee has lost more than a third of its value in the past year.

For two years, the State Bank of Pakistan has intervened in the foreign exchange market

- buying and selling foreign currency - to artificially inflate the rupee, which badly

affected exports.

“And now we don’t know what the exchange rate is going to be in the next couple of

weeks. There’s total confusion,” says Shabir Ahmed, a leading bedwear exporter.

A sudden depreciation in the rupee’s value in recent months had added to an increase in

the price of products such as baby milk, which the country imports.

Yet a complete free float is not possible as the market doesn’t has the depth to manage

the large difference between foreign currency that comes in and goes out of the country,

says Saad bin Ahmed.

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24 CITI-NEWS LETTER

“IMF has been demanding this for years but I don’t see any major shift from how the

rate is managed at the moment,” he says.

Multiple IMF programmes, including the last which ended in 2016, haven’t helped

Pakistan deal with weaknesses that have led to the balance of payments crisis.

The last programme did help boost foreign exchange reserves for a time and made

Pakistan’s capital markets attractive to foreign investors. However, that didn’t motivate

the government to address more pressing issues.

“Just like the previous government ( of ex Prime Minister Nawaz Sharif), this

administration has not bothered to ask what we, the exporters, want,” says Shabir

Ahmed.

“I don’t see things getting better any time soon.”

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