1. ‘Job losses bode ill for the economy’

April’s labour participation rate was lower than in March 2020: CMIE chief Vyas

Rising unemployment, including among the salaried class, and shrinking real incomes have led to a lack of demand that bodes ill for the economy, said Mahesh Vyas, managing director at the Centre for Monitoring Indian Economy (CMIE).

“Unemployment rising is not a good sign at all for the economy,” he said. “Labour participation rate recovered soon after the lockdown was eased last year, but has run out of momentum even before it could recover fully,” Mr. Vyas added.

Unemployment rose to 8% in April, from 6.5% in March, the CMIE said. The labour participation rate (LPR) was 40% in April. “The LPR is about two percentage points below what it was before April 2020. This is a very serious matter for a population of our size,” Mr. Vyas said.

Observing that the economy had recovered after the lockdowns were eased in 2020, he said, “All supply side indicators saw a robust turnaround. But where is the demand?”

Asserting that the lack of demand was a bottleneck for further growth, he said, “Income and consumer sentiment have also been hit. Income is lower than it was a year earlier. 90% of families have seen income shrinkage (i.e., real income, adjusted for inflation).”

Domestic demand is key

“We can’t depend on exports. It is domestic consumption that will help the economy,” Mr. Vyas said, adding that it was critical to put money in the hands of the consumer now.

Significantly, the size of the salaried class shrank for the third consecutive month in April, with 3.4 million jobs lost. During 2019-20, there were 85.9 million salaried jobs. As of April 2021, there were just 73.3 million, he said in a separate note.

India’s Unemployment Problem

Just before the Covid crisis at the end of 2019-20 financial year, India had around 403.5 million employed people and around 35 million (or 3.5 crore) openly unemployed people (those who are seeking work and not finding it) in the country.

Issues

• Addition of Job Seekers Every Year: Given India’s population growth, each year there are close to 20 million (or 2 crore) people who enter the working-age population of 15 to 59 years.
• Recovery Post Pandemic: As of January 2021, India had only about 400 million employed (pre-COVID it was 403.5 million). At one level this is good news because far more had lost jobs and many seem to have regained employment as the economy has started recovering. 
• Steady Decline in number of Employed People: As per CMIE data since 2016, the total number of employed people in India has been steadily coming down. It was 407.3 million in 2016-17 and then fell to 405.9 million in 2017-18, and to 400.9 million at the end of 2018-19.
• Unemployment has larger Impact on Society: Each unemployed person is part of a larger family — implying millions of families suffering from the lack of employment opportunities.
• Falling Labour Force Participation rate: Even though people have skills they may not be in position to enter labour market for variety of reasons. For instance, if law and order is poor or if cultural mores can prevent women to seek work. Also, men can give up looking for work after repeated failed attempts. As a result, India’s labour force participation rate (LFPR) falls. India’s LFPR is about 40% (in most developed countries it is 60%)
• Jobless Growth: Typically, fast economic growth takes care of unemployment worries. However, due to distorted economic structure (service led growth) India’s growth has not translated into jobs. What was required is labour intensive manufacturing led growth providing jobs for millions
• Technological Advancement & Unemployment: The GDP can continue to go up as more and more companies become more productive by replacing labour with capital (machinery) but that will only deepen India’s unemployment problem.
• Criticism of Government’s role in Creating Jobs: The mantra of “minimum government” espoused in Union Budget for 2021-22 essentially undercuts the government’s role in directly creating new jobs. While on paper this makes sense, the timing is questionable. That’s because the Indian economy is quite weak and the private sector has already shown its preference by choosing to cut jobs and boost its profits

Types of Unemployment in India

• Disguised Unemployment:
  • It is a phenomenon wherein more people are employed than actually needed.
  • It is primarily traced in the agricultural and the unorganised sectors of India.
• Seasonal Unemployment:
  • It is an unemployment that occurs during certain seasons of the year.
  • Agricultural labourers in India rarely have work throughout the year.
• Structural Unemployment:
  • It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market.
  • Many people in India do not get job due to lack of requisite skills and due to poor education level, it becomes difficult to train them.
• Cyclical Unemployment:
  • It is result of the business cycle, where unemployment rises during recessions and declines with economic growth.
  • Cyclical unemployment figures in India are negligible. It is a phenomenon that is mostly found in capitalist economies.
• Technological Unemployment:
  • It is loss of jobs due to changes in technology.
  • In 2016, World Bank data predicted that the proportion of jobs threatened by automation in India is 69% year-on-year.
• Frictional Unemployment:
  • The Frictional Unemployment also called as Search Unemployment, refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs.
  • In other words, an employee requires time for searching a new job or shifting from the existing to a new job, this inevitable time delay causes the frictional unemployment. It is often considered as a voluntary unemployment because it is not caused due to the shortage of job, but in fact, the workers themselves quit their jobs in search of better opportunities.
• Vulnerable Employment:
  • This means, people working informally, without proper job contracts and thus sans any legal protection. These persons are deemed ‘unemployed’ since records of their work are never maintained.
  • It is one of the main types of unemployment in India.

Related Terms

• Unemployment trap is a situation when unemployment benefits discourage the unemployed to go to work. People find the opportunity cost of going to work too high when one can simply enjoy the benefits by doing nothing.
  • Description: While the purpose of social security and welfare systems is to provide relief to the unemployed, they end up providing them with an incentive not to return to work. An unemployment trap arises when opportunity cost of going to work is higher than the income received, discouraging people from returning to work and being productive.
• Harmonised unemployment rates define the unemployed as people of working age who are without work, are available for work, and have taken specific steps to find work. The uniform application of this definition results in estimates of unemployment rates that are more internationally comparable than estimates based on national definitions of unemployment.
  • This indicator is measured in numbers of unemployed people as a percentage of the labour force and it is seasonally adjusted. The labour force is defined as the total number of unemployed people plus those in civilian employment.

2.  DRDO’s drug launched for emergency use

‘It can help patients overcome oxygen dependency’

The first batch of the adjunct COVID therapy drug, 2-deoxy-D-glucose (2-DG) — developed by the Defence Research and Development Organisation (DRDO) along with Dr Reddy’s Laboratories (DRL), Hyderabad — was on Monday released for emergency use. Defence Minister Rajnath Singh formally handed over the drug to Health Minister Harsh Vardhan.

“One box each of the sachets of the drug were handed over to Dr. Randeep Guleria, Director All India Institute of Medical Sciences (AIIMS) and Lt. Gen. Sunil Kant of Armed Forces Medical Services (AFMS). More will be handed over to different hospitals across the country for emergency use,” a Defence Ministry statement said.

An anti-COVID-19 therapeutic application of the drug 2-DG has been developed by Institute of Nuclear Medicine and Allied Sciences (INMAS), a DRDO lab along with DRL.

DRL will increase the production of the drug which is expected to be made available to all hospitals by the first week of June, said K. Satish Reddy, Chairman DRL.

The drug is a good example of DRDO and private partnership, which will help patients in overcoming oxygen dependency by around 40%, Mr. Singh said, speaking at the event.

Dr. Harsh Vardhan said 2-DG was the first therapeutic drug for COVID which India has developed indigenously.

“Scientists have been working on the molecule for long and over the last one year clinical trials were conducted extensively in various hospitals across the country,” said Dr. G. Satheesh Reddy, Chairman DRDO.

2-deoxy-D-glucose (2-DG)

• DRDO’s new anti-Covid oral drug, 2-deoxy-D-glucose (2-DG), was recently granted emergency use approval by the Drug Controller General of India (DCGI).
•  2-DG halts the spread of COVID-19 inside the body cells.
• Clinical trial results have shown that this molecule helps in faster recovery of hospitalised patients and reduces supplemental oxygen dependence.
• In efficacy trends, the patients treated with 2-DG showed faster symptomatic cure than Standard of Care (SoC) on various endpoints.
• A significantly favourable trend (2.5 days difference) was seen in terms of the median time to achieving normalisation of specific vital signs parameters when compared to SoC.

How 2-DG reduces dependence on oxygen

• The 2 DG drug, like glucose, spreads through the body, reaches the virus-infected cells and prevents virus growth by stopping viral synthesis and destroys the protein’s energy production.
• The drug also works on virus infection spread into lungs which help us to decrease patients dependability on oxygen.

3. States showing interest in Sputnik V

Dr. Reddy’s Laboratories says at least eight States have approached the company

Many States have approached Dr. Reddy’s Laboratories, marketing partner for Sputnik V in India, to procure the Russian vaccine, a member of the company’s management team said on Monday.

Their interest assumes significance in the backdrop of the vaccination programme in the country slowing down due a shortage of vaccines and more people becoming eligible with the Centre earlier this month permitting vaccination of those above 18 years of age.

“As of now, 8-9 States have approached,” Global Head of Integrated Product Development Organisation Sauri Gudlavalleti said at the launch of a pilot programme for the vaccine at Apollo Hospitals here on Monday.

Last week, announcing the roll-out of the two-dose vaccine, Dr. Reddy’s said the MRP per dose was ₹995.40, which includes a 5% GST. The company had received the first consignment of 1.50 lakh doses from Russia on May 1 and 60,000 doses of the second dose component of the vaccine on Sunday.

The cost is expected to come down with the commencement of domestic production. Six companies have entered into agreements to produce 850 million doses a year, and the made in India Sputnik is expected to be launched by July.

Sputnik Light

To queries on plans to bring Sputnik Light, a single dose vaccine launched by Sputnik V developers, he said the data forming the basis for its approval in Russia was being studied. It was expected to be submitted to the regulator in India in the next few weeks.

President – Hospitals Division of Apollo Hospitals Enterprises, Dr. K. Hari Prasad, said the pilot phase would allow Dr. Reddy’s and Apollo to test the arrangements and cold chain logistics, since Sputnik had to be stored at minus 18 degrees C, and prepare for the launch.

“We are doing a trial run from today to fix any logistics issues and to prove that they are safe, by vaccinating around 50,000 staff and families of Dr. Reddy’s, across the country. The cost will be ₹1,200-₹1,250, including vaccination and vaccine administering,” he said.

India being as Pharmacy of the world:

1. India is largely considered as the global hub for cheap and generic medicines. It is therefore pertinent for this production and supply of generic medicines to continue in order to address major health crisis in poor, least developed, and developing nations.
2. The pandemic offers an unprecedented opportunity to establish those credentials, but already a key step of establishing the vaccine’s efficacy in the Indian population before rollout has been side-stepped.
3. Vaccines by Bharat Biotech and Serum Institute of India (SII) were formally approved by the Central Drugs and Standards Committee (CDSCO) on Sunday.
4. This allows the vaccines Covishield from SII and based on the Oxford AstraZeneca vaccine, and Covaxin from by Bharat Biotech to be offered to healthcare workers and frontline workers in India.

Highest risk personnel will be given the vaccine for free:

1. The Health Ministry has said 3 crore such personnel, considered at highest risk for COVID-19, will be given the vaccine for free.
2. It isn’t yet known which vaccine will be made available to these personnel though multiple officials say rollouts can begin in less than a fortnight.
3. Both the approvals accorded are for “restricted use in emergency situation” and in the case of Bharat Biotech the approval wording notes it is in “public interest as an abundant precaution, in clinical trial mode, to have more options for vaccinations, especially in case of infection by mutant strains.” What these conditions are were not specified.
4. Covaxin has been developed based on an inactivated Sars-CoV-2 strain cultured at the National Institute of Virology, an ICMR body.
5. Because it was a whole virus (and therefore, more of it would be exposed to the immune system) the chances that it would mount a response against a variety of mutant virus types or strains were higher.
6. The Indian data furnished by the companies only attest to the vaccine’s safety and its evoking some immune response.
7. However, this pandemic has revealed multiple instances of therapies and interventions from convalescent plasma therapy to a slew of antivirals that seemed to work well under idealised lab conditions but did not measurably protect in real-world hospital conditions.

How do Covishield and Covaxin work?

1. Covishield is the Indian variant of AZD1222, the vaccine developed by AstraZeneca and University of Oxford. Pune-based Serum Institute of India (SII) developed and manufactured Covishield through a licence from AstraZeneca and Oxford.
2. It is a “non-replicating viral vector” vaccine, which means it makes use of another weakened and genetically modified virus, in this case a common cold chimpanzee virus to help the body develop immunity against the coronavirus.
3. The vaccine carries just the code to make the spike protein (the spike on the virus’s surface). The body’s immune system is supposed to recognise this protein as a threat, and work on building antibodies against it.
4. Covaxin, developed by Hyderabad-based Bharat Biotech in collaboration with the National Institute of Virology, uses a different platform.
5. It is an “inactivated” vaccine, which means it uses the killed SARS-CoV-2 virus, which has no potential to infect or replicate once injected and just serves to boost an immune response.
6. Covaxin is expected to target more than just the spike protein — it also aims to develop an immune response to the nucleocapsid protein (the shell of the virus that encloses its genetic material).

Concerns regarding untested vaccine:

1. Some scientists have expressed concern about the basis for the approval to Covaxin, given that it does not seem to adhere to the regulator’s own requirements for clearing a vaccine in this pandemic.
2. The concern from approving an untested vaccine is that it makes it nearly impossible to conduct a proper phase-3 trial.
3. It will be unethical to expect volunteers to participate in a trial where there is only a 50% chance of being administered the actual vaccine, when they have the option of the real dose elsewhere.
4. Both SII and Bharat Biotech, given the pace of recruitment and potential pool of volunteers, would have been able to generate much more data within mere weeks.
5. So, it is hard to imagine why an emergency use authorisation of these vaccines was hurried through.
6. Opacity marks the government’s communication strategy in a country where distrust of vaccines remains in spite of years of vaccination programmes and elimination of grave diseases. The government neglects this at the country’s peril.

4. ‘Remdesivir production stepped up’

Centre tells Madras HC that manufacturing capacity of 7 licencees enhanced

The Centre on Monday told the Madras High Court that seven Indian licencees of patented anti-viral drug Remdesivir were manufacturing only 27 lakh vials a month as on April 1 this year though their installed capacity was 38.8 lakh a month. Now, due to the surge in COVID-19 cases in certain parts of the country, the Drugs Controller General of India (DGCI) has permitted them to produce 1.19 crore vials a month.

Appearing before the first Division Bench of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy, Additional Solicitor General (ASG) R. Sankaranarayanan said the patent for Remdesivir was held by Gilead of the United States and only seven Indian companies were manufacturing the drug here under licence agreements. The DGCI, V.G. Somani, jumped into action immediately when the demand for the drug increased recently.

In order to enhance the production capacity of the seven licensed manufacturers, the DGCI approved 35 additional manufacturing sites, apart from the 22 already in existence. It resulted in enhanced manufacturing capacity of 70 lakh vials as on April 23 and 1.19 crore vials as on May 15. Consequently, the Centre increased the allocation of Remdesivir to 53 lakh vials to various States for the period between April 21 and May 16.

The Union Ministry of Health is also procuring Remdesivir from other countries.

On the other hand, India was completely dependent on imports with respect to critical care drug Tocilizumab, the ASG said, referring to a report submitted by the DGCI and added that only limited stocks were being imported.

Nevertheless, he added that there were other drugs produced domestically. He said drugs such as Itulizumab, Dexamethasone and Methyl Prednisolone were either equivalent to or better than Tocilizumab.

Role of Remdesivir in treatment of Covid-19 patients

The panic buying of antiviral Remdesivir amid the surge of Covid-19 cases is yet again seeing a discussion on the use of the drug with little or significant benefit. Debates arising looking at the Solidarity trials results, based on which the World Health Organisation had issued guidelines against the use of Remdesivir as there was little or no effect on overall mortality, mechanical ventilation and duration of hospital stay of hospitalised covid-19 patients.

The investigational broad-spectrum antiviral drug Remdesivir was initially manufactured in 2014 by biotechnology firm Gilead Sciences for targeting hepatitis C, showed potent activity against Ebola virus and Middle East Respiratory Syndrome (MERS) however it didn’t meet much success.

During the Covid-19 outbreak, the drug was found to be effective in fighting coronavirus SARS-COV-2 but in few smaller studies.

The National Institutes of Health(NIH) Adaptive COVID-19 Treatment Trial (ACTT) results found that hospitalized patients with advanced Covid-19 and lung involvement who received Remdesivir had a faster recovery time than those who received placebo.

According to medical doctors treating Covid-19 patients in India, the drug does help in reducing the viral replication however, they highlight that moderate to severe Covid-19 patients are being treated not only with Remdesivir but a combination of oxygen therapy, vitamin supplements, steroids and blood thinner at appropriate stages and that has been helping patients in recovering faster.

The most critical factor in the effectiveness of Remdesivir is when was it administered to the patient.

“Remdesivir should be used within the first 9 days from the onset of symptoms, in moderate cases or patients who are progressing from moderate to severe. It should be used only for five days, there is no point in using it for more than 5 days. There is no mortality benefit, hence it is not a magic wand however, it (Remdesivir) is the only antiviral medicine that is available right now so we need to use it properly,” said Dr. Rahul Pandit who is the Director of Critical Care Medicine and ICU at Fortis Hospital.

Given intravenously, Remdesivir interrupts the production of the virus by interfering with one of the key enzymes the virus needs to replicate RNA and this prevents the virus from multiplying. The other drugs support in bringing ease to inflammation triggered by the virus.

According to Bhatia Hospital’s Consultant Internist Dr Samrat D Shah, Remdesivir is the only sure-shot antiviral drug that reduces that viral replication. “It gives a lot of assurance that my patient is going to recover soon,” he said.

“During shortage of Remdesivir, you are relying on all other drugs to work. The treatment is incomplete when there is a combination of broad-spectrum antiviral, antibiotic, anti-inflammatory and anticoagulant. So until and unless you use this, you feel the patient is left exposed to some kind of complication,” added Dr Shah while sharing his experience of managing covid patients amid the shortage of the drug.

Speaking on the judicious use of the antiviral drug, Global Hospital’s Consultant Intensivist and Chest Physician, Dr. Harish Chafle said, “If we start the drug in the initial days of illness where the patient has consistent fever and oxygen requirement, then you definitely get a better outcome. All patients who are young and without any comorbidities, have a milder form of symptoms and do not require oxygen can be treated without Remdesivir also, it is not required to be given to all patients.”

5. Israeli strikes hit Gaza tunnels as diplomats work for ceasefire

Military says it destroyed 15 km of tunnels used by Hamas fighters to take cover

The Israeli military unleashed a wave of heavy airstrikes on the Gaza Strip early on Monday, saying it destroyed 15 km of militant tunnels and the homes of nine Hamas commanders, as international diplomats worked to end the week of fighting that has killed hundreds of people.

The latest attacks killed a top Gaza leader of the Islamic Jihad militant group whom the Israeli military blamed for some of the thousands of rocket attacks launched at Israel in recent days.

Residents of Gaza awakened by the overnight barrage described it as the heaviest since the war began.

The strikes came a day after the deadliest attack in the current round of hostilities between Israel and Gaza’s Hamas rulers, which killed 42 people and flattened three buildings in Gaza.

Gaza’s Mayor, Yahya Sarraj, told Al-Jazeera TV that the strikes had caused extensive damage to roads and other infrastructure. “If the aggression continues we expect conditions to become worse,” he said.

The UN has warned that the territory’s sole power station is at risk of running out of fuel, and Mr. Sarraj said Gaza was also low on spare parts. Gaza already experiences daily power outages for between eight and 12 hours, and tap water is undrinkable. Mohammed Thabet, a spokesman for the electricity distribution company, said it has fuel to supply Gaza with electricity for two or three days.

Hamas also continued its rocket attacks, launching them from residential areas in Gaza and aimed at civilian population centres in Israel.

The war broke out last Monday, when the Hamas militant group fired long-range rockets at Jerusalem after weeks of clashes in the holy city between Palestinian protesters and Israeli police. The protests were focused on the heavy-handed policing of a flashpoint sacred site during the Muslim holy month of Ramadan and the threatened eviction of dozens of Palestinian families by Jewish settlers.

Call for strike

More protests were expected across the region on Tuesday in response to a call by Palestinian citizens of Israel for a general strike. The protest has the support of Palestinian Authority President Mahmoud Abbas’ Fatah party.

Since the fighting began, the Israeli military has launched hundreds of airstrikes. Palestinian militants in Gaza have fired more than 3,200 rockets into Israel.

The Israeli military, meanwhile, said it struck 35 “terror targets” on Monday as well as the tunnels, which it says are part of an elaborate system it refers to as the “Metro,” used by fighters to take cover from airstrikes.

At least 200 Palestinians have been killed in the strikes, including 59 children and 35 women, with 1,300 people wounded, according to the Gaza Health Ministry. Eight people in Israel have been killed in rocket attacks launched from Gaza..

Despite international efforts at a ceasefire, Israeli Prime Minister Benjamin Netanyahu said on Sunday that Israel’s attacks were continuing at “full-force” and would “take time.“ Israel “wants to levy a heavy price” on the Hamas militant group, he said.

Hamas’ top leader, Ismail Haniyeh, who is based abroad, said the group has been contacted by the UN, Russia, Egypt and Qatar as part of cease-fire efforts but “will not accept a solution that is not up to the sacrifices of the Palestinian people.”

Egyptian President Abdel Fattah el-Sissi said his government is working to “urgently” end the violence.

6. ‘Demand takes big hit on second wave’

Economic indicators moderate through April-May as COVID-19 cases overwhelm India: RBI Bulletin

As the second wave of COVID-19 overwhelmed India and the world, the real economy indicators moderated through April-May 2021, senior officials of the Reserve Bank of India wrote in the RBI’s monthly bulletin.

“The biggest toll of the second wave is in terms of a demand shock — loss of mobility, discretionary spending and employment, besides inventory accumulation” while the aggregate supply was less impacted, they wrote.

“The resurgence of COVID-19 has dented but not debilitated economic activity in the first half of Q1… Although extremely tentative at this stage, the central tendency of available diagnosis is that the loss of momentum is not as severe as at this time a year ago,” they added. In an article on ‘State of the Economy’, the officials including Deputy Governor Michael Debabrata Patra observed that agriculture remained robust at this critical time and industrial production surged after a two-month contraction on the tailwinds of a large favourable base effect.

The impact of the new infections appeared to be U-shaped, they posited.

‘Weathering the storm’

“Each shoulder of the U represents sectors that are weathering the storm — agriculture at one end and IT on the other. On the slopes of the U are organised and automated manufacturing on one side and on the other, services that can be delivered remotely and do not require producers and consumers to move. These activities continue to function under pandemic protocols,” they wrote.

In the well of the U were the most vulnerable — blue collar groups that had to risk exposure for a living and for the rest of society to survive; doctors and healthcare workers; law and order; municipal personnel; individuals eking out daily livelihoods; small businesses, organised and unorganised — and they warranted priority in policy interventions, the officials observed.

“It is in this direction that the Reserve Bank, re-armed and re-loaded, has stepped out… The road ahead is fraught with danger, but India’s destiny lies not in the second wave, but in life beyond,” they added.

NBFCs hit hard

In another article on the performance of NBFCs during the pandemic, the bank’s officials wrote that as the pandemic disrupted economic activity significantly, Non-Banking Financial Companies were hit hard. During Q2 and Q3 of FY21, the consolidated balance sheet of NBFCs grew at a slower pace.

“However, NBFCs were able to continue credit intermediation, albeit at a lower rate, reflecting the resilience of the sector. Among sectors NBFCs lend to, industrial sector, particularly micro and small and large industries, were the hardest hit by the pandemic as they posted decline in credit growth,” the article’s authors added.

Non-Banking Financial Companies

• A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
• A non-banking institution which is a company and has a principal business of receiving deposits under any scheme or arrangement in one lump sum or in instalments by way of contributions or in any other manner is also a non-banking financial company (Residuary non-banking company).

NBFCs are doing functions similar to banks. What is the difference between banks & NBFCs?

NBFCs lend and make investments, and hence their activities are akin to that of banks; however, there are a few differences as given below:

1. NBFC cannot accept demand deposits;
2. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself.
3. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
4. Unlike Banks which are regulated by the RBI, the NBFCs are regulated by multiple regulators; Insurance Companies- IRDA, Merchant Banks- SEBI, Micro Finance Institutions- State Government, RBI and NABARD.
5. The norm of Public Sector Lending does not apply to NBFCs.
6. The Cash Reserve Requirement also does not apply to NBFCs.

Non- Banking Financial Institutions – Types

Mutual Funds

1. Mediators between people and stock exchange
2. Money collected from people by selling their units is called the corpus
3. Oldest Mutual Fund company in India is UTI ( Unit Trust of India)
4. Mutual Funds nearly provides all the considerations

Insurance Companies

1. Collect money from the public through the sale of insurance policies
2. There are two types of Insurance – Life Insurance and General Insurance

2. General Insurance includes Loss of property, car, house etc.
3. It also includes Health Insurance

IRDA Act, 1999

As per the Insurance Regulatory and Development Authority Act, Insurance companies were opened up for private companies. The objective was to promote competition FDI was allowed up to 26% (Recently increased to 49%) IRDA was established as the regulator of the insurance sector

1. LIC – Life Insurance Corporation

• Set up in 1956 by the government by nationalising all the existing private sector life insurance companies
• This was done due to large scale defaults

2. GIC – General Insurance Corporation

• It was established in 1973
• Subsidiaries of GIC are:-

• NICL – National Insurance Company of India Limited
• United India Insurance Company Limited
• Oriental Insurance Company of India Limited
• New India Insurance Company of India Limited

3. ULIP – Unit Linked Insurance Plans

• A mixture of Insurance and Mutual Funds

Hedge Funds

1. These are mutual funds for rich investors
2. Funds are raised through the sale of their unit to High net worth Individuals and Institutional Investors
3. Units of these are usually sold in chunks/groups
4. There is a lock-in period for Hedge funds before which funds cannot be withdrawn
5. Corpus is an investment in risky instruments with a long term perspective

Venture Capital Firms/ Companies

1. They provide finance and technical assistance to firms which undertake a business project based on innovative ventures
2. They provide finance for the commercial application of new technology

Merchant banks (Investment Banks)

1. Merchant banks provide financial consultancy services
2. They advise firms on fundraising, manage IPO of firms, underwrite new issues and facilitate demat trading.

Finance Companies (Loan Companies)

1. Financial Institutions raise funds from the public for lending purpose
2. e.g. – Muthoot Finance, Cholamandalam

Micro Finance Institutions (MFI)

1. Raise funds from the public for lending to weaker sections
2. In India, they mainly raise funds from banks
3. e.g. – Basix, Bandhan, SKS Micro Finance.

Vulture Funds

1. These funds buy stocks of companies which are nearing bankruptcy at a very low price.
2. After purchasing such stocks they initiate the recovery process to increase the price of shares and sell it at a later point of time

Islamic Banks

1. These banks provide loans on the basis of Islamic laws called Sharia.
2. In the law of Sharia Interest cannot be charged on the loans

Leasing Companies

1. They purchase equipment and machinery and provide the same to companies on a lease.
2. These companies charge rent on these machineries which is similar to EMI

7. WPI inflation hits high of 10.5%

Industry frets, urges Centre to rationalise fuel taxes

Inflation as measured by the Wholesale Price Index quickened to a record high of 10.5% in April, from 7.4% in March and 4.8% recorded in February, thanks to a base effect from last April which recorded a negative inflation of 1.57%, and a surge in fuel, food and manufactured goods’ prices.

Wholesale inflation in fuel and power more than doubled to 20.94% in April 2021 from 10.25% in March 2021, while manufactured goods recorded inflation of 9%, prompting industry to urge the government to rationalise fuel prices and try to rein in high commodity prices.

Food prices also hardened to record 7.6% inflation in April from 3.6% in February and 5.3% in March. Retail inflation for April had moderated to a three-month low of 4.29% from over 5.5% in March, helped by cooling food prices, but economists had expected the WPI to harden during the month.

The high inflation in fuel and power is significantly raising input costs of Indian industry, said PHDCCI president Sanjay Aggarwal. “We urge the government to consider petroleum products in the ambit of GST to rationalise the prices and to contain rising inflation,” he said.

ICRA chief economist Aditi Nayar said the headline WPI inflation surge was sharper than expected and could rise further to 13%-13.5% in May before winding down.

However, core WPI inflation may continue to rise over the next three months to a peak of about 10.5% from 8.4% in April. “The likely trajectory of WPI inflation supports our view that there is no space for rate cuts to support the faltering growth momentum, even as we expect the monetary stance to remain accommodative,” she said.

Inflation in India

Measurement of Inflation in India

• Wholesale Price Index WPI
  • It is the most widely used inflation indicator in India.
  • Published by the Office of Economic Adviser, Ministry of Commerce and Industry.
  • All transactions at the first point of bulk sale in the domestic market are included.
  • Major criticism for this index is that the general public does not buy products at wholesale price.
  • The base year of All-India WPI has been revised from 2004-05 to 2011-12 in 2017.
• Consumer Price Index CPI
  • It measures price changes from the perspective of a retail buyer.
  • It measures changes over time in the level of retail prices of selected goods and services on which consumers of a defined group spend their incomes.
  • Four types of CPI are as follows:
    • CPI for Industrial Workers (IW).
    • CPI for Agricultural Labourer (AL).
    • CPI for Rural Labourer (RL).
    • CPI (Rural/Urban/Combined).
    • Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the Central Statistical Organisation (CSO) in the Ministry of Statistics and Programme Implementation.
  • Base Year for CPI is 2012.

CPI vs. WPI

• WPI, tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level.
• Both baskets measure inflationary trends (the movement of price signals) within the broader economy, the two indices differ in which weightages are assigned to food, fuel and manufactured items.
• WPI does not capture changes in the prices of services, which CPI does.
• In April 2014, the RBI had adopted the CPI as its key measure of inflation.

8. Editorial-1: Counting the COVID toll in India

In order to understand the pandemic’s extent, a district-wise estimation is the best bet to arrive at a national total

Last year, in these columns, I wrote about the many challenges in estimating deaths due to COVID-19 in India. While the challenges remain, the need for estimating COVID-19 deaths globally and in India to understand the magnitude of the pandemic is still there. Since direct counting of COVID-deaths is problematic, the approach most commonly used is the “excess” death approach which attributes all deaths beyond what is considered “normal” for that area and time to COVID-19. It includes deaths directly caused by COVID-19 as well as deaths indirectly caused due to the impact on access to care for other diseases during the pandemic and the lockdown.

Global estimates released

While official or unofficial estimates are available for some countries, two estimates have been released globally. Based on the World Mortality Dataset — the largest international dataset of all-cause mortality encompassing 89 countries — researchers estimated excess mortality and reported that it exceeded the number of reported COVID-19 deaths in these countries by over 1.6 times. It also said that this ratio is likely to be conservative as undercounting is likely to be much higher in countries which are not part of this dataset.

The Institute for Health Metrics and Evaluation (IHME), a global leader in this area, recently released its estimates that put the global toll of COVID-19 deaths by May 3, 2021 at 6.93 million, a figure that is more than two times higher than the reported number of deaths of 3.24 million. India accounted for about 10% of them at 6,54,395 (only second to the United States with an estimated 0.9 million) which is about three times higher than the reported official figure.

The lower number of reported deaths does not imply undercounting, deliberate or otherwise. Even if there had been no underreporting of COVID deaths in a country, this ratio is likely to be above one as excess deaths include not only those that are directly caused by COVID-19 and likely to be reported but also those where deaths occurred due to other diseases, either due to a lack of care or as a consequence of COVID-19. It is very difficult to tease out these proportions. We might have a better sense if we look at cause-specific deaths. But that kind of data is still more difficult to get.

WHO classification

The World Health Organization classifies countries into three categories based on their data availability for COVID-19 excess death estimation. First are those countries that have good data available and excess death estimation is possible (most countries in the above mortality dataset). Second is the group of countries whose data, though not good, is acceptable for use through some process of harmonisation or adjustment for incompleteness leaving the third category of countries where the data on deaths are not available or usable, forcing the adoption of an indirect approach of using data from other countries or a multivariate approach using covariates to arrive at these estimates. India and China, which together constitute a third of the world population, are currently in category three, and unless we manage to provide some source of usable data, India will have to be content with an estimate generated by an external agency using an indirect approach.

Data for India

So, what do we know about the COVID-19 mortality in India? Data from Kerala, which is among the States with a very good vital registration system, showed that there has been a decline in deaths in 2020 as compared to previous years. While it will need a closer look, under-registration of all deaths due to the pandemic is a possibility.

Data released by the Municipal Corporation of Greater Mumbai, shows 22% excess deaths during 2020 in Mumbai region. An analysis of data from a panel of 2,32,000 households maintained by the Centre for Monitoring Indian Economy Pvt Ltd (CMIE) found that deaths from all causes between May and August 2020 numbered almost twice as many as compared with the same period in past years.

These are crude estimates based on the number of extra deaths reported as compared to previous years. Estimation of excess deaths needs a more sophisticated statistical approach which first defines a baseline, before estimating excess. The simplest approach for defining a baseline would be estimation of mean and standard error based on data for the last five years to provide a plausible range for a baseline. We could then see whether the registered deaths are beyond that range to estimate “excess” deaths. There are other statistical approaches which use different data distribution assumptions to define a baseline. This analysis should be done by age and sex on a weekly or monthly basis and correlated to the peaks of the epidemic.

My team analysed data from the Civil Registration System (CRS) of district Faridabad in Haryana, which has been reporting 100% registration of deaths in the past few years. We found that 7% higher deaths have been reported in 2020 as compared to 2016-19, with a 17% increase in deaths above 60 years. By applying well-accepted statistical techniques, we found that the period of excess deaths correlated with the pandemic peaks in the districts. Our range of estimates for excess deaths by different approaches resulted in a ratio of reported to excess death estimate to be between 1.8 to 4. This is not very different from that reported by the IHME, though its ratio included part of the second wave. This estimate should be read in the context that 80% of the population for Faridabad is urban and the serological survey in October 2020 showed a 31% seropositivity.

It is not appropriate to extrapolate these estimates to India as even within India, there are enormous differences in the severity and timing of the epidemic and its health system capacity. Thus, combining data at higher levels is likely to lead to errors in estimation. A district-wise estimation is our best bet to arrive at a national estimate. An assessment of the quality of CRS data should enable us to identify districts with an acceptable quality of registration and generate estimates for them. For districts which lack an acceptable quality of registration, we could use alternative approaches. We are seeking access to the CRS dataset from the authorities and are hopeful of being able to generate national estimates in the next few months.

A continuing process

Our experience with an estimation of deaths in past influenza pandemics shows that different agencies come up with different estimates which leads to confusion among policy makers and the public. These are both due to data limitations and differences in statistical approaches. The long-term way out for countries is to address the data limitations while academics work on refining their approaches.

There will be more estimates of COVID deaths in the near future and the numbers will keep changing till some sort of a consensus emerges. However, putting up a number which is contested and debated is still good as it propels people to improve that estimate. The second wave has been deadlier, and undercounting is more likely to have occurred as the pandemic has spread to rural areas, and when access to testing has been adversely affected and many deaths are occurring outside hospitals. Refining our approaches using the first wave in 2020 would enable a much better estimation of the deaths in subsequent waves.

9. Editorial-2: The Biden push-button to West Asia’s diplomatic resets

Unprecedented interactions among the major powers are leading to a significant diplomatic churn in the region

Major West Asian nations have recently embarked on new diplomatic engagements with erstwhile rivals that could in time overturn existing regional alignments and possibly end ongoing conflicts that have wreaked havoc in several states.

The most dramatic interactions have been between senior Saudi and Iranian officials. After their meeting on April 9, the first since diplomatic ties were broken in January 2016, there have been other interactions, with technical committees set up to look at specific topics.

Again, since early this year, following the removal of the diplomatic and economic blockade on Qatar that was imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, Doha has made efforts to mend ties with both Saudi Arabia and Egypt, in tandem with similar initiatives of its doctrinal and political ally, Turkey.

On May 5, Turkey and Egypt had their first diplomatic meeting in Cairo after they had broken diplomatic ties in 2013, when Egyptian President Mohammed Morsi was overthrown in a military coup. The two countries, on opposite sides on almost all regional issues, are now exploring how to address their differences.

The Biden challenge

The driving force behind these unprecedented engagements is the advent of the Biden administration at the helm of politics in the United States. Within his first 100 days in office, Mr. Biden has signalled a fresh U.S. approach to West Asian affairs. He has taken a tough line on Saudi Arabia, indicating a closer scrutiny of its human rights record and strong opposition to the war in Yemen.

Egypt too has concerns on the human rights issue, while seeking regional support for its differences with Ethiopia. It now seems the U.S. could re-enter the nuclear agreement, but Iran has concerns about the limitations to be imposed on its regional role.

Turkey could also experience fresh winds from Washington. Turkish President Recep Tayyip Erdoğan has built close ties with Russia, while threatening U.S. allies in Syria, the Kurds, with military force. Mr. Biden is expected to be less accommodative; his recent recognition of the Armenian “genocide” is already a fresh rebuke.

Besides concerns in West Asian capitals about a new U.S. approach to each of them, the broader message from Washington is that the U.S. is now likely to be less engaged with the region’s quarrels. Mr. Biden seems to be reiterating earlier messages from his predecessors Barack Obama and Donald Trump that regional states should be responsible for regional security.

These signals of new U.S. policies have occurred even as the novel coronavirus pandemic is devastating West Asia. Besides the widespread infections and deaths, the viral epidemic has severely damaged regional economies, while oil prices remain in the doldrums, creating uncertainties for the producer states.

Finally, one major factor that is encouraging these unprecedented interactions among rivals is the recognition that the ongoing regional conflicts, in Syria, Yemen and Libya, despite the massive death and destruction, have yielded no military outcome and now demand fresh diplomatic approaches.

Recent engagements

Following the first meetings in Baghdad, both Iran and Saudi Arabia have made efforts to improve the atmosphere. In a recent interview, Crown Prince Mohammed bin Salman spoke of seeking a “good and special relationship” with Iran. The Iranian spokesman responded by referring to a “new phase of cooperation and tolerance”.

The priority for the kingdom is to end the Yemen conflict: the lethal attacks from the precision missiles of the Houthis, said to have been provided by Iran, are a threat to national infrastructure and morale. The recent Houthi attack on oil-rich Marib is also a Saudi concern, while Iran would like theblockaded Hodeidah port which is partially open, to be used to rush humanitarian aid to the beleaguered Houthis. Iranian Foreign Minister Javad Zarif has supported the Saudi offer of a ceasefire in Yemen.

Both countries also share concerns relating to the political impasse in Lebanon and the security of the waters of the Gulf and the Red Sea where a “shadow war” on oil and merchant vessels could escalate into a larger conflict. So far, both have paid a heavy financial price for their rivalry: Iran’s role in Syria costs its exchequer a few billion dollars every month, while Saudi Arabia has spent several hundred billion dollars in buying weaponry to sustain its partnership with the U.S.

Turkey is also exhibiting diplomatic dexterity. Despite differences with Egypt over Libya, the East Mediterranean waters and Turkey’s affiliation with the Muslim Brotherhood, Turkey now sees Egypt as a valuable partner to promote peace in Libya and pursue their interests jointly in the East Mediterranean by challenging Greece, Israel and Cyprus.

Turkey has also made overtures to Saudi Arabia. Besides accepting the Saudi court verdict on the Khashoggi murder case, Turkey has indicated it could work with the Saudis against the Houthis and facilitate the post-war political process through the Islamist Al-Islah party. Turkey has also offered the kingdom its advanced drones to be used against Houthi missiles.

Qatar’s outreach to Egypt has been well received, since it appears to have moderated its ties with the Brotherhood, toned down anti-Egypt broadcasts on Al Jazeera television, and is a major potential investor in Egypt’s flagging economy. To promote regional peace, Qatar’s Foreign Minister has called for a structured dialogue of the Gulf countries with Iran, affirming its view that Iran is a major presence in the regional security scenario.

Regional security

These are very early days and all sides concerned have a long way to go in resolving their differences. Egypt remains uneasy about Turkey’s ties with the Brotherhood and its regional ambitions. Saudi Arabia has similar concerns about Turkey’s doctrinal affiliations and its relations with Iran.

There are difficulties in reshaping Saudi-Iran relations as well. Iran may ease the pressure on the kingdom in Yemen and gradually yield ground in Iraq: the latter has already conveyed its desire to be free from all external influences. However, Syria will test their diplomatic skills as they explore how to accommodate their competing strategic interests in that devastated country.

Still, this is truly a historic period for West Asian diplomacy: the major states are displaying an unprecedented self-confidence in pursuing initiatives without the heavy hand of western powers that have dominated regional affairs for at least a couple of centuries, and, in pursuit of their own interests, have nurtured deep animosities between many of them. This has left a pervasive sense of insecurity across West Asia and made the countries dependent on western alliances to ensure their interests.

A role for India?

Today, states in West Asia appear poised to negotiate their strategic interests without outside intrusion. But, given that regional contentions are inter-connected, third-party facilitators will be needed to promote mutual confidence and prepare the ground for a comprehensive regional security arrangement which will bring together regional and external states with a stake in West Asia security.

This arrangement will have provisions for participating states to uphold regional peace and promote mutually beneficial cooperation in energy, economic and logistical connectivity areas.

Given its close ties with all the regional states, India is well-placed to build an association of like-minded states — Japan, Russia, South Korea — to shape and pursue such an initiative for West Asian peace.

10. Editorial-3: Prioritising the right to life

A monthly cash transfer to informal workers will provide them relief and also revive the economy

The majority of India’s working population is today reeling from the impact of multiple crises: a health emergency more ferocious than any in independent India; massive job losses and dramatic declines in incomes from work; and significantly increased mass hunger and worsening nutrition.

Many failures

The Supreme Court on May 13 directed the Centre and the State governments of Punjab, Haryana and Uttar Pradesh to provide free rations without insisting on ID proof to all migrant workers and to run kitchens providing free meals twice a day. The verdict was significant as this was the first time since the national lockdown last March that the apex court acknowledged a hunger crisis in the country that needed urgent state action. But it fell short of being path-breaking for three reasons: it did not extend the facility to the country as a whole; it did not extend the facility to cover cash payments by the state besides meals and ration; and it made the facility a state largesse rather than a right. Had it recognised a universal right to livelihood as the basis for its verdict, deriving from the right to life, all three lacunae would have been overcome.

The most brazen violation of the right to life by the state at present is its vaccine policy. Being vaccinated against COVID-19 is essential for defending one’s right to life; and since the state must respect everyone’s right to life, it must make the vaccine equally available to all irrespective of the recipient’s capacity to pay. This can be accomplished only if vaccination is free. In many other countries, including the most privatised medical systems like the U.S., vaccines are being distributed free to all the people. India is making people (aged 18-45 years) pay to be administered these vaccines in private clinics — an obscene and counterproductive strategy to deal with a pandemic.

This is the outcome of many grave failures of the Indian government: it did not ensure adequate production through compulsory licensing of more producers; it did not order enough vaccines; it reneged on its responsibility to provide these vaccines to State governments; it introduced differential pricing, forcing State governments to compete with each other and with private clinics to buy vaccines; and it allowed price gouging by Bharat Biotech and Serum Institute of India.

The lack of consideration for lives is matched by callousness about the loss of livelihood that has come about during the second wave. At least 90% of workers are informal, with no legal or social protection, denied adequate compensation over the past year of lockdowns, restrictions and economic distress. But there is hardly any public outcry about the plight of the nearly one billion people whose lives depend on informal activities, and policymakers, especially at the national level, have completely abandoned them. The consequences of inaction are going to be dire and long-lasting, not just for people experiencing untold suffering, but for the country and the future economic trajectory.

A recent study called ‘Hunger Watch’ by a large collective of social groups found that even two months after the lockdown was lifted last year, two-third families reported eating less than they did before the lockdown, and a reduction in healthy food. For a quarter of the families surveyed, incomes had fallen by half. It also found that hunger was higher in urban India compared to rural. The recent knee-jerk lockdowns will stifle the attempts for revival.

A significant fiscal package

Even as the country confronts its greatest humanitarian crisis in half a century, India is one of the few countries in the world that has not come up with a significant fiscal package to counter the health and economic effects of the pandemic. It has remained fiscally conservative, and actual Central government spending over April 2020 to February 2021 shows a rise in non-interest expenditure only by 2.1% of GDP. This explains why India’s economy has been performing so poorly compared to other countries that were more battered by the first wave of the pandemic, since most of them had significantly larger fiscal packages that were also directed towards providing income support to people.

Finance Minister Nirmala Sitharaman speaks of government spending on the backlog of infrastructure projects as the means for a recovery. If instead she relied on cash transfers to the millions of the labouring poor, it would have shielded them from slipping deeper into hunger and joblessness and also spurred growth, because all of this would be spent for simple, domestically produced goods. Therefore, the ‘multiplier’ effects of this public expenditure would have been much higher than if spent on infrastructure projects.

Free rations and meals, as mandated by the Supreme Court, though beneficial, have very little expansionary effect on the economy, since the bulk of the commodities required come from decumulation of existing stocks of foodgrains. Thus, both the need to provide relief and the imperative to revive the economy demand that a monthly cash transfer, of about ₹7,000 per family (the rough equivalent of minimum wages), be made to people, over and above the provision of free meals and rations.

What the state needs to do urgently is to take a range of measures that prioritise the right to life, which also remains the surest way of initiating assured (and equitable) economic recovery today. Among them are enabling expanded production and central procurement of COVID-19 vaccines, and distribution to States for free immunisation to all; universal access to free foodgrains of 5 kg per month to all those who require it for the next six months; cash transfers of ₹7,000 per household for at least three months to those without regular formal employment; increased resources to the Integrated Child Development Services to enable revival and expansion of their programmes; making the MGNREGS purely demand-driven, with no ceilings on the number of days or the number of beneficiaries per household; and covering urban India with a parallel scheme that would also cater to the educated unemployed.

Where, it would be asked, are the resources? In an economy with substantial unemployment, unutilised capacity and unused foodgrain stocks (about 80 million tonnes at present), resource mobilisation does not require curtailing anyone else’s consumption. Even enlarging the fiscal deficit would cause no harm, except that it would gratuitously widen wealth inequalities and frighten globally mobile finance capital. To prevent both, a simple measure would be to introduce wealth taxation (though larger profit taxation will also suffice). These measures together would not cost more than an additional 3.5% of GDP, of which about 1% would flow back as extra tax revenue to Central and State governments, requiring 2.5% of GDP as fresh additional tax revenue. A 1.5% wealth tax levied on only the top 1% of households will be adequate to raise this amount.

These figures are only illustrative. But when U.S. President Joe Biden and U.S. Secretary of the Treasury Janet Yellen are considering more radical measures, India should not shy away from measures that give substance and meaning to the term ‘right to life’ and the pledges of equality and fraternity in the Constitution.

11. Editorial-4: Walk the talk on TRIPS waiver

The government should offer Covaxin’s technology to domestic pharmaceutical companies and foreign corporations

Member countries of the World Trade Organization (WTO) are under an obligation to ensure that their domestic intellectual property rights (IPR) laws conform to the requirements of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. When the pandemic hit the globe, India and South Africa piloted the proposal to waive key provisions of the TRIPS agreement on COVID-19 vaccines, drugs, therapeutics, and related technologies. The core idea is that IPRs such as patents should not become barriers in scaling up production of medical products essential to combat COVID-19. The TRIPS waiver proposal, now backed by the U.S., is essential because it would give immunity to member countries from a legal challenge at the WTO if their domestic IPR laws suspend or do not enforce IP protection on COVID-19 medical products.

Foot-dragging on compulsory licences

It is uncertain when the TRIPS waiver would be adopted, or what conditions it would be subjected to. Meanwhile, nothing stops India from using the existing flexibilities under the Patents Act of 1970, such as compulsory licences, which are consistent with the TRIPS agreement, to increase the supply of COVID-19 medical products. While issuing compulsory licences for COVID-19 vaccines in the absence of technology transfer is easier said than done, they can be used to augment the supply of drugs and other therapeutics. For instance, Natco, an Indian pharmaceutical company, has requested a compulsory licence under Section 92 of the Patents Act for Baricitinib, a COVID-19 drug. Incyte Holdings Corporation owns the patent for Baricitinib with a licence to Eli Lilly, an American drug company. Likewise, there are demands that compulsory licences be issued for drugs such as Remdesivir to augment supply. Natco’s application demonstrates that the option of issuing compulsory licences is available to the government. However, despite the nudging by the judiciary and others, the government inexplicably hasn’t made use of compulsory licences in the pandemic. This is ironic because India has historically played a leading role in mainstreaming TRIPS flexibilities like the compulsory licence at the WTO.

To make matters worse, the Central government, in an affidavit filed before the Supreme Court a few days ago, suggests that issuance of compulsory licences will not be effective. Specifically, the affidavit states that the main constraint in boosting the production of drugs like Remdesivir is the unavailability of raw materials and essential inputs. If that is the real bottleneck, and not IPR-related legal hurdles, why is India pushing for a TRIPS waiver at the WTO? After all, the TRIPS waiver is about overcoming legal impediments, not about addressing supply-side bottlenecks. The affidavit further states, “it is presumptuous to assume that the patent holder will not agree to more voluntary licences”. Thus, the government believes that voluntary licences, not compulsory licences, are the way forward to address shortage of COVID-19 medical products. Interestingly, those who oppose the TRIPS waiver at the WTO advance the same argument.

The first step in advocating for the removal of IPR-related impediments at the WTO is to make use of the existing lawful means, even if insufficient, to lift the obstacles that come in the way of manufacturing patented products domestically. Therefore, the government’s stand before the Supreme Court is not only contradictory with India’s position at the WTO but also severely undermines it. This would make the TRIPS waiver negotiations arduous. To make its TRIPS waiver stand convincing, the government needs to make aggressive use of Sections 92 and 100 of the Patents Act to license all patents necessary to make COVID-19 medical products, without waiting for a private party to apply for a licence. An assertive posture on compulsory licences would also have the advantage of forcing several pharmaceutical companies to offer licences voluntarily.

Licensing Covaxin

India’s development of Covaxin is a spectacular scientific achievement. Given the involvement of taxpayers’ money in the development of Covaxin, the government has a stake in its IPR. Thus, the government should not only transfer Covaxin’s technology to domestic pharmaceutical companies, to boost national supplies, but also offer it to foreign corporations. By unlocking its vaccine technical know-how to the world, India would demonstrate its resolve to walk the talk on the TRIPS waiver. Licensing Covaxin widely would enable India to live up to its reputation of being the ‘pharmacy of the world’ and also put pressure on developed countries to transfer their vaccine technology to developing countries. India must take a consistent stand on IPRs on COVID-19 medical products internationally and domestically.

12. Editorial-5: No learning from the Spanish flu

The governments of most countries have failed to understand and predict human behaviour

In the beginning of COVID-19 last year, thousands of people around the world shared an image on social media depicting the three waves of the 1918 influenza pandemic, commonly known as the Spanish flu. The image had the headline, ‘Humanity should never allow a repeat of the same mistake made in 1918, in the time of COVID-19’. The image read, “The most severe pandemic in history was the Spanish Flu of 1918. It lasted for 2 years, in 3 waves, with 500 million people infected and 50 million deaths. Most of the fatalities happened in the 2nd wave. The people felt so bad about the quarantine and social distancing measures that when they were first lifted, the people rejoiced in the streets with abandon. In the coming weeks, the 2nd wave occurred, with tens of millions dead.”

This post contained a mix of accurate and inaccurate information. The estimates are accurate and the second wave was indeed the most deadly. However, according to James Harris, a historian at Ohio State University, part of the reason why the flu spread like wildfire causing a second wave was because officials were unwilling to impose restrictions during wartime despite the existence of a new mutated strain.

Lessons from the past

This shows that we haven’t been able to learn from history to prevent millions of infections and deaths worldwide. One would believe that knowledge makes one wiser. But in reality, knowledge doesn’t change behaviour. Knowing about the Spanish flu is very different from having to live through a similar pandemic. Knowing about masks being protective doesn’t make people wear them. Knowing about social distancing doesn’t make people practise it.

In most countries, people got tired of lockdowns, wearing masks, staying at home and not socialising last year. Human beings are social animals after all. Social ostracisation has been shown to cause pain in the brain similar to putting up with physical pain. So, as the number of cases began to fall by the end of the first COVID-19 wave, governments and people around the world started to let their guard down. Amongst many businesses that were allowed to resume, for example, restaurants which were suspected to be one of the major centres for the spread of COVID-19 were given permission to open. Signs outside their establishments read ‘No entry without mask’, but once inside, visitors could remove their masks even while not eating. They talked, laughed, sneezed and coughed in indoor non-ventilated spaces. These visitors would have known about the dangers of this behaviour, some of them may have read about the Spanish flu. But awareness and action often lie at opposing ends.

Lifting restrictions

Each one of us has to contribute to break the chain of COVID-19 infections. However, the ultimate responsibility of managing the pandemic cannot lie with the masses in today’s modern societies; it is the job of governments. But governments of most countries failed to learn from the Spanish flu because they failed to understand and predict human behaviour. In India, the government allowed election rallies and religious gatherings. It hesitated in imposing a lockdown despite the emergence of new strains of the virus. Leaders were often seen addressing crowds and conducting meetings without masks. Every politician wants to win over people and give them what they want (in this case, freedom from lockdowns). But declaring victory prematurely gave rise to policies that caused the second wave.

India had the opportunity to learn from the mistakes of other countries which opened up too soon after the first wave. But it didn’t. This has led to the huge spike in COVID-19 cases and deaths. Perhaps it was overconfidence in the government’s ability to manage the pandemic or an underestimation of the ability of COVID-19 to cause infections and deaths in the second wave or both that led to the surge in infections. While vaccines weren’t available during the Spanish flu, we have the benefit of curbing COVID-19 by vaccinating people now.