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

01-06-2020 65.45 (Unch)

03-06-2019 79.10

05-06-2018 99.60

New York Cotton Futures (Cents/lb) As on 03.06.2020 (Change from

previous day)

July 2020 60.30 (-0.07)

Oct 2020 59.40 (+0.83)

Dec 2020 59.61 (+0.90)

03rd June

2020

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

June 2020 16240 (+260)

Cotton 11455 (+200) July 2020 16450 (+240)

Yarn 18845 (+230)

Future Ready: Will get growth back, reforms on track,

says PM Modi

Express Expressions with Smriti Irani: India has

capability to make world class products

Exports to Bangladesh yet to resume as truckers fear

strict quarantine after return

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Future Ready: Will get growth back, reforms on track, says PM Modi

Express Expressions with Smriti Irani: India has capability to make world class products

CITI hails decisions of Union Cabinet for boosting MSMEs

CITI Chairman Welcomes Centre's Decision To Support MSMEs, Days Confidence To Grow Will Boost

CITI hails Govt for boosting MSMEs, farmers and street vendors

Industries welcome revised definition for MSMEs

Exports to Bangladesh yet to resume as truckers fear strict quarantine after return

Covid takes heavy toll on SEZs; exports plummet 50 per cent, over a third of orders get cancelled

From Zero To Rs 7,000 Crore Industry In Two Months: How PPE Kits Manufacturing Sector Developed Rapidly During Onset

Of Coronavirus Pandemic

Tax relief likely on creation of ‘permanent establishment’

Enhancement of turnover limit of MSME sector to help exporters

Reviving demand is key to India’s economic recovery

Regulating crops doesn't guarantee better profitability for farmers: FSII Director General

India’s lockdown strategy was faulty, economy to contract 10% this fiscal: Former finance secretary SC Garg

SBI creates separate business vertical to drive MSME, agri finance

SBI, ICICI Bank cut savings rates, check new rates

India needs to open up more and knock down import tariff imposed in last 3 years: Arvind Panagariya

Impact of Covid-19 Pandemic on Small Textile Units

Hike in MSME limits is relief for textile industry: SIMA

Increasing MSP on cotton not a sustainable solution, bring back TMC: SIMA

Garments association demands reopening of shops

----------------------------------------------------------------------------- COVID-19: World Bank urges countries to go for comprehensive policies to boost long-term growth

Time to work with Asian partners on a global COVID-19 recovery strategy

Foreign direct investments could contract by 40% this year, hitting developing countries hardest

Eastman Staples supplies PPE manufacturing equipment

A promising approach in the development of antibacterial textiles

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

NATIONAL

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

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Future Ready: Will get growth back, reforms on track, says PM Modi

(Source: Financial Express, June 03, 2020)

PM's assertion follows GDP growth slowing to a 44-quarter low of 3.1% in Q4FY20 and

rating downgrade by Moody's

Prime Minister Narendra Modi on Tuesday expressed his strong resolve to regain the

economy’s growth momentum and asked for industry inputs for ‘more structural reforms’

his government is determined to undertake, in its effort to facilitate the country’s ‘growth-

oriented, big take-off’. “For us the meaning of reforms is the boldness to take decisions

and persist with them till the logical end,” Modi said, addressing the Confederation of

Indian Industry’s 125th annual session, via video conference.

Listing out the steps taken by his governments over the years like the insolvency code,

GST and bank mergers to bolster the economy’s productive capacity and the reform

measures announced recently in the areas of agriculture produce marketing and coal

mining, Modi said these long-pending reforms were among the ones the country appeared

to have abandoned due to their apparent intractability. The prime minister asserted: “Yes,

we will definitely get our growth back… India will get its growth back”.

Modi, accused by many analysts of being content with incrementalism in his approach to

reforms during the tenure of his first government, has clearly changed tack. In the

backdrop of the economic expansion rate having plunged to a 11-year low of 4.2% in 2019-

20, and even the RBI prognosticating the growth to be in the negative territory in the

current financial year, Modi clung tenaciously to his pledge to resort to “systematic,

planned, inter-connected and integrated” reforms to find a way out of the current morass.

Land and labour market reforms are at the top of Corporate India’s wish-list, as it looks

forward to an economic climate for them to resume long-dried-up investments.

Stating that “every sector has to be made future-ready”, Modi said his government was

wedded to create an ‘encouraging eco-system’ for private firms and entrepreneurs,

through continuous decisions and steps. “Corona may have slowed our speed (of growth)

but India has now moved ahead from lockdown with the phase one of unlock. Unlock

Phase-1 has reopened a large part of the economy,” he said. According to him, intent,

inclusion, investment, infrastructure and innovation are crucial for India to revert back

to a high-growth trajectory.

The prime minister’s comments come at a time when the country’s fiscal situation has

deteriorated and the government is struggling to give support to the economy via own

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4 CITI-NEWS LETTER

spending, while also incentivising the players in the economy through what it calls

Atmanirbhar Bharat package consisting mainly of supply side steps.

Advocating the concept of Make-for-the-World, Modi said: “the world is looking for a

trusted, reliable partner. India has that potential, strength and ability”. He noted that

while battling corona at home, India helped over 150 countries with medical supplies.

To boost manufacturing and job creation, Modi said the government has identified

priority sectors such as furniture, air conditioners, leather and footwear for special

attention. India imports about 30% of its air-conditioner requirements while the country

is not a leading player in world markets export of leather and footwear despite being the

second largest producer.

Moody’s Investors Service on Monday trimmed India’s sovereign rating by a notch to the

lowest investment grade of Baa-3 and retained the “negative” outlook, giving effect to

earlier warnings of a downgrade if the country’s fiscal metrics “weaken materially” in the

wake of the Covid-19 pandemic.

Since the agency had warned of downgrade on May 8, the Centre unveiled an economic

stimulus package of close to Rs 21 lakh crore (barely 10% of which was additional

budgetary cost) and the Centre’s fiscal deficit in FY20 was revealed to be 4.6% of GDP,

the highest level since FY13. The fiscal deficits of both the Centre and states are expected

to rise substantially in FY21, most likely to double-digit levels, given the economic slump

and continued reliance on government spending to revive the economy and meet the extra

spending obligations related to Covid-19.

Moody’s expects India’s real GDP growth to contract by 4% in FY21 due to the shock from

the coronavirus pandemic and related lockdown measures, followed by 8.7% growth in

the next fiscal and closer to 6% thereafter. It forecasts the country’s debt burden to rise to

about 84% of GDP in FY21, indicating fiscal stress.

Crisil has said recently that Covid-19 pandemic would likely inflict a 10% permanent loss

to real GDP, so a catch-up to the pre-crisis trend level of GDP won’t be possible over the

next three fiscal years. After the global financial crisis, a sharp growth spurt helped catch

up with the trend within two years.

GDP grew 8.2% on average in the two fiscals following the global financial crisis. Massive

fiscal spending, monetary easing and swift global recovery played a role in a V-shaped

recovery then. “To catch up would (now) require average GDP growth to surge to 11% over

the next three fiscals, something that has never happened before,” Crisil wrote.

Home

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5 CITI-NEWS LETTER

Express Expressions with Smriti Irani: India has capability to make world

class products

(Source: Prabhu Chawla and Kaveree Bamzai, Indian Express, June 03, 2020)

Union Minister for Women and Child Development and Textiles Smriti Irani said India can

make world-class products at a competitive price.

Union Minister for Women and Child Development and Textiles Smriti Irani said India

can make world-class products at a competitive price.

Deep engagement with officials at the state and district levels has yielded positive results,

she said in a conversation with Prabhu Chawla, Editorial Director, The New Indian

Express and author and senior journalist Kaveree Bamzai on TNIE’s Expressions, a series

of live webcasts with people who matter.

Women across classes have shouldered a lot of the burden during the

pandemic. Can you take us through some of the initiatives you have taken in

the past two months, especially for domestic violence — one of the biggest

issues women faced?

We were working to ensure that the one-stop crisis centres across the country were

functional and never shut their doors, irrespective of the country being in lockdown. We

reached out to every one-stop centre. Similarly, we engaged with all child care centres and

women’s homes across the country to ensure that the people living in those homes are

safe and have access to essential commodities.

We also ensured that the anganwadis, which are at the frontline, continued to function.

Even if anganwadis were shut, the take-home rations were delivered at the doorstep. In

the lockdown, we had 9 crore female beneficiaries who received the rations at the

doorstep.

How do you take the incident of anganwadi workers being beaten away?

The PM has been very vocal not only in terms of his words but also his action that the

breakdown of law and order will not be accepted by the Centre. We have taken a Cabinet

decision to protect frontline workers as well. There was also a public outrage over it.

During the COVID-19 crisis, we saw a cohesiveness in the PM’s approach and the people’s

response.

Have cases of child abuse and violence against women gone up?

When COVID-19 hit India, there was a lot of talks — and it came from international

agencies — that across the world 80 per cent women are getting beaten at home. When

we asked for validated figures, they said this is just a supposition. When we tracked the

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6 CITI-NEWS LETTER

numbers, we found that they have gone down. But because it is an evolving situation, it

would be premature for me to make a generic statement.

What have we achieved in the journey from Make in India to ‘Atmanirbhar

Bharat’?

We studied 580 export-import lines and we alerted the revenue department on increasing

the import duties. In light of Covid-19, we tried to figure out how we can enhance the

opportunities for local artisans. We coordinated with self-help groups for making face

covers which are being locally consumed. I am engaged in further discussions on the

textile ministry with the ministries of finance and commerce which I cannot mention right

now.

Will the existing textile units have to reinvented for new kinds of products?

They have themselves adapted to new market needs.

Home

CITI hails decisions of Union Cabinet for boosting MSMEs

(Source: Fibre2Fashion, June 02, 2020)

The Confederation of Indian Textiles Industry (CITI) has welcomed the decisions

of the Union Cabinet, chaired by Prime Minister Narendra Modi, which will

provide economic support for MSMEs, farmers, street vendors and agricultural

sector. Since they are the backbone of the Indian economy, support to them will result in

growth of the overall economy.

MSMEs, which have 29 per cent share in the country's GDP and 48 per cent share in the

country's exports and provide employment to millions of people, will receive maximum

benefits from the change in the definition of MSME under which turnover limit for

medium enterprises has been revised upward to ₹250 crore from present ₹100 crore,

as announced earlier. Under the new definition, the distinction between manufacturing

and services enterprises has been eliminated.

In the revised definition, even small weaving mills may be included and because of this

many garment manufacturers will benefit, said CITI chairman T Rajkumar. He further

stated that the Centre’s revision in the definition of MSMEs will give MSMEs the much-

needed confidence to grow and will promote its seamless expansion in the country.

Rajkumar also welcomed the decision of Distressed Asset Fund of ₹4,000 crore created

to help weaker MSMEs that are struggling through NPA norms due to the outbreak of

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7 CITI-NEWS LETTER

COVID-19 pandemic. "This fund will bring them back into the business and they can start

the business activities afresh with the help of this fund. Further ₹20,000 crore

subordinated debt for stressed MSMEs is likely to benefit 2 lakh stressed MSMEs."

"This is the first time when the Government has given so much importance to the MSME

sector," said Rajkumar. He further stated that the Government’s announcement of

₹10,000 crore funds for MSME to get listed in the stock market is a welcome measure.

He pointed out that along with the other investment, this fund will reach ₹50,000 crore

and more funds from the market to MSMEs-listing in the stock market will make MSMEs

attract more funds from the market and this will boost the MSME Sector to enhance its

reach to major destinations.

CITI chairman appealed to the Government to consider industry’s urgent demand of

extending the moratorium for repayment of loans and interest up to March 31, 2021 and

extend 25 per cent additional working capital without any collateral or margin money for

all the categories of accounts other than MSMEs also.

He has also hoped that the Government would consider textile and clothing industry’s

demand for one-time debt-restructuring which can solve many financial related problems

of the textile and clothing sector.

CITI chairman also felt that the Government would soon announce a special package for

boosting exports for all the textiles and clothing products including cotton yarn and fabric

to grab the emerging opportunities and also consuming the surplus cotton that might

significantly affect the cotton farmers in the country.

The revised upward limit for the medium enterprises to ₹250 crore, excluding exports

from ₹100 crore as announced earlier, will certainly boost many companies which were

not able to come under MSME category. However, in order to encourage technology

upgradation and scale of operation in the textile sector, the condition of 'investment and

sales turnover' needs to be modified as 'investment or sales turn over', Rajkumar said. He

hoped that the capital-intensive textile sectors like spinning, independent weaving,

processing, etc will also get the much-needed economic package to tide over the ill-effects

of COVID-19 pandemic situation.

Home

CITI Chairman Welcomes Centre's Decision To Support MSMEs, Days

Confidence To Grow Will Boost

(Source: Daily Addaa, June 03, 2020)

Confederation of Indian Textile Industry (CITI) Chairman T. Rajkumary said on Monday

that the centre's revised definitions for MSMEs will increase the confidence to grow

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8 CITI-NEWS LETTER

The revised definition will give micro, small and medium Enterprises (MSMEs)

confidence to grow and will promote their expansion, Confederation of Indian Textile

Industry (CITI) Chairman T. Rajkumary said on Monday.

The industry body welcomed the decisions of the Union Cabinet chaired by Prime

Minister Narendra Modi for providing economic support to MSMEs, farmers, street

vendors and the agricultural sector.

He said MSMEs, which have a 29 per cent share in the country''s GDP and 48 per cent

share in the country''s exports and provide employment to millions of people, will receive

maximum benefits from the change in the definition of MSME under which turnover limit

for medium enterprises has been revised upward.

Under the new definition, the distinction between manufacturing and services enterprises

has also been eliminated.

The CITI Chairman pointed out that in the revised definition, even small weaving mills

may be able to come and because of this, many garment manufacturers will be benefited.

The Centre''s revision in the definition of MSMEs will give MSMEs the much-needed

confidence to grow and will promote its seamless expansion in the country, he said.

He also welcomed the decision of Distressed Asset Fund of Rs 4,000 crore created to help

weaker MSMEs that are struggling through NPA norms due to the outbreak of Covid-19

pandemic. This fund will bring them back into the business and they can start

the business activities afresh with the help of this fund, he said. Further Rs 20,000 crore

subordinated debt for stressed MSMEs is likely to benefit 2 lakh stressed MSMEs.

As per the new definition, businesses with investment of less than Rs 1 crore and turnover

of Rs 5 crore would be classified as micro enterprises while, the businesses with

investment of Rs 10 crore and the turnover of less than Rs 50 crore will come under small

enterprises.

Similarly, companies with investment of Rs 50 crore and turnover of up to Rs 250 crore

would be classified as medium enterprises.

Home

CITI hails Govt for boosting MSMEs, farmers and street vendors

(Source: Millennium Post, June 03, 2020)

T. Rajkumar, Chairman, CITI welcomed the decisions of the Union Cabinet chaired by

Prime Minister Narendra Modi which will provide the economic support for MSMEs,

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9 CITI-NEWS LETTER

Farmers, Street Vendors and Agricultural Sector. He stated that MSMEs, Farmers and

Agriculture Sector are the backbone of the Indian economy.

Rajkumar appreciated that MSMEs which has 29% share in the country's GDP and 48%

share in the country's exports and provide employment to millions of people, will receive

maximum benefits from the change in the definition of MSME under which turnover limit

for MSMEs has been revised upward to Rs 250 crores from present Rs 100 crores.

Home

Industries welcome revised definition for MSMEs

(Source: The Hindu, June 02, 2020)

Industries in Coimbatore and Tiruppur districts have welcomed the revised definition for

Micro, Small and Medium Enterprises (MSME) classification.

According to Cotton Textiles Export Promotion Council chairman KV Srinivasan, the

enhancement in turnover and investment limits for medium enterprises is a positive step.

The cabinet has decided to exclude export turnover from the turnover limits for MSMEs.

This is a welcome decision for textile exporters as many of them will be eligible for 5 %

interest equalisation scheme benefits.

Apparel Export Promotion Council chairman A. Sakthivel said the turnover of exporting

units depended on foreign exchange rates. Rupee value has weakened continuously for

the last 10 years. The decision to exclude export turnover will strengthen the MSME sector

and propel exports.

T. Rajkumar, chairman of Confederation of Indian Textile Industry, said that with the

revised definition, even small weaving mills will be classified as MSMEs. This will benefit

the garment manufacturers too. Decision to create ₹4000 crore Distressed Asset Fund

will help the weaker MSMEs that are struggling due to NPA norms.

According to Southern India Mills’ Association chairman Ashwin Chandran, several

segments of the textile value chain - power looms, handlooms, knitting, processing,

embroidery, garment, etc - that do job works will be encouraged to consolidate and

modernise their facilities. He urged the government to further consider modifying the

definition to investment or turnover from the existing investment and turnover limits

specified.

Tiruppur Exporters’ Association president Raja M. Shanmugham said the upward

revision of investment and turnover limits for medium scale units will benefit the garment

exporting units in Tiruppur and attract investments.

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10 CITI-NEWS LETTER

The Railways Suppliers’ Association in Coimbatore opposed the change in definition

saying micro and small-scale units will stand to lose, especially in getting orders from

public sector undertakings.

Home

Exports to Bangladesh yet to resume as truckers fear strict quarantine after

return

(Source: Economic Times, June 02, 2020)

Exports to neighbouring Bangladesh through the land ports in West Bengal are yet to

resume with around 5,000 trucks stuck at various locations along the border, even as the

government has announced several relaxations, an official of the exporters' body said on

Tuesday. The state administration is not making any intervention to resolve the crisis,

triggered by fear among truckers that they will be quarantined following their return from

Bangladesh after unloading goods, Federation of Indian Exports Organization's regional

chairman (east) Sushil Patwari told .

The trucks are stranded for the last 70 days, causing losses running into crores of rupees,

he said. The trade between the two countries takes place through the land ports at

Mahadipur in Malda district, Changrabandha in Cooch Behar, Fulbari (Jalpaiguri), Hilli

(South Dinajpur), Ghojadanga and Petrapole in North 24- Parganas district. "There is no

change in the status of exports to Bangladesh or Nepal. Trucks remain stranded at the

various borders. For Bangladesh, some 5,000 trucks are stuck at various land ports over

quarantine fears. So far there has been no effective intervention from the state

government regarding this," Patwari said.

Exporters thought that trade can resume as greater relaxations kicked in on June 1 and

the truckers will be exempted from the strict quarantine norms.

Mahadipur Exporters Association on Tuesday wrote to the Customs Department, seeking

directions to the local administration to resume the trade. The state government allowed

resumption of exports on May 11 following the Centre's notification on cross-border trade,

but fear among locals over the spread of coronavirus from the returning truckers

prevented trade to take off. Even a plan to unload trucks at ground zero failed.

"We had advised full PPE for drivers and helpers and sanitisation of trucks but local

administration is not willing to take the risk," Patwari said. FIEO on May 27 shot a letter

to Chief Minister Mamata Banerjee highlighting plights of the small exporters and raising

apprehensions about thousands of job losses. Even as talks have gained momentum over

trade through rail road and waterways, exports are yet to begin.

Home

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11 CITI-NEWS LETTER

Covid takes heavy toll on SEZs; exports plummet 50 per cent, over a third of

orders get cancelled

(Source: Amiti Sen, The Hindu Business Line, June 02, 2020)

Units ask government to help ease movement across borders, sort out operational issues

Exports from units in special economic zones (SEZs) fell over 50 per cent in April, while

more than a third of the orders placed were cancelled, due to Covid-led disruptions,

revealed an internal survey carried out by the Export Promotion Council for EOUs and

SEZs (EPCES)……..

Home

From Zero To Rs 7,000 Crore Industry In Two Months: How PPE Kits

Manufacturing Sector Developed Rapidly During Onset Of Coronavirus

Pandemic

(Source: M.R. Subramani, Swarajya, June 02, 2020)

On 18 March this year, when the Union Textiles Secretary, Ravi Capoor, chaired a joint

meeting of officials and industry representatives to assess the availability of protective

wears for use by health professionals while attending to novel coronavirus patients, the

country was facing a shortage of body coveralls and masks.

During the joint meeting, the Ministry of Health and Family Welfare (MoHFW) said it

would require 7.25 lakh coveralls as part of the Personal Protection Equipment (PPE) kits,

along with 60 lakh N-95 masks and one crore three-ply masks for its frontline workers to

tend to coronavirus patients.

The MoHFW officials told the meeting that the ministry was facing a shortage of PPE kits

and supplies were not increasing in tune with the demand. The officials, however, were a

little smart to have made a timely import of 2.75 lakh PPE kits in January.

Again, the availability or shortage was in relation to MoHFW needs. It did not include

what each state would require. The meeting then did not have even the slightest idea of

how many Covid-19 cases India would have and how the pandemic would spread across

the globe.

A joint secretary of the Textiles Ministry told the meeting that even state governments

reported difficulties in meeting their requirement and the few available suppliers were

quoting ‘unreasonable prices’.

The meeting then decided to go in for the developing of PPE kits locally, from available

resources within the country, besides imports.

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12 CITI-NEWS LETTER

It also decided that the manufacture of PPE kits would be in full swing and the

Coimbatore-based South India Textile Research Association (SITRA) will test if the

samples of the kits met the specified standards and certify them for use by frontline

workers.

The Hindustan Latex Limited (HLL) was made the centralised handling agency for

procurement and getting intents for supply from manufacturers.

Later, the Defence Research and Development Organisation (DRDO) was added as

another testing and certifying agency to help speed up the manufacturing process.

“When the initiative began, the government had a clear roadmap. Therefore, at no point

of time did we have any doubt of meeting the rising demand for PPE kits,” said an

industrial participant of the 18 March meeting on condition of anonymity. The participant

is not authorised to speak to the media.

In the two months’ time since then, India has developed into a country producing 4.5 lakh

PPE kits a day from zero. It is now a Rs 7,000-crore industry in the making.

“No other sector of the industry has developed so fast and rapidly like this in our country.

An important point is that the industry got no subsidy or incentive from the government

and it sprung to its feet on its own,” said the participant.

Invest India, in a write-up, says that this is a remarkable journey of collaboration between

governments at the central and state levels, industries and workers to revamp existing

production lines and manufacture a completely unknown product, from scratch.

Today, the Centre and States, together, have a buffer stock of nearly 16 lakh PPE kits,

while orders for another 2.2 crore kits have been placed with the industry.

Bengaluru, Karnataka’s capital, has become a major hub for PPE coveralls production in

the country, accounting for nearly 50 per cent of the total output.

The coveralls are also being manufactured at approved production units in Tiruppur,

Chennai and Coimbatore in Tamil Nadu, Ahmedabad and Vadodara in Gujarat, Phagwara

and Ludhiana in Punjab, Kusumnagar and Bhiwandi in Maharashtra, Dungarpur in

Rajasthan, Kolkata, Delhi, Noida, Gurugram and few other places.

Some of the country’s textile majors such as Arvind, JCT Mills, The Trident Group,

Welspun and Shahi Exports are into manufacturing of the coveralls.

Over a thousand companies have got the technical clearance and certification to produce

PPE kits across the country.

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13 CITI-NEWS LETTER

Ashok Naik, head of Delhi-based Grassroot Markmen, told Swarajya that there are two

aspects to the development of PPE kits.

“One, no other job was available for us when the nation-wide lockdown (to curb the spread

of Coronavirus) was announced. Second, we had to do something and so, we got into

making PPE kits,” he said.

Naik’s firm got a prototype of the coverall made from a small unit with which it had

entered into contract manufacturing.

It sent the sample to DRDO and got its clearance and certification within two weeks along

with the Uniform Commercial Code (UCC).

Today, it can supply 6,000 PPE kits a day. In the last three weeks, the firm has supplied

85,000 kits.

Tiruppur Exporters Association (TEA) Executive Secretary S Sakthivel said at least 100

units in the hosiery town were involved in making PPE kits.

“These units are producing 1.25 lakh to 1.5 lakh pieces (mainly masks) every day. They are

supplying to HLL, state governments and even to the private sector,” he said, adding that

the opportunity ensured employment for at least 50,000 workers during the lockdown

period.

SITRA administrator K Sajjan Rao said that the standards for Indian PPE kits were higher

at least by two notches than the one set by the World Health Organisation.

“This is one reason that the death of frontline workers is less compared with other

countries,” Rao said and added that 1,500 firms have got the certification for coveralls

and 2,000 companies for the fabric to be used in the coverall.

Grassroot Markmen’s Naik said the sector got only a ministry notification that specified

60 GSM for the fabric, which means it will not let any fluid to pass through, and 30 GSM

for the material used for laminating the fabric.

“The only problem for us is getting the required number of gloves. In India, we don’t have

units making huge numbers like Vietnam or Malaysia,” said Naik.

He said the manufacturing units seldom faced problems in getting raw material supplies

for making the kits. “At the most, they could have got delayed by a maximum 48 hours,”

he said.

Though PPE kits production is new to India, the manufacturing units were smart to

ensure that each of them specialized in one product than go in for making a complete PPE

kit.

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14 CITI-NEWS LETTER

Naik said that the demand for PPE kits is increasing and could scale up if the general

public, too, begins to use them. “We can easily double our production,” he said, adding

that he had never seen such a production rise at such a rapid pace even during normal

period.

“Small manufacturing units have turned this business like anything,” Naik said.

SITRA’s Rao said though the HLL had announced covering its requirements, many units

continue to apply for certification.

“We are getting between 100 and 150 samples every day for testing. The manufacturing

units expect to supply the kits to various states,” he said and added that the research body

collects Rs 5,750 for testing and certification as fee.

TEA’s Sakthivel said that manufacturing units were quick to import some 300

machineries from China and South Korea required for making these kits. “Now, we need

not worry about importing machinery as a local manufacturer is ready to meet our

requirements,” he said.

Grassroot Markmen’s Naik, who supplies 6,000 PPE kits a day and has supplied 85,000

kits in the last three weeks, said Indian manufacturers have begun to get enquiries from

countries abroad such as Canada and Ghana.

“We can be competitive in price and quality in almost all PPE kit products, barring gloves.

People have stopped buying from China and it also does not have stocks,” said Naik,

adding that Indian manufacturers can match European Union standards.

TEA Sakthivel said PPE kits cannot be exported currently as their shipments abroad have

been banned.

“We have requests from abroad where buyers are asking for matching PPE masks along

with garments. We can export them to the European Union and the US. Units are just

waiting to take off. We expect exports to be allowed next month,” Sakthivel said.

SITRA’s Rao said Indian PPE kits matched US standards but when it comes to export to

the US and European Union, different test parameters would apply.

Naik said the government will have to encourage more small and medium units to

produce PPE kits.

“We need more number of smaller factories because they can also provide huge

employment,” he said.

M.R. Subramani is Executive Editor, Swarajya.

Home

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15 CITI-NEWS LETTER

Tax relief likely on creation of ‘permanent establishment’

(Source: Deepshikha Sikarwar, Economic Times, June 03, 2020)

India will provide relief to overseas companies with global income that may be subject to

tax here because the presence of their key management personnel stuck in the country

during the lockdown created a ‘permanent establishment’ or place of effective

management in the country. The respite will be granted on a case-by-case basis. The govt

has exempted individuals by excluding their lockdown stay from residency calculation

and it was widely expected that a similar concession would be given to companies. “We

can provide relief on a case-by-case basis,” an official with the Central Board of Direct

Taxes said. The presence of key decision makers and employees of a business

establishment in a tax jurisdiction due to reasons beyond their control such as lockdowns

and travel restrictions can lead to the creation of a permanent establishment and make

the company liable to pay tax.

According to the Organisation for Economic Co-

operation and Development’s guidelines, a

temporary change in location of the CEO and

other senior executives is an extraordinary and

temporary situation due to the Covid-19 crisis

and should not trigger a change in residency. “It’s only logical that such physical presence

and the work carried out like e-signing of contracts, business decisions on operations

during such time should be ignored while evaluating the business presence/PE exposure.

Interestingly, OECD has envisioned few such situations and provided some guidance on

this subject,” said Vikas Vasal, national leader tax at Grant Thornton in India.

India and other countries imposed nationwide lockdowns including bans on international

flights to contain the spread of the coronavirus.

The CBDT official said each case will be assessed separately as the situation may not have

been the same for all. However, experts said there should be clear guidance for field

officials so that the principle is uniformly applied without subjectivity. “In these globally

difficult and unprecedented times, it’s only fair that India also issues necessary relaxation

to clarify that due to forced presence in India of senior management personnel due to

lockdown will not by itself result in permanent establishment or place of effective

management in India,” said Sanjay Sanghvi, a partner with Khaitan & Co.

Home

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16 CITI-NEWS LETTER

Enhancement of turnover limit of MSME sector to help exporters

(Source: Suman Singh, Your Story, June 02, 2020)

Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said

that exclusion of exports turnover from total turnover will help in the internationalisation

of MSMEs and will bring their focus on exports.

The Indian government's decision to increase the turnover limit for medium units from

Rs 100 crore to Rs 250 crore will help infuse technology and promote automation in

certain sectors, and boost outbound shipments, Indian exporters said.

Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said

that exclusion of exports turnover from total turnover will help in the internationalisation

of MSMEs, and will bring their focus on exports.

The cabinet on Monday approved further increasing the limit for medium manufacturing

and service units to Rs 50 crore of investment, and Rs 250 crore of turnover.

The turnover with respect to exports will not be counted in the limits of turnover for any

category of MSME units whether micro, small, or medium.

"The move is most pragmatic, and will also infuse technology as in certain sectors,

margins are so low that enhancement in investment in plant and machinery would not

have been of much use unless accompanied by an increase in the turnover limit to Rs 250

crore. Such a move will also bring automation of certain processes which are required for

competitive manufacturing," he added.

Hailing the decisions on MSME sector, financial advisory firm Findoc Group MD Hemant

Sood said that MSMEs are the backbone of the Indian economy and the highest employer

of skilled labour.

"The decision by the government to allow the listing of MSMEs will help them in the

longer term and become a growth engine for their revival," Sood said.

Apparel Export Promotion Council (AEPC) Chairman A Sakthivel also said that as the

exporters' turnover depends upon the foreign exchange rates, and since rupee value has

continuously weakened for the last 10 years, the council had requested the government to

remove the turnover criterion for defining MSMEs in the exports sector.

"Today's decision will propel India's exports and strengthen the MSME sector, which is

the key to India becoming self-reliant. Further, the decisions to allow MSMEs get listed

and the provision of distressed asset fund for MSMEs will give a major stimulus to the

sector, job generation, and revival of the economy," Sakthivel said.

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17 CITI-NEWS LETTER

The enhancement in the investment and turnover limits for medium-sized enterprises

will help in increasing exports of textiles by making them more competitive in the global

markets, the Cotton Textiles Export Promotion Council (TEXPROCIL) said. TEXPROCIL

Chairman K V Srinivasan said this is a welcome decision as a large number of exporters

in the textiles sector can now be classified as MSMEs under the new criteria, and will be

eligible to get all the benefits extended to the MSMEs, including five percent interest

equalisation scheme.

He said that these decisions will lead to an increase in exports of textiles by making them

more competitive in the global market, which in turn will lead to employment generation.

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Reviving demand is key to India’s economic recovery

(Source: Sudhir Valia, Financial Express, June 03, 2020)

The real estate and the automobile industry have more than 350 upstream and

downstream linkages. Any revival here will release a cascading stream of benefits in all

other interlinked segments

With the entire nation under lockdown for over two months, demand has slumped.

Almost every sector, be it in services or manufacturing, has reported a drastic plunge in

demand. In April, the automotive industry reported no sales whatsoever. Some of the

biggest engines of economic growth, such as realty and construction, hospitality, aviation,

all reported virtually no activity. Apart from healthcare and essential services, the only

industry that kept working was agriculture. This is the saving grace because the largest

chunk of manpower in India is employed in the agricultural sector. We have seen the

recession of 2008 where millions were unemployed, companies were reluctant to invest,

and factories had fallen silent. Consumer demand was stagnant. But, in no time, the

demand was gushing. A handful of companies were doing exponentially better than their

competitors. They enjoyed runaway growth, premium pricing, and extraordinary

customer loyalty. Companies started growing, profits were robust, and customers were

loyal because these companies continued business.

We must not over-react to the present situation and take stern decisions that eventually

break our businesses. It is very important to take a balanced view, without haste. It is

important to be in business to ensure continuity, and we should retain our employees.

So, how will the economy soar once again after the pandemic, when the crisis is deeper

than the one in 2008?

The economy is based on demand; Other than the necessities, demand is based on

perception. The government has tried to pump liquidity in to the market; however, it is

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18 CITI-NEWS LETTER

perceived that demand hasn’t come back. Demand will come back only when people feel

that prices will go up, or they assume that they are getting an opportunity that they should

encash les it is missed.

Now, with the government pushing for liquidity and asking banks to lend, will this not

bring the economy back on track?

Liquidity will help industry to manufacture, but if industry doesn’t see demand, it won’t

produce.

Demand generation

The government has been coming up with a lot of measures; however, we must agree with

the fact that for an economy to revive, demand should be there. Reforms should be framed

in such a manner that the industries are supported, so that employment continues. If

employment continues, purchasing power will be sustained.

It is cyclical. Money needs to rotate in the market, which is crucial. Once the government

starts ‘give and take’, there are immense possibilities for reviving the economy, and the

government will earn more revenue than it has to give up. Banks are averse to lending in

this gloomy economy. The government, in consultation with banks and industry, should

structure relations in such a manner that it is lenient for all and in benefit of general

public.

RBI has created a perception that it will support mutual funds, and the government has

given an assurance by way of guarantee to banks. Here, banks and the government

together have to work for the same goal.

The Insurance Regulatory and Development Authority (IRDA) is aggressively thinking of

reviving its credit insurance business. This will definitely help the banks, which will be

safeguarded and, thus, encouraged to lend. The government is making a lot of effort, but

money is not reaching the people on the street and purchasing power isn’t going up.

Consider our two major industries: construction/real estate and automotive.

Construction/real estate: Banks must form a scheme for real estate where they give loans

for 35-40 years, with 2-3 years moratorium. Here, RBI support will be required for giving

loans for 35-40 years as there will be no matching deposits that banks will have. Currently,

interest rates are already very low and there is no need to reduce. Based on a ready-

reckoner rate, banks should give loans. In affordable categories, banks should not ask for

more papers, but must get contribution from homebuyers or assurance from developers

that banks will not be left in the lurch. Only pre-approved projects should be funded so

that banks do not take any haircut. However, bank loans on EWS category should be

considered as priority sector lending. The government will get GST on input material. Per

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19 CITI-NEWS LETTER

square feet, at least Rs 300 will go towards GST. There is a huge unmet need in this

segment, and across India, 100 crore sq-ft constructions, which translate into 20 lakh

houses, will be consumed in the next 2-3 years. The government also will earn additional

5% GST on sale of these flats, which will again be about Rs 300-400 per sq-ft. If the

government gives time to homebuyers to pay GST of 5% within five years in five equal

instalments with 7% interest, then it will be a great help to homebuyers. Such a scheme

should be made available for

6-9 months. In case homebuyers are unable to repay to the bank, then a bank can

monetise the asset, or a developer will compensate to the bank. The real estate sector has

a lot of NPAs. If the government pushes work, banks will be able to monetise their

outstanding receivables. People in the retail segment generally do not default unless they

are jobless or face any other critical/unavoidable reason, as in India self-respect in the

community is valued more than anything else.

Automotive: Similarly, in the automobile industry, there can be new bank loans with

margins of 25-35%, and banks must give loans up to Rs 2.5-3 lakh. It will help sales of

small cars, two-wheelers and light commercial vehicles pick up. In this case, car

manufacturers must give FLDG (first loss default guarantee) or will buy-back a vehicle

from banks, where banks will not make any loss. In such a case, automobile

manufacturers and banks both are protected. Easy loans will help people buy vehicles as

public transport will likely be avoided. Automobile manufacturers should develop

attractive schemes to push demand.

If the government gives a waiver of tax on payment of interest for purchase of a house or

a vehicle, it will be widely accepted by the borrowers and will propel demand.

Labourers have migrated, and in such a scenario the revival of real estate seems gloomy.

A lot of action has been taken and labour laws are getting reformed. Now, 12-hour working

shifts should start. Everyone must contribute towards economic development, and extra

labour must be provided with a suitable pay package. Moreover, the government must

come out with an order that all the workers have to report on a particular restart date or

within 30 days of a restart date. If they do not report, action can be taken.

The real estate and the automobile industry have more than 350 upstream and

downstream linkages. Any revival here will release a cascading stream of benefits in all

other interlinked segments. As a result, myriad employment and entrepreneurial

opportunities will be generated, and this will be key in driving a faster turnaround of the

Indian economy. The prime minister’s ambitious vision of a self-reliant India, or

Atmanirbhar Bharat, will then become a ground reality sooner rather than later.

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20 CITI-NEWS LETTER

Everyone has to work to overcome the economic crisis. The government is a saviour, but

it alone cannot solve all the problems of the people. All of us Indians need to contribute

towards this.

The author is on the board of The Investment Trust of India Ltd.

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Regulating crops doesn't guarantee better profitability for farmers: FSII

Director General

(Source: C R Sukumar, Economic Times, June 02, 2020)

Regulating crops is not an end in itself and does not guarantee better profitability for

farmers, Federation of Seed Industry of India (FSII) director general Ram Kaundinya told

ET in an interview as Telangana prepares to be the first state to introduce regulated

agriculture policy. Edited excerpts:

How do you view the decision of the Telangana government to choose a

regulated agriculture policy in general and for cotton cultivation in 7-8

million acres out of about 12 million acres in particular?

Crop planning is a very difficult exercise because it has to satisfy many stakeholders.

Ideally, this should be done at the national level. This is the first attempt by any state in

India. The success of this exercise will depend on the achievement of the objective, which

is better profitability for the farmer. Emphasis on cotton does seem to be on the higher

side. We understand that this decision is taken because the data analysed by the state

government showed that farmers made more money in cotton than in other crops, which

might be true.

What opportunities would this decision create for hybrid cotton seed

producers, and fertiliser and pesticide makers?

Demand for cotton is on the higher side this year. We do not see any special opportunity

for cotton seed companies in this. We believe that the overall cotton area in the country

may grow by about 8-10%. Fertiliser consumption in the state may not undergo much

change because corn would have also consumed fertilisers, if it was grown in place of

cotton. On the pesticide front, this might provide a better selling opportunity for the

companies since cotton consumes more pesticides than corn. In view of labour shortage,

weed control is the real issue that farmers will face. We expect higher offtake of weedicides

in all crops.

What adverse effects do you anticipate with such high focus on cotton

cultivation in Telangana, especially since most farmer suicides in India have

been attributed to cotton crop related distress?

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21 CITI-NEWS LETTER

Cotton needs more investment from farmers than corn and hence, the distress could be

more in the face of lower commodity prices. The state government will have to step in at

that point of time and ensure that the produce is picked up by the Cotton Corporation of

India (CCI) at the minimum support price (MSP). Cotton price is expected to be good this

year, but it has dropped in the last one month. We cannot predict the commodity prices

that will prevail when kharif crops come into the market. Agricultural supply chains

across the globe have been disrupted due to coronavirus and it is not easy to predict the

price volatility this year. If the prices of cotton turn out to be good, it will be very good for

the farmers. If not, then it will depend on how the CCI buys cotton at that time.

What would you advise stakeholders in the backdrop of the proposed

regulated agriculture policy?

Regulating crops is not an end in itself. It is no guarantee of better profitability for the

farmer. A lot of hard work needs to be done for providing market access to farmers,

encouraging competition and ensuring better price realisation for the farmer when he

sells his produce. Digital markets have to be made available to the farmer so that he is

free to reach buyers anywhere in the country. Challenges of labour availability have to be

handled through higher mechanisation.

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India’s lockdown strategy was faulty, economy to contract 10% this fiscal:

Former finance secretary SC Garg

(Source: Financial Express, June 02, 2020)

The former finance secretary went on to say that the 2020-21 fiscal will go down in the

history of India as the year when India got way-laid from its story of three decadal

outstanding growth.

Former finance secretary Subhash Chandra Garg on Tuesday said the Indian economy

will shrink by 10 per cent or Rs 20 lakh crore in the ongoing fiscal, the first contraction in

over 40 years, due to a “faulty” COVID lockdown. Garg also said that the government’s Rs

21 lakh crore stimulus package is actually of only Rs 1.4-1.5 lakh crore or about 0.7 per

cent of the country’s gross domestic product (GDP).

“It is certain that India’s GDP will contract after 40 years in 2020-21,” he said in a

blogpost, adding that “it also appears fairly certain that this would be a very large

contraction of about 10 per cent of GDP or loss of about Rs 20 lakh crore of income”.

The former finance secretary went on to say that the 2020-21 fiscal will go down in the

history of India as the year when India got way-laid from its story of three decadal

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22 CITI-NEWS LETTER

outstanding growth. Pointing out that India was not in the pink of economic health in

2019-20, he said, the economy grew barely by 4 per cent for the year which happens to be

the lowest growth rate in last 11 years.

Recently, rating agencies Fitch and Crisil drastically cut India’s economic growth forecast

for the current fiscal year due to a prolonged lockdown.

Fitch forecast 5 per cent contraction in 2020-21, a sharp decline from 0.8 per cent growth

projected by the global rating agency in late April. Crisil also predicted the economy to

shrink by 5 per cent in the current fiscal. Earlier, it projected a growth of 1.8 per cent.

The former finance secretary termed India’s lockdown strategy to contain spread of

coronavirus as faulty. “The lockdown was imposed under a naive belief that India would

be able to eliminate COVID-19 from the face of India in three weeks’ time.

“India decided to use the brahmastra – total economic and human lockdown – on the

entire country when only a tiny part was infected,” he argued. The nationwide “lockdown”

was first announced by Prime Minister Narendra Modi on March 24 for 21 days in a bid

to contain the spread of the novel coronavirus. The lockdown was first extended till May

3 and then again till May 17. It was further extended till May 31 and now has been

extended in containment zones till June 30.

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SBI creates separate business vertical to drive MSME, agri finance

(Source: Business Standard, June 03, 2020)

Under FI&MM, the bank will offer loans predominantly for agriculture & allied activities,

and micro/small enterprises and vastly improve customer experience for the citizens in

the hinterland

In a major restructuring exercise, SBI has created a separate business vertical to focus on

financial inclusion and micro-markets (FI&MM) in semi-urban and rural areas.

Under FI&MM, the bank will offer loans predominantly for agriculture & allied activities,

and micro/small enterprises and vastly improve customer experience for the citizens in

the hinterland.

About 8,000 branches in rural and semi urban areas have been identified for providing

specialised services to the micro segment, including micro credit for small businesses and

farmers under new vertical.

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23 CITI-NEWS LETTER

SBI, ICICI Bank cut savings rates, check new rates

(Source: Financial Express, June 03, 2020)

Data from the Reserve Bank of India (RBI) showed that deposits with the banking system

grew 10.65% year-on-year(y-o-y) during the fortnight ended May 8.

State Bank of India (SBI) and ICICI Bank cut interest rates on savings deposits by five

basis points (bps) and 25 bps, respectively, at a time when the repo rate has undergone

massive cuts and liquidity remains in surplus.

All savings accounts with SBI will now earn 2.7% per annum. At ICICI Bank, a savings

account with a balance of less than Rs 50 lakh will now yield 3% per annum, while those

with a balance of Rs 50 lakh or more will earn 3.5%.

This is SBI’s second cut to the savings rate in as many months. Last week, the country’s

largest bank had slashed term-deposit rates to levels not seen in the last 17 years.

The rate cuts by banks follow a steep drop in the repo rate over the last two months. In

two back-to-back monetary policy reviews, the monetary policy committee (MPC) has

lowered the repo rate by 115 bps between March 27 and May 22. As a portion of banks’

loan books are now linked directly to the repo, they have been quick to pass on the rate

cuts to depositos as well.

SBI’s is currently the lowest savings rate being offered in the banking system, followed by

that of ICICI Bank. Savings deposits with HDFC Bank and Bank of Baroda (BoB) yield a

little more at 3.25%.

Lenders have also gained confidence about paying depositors less as the latter seem

unlikely to pull their money in the current environment. Data from the Reserve Bank of

India (RBI) showed that deposits with the banking system grew 10.65% year-on-year(y-

o-y) during the fortnight ended May 8, while non-food credit grew much slower at 6.48%

y-o-y.

Analysts expect deposit rates to continue to fall across the banking system, with lender

shaving a strong liability base better-positioned to cut rates and preserve margins. In a

recent report, Motilal Oswal Financial Services said, “The continued monetary easing

would drive further reduction in lending yields under the external benchmark and a

decline in the one-year MCLR rates (20-50 bps reduction since January 2020) while

banks have also been sharply cutting the retail and bulk deposit rates over the last few

months (large banks have reduced TD rates by up to 150 bps) to offset margin pressure.

Overall, we believe that large banks with strong/granular liability franchise would be able

to tackle the margin pressure v/s their mid-sized peers.”

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24 CITI-NEWS LETTER

India needs to open up more and knock down import tariff imposed in last 3

years: Arvind Panagariya

(Source: Financial Express, June 02, 2020)

Panagariya said India should continue to engage with Asia Pacific partners and get into

RCEP as it prepares to take over the multinational companies from China in areas of

textiles, footwear and other labour intensive sectors.

Economic liberalisation has done good to India, and the country needs to knock down

import tariffs imposed on many products in the last three years, former Niti Aayog Vice-

Chairman Arvind Panagariya said on Tuesday. Panagariya also pointed out that COVID-

19 pandemic may lead to integration of global labour market.

“Liberalisation has done good to us. We are reversing something from which we benefited.

I thought that in 1991, India had give(n) up import substitution, but in the last three years,

import tariff on many products have been raised,” he said while addressing CII Annual

Session 2020.

“India needs to open up more and knock down import tariff imposed on many products

in the last 3 years. We should bring tariff to 7 per cent and sign trade agreement with the

US, RCEP and European Union,” he said.

The eminent economist also expressed hope that down the line, India will sign trade

agreements with the US, Regional Comprehensive Economic Partnership (RCEP) and the

European Union.

Panagariya said India should continue to engage with Asia Pacific partners and get into

RCEP as it prepares to take over the multinational companies from China in areas of

textiles, footwear and other labour intensive sectors.

The professor of economics at Columbia University also pitched up for setting up

Shenzhen-style coastal employment zones to boost manufacturing and creating

employment.

Panagariya pointed out that there will be greater globalisation post COVID-19 pandemic

in terms of integration of labour markets. “Boundaries of the labour market will extend

beyond H1 B visa as workers will work from their remote countries,” he said, adding India

could emerge as winner if it brings in major reforms in the education sector.

Panagariya observed that multilateralism had taken a hit even in the pre-COVID 19 days

with bodies like the WTO Dispute Settlement mechanism becoming inoperative due to

non-cooperation by the US.

“The COVID-19 crisis which has been currently sweeping the world is not likely to affect

the process of globalisation,” he stressed. Panagariya said India needs 2-3 large

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25 CITI-NEWS LETTER

employment zones with full autonomy to change rules. “Today 44 per cent of Indian

workforce still involved in farming, you can’t combat poverty without lot of farm workers

moving out of farming to low skill industry,” he argued.

Also, speaking at the event, Jeffrey Sachs, director of sustainable development, Columbia

University, said that India made a big mistake in not joining the RCEP because this is an

economic group catering to 3.2 billion people. He stated that in light of the COVID-19

pandemic, countries sealing off their borders to prevent the virus from spreading in the

country was not the same thing as reversing globalisation.

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Impact of Covid-19 Pandemic on Small Textile Units

(Source: Srishti Tewari, Fibre2Fashion, June 02, 2020)

The COVID-19 crisis is set to have a huge impact on small labour-intensive textile units,

mostly dependent on migrant workforce. While the focus around the world right now is

on food, medicine and protective gear, the pandemic has posed a serious threat to all the

sectors of the economy. Economies everywhere have been predicted to hit rock bottom.

The Indian textile industry faces some grave challenges: from maintaining production

and addressing the need for protective clothing to coping up with the deficit due to

lockdown and retain migrant labourers.

Punjab, Gujarat, Maharashtra and Tamil Nadu, the hubs of textile manufacturing in

India, are amongst the worst hit states by the pandemic. The industry is mostly dependent

on migrant workforce from Bihar, Jharkhand Uttar Pradesh and Orissa. Due to the

seriousness of the pandemic, the textile units were shut in March. The absence of wages

and imminent risk to life made the migrant labourers go back to their respective native

places.

As reported by the scientists and doctors, the pandemic might last longer than expected

and that again may pose a challenge to small textile units as migrant labourers may not

return until safety can be assured to them. Unlike big companies, these smaller units are

operated either manually or semi-automatically. Majority of these textile processing units

function on a seasonal basis based on the availability of raw material and the demand for

products. The machines installed in these units are ill spaced; hence violate the standard

six-feet social distancing norm between workers. These are some of the issues that may

affect the production and economic state of the small textile units:

Availability of raw material: Due to the pandemic, agriculture has also

suffered. With more emphasis on food crops, cash crops are being sidelined due to

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26 CITI-NEWS LETTER

decreasing demand. This will lead to lower availability of raw materials like cotton

and silk. For synthetic textiles too, a similar situation has arisen as the majority of

chemical units are either closed or are focussing on meeting the demand for

sanitisers and essential chemicals to deal with the pandemic.

Transportation: Transportationis the spine of any supply chain, be it raw

material or finished goods. Due to the long duration of the lockdown,

transportation has severely suffered, and that has affected both established as well

as small businesses. It may take awhile to repair the broken supply chain and bring

production, transportation and delivery on track.

Cash flow: Big companies have larger turnover and profits, and so, they have a

continuous cash flow unlike smaller textile units, which are more precarious.

Limited sources of capital combined with low production size may lead to shutting

down of many small textile units.

Availability of labour: Small textile units mostly rely on manual operation. Due

to the pandemic and the lockdown, migrant labourers have moved back to their

native places and are less likely to return soon to work. This problem is more

serious for smaller textile units and this could hamper their production and overall

business.

In this crisis situation, the textile industry is also motivated to contribute to the fight

against coronavirus. As a result, the focus has shifted from aesthetic clothing to functional

clothing that impart protective function to apparel. In the last two months, the production

of personal protective equipment (PPE) kits, gloves and masks has shot up and is expected

to rise further. But the production of PPE kits is still concentrated among the highly

specialised manufacturing units that happen to be only 110 in number. Right now, due to

increased domestic demand, India has not started exporting protective gears. Once the

production rate rises and the domestic demand is met, India will soon export such items.

The new mantra of ‘Aatmanirbhaeta’ (self-reliance) and ‘Be vocal about local’ given by

Prime Minister Narendra Modi will hopefully boost the morale of the small textile units.

His address emphasised on using more and more domestic products and brands. This on

one hand will support local companies, and simultaneously will decrease dependence on

foreign products. This will surely lead small textile units to recover from the losses

incurred by them during the lockdown. This also poses a huge challenge for domestic

brands, which have to match the quality of global brands and satisfy consumers to that

extent.

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27 CITI-NEWS LETTER

Hike in MSME limits is relief for textile industry: SIMA

(Source: Fibre2Fashion, June 03, 2020)

Considerably increasing the investment and sales turnover thresholds for MSMEs will

significantly benefit various segments of textile value chain, The Southern India Mills’

Association (SIMA) has said. It has also welcomed the increase in minimum

support price (MSP) of cotton as it would benefit cotton farmers and sustain the area

under cotton cultivation.

The government has focused on farmers and MSMEs under its Atmanirbhar Bharat

Abhiyan, a slew of financial relief measures to enable the country to tide over the

unprecedented economic crisis being posed due to the COVID-19 pandemic.

Subsequently, the Cabinet Committee has now announced further relief measures

focusing on farmers and MSMEs and also hiking the MSP for 14 kharif crops including

cotton.

Prior to the recently announced changes, the investment limit for a medium sized

industry was only ₹10 crore when compared to the new limit of ₹50 crore. Increasing

the sales turnover limit to ₹250 crore from the recently announced turnover of ₹100

crore, while excluding export sales turnover from this calculation, would greatly benefit

the highly labour-intensive and fragmented textiles and clothing industry, SIMA

chairman Ashwin Chandran said in a press release.

"Since most of the decentralised sectors, especially powerloom, handloom, knitting,

processing, embroidery, garmenting and made-up segments operate on job work basis

and where traders play a major role, the new definitions would encourage consolidation

and modernisation of the decentralised sectors. This will improve economies of scale, help

boost exports and also help to grow the domestic textile and clothing industry," Chandran

said.

He also welcomed the allocation of ₹4,000 crore towards distressed fund to bailout

MSME units under NPA category and also allocating ₹10,000 crore fund on fund to

enable the high performing MSME units to get listed in the stock market and gain

advantage.

He, however, appealed to the Government to consider modifying the definition of MSMEs

from “investment and turnover basis” to “investment or turnover basis” to further extend

the benefits to the capital-intensive sectors of the textile industry viz spinning, weaving,

processing and technical textiles. "This will encourage modernisation and increase scale

of operation so that these segments can improve their global competitiveness."

SIMA chairman also welcomed the MSP increase of 4.75 per cent for medium staple

cotton and 4.95 per cent for long staple cotton that would greatly benefit the cotton

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farmers and sustain the area under cotton cultivation. The minimum support price for

seed cotton (kapas) for medium staple has been increased from ₹5,255 per quintal to

₹5,515 per quintal. For long staple, it has been increased from ₹5,502 to ₹5,825 per

quintal.

"Increasing the minimum support price is not a sustainable solution and the Government

needs to focus on bringing back the Technology Mission on Cotton in a revised format, to

increase the productivity which is half that of other major cotton producing countries,

improve quality by reducing contamination and trash cotton by adopting global best

practices," said Chandran.

He also pointed out that with the current market price for cotton and expected

accumulation of stocks due to COVID-19, the Government would need to allocate huge

funds for the forthcoming cotton season as the country would produce at least 25 per cent

higher than the domestic requirement, apart from a carryover of 125 to 150 lakh bales of

closing stock in the current season.

Home

Increasing MSP on cotton not a sustainable solution, bring back TMC: SIMA

(Source: Outlook India, June 02, 2020)

The Southern India Mills Association (SIMA) welcomed the increase of MSP on cotton as

it would benefit cotton farmers, while saying it was not a sustainable solution and called

for bringing back the Technology Mission on Cotton.

The minimum support price for seed cotton (kapas) for medium staple has been increased

from Rs 5,255 to Rs 5,515 per quintal (by 4.75 per cent) and for long staple, it has been

increased from Rs 5,502 to Rs 5,825 per quintal (4.95 per cent) on Monday.

Reacting to the announcement, SIMA Chairman, Ashwin Chandran said though increase

in MSP would benefit the farmers, it was not a sustainable solution and the government

should bring back the TMC, in a revised format.

This, he said was to increase the productivity which is half that of other major cotton

producing countries, improve quality by reducing contamination and trash cotton by

adopting global best practices.

With the current market price for cotton and expected accumulation of stocks due to

COVID-19, the government would need to allocate huge funds for the forthcoming cotton

season as the country would produce at least 25 per cent higher than the domestic

requirement, apart from a carryover of 125 to 150 lakh bales of closing stock in the current

season, he said in a statement.

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29 CITI-NEWS LETTER

With reference to modifying the definition of MSMEs, he said though five-fold hike in

MSME limits is a great relief for the textile industry, the government should consider

modifying the definition from "investment and turnover basis" to "investment or turnover

basis" to further extend benefits to capital intensive sectors of the textile industry like

spinning, weaving, processing and technical textiles.

This will encourage modernisation and increase scale of operation so that these segments

can improve their global competitiveness, he said.

Stating that prior to the recently announced changes, the investment limit for a medium

sized industry was only Rs 10 crore when compared to the new limit of Rs 50 crore,

Ashwin said that increasing the sales turnover limit to Rs 250 crore from the recently

announced turnover of Rs 100 crore, while excluding export sales turnover from this

calculation, would greatly benefit the highly labour intensive and fragmented textiles and

clothing industry.

Ashwin also welcomed the allocation of Rs 4,000 crore towards distressed fund to bail

out MSME units under NPA category and also allocating Rs 10,000 crore fund on fund to

enable the high performing MSME units to get listed in the stock market and gain

advantage.

Home

Garments association demands reopening of shops

(Source: Roshan Kumar, Daily Pioneer, June 03, 2020)

The fifth phase of the Covid-19 lockdown has begun with certain relaxations in terms of

economic activities in State. Shops selling non-essential items such as TV, Mobile,

consumer electronics shops, refrigerator and air conditioners alongwith their service

centres. Intra-district public transport in small commercial vehicles and other economic

activities have been allowed. But, shops selling clothes and footwear have to wait as the

Soren Government is yet to take any decision on this issue.

Associations associated with shoe-slippers and clothes & apparels from Dumka, Dhanbad

and other districts on Tuesday staged a protest demanding permission from the

Government to open their shops. The shopkeepers’ grievances is that their shops are

closed for two months further delay will create more economic problem for them as they

don’t have even money to give salaries to their staff. The shopkeepers claims that all units

such as hardware, sanitary ware, stationary and others have received permission from

government for starting their business, but the government feels that the corona is a

product of the textile business and it has been ignored.

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30 CITI-NEWS LETTER

Mahesh Agarwal who runs a garment shop at Upper Bazar said, “The State Government

is much bothered to bring migrant labourers from across the country, but at the same

time is ignoring millions of workers directly and indirectly linked with textile industry.”

The clothes merchants under the banner of Jharkhand Thok Vastra Vikreta Sangh on

Tuesday met Federation of Jharkhand Chamber of Commerce & Industries (FJCCI)

president Kunal Ajmani and other members and demanded trade body to intervene on

the issue.

Jharkhand Thok Vastra Vikreta Sangh, president Anil Jalan said, “We urge the Chamber

member to apprise our problem to Chief Secretary, Industries Secretary or Chief Minister

so that like other states garments shop too are opened.” Jalan claimed that the loss that

garment industries have incurred in last two months is immense. “As the shops are closed

for two months we are concern about the clothes as festive and wedding session have

passed,” added Jalan.

Chamber Vice-President Ram Bangar said, “We had a meeting with members from

Jharkhand Thok Vastra Vikreta Sangh today. We assured them we will apprise concerned

officials and ministers about the problem faced by textile industries.” Sources said that

many states have given permission to garment shops to open their outlets.

Sources said that textile industries in Country is going to affect a lot as there could be as

many as one crore job cuts in the textiles sector, which has been severely hit by the

ongoing lockdown. If the garment industry closes down, it would impact the entire value

chain from fabric supply industry to brand to the zipper and label industry.

Home

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31 CITI-NEWS LETTER

GLOBAL

COVID-19: World Bank urges countries to go for comprehensive policies to

boost long-term growth

(Source: Economic Times, June 02, 2020)

The World Bank on Tuesday urged countries to go for comprehensive policies to boost

long-term growth along with short term measures to address health emergencies and

secure core public services in the wake of the coronavirus crisis, amid indications that 60

million people could be pushed into extreme poverty in 2020. The scope and speed with

which the COVID-19 pandemic and economic shutdowns have devastated the poor

around the world are unprecedented in modern times, World Bank Group President

David Malpass said. "Current estimates show that 60 million people could be pushed into

extreme poverty in 2020. These estimates are likely to rise further, with the reopening of

advanced economies the primary determinant," he told reporters during a conference call

as the World Bank released analytical chapters from its flagship Global Economic

Prospects report.

Noting that the coronavirus pandemic and the economic shutdowns are dealing a severe

blow to the global economy, especially poorer countries, the report said developing

nations and the international community can take steps now to speed up recovery after

the worst of the health crisis has passed and blunt long-term adverse effects. "Policy

choices made today - including greater debt transparency to invite new investment, faster

advances in digital connectivity, and a major expansion of cash safety nets for the poor -

will help limit the damage and build a stronger recovery," Malpass said.

"The financing and building of productive infrastructure are among the hardest-to-solve

development challenges in the post-pandemic recovery. We need to see measures to speed

litigation and the resolution of bankruptcies and reform the costly subsidies, monopolies

and protected state-owned enterprises that have slowed development," he said.

Short-term response measures to address the health emergency and secure core public

services will need to be accompanied by comprehensive policies to boost long-term

growth, including by improving governance and business environments, and expanding

and improving the results of investment in education and public health, the World Bank

report said. To make future economies more resilient, many countries will need systems

that can build and retain more human and physical capital during the recovery - using

policies that reflect and encourage the post-pandemic need for new types of jobs,

businesses and governance systems, it said. According to the report, in the long-term, the

pandemic will leave lasting damage through multiple channels, including lower

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32 CITI-NEWS LETTER

investment; erosion of physical and human capital due to closure of businesses and loss

of schooling and jobs; and a retreat from global trade and supply linkages.

These effects will lower potential output - the output an economy can sustain at full

employment and capacity - and labor productivity well into the future. Pre-existing

vulnerabilities, fading demographic dividends, and structural bottlenecks will amplify the

long-term damage of deep recessions associated with the pandemic, it said. "When the

pandemic struck, many emerging and developing economies were already vulnerable due

to record-high debt levels and much weaker growth. Combined with structural

bottlenecks, this will amplify the long-term damage of deep recessions associated with the

pandemic," said Ceyla Pazarbasioglu, World Bank Vice President for Equitable Growth,

Finance and Institutions. "Urgent measures are needed to limit the damage, rebuild the

economy, and make growth more robust, resilient and sustainable," Pazarbasioglu said.

During the recovery period, countries will need to calibrate the winding down of public

support and should be targeting broader development challenges. The Bank analysis

discusses the importance of allowing an orderly allocation of new capital toward sectors

that are productive in the new post-pandemic structures that emerge. To succeed in this,

countries will need reforms that allow capital and labour to adjust relatively fast - by

speeding the resolution of disputes, reducing regulatory barriers, and reforming the costly

subsidies, monopolies and protected state-owned enterprises that have slowed

development, the report said.

Home

Time to work with Asian partners on a global COVID-19 recovery strategy

(Source: Peter Drysdale, ANU and Chatib Basri, University of Indonesia, East Asia Forum, June 03, 2020)

As the world contemplates the savage impact of the COVID-19 virus on the global

economy, there’s need to seize initiative in global cooperation to escape the slump caused

by the health lockdown. International economic cooperation will be vital to managing the

crisis and to supporting the recovery through trade, stabilising markets, faster reopening

of business supply chains and international travel. Without it, the world is facing a

prolonged health crisis and lasting economic stagnation on a scale not seen since the

Great Depression.

In this geopolitically fractured world, international cooperation is no easy call. The United

States, the world’s biggest power, has lost its appetite for multilateral cooperation and is

at odds strategically with China, the world’s second largest power. Strategic competition

between the United States and China ultimately limits both countries’ capacity to

contribute constructively to global recovery.

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33 CITI-NEWS LETTER

A compact for multilateral cooperation between Asian nations can be the starting point.

Because of the weight and potential they have in the world economy, Asian economies are

central to recovery from the COVID-19 crisis. Struck first by the virus, they are positioned

to restart their economies sooner. Asia can help lead the exit from the crisis and be a vital

source of global economic recovery.

Asia, like the rest of the world, has to deal simultaneously with twin challenges: the big

international health challenges and the economic policy challenges of exit from the crisis.

Failure to navigate judiciously between these two will cause social disruption, more

deaths and economic hardship. The task of defining the way forward on both fronts at the

same time is urgent.

An Asian experts group convened by the Asian Bureau of Economic Research, of which

we were members, today released its Asian COVID-19 recovery strategy paper, calling for

ASEAN+6 nations (ASEAN plus China, Japan, South Korea, India, Australia and New

Zealand) to move rapidly to coordinate financial, trade, public health and food security

action to avoid prolonged stagnation and push the United States and Europe to join them.

The foundations for gearing up regional policy action in Asia were laid at an ASEAN+3

summit last month that included leaders from Southeast Asia, China, Japan and South

Korea, and committed to health and economic policy coordination. Australia, given its

record in managing the virus and its economic policy heft, has an important and

influential contribution to make in working with its neighbours in ASEAN, Japan, India,

South Korea and China in meeting the challenge posed by the virus.

There are six important objectives of this initiative in regional policy cooperation

To get global central banks and finance ministries to expand bilateral currency

swap arrangements and agree on a new issuance of Special Drawing Rights (SDRs)

to create a stronger regional financial safety net. This would provide

macroeconomic policy space and financial stability simultaneously to combat the

public health and economic dimensions of the crisis in developing countries in the

region and is a key Indonesian interest.

To support the development, production and equitable distribution in Asia of

diagnostic tests, a vaccine and treatments through collective commitment of funds

to the WHO’s COVID-19 Tools (ACT) Accelerator and the expansion of the COVID-

19 ASEAN Response Fund to include ASEAN+6 nations.

To keep regional medical and food markets open. It is essential to avoid restrictions

on trade in medical equipment and supplies after critical domestic needs have been

met. This requires commitment by the region to reducing or eliminating tariffs and

non-tariff measures on medical goods and services. Similarly, regional food

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34 CITI-NEWS LETTER

security will depend on access to international markets and the removal of export

restrictions that have been imposed. Current bilateral initiatives to keep food trade

open can be consolidated into a regional agreement.

To speed up the development of protocols for health certification for international

travel to fast-track the resumption of international commerce, travel for study,

scientific exchange, temporary labour movement, and tourism. Getting experts

together to work through the issues is the first step.

Embrace the digital transformation that COVID-19 has brought to health

management. Asia can initiate a proactive agenda for collective governance of

digital infrastructure that includes regulatory coherence, privacy standards and

data sharing. This is now essential to new work practices, innovation in

production, supply chain management and delivery of goods and services,

including government services.

Conclude the Regional Comprehensive Economic Partnership (RCEP) agreement

immediately to ensure regional trade solidarity. Early conclusion of RCEP with 15

members will send a global signal on keeping trade open, ensure food security and

keep markets open in East Asia. The RCEP group needs to keep open a path for

eventual Indian membership and actively promote economic cooperation with

South Asia.

The COVID-19 crisis is now at the centre of the maelstrom that is engulfing global

economic and political affairs.

Asia can act to implement this agenda through its ASEAN, ASEAN+3 and ASEAN+6

arrangements, engaging the East Asian Summit countries including the United States,

and the APEC and G20 forums, while stepping up to lead WTO and IMF reforms.

Coordination through regional and multilateral frameworks will increase the capacity of

all Asian nations to contribute constructively to regional and global recovery beyond

conflictual geopolitics. Mobilising the political energy and will in Asia to deal with the

international ramifications of the COVID-19 crisis immediately will be central to dealing

with big global problems we face, to securing regional political stability and to restoring

the early prospect of prosperity.

Peter Drysdale is Professor Emeritus and Head of the Asian Bureau of Economic

Research in the Crawford School of Public Policy at The Australian National University.

Chatib Basri is Professor at the University of Indonesia and former Indonesian Finance

Minister.

Home

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35 CITI-NEWS LETTER

Foreign direct investments could contract by 40% this year, hitting

developing countries hardest

(Source: World Economic Forum, June 03, 2020)

Coronavirus has dramatically impacted globalization, with flows of foreign direct

investments (FDI) being disrupted as a result.

According to the UN Conference on Trade and Development (UNCTAD), global

FDI flows are expected to contract between 30 to 40% during 2020/21.

If the contraction in global FDI lasts for a while, the consequences for developing

countries will be severe.

COVID-19 is uprooting economic globalization. With both supply and demand

experiencing simultaneous shocks due to containment measures, global production

networks are being disrupted on a scale never witnessed before. The pandemic has

exposed how globally interconnected the flow of goods and services has become, and

countries are now rethinking their international trade strategies to reduce their

vulnerability to global economic shocks.

Disruptions to flows of foreign direct investments (FDI) — which are part and parcel of

economic globalization — are no exception. In late March, the International Monetary

Fund announced that investors had removed 83 billion US$ from developing countries

since the beginning of the COVID-19 crisis, the largest capital outflow ever

recorded.1 According to the UN Conference on Trade and Development (UNCTAD),

global FDI flows are expected to contract between 30 per cent to 40 per cent during

2020/21. All sectors will be affected, but sharp contractions in FDI are especially evident

in consumer cyclicals, such as airlines, hotels, restaurants and leisure, as well as

manufacturing industries and the energy sector.2

The contraction in FDI is going to hit developing countries particularly hard. The reasons

for this are that first, FDI inflows to developing countries are expected to drop even more

than the global average, considering that those sectors that have been severely impacted

by the pandemic account for a larger share of FDI inflows in developing

countries.3 Second, developing countries have become more reliant on FDI over the last

few decades. FDI inflows to developing countries increased from 14 billion to 690 billion

US$ (current prices) between 1985 and 2017. This represents an increase from 25 per cent

to 46 per cent as a share of world FDI inflows. The increase in FDI to developing countries

is underpinned by a rise in both offshoring and global fragmentation of economic

activities, especially within the manufacturing and services sectors. The drop in global

FDI is therefore very much related to the disruptions in global supply chains, which we

have also witnessed as a result of the COVID-19 pandemic.

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36 CITI-NEWS LETTER

FDI inflows to developing countries are not uniform in either quantity or quality. Fast-

growing economies in Asia with large populations have been driving the surge over the

past few decades, most importantly China, but also Cambodia, India, Indonesia,

Malaysia, Myanmar, Philippines, Thailand and Viet Nam.4 The inflows of investments

into these countries are mainly concentrated in manufacturing and services. If we look at

dependence on FDI inflows rather than their quantity, African countries enter the picture.

The FDI inflows to Africa tell a different story to those of developing countries in Asia. In

Africa, the extractive industries, such as oil and mining, attract most FDI inflows.5 This

type of direct investments tends to be more volatile, which explains the erratic swings in

FDI inflows in the cases of Congo and Mozambique. Ethiopia is an exception with the

growth in FDI inflows being largely concentrated in the manufacturing sector.

The consequences of FDI contraction (and resumption) for developing

countries

Making predictions about the economic consequences of COVID-19 is a thankless task.

We do not know how quickly economic activities will resume, we cannot yet determine

the scale of the damage from the fall in global demand and supply, and we cannot envisage

the nature of potential future fiscal stimulus packages.

Comparing recent data on business confidence in China and the United States — two

countries that have an important impact on global investment flows — might give us a

hint though as to the future of global investment flows. From the chart below, we see that

China is following a different trend compared to the United States: business confidence

in China is improving towards pre-pandemic levels.

What does this mean? At the most obvious level, it means that China is resuming

production and work earlier than other countries (business confidence in most other

countries are showing trends similar to the United States). Monthly production data in

China confirms this trend, as we see that manufacturing output rebounded sharply in

March.

Taken together, this could indicate that we are seeing the start of a global V-shaped

recovery of business activity, and that, assuming other countries’ recoveries, the global

slump in FDI will not be as dire as predicted by some people. Or, it could indicate that

Chinese companies are using this crisis as an opportunity for further expanding their

global influence. In fact, FDI outflows from the Global South, primarily China, has been

on the rise for a number of years now.6 So it is not unthinkable that this pandemic will

influence the composition of global FDI flows in the future.

It should be borne in mind, however, that the measure we are using here to indicate

business confidence in China, the Purchasing Managers Index (PMI), has been subject to

scrutiny.7 Yet more importantly, the PMI reflects a trend, and that trend reveals that

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37 CITI-NEWS LETTER

levels of production are improving, and not that they have returned to pre-pandemic

levels. Additionally, due to the nature of FDI, we should be prepared for a slow recovery.

In many instances, cross-border business ties need to be re-established; investors are

normally more risk averse abroad than at home, and there are a number of complicated

operations and logistics challenges involved in restarting production in a foreign country.

The consequences of a global FDI contraction could be more dire for developing countries

with a more diversified portfolio of FDI inflows because the potential economic benefits

of those inflows are greater.

If the contraction in global FDI lasts for a while, the consequences for developing

countries will be severe. It will impact them in different ways, however. Countries whose

extractive sectors depend on FDI inflows, many of which are in Africa, will first and

foremost experience a loss in export revenues (which many already have due to the plunge

in prices for primary commodities, especially oil8). The consequences of a global

contraction in FDI could be even more serious for developing countries with a more

diversified portfolio of FDI inflows, because the potential benefits of such inflows are

greater: FDI inflows do not only boost export revenues in these countries, they also boost

employment, tend to have a more positive impact on infrastructure development, and can

result in technology transfers to the host economy, particularly in the manufacturing

sector.9 In addition to a loss of investments, we can expect many investors to halt their

plans for expansion. Attracting investors is only the first step towards a successful FDI

strategy. Convincing investors to stay and expand their operations is a key factor for

achieving economic development goals.

The competition among developing countries to attract FDI from high-income countries

has become fiercer than ever, particularly in manufacturing.

The nature of competition in the global economy of the 21st century is also an issue of

concern in relation to the contraction in FDI to developing countries. The competition

among developing countries to attract FDI from high-income countries and/or serve as

suppliers for consumer markets in high-income countries has become fiercer than ever,

particularly in manufacturing. The developing-country share of low-tech manufacturing

exports has almost tripled since 1980, and the global pool of unskilled labour has doubled

since 1990.10 This means that reopening production quickly after the pandemic has been

contained, perhaps even prematurely, can provide a competitive edge. For example,

garment manufacturers in Bangladesh have been pressured to restart production despite

the associated health risk. Factory owners fear that overseas retailers will simply source

production from other countries like China, Viet Nam or Cambodia if they do not resume

production quickly.11 In other words, there seems to be a trade-off between keeping

employees safe from the health-risks associated with COVID-19 and retaining a

competitive edge.

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38 CITI-NEWS LETTER

Policy efforts to mitigate the negative effects of FDI contraction

To recover post-COVID-19, the world—and developing countries in particular—will

require a significant influx of resources. FDI inflows can bring in some of those resources,

but governments will need to put conditions in place to help attract and retain productive

investments and, more importantly, to maximize their development benefits. This crisis

may offer a window of opportunity for governments to re-examine their approaches to

investment attraction and retention, with a view towards increasing the embeddedness of

FDI within their local economies. To this end, we highlight three focal areas that may

require novel policy approaches and thus deserve increased attention from policymakers:

First, measures and supportive mechanisms to help local firms overcome supply-side

constraints must be introduced and further strengthened. Two types of measures

specifically can be fruitful in the longer term in this respect, both for developing stronger

linkages between local and foreign firms, as well as to improve competitiveness of local

industrial structures: the development of a system of quality certification that is often

required to enter into the supply chains of foreign firms, and improvements in digital

infrastructure that allow firms to operate remotely both along global value chains and in

reaching out to foreign markets.

Second, export processing zones (EPZs), which have been an important tool for attracting

FDI in many developing countries, should be designed in a way to link up to the domestic

economy. This calls for EPZ regulations that support the establishment of local supplier

relationships, including the design of supplier development programmes to support

match-making processes between foreign firms and local suppliers.

Third, international actions to support countries during and after the pandemic need to

pay particular attention to least developed countries. Those countries are facing

particularly hard budget constraints and are often limited to implementing policies that

focus primarily on investment facilitation measures, simply because they do not have the

resources to offer more substantive support to their private sector firms.12 This is why it

is crucial for international organizations and country groupings, like the United Nations

and the G20, to respond to their calls for support by advocating and facilitating

cooperation in the area of international investment and trade policy.

Home

Eastman Staples supplies PPE manufacturing equipment

(Source: Fibre2Fashion, June 02, 2020)

Eastman Staples, a garment and textiles supplier, has provided vital equipment to

manufacture Personal Protective Equipment (PPE) for the healthcare industry after

receiving a £300,000 loan from HSBC UK through Coronavirus Business Interruption

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39 CITI-NEWS LETTER

Loan Scheme (CBILS). Company traditionally supplies sewing machines, fabric and

textile tools to garment industry.

However, with demand for PPE across the UK surging, the company was inundated with

requests from the NHS, its suppliers and factories searching for machinery and materials.

The six-figure funding package from HSBC UK has enabled Eastman Staples to quickly

source and supply a range of equipment and machinery to their clients.

Most recently, the company has supported volunteers of the “Scrubs Glorious Scrubs”

campaign, who are creating colourful patterned scrubs for doctors and nurses working on

the front line; and Northumbria NHS Trust, which has opened a PPE factory to help beat

the supply crisis. To date, Eastman Staples has provided equipment including sewing

machines, chairs, garment rails and mannequins to these clients at a time of

unprecedented need.

“As with many businesses, Eastman Staples has faced uncertain times during Covid-19,

which has required us to quickly adapt our business model to clients’ needs. We were

inundated with requests from PPE suppliers who were desperately trying to meet demand

and we were determined to help them, but this would not have been possible without the

HSBC UK team, including Navin Sharma and Joanne Evenden. The funding has enabled

us to meet these urgent orders and helped to keep the business trading throughout this

challenging time,” Peter Kyprianou, director at Eastman Staples, said in a press release.

“It’s vital that every solid business has the chance to survive during this challenging

situation. The team at Eastman Staples has been incredibly flexible and dedicated during

an uncertain time and we are humbled to support them as they strive to supply vital

machinery. We look forward to seeing further demonstrations of how the business is

helping their healthcare clients over the coming months,” Navin Sharma, relationship

director for Corporate Banking, HSBC UK, said.

Home

A promising approach in the development of antibacterial textiles

(Source: European Coatings, June 02, 2020)

A present research reports on the synthesis and characterisation of copper oxide

nanoparticles (CuONPs) and their application on cotton fabric to increase the bactericidal

and hydrophobic properties.

The synthesised materials have been subjected to spectroscopic and microscopic

characterisations to help in understanding their structure, morphology, size, and

composition. Further, upon dispersion of the nanoparticles onto the fabric, its

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40 CITI-NEWS LETTER

hydrophobicity and mechanical properties were evaluated using electron microscopy and

universal testing machine.

Treated cotton fabric exhibits higher tensile strength (32 MPa) than the untreated one (27

MPa), whereas copper nanoparticle-coated cotton fabric shows a fair hydrophobicity.

Greater antibacterial activity

Moreover, CuONPs-treated and untreated cotton fabrics have been analysed for

bactericidal activity against various gram-negative and gram-positive strains. Finally, the

CuONPs-coated cotton fabric displays greater antibacterial activity against E. coli and

exhibits superior antimicrobial activity even after 30 cycles of washing, indicating that the

CuONPs-coated cotton fabric has a higher potential to be employed as a medical textile

to avoid cross-infection within a clinical environment.

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