Daily Financial News Analysis – 16th June’20

Table of Contents

Handicrafts & Textiles

India has an estimated 16 million craftspeople.
They are located mainly in rural India.
These craftspeople constitute a highly-skilled workforce, with huge knowledge of specialised processes, learnt from master craftsmen, who ran guilds over centuries, of complex designs.
Art of gold embroidery in a rural setting, in small villages in West Bengal.
It is said that the origin of the craft was Iran, and it came to India during the Sultanate.
The embroideries from these villages were once patronised by the Nawabs of Bengal.
India is replete with village workshops like these, which cannot survive without financing and infrastructure.
A superior handloom product, aesthetically appealing as well as ecologically-friendly, cannot be sold out of compassion but needs the modern technology of marketing and retailing, and needs to be projected as the best in the world.
India was the world’s largest supplier of textiles 200 years ago.
By 1947, this was converted into a nation using copies of its own textiles, in bulk from England’s industrial areas.
This bankrupted India’s rich craft economies is causing destitution in India’s rural markets.
It is a miracle that post-Independence, due to the government’s efforts to revive heritage crafts, India has been able to recreate many of its forgotten textile crafts.
This was forward-thinking at its best and was not easily achieved.
It took a sustained and progressive, revival movement to save India’s handmade legacy.
This was successfully launched with a series of the “Viswakarma” exhibitions, which displayed the sophisticated creations of this revival in prestigious museums.
In an effort to create interest in Indian crafts internationally, the “Vishwakarma” exhibitions were exhibited through the Festivals of India in the most-prestigious museums around the world capitals.
This highlighted the richest traditions of handcrafts left in the world.
This again caught the attention of the fashion fraternity abroad.
India was once again on the world fashion map.
The programme generated a great degree of excitement, and the affluent middle-class became the biggest patron of these textiles.
Over the last two decades, the Indian fashion industry has made strides.
And unlike the rest of the world, it boasts of an indigenous team of designers.
In India, the garments from maharajahs and royal pageants serve as a theme to Big and Small Indian Weddings.
Their imitations have flooded malls, boutiques, village haats and bazaars across smaller markets.
Each has its own version, creating a theatrical, Indian ethnic fashion.
With the recessionary trend that the pandemic is causing, it is time for the government to step in, as they did in the 1950s, to save India’s handicrafts.
Most high-end production will move from hand-made to mechanised alternatives.
The world today produces textiles using sophisticated machinery.
India’s vast repertoire of designs may end up being used only as an inspiration, as is the case with China, which produces copies of the woven Benares saris, among a host of other textile merchandise, and sells these at a fraction of the price to India.
The government has to think outside the box, step in and support start-ups.
It requires little investment in production infrastructure or skill development. It will be the only Made in India by Hand brand in the world.

Waiver of Loan Interest

On June 12, the Supreme Court had told the central bank to meet with the finance ministry to decide whether interest will accrue through the moratorium period or be waived.
The matter will be heard next on June 17 by the SC.
Banks have told the regulator and the government that they are opposed to the waiving of interest during the loan moratorium period.
Officials from the finance ministry, the Reserve Bank of India and the Indian Banks’ Association (IBA) along with a few state-run bank chiefs got into a virtual huddle on Monday to finalise the government’s stand in the moratorium case.
The RBI had announced the moratorium, which ends August 31, to protect borrowers hit by the Covid-19 crisis.
The lenders opposed any interest waiver and defended the right to charge interest on interest, saying any waiver would set a bad precedent.
They also pointed out that while there was a moratorium on loans, there was no moratorium on paying interest to depositors.
Banks led by IBA have presented key points to the finance ministry pertaining to the moratorium and how it will hit their bottom line if any waiver is granted.

Climate Change for India

Climate change poses serious challenges to India’s economic growth, food security and public health with increasing floods, droughts and storms along with heightened threat of floods and cyclones in coastal cities such as Mumbai and Chennai, the country’s first official report on changing weather patterns said.
India already is seeing a higher number of warm days, fewer cold nights, depleting rainfall and warming of the Himalayas, the study conducted by the Ministry of Earth Science and experts from the Pune’s Indian Institute of Tropical Meteorology has said.
“The Intergovernmental Panel on Climate Change brings out the report on climate change for the world. It is for the first time that a regional report using Indian climate model has been prepared,” said M Rajeevan, secretary, ministry of earth sciences.
The report is based on many factors including atmosphere, oceans, temperature changes, extreme weather events, storms, floods and droughts using a local model, said its editor Milind Mujumdar.
The report said heatwaves will continue to increase.
The frequency of warm extremes over India has increased during 1951-2015, with accelerated warming trends during the recent 30 year period 1986-2015.
Significant warming is observed for the warmest day, warmest night and coldest night since 1986.
Monsoon rainfall has also decreased since 1950, and is likely to have higher variability.
The report says that the Mumbai region is highly vulnerable to climate change due to sea-level rise, storm surge and extreme precipitation.
The coastal city of Kolkata is also prone to flooding due to extreme rainfall activities associated with tropical cyclones.

Exports

The pace of contraction of India’s exports slowed in May as relaxations in the lockdown to contain the Covid-19 pandemic led to some pick up in economic activity.
The government expects the trend to improve in June on the back of some early indications.
Exports in May shrank 36.47% to $19.05 billion against a 60% contraction in April, which was largely due to overseas orders’ cancellation.
Trade deficit narrowed to $3.15 billion in May as the contraction in imports was sharper.
The previous low for trade deficit was March 2016 when it was $2.18 billion.
Merchandise exports recovered faster than imports but among major items of export, only rice, spices, iron ore, drugs and pharmaceuticals recorded positive growth in May.
Rating agency ICRA said in a note that merchandise exports recovered faster than imports, recording a sharp month-on-month expansion of 84% as compared to 30% for the latter, suggesting that the easing of logistical issues may have accelerated shipments of inventory even as labour availability remained an issue in some areas.
Commerce and Industry Minister Piyush Goyal has said that exports in the first week of June are at a par with what they were in June 1-7, 2019 and that he expects the contraction to narrow to 8-10% in June.
Exports in 1-7 June stood at $4.94 billion as against $5.03 billion in the year-ago period, a marginal dip of about 0.76%.
“Export data reveal the process of the global economy slowly opening up,” said Saugata Bhattacharya, chief economist at Axis Bank.
“Indian exporters began operations late April onwards. However, the demand for many products such as handicrafts and leather was low, even if labour in India was available.”

Credit Scheme for MSMEs

Finance minister Nirmala Sitharaman on Monday held a review meeting with top executives of 20 private sector banks and non-banking finance companies (NBFCs) to ensure a smooth roll out of the Emergency Credit Line Guarantee Scheme (ECLGS).
Secretary-financial services in the finance ministry Debasish Panda and representatives of Small Industries Development Bank of India (Sidbi) also attended the meeting, according to a tweet by the Department of Financial Services (DFS).
It said the meeting highlighted the government’s commitment to help micro, small and medium enterprises (MSMEs) by ensuring uninterrupted supply of liquidity during these difficult times.
According to a Twitter update from the finance minister’s office, public sector banks have sanctioned loans amounting to ₹29,490.81 crore until June 11 under the ECLGS, of which ₹14,690.84 crore had already been disbursed.
Sitharaman has been regularly reviewing the implementation of the 100% credit guarantee scheme she announced for MSMEs as part of the Atmanirbhar Bharat package on May 13.