FW
The Goods and Services Tax (GST) will have a four-slab tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent. The lower rates are for essential items and the highest for luxury goods. Both the Center and the states will have powers to scrutinise and audit all assessees.
The highest tax slab of 28 per cent will be applicable to items which are currently taxed at 30 to 31 per cent (excise duty plus VAT). However, a lot of the items in this category which are mass consumed by middle and lower-middle classes, like soaps and detergents, could be brought under the 18 per cent slab.
Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate. The idea would be to keep the total tax plus cess similar to the levy charged on these items now.
The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST. The cess would lapse after five years.
Some global apparel manufacturers are actively moving to transfer manufacturing capacity from Bangladesh to Ethiopia. Ethiopia is a country that has worked very hard to build its capability in this area, and it’s had considerable success.
In fact, in an interesting development Bangladeshi manufacturers are starting to outsource some of their production capacity to Ethiopia and to other East African countries. This development is slightly ahead of the curve because a lot of people are talking about transferring their capacity from China to Bangladesh at the moment.
However, whether this move to Africa will work out remains to be seen because Ethiopia as it happens is under some turmoil. There has been a crackdown on the opposition. There are worries that this will have an impact on the kind of companies that are looking to invest there, because one of the things that they’re very focused on, particularly in the apparel industry, is corporate responsibility.
Companies want to make sure that their supply chain is not riddled with issues like child labor or collapsing factories – the things that have really damaged their image in the past. So this political crisis is exactly the sort of thing that’s going to put off the manufacturers that are just starting to get interested in that country.
Free market policy in Pakistan will continue with the government pulling itself out completely of the cotton business. It would mainly focus on regulation, says Aamer Irshad, chief of Food and Agriculture Planning Commission. While cotton will continue as an important contributor to the national economy, the private sector will be encouraged to lead innovation, bring knowledge and investment in cotton technology (value chain and varietal development), informed Irshad. He was talking at the 75th plenary meeting on the fifth day of the ICAC.
The government will further strengthen its cotton governance while its investment in cotton will focus on improving productivity and efficiency, Irshad added. He further said that cotton production was 14.2 million bales in 2004-05 it fell down to 10 million bales in 2015-16. However, he said that various policy instruments such as textiles Policy, Strategic Trade Policy Framework and Vision 2025 along with the organisations has been taken by the government for brining improvement in the sector.
He cotton would continue to be prime contributor to Pakistan's economy. The government needs to facilitate to improve yield by carrying out necessary legislation such as enactment of Plant Breeders Right Bill and by providing support to reduce the cost of doing business, he observed.
Muhammad Ilyas Sarwar of the Pakistan Central Cotton Committee Central Cotton Research Institute urged for a research on high yielding with better fibre quality cotton varieties. He said cotton trading houses should be established and make them beneficial for all stakeholders.
The Circle Textiles Program is a Dutch initiative that’s focuses on closing the loop for post-consumer textiles. The program, which was launched in 2014, wants to achieve a zero-waste industry by developing and creating a commercial, scalable model for closing the loop on post-industrial and pre- and post-consumer textiles. It will also develop new tools for the industry that are critical in engaging companies in closed-loop strategies.
One of these is the Circle Fashion tool, an interactive platform that offer brands a circularity scan, from both a strategic and environmental perspective, and offer reasonable recycling scenarios for capturing value from textile waste. The program’s other projects include Fibersort, a machine that sorts large volumes of mixed post-consumer textiles waste, and Circle Market, an online marketplace for the recovery, reuse and resale of textiles.
Circle Textiles feels fashion can be a force for good and that its pragmatic, tool-based approach will make it easier for the global apparel industry to transition to new, restorative business models. C&A Foundation is the program’s latest ally on its mission to close the loop for textiles and create a zero-waste industry. The foundation has committed 2,78,000 dollars to expand the Circle Textiles Program.
In the first three quarters exports of direct-spun polyester staple fiber from China saw an increase of 4.7 per cent year on year. Exports in the first quarter declined year on year, but the picture in the following two quarters turned better, particularly in the third quarter, when the export growth reached as high as 15 per cent over the previous year.
Indonesia emerged the largest destination of China’s direct-spun PSF export this year. Exports to the US also grew fast. From January to September, direct-spun PSF exports from China to Indonesia saw a 75.8 per cent increase year on year while exports to Pakistan saw a reduction of 42.6 per cent. In August and September, the export volume to Indonesia was two times more than that to Pakistan.
Exports to Pakistan went down since an anti-dumping duty has been levied on China’s PSF exports. Exports to Indonesia grew despite the country's anti-dumping policy in mid-2016. Direct-spun PSF demand increased amid fluctuating cotton prices. Also polyester yarn imports of yarn mills in Indonesia have increased. Though polyester staple fiber exports of Pakistan slumped, it may to some extent due to the substitution of polyester yarn imports by local downstream plants.
Norway-based knitwear manufacturer and retailer Devold, will make use the Australian wool industry as part of its marketing strategy. This would be in the form of a sales and marketing partnership with select fine wool producers. Devold is a Norwegian name with a long pedigree in the business of warm clothes, in a climate where warmth is a necessity. The company, established in 1853, initially started with knitting and selling sweaters made of wool for the inner region fishermen on the west coast of Norway.
Warm woolen undergarments from Devold were part of the expedition equipment for Norwegian explorers Roald Amundsen and Fridtjof Nansen. About the same, the company has claimed that it used those expeditions as a proving ground for their product.
Devold’s CEO Catherine Stange says, the company had made a gradual move into a different part of that market. The company moved gradually using Merino wool into the base-layer segment which is now a very big part of the company’s business. A part of the company’s evolution, lies in increasing opportunities to manufacture woollen garments, not just for the outdoors and sports, but also moving into other segments of the market like lifestyle products, she added. But that is a big market in Europe and Devold has been looking for a way to market its high end products that would give them a point of difference
"The textile industry, the second-biggest employer in the country after agriculture, has recently received a booster package of Rs 6,000 crores from the Union government. The package aims to help in creating one crore jobs, mostly for women, in the next three years. How is India going to leverage this package to become the global hub of textile? " Read on…
The textile industry, the second-biggest employer in the country after agriculture, has recently received a booster package of Rs 6,000 crores from the Union government. The package aims to help in creating one crore jobs, mostly for women, in the next three years. How is India going to leverage this package to become the global hub of textile?
Experts are of the view that while designing the package, Modi tried to replicate the Gujarat model. When he was the chief minister of Gujarat, textile used to be one of the shining stars contributing more than 23 per cent to the state's gross domestic product. It offered boost to cotton growers and textile mills by way of special incentives. Textile parks and financial support for tech upgrades were some of the major incentives taken by the government during his reign. Industry association sources feel that Modi understands the textile industry well. He has worked out the policy is such a way that it makes an inclusive impact by creating jobs, increasing production and pushing up demand and exports.
The bigger question is: will the government be able to create employment opportunities? By 2025, India is estimated to have the largest number of people, over 832 million, in the working age group (18-59) compared to 658 million-plus today. The garments sector comes as the silver lining for the government and the unemployed population. According to a data from the office of the Textile Commissioner, readymade garments is the biggest employer in the value chain; in 2011, it employed 11.22 million people out of the 45.19 million working in the textile sector. The number of people working in the apparel segment is expected to grow to 12.9 million by 2017.
Thriving industry updates
Faridabad-based Shahi Exports for example, it employs more than 1 lakh employees; 70,000 factory workers, more than 65 per cent. The company owns 43 manufacturing facilities and is one of India's biggest apparel exporters. The owner of Shahi Exports feels that this is just the beginning. The government has realised the true potential of the sector as a job creator. The package will create conditions for mass employment of unskilled, less educated, rural and migrant population.
Like Shahi Exports, other apparel manufacturers also opine that India is at the cusp of a historic opportunity and the government has finally understood what garments can do for the country. All developing countries have been focussing on labour-intensive sectors to move growth ahead. Countries such as China indentified the sector's job-creating potential five decades ago and made manufacturing and exports competitive through incentives and policies. To give you a comparative analysis, Orient Craft, with a turnover of Rs 1,600 crores, employs 32,000 people, while Maruti Suzuki India, with a turnover of Rs 48,000 crore, employs just 19,000.
China offered apparel sector subsidies of as much as 17 per cent. It invited the who's who of labour-intensive segments and offered them cheap land, good infrastructure and other incentives to boost growth. The same phenomenon was replicated by other industries such as shoes, toys and accessories. Chinese Government was clear – the more employment you generate, the more subsidies you get. This proposition worked wonders for capturing global market share and generate jobs. Today, apparel industry exports from China are eight times India's. It also employs eight times more people than India's apparel industry.
Textiles a thriving segment
Consultancy firm Technopak's Textile & Apparel Compendium 2015 says the global textile and apparel trade was worth $773 billion in 2013. It is expected to grow at a CAGR of 5 per cent over the next decade with growth of the apparel trade (6 per cent) expected to outpace that of fabric trade (4 per cent). In 2013, global fabric trade was worth $137 billion while global apparel trade was worth $428 billion. Even though China has the largest share of the global apparel trade at 39 per cent (Bangladesh's share is 6 per cent, India's is 4 per cent and Turkey's is 3 per cent), experts say things may change soon. A recent World Bank report, ‘Stitches to Riches’, highlights that as China develops, it is likely to make more higher-value goods such as electronics and computers or see production of textiles shift to other countries in response to wage differences.
Wages in China are approx. $314 a month, in comparison to $145 in Vietnam, $120 in India and $68 in Bangladesh. It must be noted that wages account for up to 30 per cent cost of a garment. As wages increase and yuan gains momentum, the apparel industry is shifting base from China, creating a potential $280 billion-plus market for other countries.
As per the World Bank estimates, a 10 per cent rise in apparel prices in China will amount to 13-25 per cent rise in South Asian countries' apparel exports. For India, it could result 14.6 per cent rise in exports to the US and 18.95 per cent to the EU. A 10 per cent increase in Chinese apparel prices will augment apparel employment in India by 3.32 per cent for males and by 2.51 per cent for females.
Dealing with the situation
India is in a better position today to leverage on changing market trends. India, China and Turkey are the only three nations that have achieved full vertical integration in the textile value chain - from farm to fashion. Also, global buyers are eying fewer countries and companies for apparel sourcing. However, for that to happen, India will have to work on its weaknesses such as high labour cost/excise duties and lack of bilateral trade agreements, which are making it uncompetitive in a highly price-sensitive market. In 2015, Bangladesh, one of India's biggest competitors, with very little fabric of its own, exported apparel worth $27 billion compared to India's $17 billion, on the back of cheap labour and Free Trade Agreement, (FTA), with the EU. The FTA enables importing countries to pay zero duty on apparel from Bangladesh. In 2012, apparel accounted for 83 per cent of our eastern neighbour's exports.
Like Bangladesh, many countries such as Cambodia, Bahrain, Egypt and Mexico have signed preferential bilateral/multilateral trade agreements with the EU and the US. These means their exports enjoy zero import duty. In contrast, Indian garment exports to the US attract import duties ranging from 10.83 per cent to 29 per cent. The figure for the EU is 9.6 per cent.
That’s one of the reasons for India not gaining from the fall in Chinese textiles exports from $173 billion in 2014 to $162 in 2015. The business has shifted to Bangladesh, Vietnam, Cambodia and Indonesia. Going ahead, India will face a big threat from Vietnam, which has a good labour force, good quality of needle, etc. In anticipation of the Trans-Pacific Partnership, signed in February 2016, which will give it duty-free access to the US, millions of dollars have already started flooding into Vietnam.
India sustains its dominance in garments requiring high degree of creativity, but Bangladesh has an edge in mass-production at unbeatable prices. Labour in Bangladesh is 40 per cent cheaper than India, thereby offering 10 per cent price advantage. If one adds the 9.6 per cent duty, its Bangladesh stands to gain by 20 per cent. The Indian government is trying to eradicate 9.6 per cent duty obstacle. The ministry is attempting to sign FTA and a special agreement with the UK after Brexit. Bilaterals with Turkey and Russia are also under pipeline.
The Spandex fiber market is expected to touch $5.40 billion by 2020, at a CAGR of 7.2 per cent between 2015 and 2020. Factors such as increasing disposable income in emerging economies such as China, India, Japan, and others and increasing market for compress bandages are fueling growth of Spandex Fiber Market. The details were shared in a report titled ‘Spandex Fiber Market by Production Process (Solution Dry Spinning, and Solution Wet Spinning), by End-Use (Textile, and Healthcare) & by Region (Asia-Pacific, North America, Europe, and RoW) - Forecast to 2020’.
Manufacturing process of spandex entails two processes namely solution dry spinning and solution wet spinning. Solution dry spinning is the most cost effective process out of the two and hence, is used more commonly. It also accounts for the larger market share between the two processes. Solution wet spinning in spite of being costlier is growing slightly faster than the solution dry spinning because of the it is used in manufacturing spandex fiber for healthcare applications.
The textile segment accounted for the largest market share in Spandex Fiber Market. Increasing disposable income in developing countries has led to increase in demand for apparels, which in turn is fueling the growth of textile market. The demand for spandex fibers is expected to grow due to rapid growth of sportswear market in the recent years. This is creating enormous opportunities for the spandex fiber manufacturers and to tap these opportunities, companies are increasing their production capacities all over the globe.
Spandex Fiber Market in Asia-Pacific is expected to grow at the highest CAGR between 2015 and 2020. This is followed by North America and Europe. India is the largest-growing market in the Asia-Pacific region.
China’s yarn imports from Vietnam surged 34 per cent in September from a year earlier whereas Indian shipments to China were down 56 per cent and imports from Pakistan have lost 30 per cent. In September 2016, 84 countries imported spun yarn from India, with China at the top accounting for 21.6 per cent of the total value with imports dropping 59.04 per cent in terms of volume YoY and declining 56 per cent in value YoY. Bangladesh was the second largest importer of spun yarns in September and accounted for around 15.8 per cent of all spun yarn exported from India. Export to Bangladesh was down 25.1 per cent in volumes and 19.6 per cent lower in value.
South Korea was the third largest importer of spun yarns, which saw volume going up 43.4 per cent while it rose 45 per cent in value. These three top importers together accounted for around 42.3 per cent of all spun yarns exported from India in September.
Cotton yarn was exported to 73 countries during the month and the average unit price realisation was down US cents 5 a kg from previous month and up US cents 31 a kg from the same month a year ago. China was the largest importer of cotton yarn from India in September, followed by Bangladesh and South Korea. The top three together accounted for more than 50 per cent of cotton yarn exported from India.
Hong Kong, Turkey, Philippines, Brazil and Venezuela were among the fastest growing markets for cotton yarn, and accounted for 7.05 per cent of total cotton yarn export value. Nine new destinations were added for cotton yarn export, of which, Oman, Bulgaria and Nigeria were the major ones. Nine countries that did not import any cotton yarn from India include Honduras, El Salvador and Saudi Arabia. In September 2016, significant decline was seen in India’s export to Argentina, United Arab Emirates, Norway, Lebanon and Kenya.
ZDHC has prepared a Manufacturing Restricted Substances List (MRSL). This is a list of chemical substances banned from intentional use in facilities that process textile materials and trim parts in apparel and footwear.
The focus at ZDHC is to ease regulatory confusion of chemical management standards and bring brands, chemical companies, mills and manufacturers to align on common standards and tools. The issue of hazardous chemicals isn’t new in consumer products; the Romans knew lead was harmful over 2000 years ago.
Scheele’s Green, a copper-arsenic-based pigment, was one of the first colorfast greens used for textiles in the early 1860s. However, it didn't take long for the toxic effects of this pigment to become known. Today both lead and arsenic are listed chemicals.
While the creation of the ZDHC MRSL was hailed as an industry milestone, one of the challenges suppliers still face in working to conform to this standard is knowing where to go, and who to trust, when it comes to safer chemistry claims.
The ZDHC chemical gateway is designed to address this gap. It provides a positive list of safer chemical formulations. Conformance is determined by third-party product accreditation standards and options available in the market. The chemical gateway will be available to the public in early 2017.
