Bad Bank “PARA”, RBI’s Windfall Profit Post-Demonetization, 4R4D

Bad Bank “PARA”, RBI’s Windfall Profit Post-Demonetization, 4R4D

• CEA Arvind Surbamanian believes that since the earlier ‘alphabetical soup’ of schemes (AQR, SDR, S4A, I&B Code etc.) has failed to solve NPA problem, and since 40% of the NPA is concentrated only in 60 firms, so better we create a centralized agency known as Public Sector Asset Rehabilitation Agency (PARA), which will work as a “Bad bank” and absorb the losses from the PSBs.
• But where to get the money to absorb these losses? Subramanian suggests that the demonetization of Rs. 500, and Rs.1000 rupee notes will create windfall profit for RBI, from which, this bad bank endeavor can be financed. How far is his assumption valid? We’ll see in this video.
• Economic Survey also warn against the moral hazard i.e. once NPA problem is settled, the Bankers may become complacent and again resume reckless lending. Therefore, systematic reforms are required to improve the governance and administration of PSBs, for this, Subramanian and others have suggested many reforms, such as 4R4D framework, Banking investment company (BIC), Bank Board Bureau, Indradhanush Roadmap etc. all of that is compiled in this last part of the NPA lecture series.

 

Twin Balancesheet Problem (TBS)- Three Stages

Twin Balancesheet Problem (TBS)- Three Stages 

economic survey perspective

• As of 31 December 2015, the total non-performing asset of scheduled commercial banks in India have stood at 9.6 lakh crores. Majority of this NPA is concentrated among the public sector banks (PSBs).
• Economic survey notes that the level of NPA in Indian economy, is among the highest in the BRICS nations!
• This NPA problem has created stress in the balance sheets of both the corporate and public sector banks, hence a new term was coined “twin balance sheet problem”.
• CEA Arvind Subramanian has outlined three stages in which this cancer has spread in the Indian economy 1) before the sub-prime crisis, there was a surge in borrowing 2) after the global financial crisis, there was a fall in demand 3) ultimately, corporates had debt servicing problems to a point where their revenue was insufficient even to pay for the interest.
• What is IC1 company?
• Although, India’s case is unique because despite such high level of India, our economy has not collapsed, or come to a standstill, unlike those advanced economies after the sub-prime crisis, or those East Asian tigers after the crisis of 1997.
• Survey projects two scenarios of the NPA/TBS problem: 1) phoenix 2) containment.
• Because of this problem, banks have become reluctant in their lending operation especially the micro and small enterprises.
• The decline in the profitability, has also led to fall in the share prices of public sector banks, some of them even selling below their face value.

 

UKPCS 2016 MAINS TEST SERIES SCHEDULE. STARTING FROM 14th may (English & Hindi medium Separately )

UKPCS 2016 MAINS TEST SERIES SCHEDULE.

STARTING FROM 14th may (English & Hindi medium Separately )

EVERYONE HAS TO DO WRITING PRACTICE BY THEMSELVES OR BY JOINING THE TEST SERIES.

• Increases the quality of content of answer
• Time management ie. to complete the paper within 3 hour with good hand writting and quality content.
• Representation , formatting  the answer within world limit.
• Regularity in preparation.
• coverage of full syllabus

Fees for test series: Rs.6000/

STARTING FROM 14th may (English & Hindi medium Separately )

EVERYONE HAS TO DO WRITING PRACTICE BY THEMSELVES OR BY JOINING THE TEST SERIES.

• Increases the quality of content of answer
• Time management ie. to complete the paper within 3 hour with good hand writting and quality content.
• Representation , formatting  the answer within world limit.
• Regularity in preparation.
• coverage of full syllabus

Fees for test series: Rs.6000/

indo china

Includes aligning its OBOR project with India’s ‘Act East Policy’ and prioritising early solution to border row.

Amid increasing strain in Sino-India ties, China has proposed a four-point initiative to overcome differences and deepen relations which includes aligning its ‘One Belt One Road’ project with India’s ‘Act East Policy’ and restarting negotiations on a free trade pact.

The proposal put forward by Chinese envoy Luo Zhaohui also includes starting negotiations on a ‘China-India Treaty of Good Neighbourliness and Friendly Cooperation’ and prioritising finding an early solution to the border dispute between the two countries.

“Firstly, start negotiation on a China-India Treaty of Good Neighbourliness and Friendly Cooperation. Secondly, restart negotiation of China-India Free Trade Agreement.

Thirdly, strive for an early harvest on the border issue. Fourthly, actively explore the feasibility of aligning China’s ‘One Belt One Road Initiative’ (OBOR) and India’s ‘Act East Policy’,” he said.

The Chinese envoy made the remarks while speaking at defence think-tank United Service Institution on Friday but the text of his closed-door address was released by the Chinese Embassy on Monday.

Indo-Pak tensions

Referring to Indo-Pak ties, Mr. Luo has said China is willing to mediate to resolve differences between the two countries if both sides accept it.

He said good ties between the two countries were conducive to regional stability and in China’s interests.

The development of China, India, Pakistan and the stability of the whole region call for a stable and friendly environment, he said.

“Otherwise, how could we open up and develop? That’s why we say, we are willing to mediate when India and Pakistan have problems. But the precondition is that both India and Pakistan accept it. We do this only out of goodwill. We do hope that there is no problem at all,” Mr. Luo said.

During 26/11 attacks

“When the Mumbai terrorist Attack on November 26, 2008, took place, I was Chinese Ambassador to Pakistan, and I did a lot of mediation at that time,” he said.

On the China Pakistan Economic Corridor (CPEC) which passes through Pakistan-occupied Kashmir, Mr. Luo said China had no intention to get involved in the sovereignty and territorial disputes between India and Pakistan.

“China supports the solution of the disputes through bilateral negotiations between the two countries. The CPEC is for promoting economic cooperation and connectivity. It has no connections to or impact on sovereignty issues,” he said.

“China sincere in intent”

“Even we can think about renaming the CPEC. China and India have had successful experience of de-linking sovereignty disputes with bilateral relations before. In history, we have had close cooperation along the ancient Silk Road. Why shouldn’t we support this kind of cooperation today? In a word, China is sincere in its intention to cooperate with India on the OBOR, as it is good for both of us,” he said.

The Chinese envoy said the OBOR and regional connectivity could provide China and India with fresh opportunities, calling the project a major public product China has offered to the world.

“It is a strategic initiative aimed at promoting globalisation and economic integration,” he said.

‘China first, not Pak first’

Referring to the views in India that China always puts Pakistan first when handling its relations with South Asian countries, he has said the government always follows ‘China first’ policy and that “problems” are dealt with based on merit.

“I want to tell you this is not true. Simply put, we always put China first and we deal with problems based on their own merits. Take Kashmir issue for example, we supported the relevant UN resolutions before 1990s. Then we supported a settlement through bilateral negotiation in line with the Simla Agreement. This is an example of China taking care of India’s concern,” he said.

On India’s bid for the membership of the Nuclear Suppliers Group (NSG), he said: “We do not oppose any country’s membership, believing that a standard for admission should be agreed upon first.”

The envoy’s four-point suggestion to overcome differences comes at a time when the relationship between the two Asian powers has been going through a rough patch due to differences on a range of issues, including China blocking India’s move to get Jaish-e-Mohammed (JeM) chief Masood Azhar banned by the U.N. and its opposition to India’s bid for NSG membership.

Trade relations

On trade ties between the two countries, Mr. Luo said he was happy to see that China has contributed its share to India’s development.

“Today, China is the second largest economy in the world, with a GDP of 11 trillion US dollars. China’s development also benefited from India’s participation.

“We sincerely hope that India can become more developed, as it not only benefits Indian people but also creates more opportunities for China’s development. Some people in the West misread China and tend to think that the ‘Dragon’ and the ‘Elephant’ are inevitable rivals, and that China would not like to see India developing. This conception is wrong. We hope to see India develop well and we are more than happy to help India develop to achieve common development,” Mr. Luo said.

We are victims of terror

On combating terrorism, he said China has been a victim of terrorism.

“China strongly opposes terrorism; second, China is ready to work with India, Pakistan, Afghanistan and the international community in fighting terrorism, and believes that terrorism knows no borders; third, countries need to have compatible policies, consensus and actions in fighting terrorism,” he said.

Making sense of Modinomics

Taking stock of the economics ideology of Prime Minister Narendra Modi and how it has impacted India in the (almost) three years that NDA has been in power

In a little less than three weeks from now, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) will complete three years in office. It is a good time if any, to take stock of its economics ideology; since Prime Minister Narendra Modi defines everything about this NDA government, it is only appropriate to dub it Modinomics (taking from Abenomics defining Japanese PM Shinzo Abe’s policy thrust).

A quick perusal of some of the big-ticket decisions undertaken by this government suggest that its economics playbook has logic, but not one defined by its right-wing predilections alone. Exactly why it is almost impossible to predict NDA’s actions; and probably why it ends up in the cross hairs of its critics on both sides of the ideological divide who are confounded by its lack of consistency.

While the right accuses it of abandoning the core principles of nudging India towards a truly market-based economy, the left wing critics argue that the NDA hasn’t done enough for the less privileged in the country (and there are about 400 million people living below the official poverty line).

The truth lies somewhere in between.

Modinomics seems to be inspired by results. Given that end, the means merely justify it. So if anything, it seems to be driven by pragmatism and an innate ability to embrace risks associated with out-of-the-box policy decisions (like demonetisation). As a result, its actions are an incredible summation of ideas loyal to the right, left and centre.

In terms of macro numbers, even the prime minister’s worst critics will concede that the worst is behind—though nobody knows when exactly the best will come. Particularly significant has been the battle against retail inflation, lowering it from double digit levels to about less than 5%—and in this the Reserve Bank of India with its singular focus needs as much if not a greater share of the credit.

The biggest worry, however, in the medium term continues to be reviving investments in the economy and generating enough jobs to absorb the 11-12 million joining the workforce every year—both of which will be overriding issues in the upcoming re-election in 2019.

What galls right of centre purists is that despite its predilections, the actions of this government speak otherwise. For instance, one of the promises it got elected to office was on ‘minimum government, maximum governance’; but the last three years has seen this government only expand its role.

Yet at the same time, it has been true to fiscal dharma. Besides sticking to its annual target, it appointed a high- level panel under N.K. Singh, a former revenue secretary and MP, to chart a new blueprint.

It is its pursuit of the anti-corruption agenda which has foxed most people. While most could grasp the logic of the NDA laying the framework of a rule-based regime through a tighter scrutiny of tax returns (especially its latest decision to link Aadhaar with PAN or personal account number for taxpayers), they were totally thrown by the decision to abruptly demonetize high value currency notes on 8 November.

Overnight, Modinomics came to be reviled, especially when the administration learnt that the corrupt were more innovative and the existing system more flawed than they had imagined. Its economic logic, however, got consigned to history as it turned out be a political masterstroke—with most voters seeing it as a bold example of a regime’s bid to walk the talk in the fight against corruption.

Similar confusion abounds in the battle for economic empowerment. The Congress-led United Progressive Alliance (UPA) defined it as a massive populist exercise, which cost the exchequer dear. Modinomics condemned this unequivocally and ridiculed the marque rural employment guarantee scheme; yet it did not cut back allocations and instead increased it to a record high (obviously recognizing the value of it as a short-term safety net to mitigate rural distress caused by poor monsoons).

At the same time though, it has pursued the idea of ‘one nation, one market’ for farmers to sell their products—integrating them into the market economy like never before—instead of getting locked into regional markets controlled by vested interests. The idea of a revamped crop insurance scheme is yet again the use of a market-based instrument to underwrite risk.

Its anti-poverty thrust (like the subsidized cooking gas, electricity for all and health policies for the poor) seems to be driven by the desire to economically empower, instead of purely raining the needy with freebies, and then nudge them to integrate into the formal economy.

It is clear then that Modinomics is bereft of orthodoxy. Eventually it will be judged by deliverables. And in this there is only one metric: jobs. Unfortunately, any official data on this government’s record will be available only after 2019. It will then boil down to managing perceptions. And that is pure politics.

GSLV Successfully Launches South Asia Satellite

The South Asian Satellite – Some highlights

• Space diplomacy has touched new heights with Prime Minister Narendra Modi’s unique gift in the sky to South Asian neighbours.

• The gift of a communications satellite for use by neighbours at no cost has perhaps no precedent worldwide.

• The satellite, which weighs over 2 tonnes, has been fabricated in three years at a cost of over Rs. 230 crore.

• Its footprint that extends all over South Asia.

• The South Asia Satellite has 12 Ku band transponders which India's neighbours can utilise to increase communications.

• Each country will get access to at least one transponder through which they could beam their own programming.

• The satellite will facilitate DTH television, VSAT links, tele-education, telemedicine and disaster management support. It will provide critical communication links in times of disasters such as earthquakes, cyclones, floods, and tsunamis.

• Heads of Government from all the seven South Asian nations who are benefiting from the satellite, connected via video conference, in a unique celebration of the successful launch.

GSLV Successfully Launches South Asia Satellite

India's Geosynchronous Satellite Launch Vehicle (GSLV-F09) successfully launched the 2230 kg South |Asia Satellite (GSAT-9) into its planned Geosynchronous Transfer Orbit (GTO) today (May 05, 2017). Today’s launch of GSLV was its eleventh and took place from the Second Launch Pad at the Satish Dhawan Space Centre SHAR (SDSC SHAR), Sriharikota, the spaceport of India. This is the fourth consecutive success achieved by GSLV carrying indigenously developed Cryogenic Upper Stage. In its oval shaped GTO, the South Asia Satellite is now orbiting the Earth with a perigee (nearest point to Earth) of 169 km and an apogee (farthest point to Earth) of 36,105 km with an orbital inclination of 20.65 deg with respect to the equator.

Few seconds before the launch countdown reached zero, the four liquid propellant strap-on motors of GSLV-F09, each carrying 42 tons of liquid propellants, were ignited. At count zero and after confirming the normal performance of all the four strap-on motors, the 139 ton solid propellant first stage core motor was ignited and GSLV lifted off at 16:57 IST. The major phases of the flight occurred as scheduled. About seventeen minutes after lift-off, South Asia Satellite was successfully placed in GTO.

. Soon after separation from GSLV, the two solar arrays of the satellite were automatically deployed in quick succession and the Master Control Facility (MCF) at Hassan in Karnataka assumed control of the satellite.

South Asia Satellite is a communication satellite built by ISRO to provide a variety of communication services over the South Asian region. For this, it is equipped with Ku-band transponders.

Following the successful launch, the Honorable Prime Minister of India, Mr. Narendra Modi addressed along with the South Asian leaders. He congratulated ISRO and remarked that today was a historic day for South Asia and a day without precedence. The Prime Minister recalled that two years ago India made a promise to extend the advanced space technology for the cause of growth and prosperity of the people of South Asia and felt that the successful launch of South Asia Satellite today marks a fulfillment of that.

In the coming days, the satellite orbit will be raised from its present GTO to the final circular Geostationary Orbit (GSO) by firing the satellite's Liquid Apogee Motor (LAM) in stages. The South Asia Satellite will be commissioned into service after the completion of orbit raising operations and the satellite’s positioning in its designated slot in the GSO following in-orbit testing of its payloads. 

Getting Narendra Modi’s generic medicines policy right

Rolling out a half-baked populist agenda is likely to backfire and be detrimental to the public health agenda

In what has come to be recognized as his signature fashion, Prime Minister Narendra Modi recently put forward another disruptive policy prescription—this time in healthcare. Doctors will now be required to prescribe generic formulations of medicines, as opposed to specific brands. This is an initiative that goes beyond attempts by institutions like the Medical Council of India to encourage the prescription of generic names, and instead works towards creating a formal legal framework for such a practice. Broadly, this is expected to bring down drug prices and expand access to affordable health solutions. The push towards generics is lauded by many stakeholders, and rightly so. However, Modi’s policy must move beyond rhetoric—for in a sector such as health, faulty policy design will directly affect the country’s mortality statistics.

As per the latest National Sample Survey Office survey on healthcare, in 2014, medicines emerged as a principal component of total health expenses—72% in rural areas and 68% in urban areas. For a country with one of the highest per capita out-of-pocket expenditures on health, even a modest drop in drug prices will free hundreds of households from the widespread phenomenon of a medical poverty trap.

In addition to the social benefits, the generics-only policy also makes economic sense. It is the government’s responsibility to keep the growth engine running. By promoting generic drug consumption, the government safeguards the health of its generic drug manufacturing industry—one of the largest suppliers of low-cost medicines in the world. With increasing pressure from the “Big Pharma” companies in developed countries, Indian generic manufacturers must now operate under a markedly restrictive intellectual property rights (IPR) regime. The new policy can ensure that—at least in the Indian market—generic manufacturers retain an advantage. Big Pharma’s access to Indian consumers will have to be routed through generic companies using channels such as voluntary licensing. Last year, US-based Gilead, for instance, licensed out its Hepatitis C drug, Sovaldi, to 11 Indian generic companies at a drastically reduced price. A generic-only policy is expected to mainstream such practices. In a global economic environment that is turning increasingly hostile to generic drug production, this is a bold move—indicative of the government’s categorical support for one of its key industries.

Low-cost medicines, apart from their attribute as a commercial commodity, have far-reaching implications on public health and international human rights. India has unambiguously subscribed to the pro-public health argument, and has articulated its position several times at home and in international forums. Public health, however, encompasses quality as much as affordability of pharmaceutical drugs. While Modi’s push for a generics-only policy is a step in the right direction, it is important to assess and ensure that Indian generic companies are competent enough to take on the task before institutionalizing such a policy.

Indian generic manufacturers have come under the spotlight due to the inferior quality of their products. Major export destinations—like the US and the European Union—have raised this issue several times. The US food and drug administration (FDA) issued warning letters to 27 manufacturing plants in India between 2011 and 2016, and banned drug imports from several of them, including some of the biggest names in Indian generics manufacturing. The European Medicines Agency (EMA) and the UK’s Medicines and Health Regulatory Authority (MHRA) have issued similar sanctions. This highlights the fallacy in equating brand names with quality—a common justification by Indian doctors for favouring certain brands over others.

Some may argue that such sanctions are merely a manifestation of the general hostility towards generic drugs. However, the problem of substandard quality is further supported by the findings of India’s own regulatory authority. The March 2017 edition of the Central Drugs Standard Control Organization’s (CDSCO) surveillance report shows that a range of commonly consumed drugs, such as the Cipla-manufactured antibiotic ofloxacin tablets or the Cadila-manufactured Cadilose, fall short of standard quality-control criteria.

There are three fundamental areas of concern. The first relates to the efficacy of Indian-made drugs. Oftentimes, such drugs have been found to contain less than the required amount of active pharmaceutical ingredient (API), rendering them ineffective. The FDA’s inspection of Avandamet tablets, used to treat type 2 diabetes, found that some tablets lack the proper dosage of rosiglitazone, an active ingredient.

Closely linked to the issue of efficacy is the lack of data integrity. The poorly managed documentation practices of Indian generic firms featured as the primary criticism flagged by foreign regulatory authorities. The lack of reliable and complete data on the test results of specific drug batches, along with inconsistencies in the records presented, meant that inspection and verification of drug quality was extremely difficult. In fact, in 2013, Ranbaxy pleaded guilty and paid fines amounting to $500 million for fabricating drug-related data in the US.

The third aspect relates to the hygiene standards of the manufacturing plants. Individuals suffering from illness are especially susceptible to infections, and inspections of generic drug plants 
reveal pest infestations and dilapidated infrastructure. Many a manufacturing unit has become home to stray pigeons and lizards. Gaping holes in building walls and rusted pipes have become sources of infectious parasites, in what ideally should be a sterile environment.

Healthcare should be accessible to all, irrespective of purchasing power. The government’s leadership on this issue is welcome. Rolling out a half-baked populist agenda, however, is likely to backfire. Unlike demonetization, one cannot afford to wait and watch for the full impact of a generics-only policy to unfold. The current government has invested heavily in creating institutions to promote evidence-based policymaking, and it must leverage these in crafting an effective generic medicine policy.