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Showing posts with label The Economic Times. Show all posts
Showing posts with label The Economic Times. Show all posts

Monday, August 9, 2021

Why the RBI should buy NBFC bonds (The Economic Times)


Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Uday Kotak has stated that the Reserve Bank of India (RBI) might inevitably have to expand its balance sheet to support the economy amidst the raging pandemic. The central bank does precisely that when it carries out long-term repo operations. However, there is scope for the RBI to provide direct liquidity support to large non-banking financial companies (NBFCs) that play a vital role in meeting the credit requirements of swathes of small and medium industry.


It is true that RBI has shored up liquidity conditions for the banking system in the past one year for onward lending, and is providing further liquidity support this fiscal. Note that the central bank has announced its pathbreaking G-SAP, government securities acquisition programme under which RBI would purchase government paper to the tune of Rs 1 lakh crore in the first quarter of FY22. Further, its targeted long-term repo operations (TLTROs) are meant to provide credit to smaller NBFCs, but, again, via bank funding. But NBFCs do have a critical role in India’s credit system, providing, as they do, credit for largely un-banked segments, and the way forward is for the RBI to directly purchase the paper issued by major league NBFCs. It would rightly and speedily step up credit support across the board.


The central bank is in the process of thoroughly revamping its oversight on NBFCs with a four-layered regulatory structure, based on such parameters as operational size, leverage, interconnectedness and nature of activity. The way ahead is for the largest NBFCs to issue bonds for direct subscription by RBI. The central bank needs to phase in making use of corporate bonds in its liquidity management operations, to boost demand for these bonds.

Courtesy - The Economic Times.

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The tweaks vaccine policy cries out for (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


India’s Covid vaccination drive has expanded eligibility for the jab, even as production is yet to ramp up. This means policy must be finetuned to allocate vaccines to those who need them most. First, instead of leaving allocation of vaccines among the states to vaccine manufacturers, the Indian Council of Medical Research must guide vaccine makers, based on transparent parameters such as vulnerable populations size, rate of vaccination, number of Covid cases, positivity rate and record of vaccine wastage. Vulnerability should be measured in terms of both the current pace of pandemic spread and size of both healthworker/frontline worker groups and the elderly population. States should prioritise vaccine delivery by vulnerability.


Second, ICMR must provide clear information on the minimum and maximum gap between the two doses of vaccines being administered. This will help avoid panic among those who have already taken the first shot but are finding it difficult to get the second. Third, the central government must strengthen and simplify the technological backbone of the vaccination drive, the CoWIN app. It must be easy to access irrespective of technological savvy. The app must be programmed to prioritise those who have had their first dose, so that they can get their second jab within the stipulated time frame. Voluntary organisations should help the digitally non-savvy to get enrolled, till vaccine supplies increase to a level when walk-in registration at vaccination centres becomes feasible. Four, map out delivery centres to maximise access and minimise crowding and infections.


Rather than a few big centres, favoured by some states, the focus should be on many smaller centres—using local primary health centres, community halls and other such facilities to set up vaccination centres. Arrangements must be made to whisk away those who develop allergic reactions to well-equipped intensive care units. It will make it easier for people particularly those who are daily wagers and informal sector workers to get vaccinated.

Courtesy - The Economic Times.

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Tuesday, May 25, 2021

Why the RBI should buy NBFC bonds (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Uday Kotak has stated that the Reserve Bank of India (RBI) might inevitably have to expand its balance sheet to support the economy amidst the raging pandemic. The central bank does precisely that when it carries out long-term repo operations. However, there is scope for the RBI to provide direct liquidity support to large non-banking financial companies (NBFCs) that play a vital role in meeting the credit requirements of swathes of small and medium industry.


It is true that RBI has shored up liquidity conditions for the banking system in the past one year for onward lending, and is providing further liquidity support this fiscal. Note that the central bank has announced its pathbreaking G-SAP, government securities acquisition programme under which RBI would purchase government paper to the tune of Rs 1 lakh crore in the first quarter of FY22. Further, its targeted long-term repo operations (TLTROs) are meant to provide credit to smaller NBFCs, but, again, via bank funding. But NBFCs do have a critical role in India’s credit system, providing, as they do, credit for largely un-banked segments, and the way forward is for the RBI to directly purchase the paper issued by major league NBFCs. It would rightly and speedily step up credit support across the board.


The central bank is in the process of thoroughly revamping its oversight on NBFCs with a four-layered regulatory structure, based on such parameters as operational size, leverage, interconnectedness and nature of activity. The way ahead is for the largest NBFCs to issue bonds for direct subscription by RBI. The central bank needs to phase in making use of corporate bonds in its liquidity management operations, to boost demand for these bonds.

Courtesy - The Economic Times.

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Thursday, May 20, 2021

Why the RBI should buy NBFC bonds (The Economic Times)

Uday Kotak has stated that the Reserve Bank of India (RBI) might inevitably have to expand its balance sheet to support the economy amidst the raging pandemic. The central bank does precisely that when it carries out long-term repo operations. However, there is scope for the RBI to provide direct liquidity support to large non-banking financial companies (NBFCs) that play a vital role in meeting the credit requirements of swathes of small and medium industry.


It is true that RBI has shored up liquidity conditions for the banking system in the past one year for onward lending, and is providing further liquidity support this fiscal. Note that the central bank has announced its pathbreaking G-SAP, government securities acquisition programme under which RBI would purchase government paper to the tune of Rs 1 lakh crore in the first quarter of FY22. Further, its targeted long-term repo operations (TLTROs) are meant to provide credit to smaller NBFCs, but, again, via bank funding. But NBFCs do have a critical role in India’s credit system, providing, as they do, credit for largely un-banked segments, and the way forward is for the RBI to directly purchase the paper issued by major league NBFCs. It would rightly and speedily step up credit support across the board.


The central bank is in the process of thoroughly revamping its oversight on NBFCs with a four-layered regulatory structure, based on such parameters as operational size, leverage, interconnectedness and nature of activity. The way ahead is for the largest NBFCs to issue bonds for direct subscription by RBI. The central bank needs to phase in making use of corporate bonds in its liquidity management operations, to boost demand for these bonds.


Courtesy - The Economic Times.

Share:

The tweaks vaccine policy cries out for (The Economic Times)

India’s Covid vaccination drive has expanded eligibility for the jab, even as production is yet to ramp up. This means policy must be finetuned to allocate vaccines to those who need them most. First, instead of leaving allocation of vaccines among the states to vaccine manufacturers, the Indian Council of Medical Research must guide vaccine makers, based on transparent parameters such as vulnerable populations size, rate of vaccination, number of Covid cases, positivity rate and record of vaccine wastage. Vulnerability should be measured in terms of both the current pace of pandemic spread and size of both healthworker/frontline worker groups and the elderly population. States should prioritise vaccine delivery by vulnerability.


Second, ICMR must provide clear information on the minimum and maximum gap between the two doses of vaccines being administered. This will help avoid panic among those who have already taken the first shot but are finding it difficult to get the second. Third, the central government must strengthen and simplify the technological backbone of the vaccination drive, the CoWIN app. It must be easy to access irrespective of technological savvy. The app must be programmed to prioritise those who have had their first dose, so that they can get their second jab within the stipulated time frame. Voluntary organisations should help the digitally non-savvy to get enrolled, till vaccine supplies increase to a level when walk-in registration at vaccination centres becomes feasible. Four, map out delivery centres to maximise access and minimise crowding and infections.


Rather than a few big centres, favoured by some states, the focus should be on many smaller centres—using local primary health centres, community halls and other such facilities to set up vaccination centres. Arrangements must be made to whisk away those who develop allergic reactions to well-equipped intensive care units. It will make it easier for people particularly those who are daily wagers and informal sector workers to get vaccinated.


Courtesy - The Economic Times.

Share:

Friday, May 7, 2021

Why the RBI should buy NBFC bonds (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Uday Kotak has stated that the Reserve Bank of India (RBI) might inevitably have to expand its balance sheet to support the economy amidst the raging pandemic. The central bank does precisely that when it carries out long-term repo operations. However, there is scope for the RBI to provide direct liquidity support to large non-banking financial companies (NBFCs) that play a vital role in meeting the credit requirements of swathes of small and medium industry.


It is true that RBI has shored up liquidity conditions for the banking system in the past one year for onward lending, and is providing further liquidity support this fiscal. Note that the central bank has announced its pathbreaking G-SAP, government securities acquisition programme under which RBI would purchase government paper to the tune of Rs 1 lakh crore in the first quarter of FY22. Further, its targeted long-term repo operations (TLTROs) are meant to provide credit to smaller NBFCs, but, again, via bank funding. But NBFCs do have a critical role in India’s credit system, providing, as they do, credit for largely un-banked segments, and the way forward is for the RBI to directly purchase the paper issued by major league NBFCs. It would rightly and speedily step up credit support across the board.


The central bank is in the process of thoroughly revamping its oversight on NBFCs with a four-layered regulatory structure, based on such parameters as operational size, leverage, interconnectedness and nature of activity. The way ahead is for the largest NBFCs to issue bonds for direct subscription by RBI. The central bank needs to phase in making use of corporate bonds in its liquidity management operations, to boost demand for these bonds.

Courtesy - The Economic Times.

Share:

Wednesday, May 5, 2021

The tweaks vaccine policy cries out for (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


India’s Covid vaccination drive has expanded eligibility for the jab, even as production is yet to ramp up. This means policy must be finetuned to allocate vaccines to those who need them most. First, instead of leaving allocation of vaccines among the states to vaccine manufacturers, the Indian Council of Medical Research must guide vaccine makers, based on transparent parameters such as vulnerable populations size, rate of vaccination, number of Covid cases, positivity rate and record of vaccine wastage. Vulnerability should be measured in terms of both the current pace of pandemic spread and size of both healthworker/frontline worker groups and the elderly population. States should prioritise vaccine delivery by vulnerability.


Second, ICMR must provide clear information on the minimum and maximum gap between the two doses of vaccines being administered. This will help avoid panic among those who have already taken the first shot but are finding it difficult to get the second. Third, the central government must strengthen and simplify the technological backbone of the vaccination drive, the CoWIN app. It must be easy to access irrespective of technological savvy. The app must be programmed to prioritise those who have had their first dose, so that they can get their second jab within the stipulated time frame. Voluntary organisations should help the digitally non-savvy to get enrolled, till vaccine supplies increase to a level when walk-in registration at vaccination centres becomes feasible. Four, map out delivery centres to maximise access and minimise crowding and infections.


Rather than a few big centres, favoured by some states, the focus should be on many smaller centres—using local primary health centres, community halls and other such facilities to set up vaccination centres. Arrangements must be made to whisk away those who develop allergic reactions to well-equipped intensive care units. It will make it easier for people particularly those who are daily wagers and informal sector workers to get vaccinated.

Courtesy - The Economic Times.

Share:

Why the RBI should buy NBFC bonds (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Uday Kotak has stated that the Reserve Bank of India (RBI) might inevitably have to expand its balance sheet to support the economy amidst the raging pandemic. The central bank does precisely that when it carries out long-term repo operations. However, there is scope for the RBI to provide direct liquidity support to large non-banking financial companies (NBFCs) that play a vital role in meeting the credit requirements of swathes of small and medium industry.


It is true that RBI has shored up liquidity conditions for the banking system in the past one year for onward lending, and is providing further liquidity support this fiscal. Note that the central bank has announced its pathbreaking G-SAP, government securities acquisition programme under which RBI would purchase government paper to the tune of Rs 1 lakh crore in the first quarter of FY22. Further, its targeted long-term repo operations (TLTROs) are meant to provide credit to smaller NBFCs, but, again, via bank funding. But NBFCs do have a critical role in India’s credit system, providing, as they do, credit for largely un-banked segments, and the way forward is for the RBI to directly purchase the paper issued by major league NBFCs. It would rightly and speedily step up credit support across the board.


The central bank is in the process of thoroughly revamping its oversight on NBFCs with a four-layered regulatory structure, based on such parameters as operational size, leverage, interconnectedness and nature of activity. The way ahead is for the largest NBFCs to issue bonds for direct subscription by RBI. The central bank needs to phase in making use of corporate bonds in its liquidity management operations, to boost demand for these bonds.

Courtesy - The Economic Times.

Share:

Tuesday, May 4, 2021

Increase Domestic Vaccine Production (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


India needs to augment its supply of Covid vaccines to inoculate its own population and that of low- and middle-income countries. India, together with South Africa and supported by others, continues to keep up the pressure for a waiver of intellectual property rights on Covid vaccines and therapeutics, and will work for a favourable decision at the G7 meet in June. In the meantime, India must take take the measures open to it to step up vaccine production.


It can and must do four things: authorise more vaccines, help expand capacity of existing manufacturers, start producing vaccines at facilities that are capable of producing vaccines but do not, because they do not have a licence for such production, and, start production in India of the entire range of ingredients that go into vaccine manufacture, by asking industry to get the needed licences, issue compulsory licences where these are not forthcoming. GoI could also do a timebound buyout IPR of the indigenous vaccines to engage other manufacturers to increase supply. Daily vaccine requirement to achieve universal adult inoculation by October would be some nine million doses. India will also have to resume its export commitments, currently hobbled, for the COVAX facility and commercial contract, at full steam. Exports in April were about 1.3 million doses, compared to 64 million between January and March. The Serum Institute of India is contractually bound to cumulatively deliver 1 billion doses to the Covax facility by end of the year. Similarly, there are export commitments for the Russian Sputnik V that is being manufactured in India. So far India has depended on SII and Bharat Biotech, with production capacity of 70 million doses a month.


The indigenous vaccine candidates in advanced stages—Zydus Cadila, Biological E and Gennova—must receive special attention for timely emergency authorisation. The government must provide support through firm orders and investment to expand production capacities right away, especially companies that source or build ingredients domestically.

Courtesy - The Economic Times.

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Aligning Incentives At Mutual Funds (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Amidst buoyant capital markets, sustained inflows of funds from abroad, and a policy-induced low interest rates regime, it is notable that the Securities and Exchange Board of India (Sebi) has tightened norms for compensation of asset managers at mutual funds (MFs). Sebi has mandated that a minimum of 20% of the earnings of key personnel in an asset management company (AMC) should be in the form of units of MF schemes they manage, which does make perfect sense.


The idea is to align the interest of key employees of AMCs with those of the unit holders of MF schemes. The fine print in MF schemes do reiterate that returns are subject to market risks, and further that the past record cannot be a pointer to future performance. Nonetheless, Sebi, rightly, wants fund managers to demonstrate to investors that they have confidence in the very schemes they manage, with skin clearly in the game. The linkage with remuneration would also be proportional to the assets under management in which the key personnel have a role or oversight. A minimum period of three years’ lock-in is mandated for the MF units so offered, along with provision for claw back for non-compliance and violation of ‘Code of Conduct, fraud and gross negligence.’


The assets under management in MF schemes are now over ₹32 lakh crore, and we need transparency on MF returns. Sebi has also, sensibly, revamped the format for reporting MF results. Its latest move may have been informed by the fiasco at six debt funds of Franklin Templeton last March. Reportedly, some employees of the MF are known to have coolly redeemed their holdings just before the schemes’ closure. ‘Market’ based compensation surely needs to be in place for credit decisions of bankers, as well, besides at MFs.

Courtesy - The Economic Times.

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Monday, May 3, 2021

Complacence not an option for re-elected (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Getting re-elected is a heady feeling. The incumbent leaders of Kerala, Assam and West Bengal have every right to be pleased with themselves and deserve kudos. Mamata Banerjee deserves special commendation for not just surviving but raising her party’s vote share, in a battle in which she forsook the safety of her traditional seat and took the challenge to her local rival’s home turf. However, it would be a mistake for these parties to think they just need to keep doing what they have been doing for a repeat performance five years from now.


Politics keeps changing, throwing up fresh challenges. Past achievement could lull the achievers into a false sense of complacence. That would be a big mistake. Pinarayi Vijayan in Kerala impressed the normally cynical Malayalis with his crisis management skills. However, the state cannot be in permanent crisis for him to keep impressing his voters. He needs new ideas for economic development of the state, beyond the welfarism he has perfected as part of crisis management. The BJP in Assam got a free pass, thanks to the listless Congress leadership of the state. What should have been the Congress leadership is with the BJP, leaving the Congress with the scion of its three-time chief minister to lead the party with few credentials other than his lineage. That would not be the case forever. The BJP needs to find a solution to the NRC crisis it has created.


Mamata Banerjee would do well to appreciate that the BJP’s campaign against what it dubs her appeasement politics has a lot of purchase among the people. Further, people expect less corruption and hate the culture of political violence. Even if successful politicians are ill-disposed towards unsolicited advice.

Courtesy - The Economic Times.

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Gains for BJP at the national level (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


As far as national politics goes, the main story to emerge from the latest round of assembly elections is not the damage done to the image of invincibility of the BJP’s top two leaders by Mamata Banerjee’s triumphant return to office. Rather, it is the demolition of the remaining vestiges of the Congress’ ability to present itself as a viable alternative to the BJP, one that could take advantage of emerging popular resentment over Covid mismanagement. Having lost Kerala and Assam and being sidelined to irrelevance in West Bengal, the Congress and its current leadership look totally discredited. This strengthens the BJP, despite its losses. After all, the non-BJP victors in these elections are regional parties that pose no threat to the BJP at the centre.


The BJP has come a cropper in West Bengal. Its defeat seems spectacular only because of the hype the BJP leadership had created over its prospects in the state. The party had unleashed a massive campaign in the state, engineered many defections, has been working for years on a project that some have dubbed subaltern Hindutva, which seeks to mobilise the most disprivileged castes into the Hindutva fold through some symbolic smoke and mirrors and deployed the usual BJP tactic of polarising voters on Hindu-Muslim lines, by pointing to Mamata Banerjee’s appeasement politics. Minus the hype, the BJP’s performance is spectacular. Over the last five years, its vote share has climbed from 10% to 38%, it has replaced the Congress and the Left as the principal Opposition and set the political agenda for the state. In Kerala, too, the BJP has changed the societal discourse, forcing the CPI(M) to repent its stand on women entering the Sabarimala shrine and emboldening a candidate in one constituency to declare that he did not want Muslims to vote for him. The party has wrested Puducherry from the Congress, too.


The challenge to Rahul Gandhi is several degrees more severe than for the Congress. His leadership stands exposed once again. There is little room now to ignore demands for reform.

Courtesy - The Economic Times.

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Saturday, May 1, 2021

Sensible suggestion from Dr Devi Shetty (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


In India’s fight against Covid-19, the focus has been on equipment, oxygen, medication and vaccines. The state of medical personnel — doctors, nurses and aides — has escaped focus, except for individual experts such as Dr Devi Prasad Shetty. Medical manpower is likely to be the next big crisis point in India’s fight against Covid-19. The government must put augmenting healthcare manpower on the priority list as it addresses issues such as oxygen supply, availability of drugs, and beds with critical care facilities.


India need more doctors, nurses, paramedics and medical technicians to deal with the rising number of Covid cases. As more patients require critical care, there will be a need to augment the ranks of doctors and nurses. Deploying final-year student nurses and fifth-year medical students will help alleviate the pressure and augment the ranks of medical personnel. In March last year, Harsh Vardhan has suggested deploying fifth-year medical students to treat Covid patients. This requires amending regulations of the Medical Council of India. The fate of that proposal is not clear. Perhaps there were concerns about asking students to put themselves in harm’s way. The situation has changed considerably. There is no longer a shortage of protective gear and equipment; vaccines are available, nursing and medical students who volunteer to work with Covid patients can be given the first dose before being deployed.


Dr Devi Shetty, who made this suggestion last year, says India will need 2,00,000 nurses and 1,50,000 doctors to deal with the pandemic over the next year, and points out that these numbers can be found from final-year students as well as those graduates who are preparing for admission to postgraduate programmes.

Courtesy - The Economic Times.

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For vaccine costs, tap health insurance (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Even after making a budget allocation of Rs 34,000 crore for vaccination, the Centre seems keen to get the states and the private sector to cross-subsidise its procurement of vaccines — there is no other rationale for multi-tiered vaccine pricing. A legitimate source of funding vaccine purchase is health insurance. All health insurance companies, including those providing State-sponsored Ayushman Bharat, can legitimately be asked to pony up the tab for procuring vaccines for everyone who is insured with them. After all, it makes sense for insurance companies to pre-empt having to pay for the hospitalised care for Covid of those insured with them.


All pre-funded insurance schemes should pay for the inoculation. The Employees’ State Insurance Corporation (ESIC) is a good example to follow. It plans to vaccinate nearly 13 crore people — 3.5 crore registered workers and their dependents — free of cost. The ESIC offers full medical care to an insured person and her family members from the day she enters insurable employment. There is no cap on expenditure on the treatment of the insured person. Rightly, eligible beneficiaries below 45 years of age will also be vaccinated free of cost. States should also use the proceeds of the Building and Other Construction Workers’ Welfare Cess to vaccinate about 3.5 crore construction workers. While every individual getting vaccinated has to pre-register and every vaccinated person gets a certificate after the jab, it is far from obvious that insurance companies or governments at the Centre and the states have any reliable way of managing their databases to match the insured with the vaccinated. It would be simpler for insurance companies to pay the Centre for their insured population, and for the Centre to procure and supply the vaccines.


Companies are right to want to count their Covid-relief expenses as corporate social responsibility (CSR) spends. Some do splendid work. Their contributions to relief funds set up by chief ministers should qualify as CSR, just as their contribution to the PM Cares Fund does.

Courtesy - The Economic Times.

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Friday, April 30, 2021

For centralised vaccine procurement (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


From May 1, the country’s entire adult population of approximately 900 million will be eligible for the Covid vaccine. This calls for, one, increasing vaccine supplies manifold, from the current level of 70 million doses a month, and, two, delivery of the vaccine in a manner calibrated to have maximum impact on the pandemic. Even with imports and authorisation and production of new vaccines, without conscious policy to increase production capacity for vaccines and their ingredients, India will be unable to either vaccinate its own people or meet its export commitments, which are not just a commercial opportunity but also a moral obligation, given India’s entrenched position as the world’s largest producer of vaccines. For rational allocation of vaccines, the Centre needs to take back the role of procuring and allocating vaccines among the states.


Rather than scramble to beat other states and private hospitals to the available supply of vaccines, states must focus on proper and efficient delivery, minimising wastage of vaccines and ensuring that priority target groups receive their jabs. Careful planning of vaccine allocation is critical. Therefore, the central government must resume this role, allocating to states based on transparent parameters such as the size of the vulnerable population and current need, based on pandemic levels and likely spread. Vaccine wastage must be penalised, however. The Centre should consider creating, if necessary, a priority order within the 18-44 years cohort. Together with state governments, it must step up efforts to increase vaccination rates among the different age cohorts, particularly the priority groups such as healthcare and frontline workers. It is worth considering if retail industry staff who interface with consumers should be deemed a priority category. Someone staffing a milk booth or handing out grocery interacts with a whole lot of people, even in a lockdown.


Centralised procurement of vaccines and priority-wise allocation to states would be the sensible way to proceed.

Courtesy - The Economic Times.

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From coal to gas for low-carbon shift (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


India’s energy security gets a boost, with the Union Cabinet’s nod last week for the coal-gasification urea plant at Talcher, Odisha. It would boost domestic output of plant nutrients and reduce fertiliser imports in the process, by gainfully leveraging our large coal reserves. The project would also be a boost for the Make in India ‘Aatmanirbhar’ initiative.


The lack of gas feedstock has significantly raised urea imports lately in the backdrop of declining domestic production. The Talcher urea plant would induct technology for negligible discharge of SOx, NOx and particulate matter. Successful coal gasification at Talcher would enable technology diffusion elsewhere, such as Korba in neighbouring Chhattisgarh. India is aiming to step up gas usage in its energy mix from a lowly, 6%-odd today, to 15% by 2030. Meanwhile, ONGC and RIL-BP have recently announced plans to raise gas output from the Krishna-Godavari basin by 52% to 122 million standard cubic meters (mmscmd) per day by 2024. Natural gas is the cleanest and most efficient fossil fuel, and we do need to shore up domestic gas output, including by tapping biogas in bio-converters. However, drilling and extraction of natural gas from wells and its transportation in pipelines cause leakage of methane, with far stronger heat-trapping potential than carbon dioxide, in fact, as much as 86 times stronger over a 20-year period. Methane leakage should be curbed.


Use of gas as an intermediate step towards a low-carbon economy also runs the risk of locking into a hydrocarbon for long enough to recoup the investment made. However, gasifying coal is imperative for coal-rich India, to cut down hydrocarbon imports and move towards hydrogen, produced from gas, preferably using clean energy.

Courtesy - The Economic Times.

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Wednesday, April 28, 2021

Real-life vaccination as clinical trials (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Beginning May 1, India will open up vaccination to its entire adult population. It is essential to secure maximum amount of data to analyse and understand the impact of the vaccines. The government needs to put in place a system that will allow vaccine recipients to volunteer to share health-related data that will be anonymised.

Across the world, Covid-19 vaccines have been given emergency approvals. Basically, long and protracted trials that vaccines developers ordinarily undertake to understand how the vaccine interacts with the human body has been abridged, given the urgency of containing Covid. Effectively, instead of a long, limited group of people taking part in a trial, Covid vaccines are undergoing mass trials. The Indian Council of Medical Research (ICMR), the country’s apex medical research body, should devise a follow-up protocol and ask vaccination centres to request those being vaccinated to volunteer for this study. Besides the volunteers providing information, they should be requested to undergo periodic check-ups. Israel made such a commitment to obtain its quota of messenger-RNA vaccines early on. The sample will need to reflect the diversity of the population. The information will be extremely useful to ascertain any long-term side effects, besides vaccine performance among different segments of the population. Information on multiple data points will allow for vaccine developers to refine their product or develop follow-up shots or even new therapies.


This exercise will help not just with development of new Covid-19 vaccines but also give a better sense of the workings of the virus and could spur the development of therapies for dealing with Covid-19 and cures or vaccines for related diseases. The process must begin now.

Courtesy - The Economic Times.

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Permission does not a bond market make (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Insurance regulator, Irdai, has given its go-ahead for insurers to invest in debt securities issued by infrastructure investment trusts (InvITs) and real estate investment trusts (Reits). The measure is intended to build a vibrant market for corporate debt in India. But taking the horse to the water is one thing and making it drink something else. To make pension and insurance monies flow to corporate bonds, these bonds have to be made attractive and the market completed for hedging risks of interest and exchange rate changes and credit default. A helpful first step would be getting the Credit Guarantee Enhancement Corporation of India, announced in Budget 2019, up and running.


Norms for long-term investors like insurance companies and pension funds require them to invest in debt securities rated AA or higher. But ongoing infrastructure projects are rarely rated above BBB, given a panoply of construction and other risks. Hence the pressing need for institutional mechanism and oversight to address default risks on bond payments, with tools such as excess interest spread, cash collateral and partial credit guarantees. Assets under management by pension and insurance funds now exceed Rs 55 lakh crore. Enhanced policy coordination is needed for long-term investors to step up resource allocation for infrastructural investments. In tandem, investors also need risk mitigation products to manage routine currency, interest rate and credit risks. And here, it is very much a work in progress. Take, for instance, credit risks. The law has recently been changed to allow ‘netting’ of exposure on derivative instruments, but the norms for credit default swaps have yet to be put in place. Or consider interest rate derivatives. Sure, non-residents can now hedge and trade in the rupee interest rate derivatives market, but there remain restrictions galore both for retail and other participants.


There are other rigidities as well. The glitches surely need prompt removal for a vibrant market for corporate bonds fund infrastructure.

Courtesy - The Economic Times.

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Monday, April 26, 2021

American opportunity via climate action (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


Joe Biden has committed to reduce US greenhouse gas emissions by 50-52% from its 2005 levels by 2030, en route to achieving net zero greenhouse gas emissions by 2050. The US commitment, along with the legally binding targets set by the UK and the EU, signal a radical transformation of the global economy, technologies, associated jobs and geopolitics. India must play a proactive role as a willing and capable partner in this process, instead of playing either victim or catch-up.


Achieving these targets will call for radical decarbonisation of the energy sector, significant changes to urban planning to reduce commutes, investments in public transport, changes to architectural design and building material use, better ways to heat and cool buildings, and switching away from fossil fuels for personal mobility. This transition will change the global energy map completely. It will alter the relationship with West Asia, and as the energy choices tilt to the clean and renewable, open up opportunities for partnerships. Even as the Indo-Pacific gets entrenched as the primary site of strategic rivalry, combating climate change will necessitate cooperation between America and China in a number of areas. Oil- and gas-dependent Russia will be forced to innovate. India can be a proactive partner in all these developing areas. The India-US climate and clean energy agenda 2030 announced by Narendra Modi at the Earth Day Leaders Summit on Climate is an example of the emerging partnerships.


Every segment of the economy and trade, and not just energy, will be altered. This radical transformation will present difficult choices, but India must recognise this transition presents an opportunity for growth at the cutting edge.

Courtesy - The Economic Times.

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For sense on how vaccines are priced (The Economic Times)

Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.


An avoidable controversy has been created, alleging that Serum Institute of India is engaging in price-gouging by setting a price of Rs 400 per dose for vaccines sold to state governments and Rs 600 per dose for doses sold to private hospitals for its version of the AstraZeneca vaccine. This is absurd and unfair, right at the outset. Serum Institute is being forced to sell to the central government at a price of Rs 150 per dose, which does not leave it with any surplus for investing in new capacity, vitally needed to supply the billions of doses the world needs to combat the pandemic.


Assuming that 25% of its output for domestic sales would go to private hospitals and another 25% to state governments, the average realised price from domestic sales would be Rs 325 per dose. If private sales are only 10% of the output, realised price would be only Rs 245 per dose. Private hospitals and state governments are facing higher prices because of the ultra-low central procurement price. Vaccine prices are not homogeneous things. They vary depending on assured volumes, upfront payment, duration of the contract, bundling with other products, discounts and rebates. The US, Britain and the EU made huge upfront payments and purchase commitments and obtained lower prices. The Indian government did not make any upfront payments. Serum Institute invested money in additional capacity to produce the AstraZeneca vaccine even before the vaccine successfully completed Phase 3 trials, taking a huge risk, for which the nation, indeed, the world should salute them. It is only now, with vaccine shortage staring the nation starkly in the face, that the government has come forward to fund additional vaccine capacity.


The price for Bharat Biotech’s Covaxin is coming out even higher. Ideally, the Centre should buy out its intellectual property rights, free up the knowhow for the vaccine to be produced by multiple players and increase supplies. Profits are what allows reinvestment to add capacity, even in the vaccine business.

Courtesy - The Economic Times.

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