GLOBAL UNCERTAINITY: THE NEW NORMAL!

The Ukraine-Russia war, the Israel-Hamas war, the tension in middle east, and the South China sea continued to be the headlines of media however the global corporates seemed to have moved on with it as the new normal. The economies world-over looked for self-interest and aligned for fiscal prudence.

These uncertainties put pressure on the global economy, supply chain and consumer demand, however, the resilience was shown in response. As per IMF report, the world seemed divided among US or China leaning countries and neutral countries in this geopolitical scenario. Though the neutral countries may not have played a crucial role during the cold war, but in the present times they are playing important role by connecting the fractured trade & communication lines between the US or China aligned countries. The trade war between US & China increased the trading routes through Mexico and Vietnam. India too came out as one of the biggest beneficiaries in garnering global attention.

With all these challenges, the world economy grew at about 3.0 percent in 2023-24 below from 3.5 percent in 2022-23. The central banks world over played important role in managing inflation from 8.7 percent in 2022 to 6.8 percent in 2023 by raising interest rates during the year, thereby easing socio-economic pressure on the masses. The global consumer demand still didn’t pick much during the year causing export-based economies reel under pressure to accommodate their inventories. The countries like India and China who have huge domestic markets managed to subside these impacts. Indian GDP turned out to be growing at highest rate of over 8 percent FY 2023-24 and the future looks promising in the years to come. The same had been evident from the exponential growth in the foreign inflow of funds in the Indian stock markets. The fund infusion from the retail investors alongside FIIs showed trust in a long-term bull market for India. There seemed to hold up demand/ projects from the industry in India for the want of new policies or incentive schemes owing to upcoming general election in May 2024, the outlook appeared promising, nevertheless.

INDIAN ECONOMY

To be more specific, India's GDP grew by 8.2 percent, and according to the 2023-24 Economic Survey, it is expected to grow between 6.5 and 7 percent in 2024-25. However, this growth will be influenced by various risk factors, including unpredictable weather, financial market volatility in developed nations, and geopolitical challenges.

Retail inflation decreased from 6.7 percent in FY 2022-23 to 5.4 percent in FY 2023-24. Core inflation for goods and services hit its lowest levels in several years, with India outperforming many developed and emerging economies in meeting its inflation targets. In 2023, India's inflation rate remained within the target range of 2 to 6 percent. However, food inflation increased from 6.6 percent in FY23 to 7.5 percent in FY24.

India's fiscal deficit was reduced from 6.4 percent in FY23 to 5.6 percent in FY24, largely due to strong growth in direct and indirect tax revenues, driven by robust economic activity and improved tax compliance. Additionally, higher-than-expected non-tax revenue from RBI dividends boosted revenue receipts. The current account deficit also decreased from 2 percent in FY 2022-23 to 0.7 percent of GDP in FY 2023-24.

Industrial R&D advanced during the year, as evidenced by India's improved ranking on the Global Innovation Index (GII) to 40th position in 2023-24. Notably, the number of patents granted increased to 103,057 in 2023-24, up from 5,978 in 2014-15. Similarly, registered designs rose to 30,672 from 7,147 during the same period.

India's start-up ecosystem is thriving, with over 45 percent originating from Tier 2 and 3 cities. The number of officially recognized start-ups (registered with the Department for Promotion of Industry and Internal Trade) grew from 300 in 2016 to more than 125,000 by March 2024. Over 13,000 of these start-ups operate in fields such as AI, IoT, robotics, and nanotechnology. Between 2016 and March 2024, start-ups filed over 12,000 patent applications. Additionally, 135 Alternative Investment Funds (AIFs) have invested INR 180 billion (US$2.1 billion) in start-ups as of FY24. The Bharat Startup Knowledge Access Registry promotes collaboration within the ecosystem.

While the compliance burden on businesses has eased compared to previous years, it remains heavy, particularly for small and medium enterprises.

Source:
https://www.india-briefing.com/news/economic-survey-of-india-2023-24-report-highlights-33716.html/#:~:text=Inflation%20trends,has%20reached%20multi%2Dyear%20lows

PRODUCTION, EXPORTS, AND IMPORTS (2023-24)

The production of the Textile Engineering Industry (TEI) registered a marginal increase of just 2% viz. Rs.14,639 crores in 2023-24 as against Rs.14,412 crores achieved during 2022-23. Except for spinning, processing and spares & accessories, which recorded +4%, +28% and +2% production over the previous year, all other industry segments reported negative turnover during the fiscal year. While the first 2 quarters showed tremendous growth, the sluggishness started catching up during the Q3 and crippling the Q4 quarter completely due to the global uncertainties caused by wars in Ukraine, and Gaza.

Both greenfield and brown field projects were acquired by the industry. Unlike last year, domestic industry’s capacity utilization was around 84% down from 90% and the industry was able to achieve a surplus of just 2% of their annual turnover as compared to 2022-23. The upward trajectory witnessed during the first two quarters of the fiscal was pulled back in a downward trend during the last quarters of the year which was an alarming sign. Though domestic production and its consumption in the local market was a good signal, the exports were hit during the year.

DATA ON THE TEXTILE ENGINEERING INDUSTRY (5 YEARS)

TMMA(I) had been maintaining and extrapolating domestic production data based on the reported figures by the industry. The exercise is based on a survey report done by the Textiles Committee with support of TMMA in 2007, and the import and export data analysed in subsequent years.

NEW SCHEME REPLACING TUFS

Though the MoT, cleared the TUF subsidy cases to its best possible capability, keeping all checks and balances and meeting legal parameters after satisfying the textile industry in majority of the cases; one thing it conveyed clearly that the government wasn’t going to launch/ relaunch any TUF kind of subsidy. Also, being the WTO complaint, the country won’t be able to bring out such a scheme. Hence, there was scope for newer mechanism to promote the indigenous manufacturing.

Earlier, the Government had launched ambitious schemes such as Technical Textiles, PM MITRA Parks, Technical Textile Mission, and Production Linked Incentives (PLI) for the textile industry. However, it was felt that the MSMEs and the Textile Machinery Industry should also be brought under similar schemes for the technology development and import substitution to promote “Make in India”.

Therefore, a series of meetings were held among the government, industry, and academia to define the contours of the new scheme that would replace the ATUF scheme.