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Why the RBI should buy NBFC bonds
Uday Kotak has stated that the Reserve Bank of India (RBI) might inevitably have to expand its balance sheet to support the economy amidst the raging pandemic. The central bank does precisely that when it carries out long-term repo operations. However, there is scope for the RBI to provide direct liquidity support to large non-banking financial companies (NBFCs) that play a vital role in meeting the credit requirements of swathes of small and medium industry.
The tweaks vaccine policy cries out for
India’s Covid vaccination drive has expanded eligibility for the jab, even as production is yet to ramp up. This means policy must be finetuned to allocate vaccines to those who need them most.
For vaccine costs, tap health insurance
Even after making a budget allocation of Rs 34,000 crore for vaccination, the Centre seems keen to get the states and the private sector to cross-subsidise its procurement of vaccines — there is no other rationale for multi-tiered vaccine pricing. A legitimate source of funding vaccine purchase is health insurance.
LIC Needs to Match Pvt Insurers in Tech
India’s private life insurers outperformed Life Insurance Corporation (LIC) last fiscal during the pandemic, shows data from the Insurance Regulatory and Development Authority of India (IRDAI). Their digital push aided private insurers in a big way. While the new business premium of private companies rose 16.29% over the previous fiscal year, that of LIC grew 3.48%, adding up to a cumulative ₹2.78 lakh crore.
India Inc, Bring Your Competence
India Inc is doing its bit to solve the oxygen shortage pandemic-struck Indian cities face. Even before the government ordered diversion of industrial oxygen for medical use, enterprises ranging from giant steel plants to tiny welding units in Delhi’s Shaheen Bagh have been pushing their oxygen stocks to hospitals. Tata, ITC and Adani are importing cryogenic containers, Reliance is producing extra oxygen.
American opportunity via climate action
Joe Biden has committed to reduce US greenhouse gas emissions by 50-52% from its 2005 levels by 2030, en route to achieving net zero greenhouse gas emissions by 2050. The US commitment, along with the legally binding targets set by the UK and the EU, signal a radical transformation of the global economy, technologies, associated jobs and geopolitics. India must play a proactive role as a willing and capable partner in this process, instead of playing either victim or catch-up.
For sense on how vaccines are priced
An avoidable controversy has been created, alleging that Serum Institute of India is engaging in price-gouging by setting a price of Rs 400 per dose for vaccines sold to state governments and Rs 600 per dose for doses sold to private hospitals for its version of the AstraZeneca vaccine. This is absurd and unfair, right at the outset.
Act on shortage of Covid drugs, too
On top of a shortage of medical oxygen in the places that need them most, reports emerge of a shortage of assorted drugs used in the treatment of Covid. A hint of shortage leads to our ‘prudent’ citizens and ‘greedy’ merchants stocking up on the drugs in question, aggravating the shortage. The market would sort this problem out — eventually, by which time the country would have experienced much avoidable human suffering. Coordinated action by the government alone can bring fast relief.
National emergency, national response
With India recording more than 3 lakh new Covid-19 cases for the second day in a row, it is critical to become proactive, instead of being merely reactive, in combating the pandemic. It is also vital to ensure that all levels of the federal polity work in coordination. At his meeting with the chief ministers of the 10 worst-affected states, Narendra Modi’s message was simple: there would be no scarcity of resources if everyone pulled together as one nation. This is sound enough.
Put a lid on ugly shows of strength
The unpleasantest truth about politics is that misfortunes and tragedies make for fodder in this ‘professional’ sport of one-upmanship. The death of four people in Sitalkuchi village in West Bengal’s Cooch Behar on polling day on April 10 when Central Industrial Security Force (CISF) personnel opened fire on a mob can add ‘misunderstanding’ to the recipe of political blame-gaming.
Mining Policy: The wrinkles that remain
It ain’t over till the fat lady sings. In the case of mining reform, strains of the relevant trill indicating the end of the process would be the clanging of machinery as new mines open up and imports of the very same minerals that lie buried under Indian soil cease. The recent amendments to the Mines and Minerals (Development and Regulation) Act (MMDRA) do go a long way in removing hurdles in the path of making good on the country’s mineral wealth.
Total lockdown the last option
The Maharashtra government must opt for measures that are effective rather than expedient. It must consider more creative and flexible alternatives to a lockdown, to tackle the rising number of Covid-19 cases. Lockdown is relatively easy to enforce but has massive adverse impacts. The second wave is manifesting as more infectious, but minus a proportionate rise in hospitalisation.
If it’s remote work, do it from India
Covid has seen an uptick in the relocation of people from larger cities to smaller ones in the US: remote working is seen as being practical in a great many sectors that previously had not been considered amenable to it. At the same time, several industries struggle and would love to cut costs further. Together, these combine to offer India’s information technology (IT) and IT-enabled services industries new global opportunities. The challenge is to take creative advantage of such openings.
Welcome Move for Pre-Packed Resolution
The government has done well to allow pre-packaged insolvency resolution plans for micro, small and medium enterprises (MSMEs) with defaults up to ₹1 crore. This debtor-initiated reorganisation plan in advance with creditors on board will give MSMEs a chance to rehabilitate themselves, rather than get liquidated. And those that cannot be restored would have their assets efficiently redeployed.
Better Policing, Better Governance
It is welcome that the Maoists have released the lone CoBRA force commando they had taken captive after an ambush in Chhattisgarh’s Bastar region that left 22 members of the paramilitary Central Reserve Police Force dead. But that does not mean that there is room for any compromise with the Maoists’ rejection of democratic politics and resort to force.
Right Move to Look Through Inflation
The decision of the Monetary Policy Committee (MPC) to keep RBI’s key policy rates unchanged and stance accommodative, despite a rise — transient, it is hoped — in inflation is pragmatic and forward-looking, following a pandemic-induced growth contraction. The MPC has rightly surmised that the inflationary pressures emanate from high global commodity prices and logistics costs, and that softening crude oil prices should reduce cost-push inflation.
Expand Output of Covid Vaccines
Even as the effort to induce Covid-appropriate behaviour in the population at large intensifies, it is vital to increase the supply of vaccine doses exponentially. India is vaccinating about three million people a day. That might appear impressive.
Mine Stalled Real Estate for Growth
The latest figures suggest that growth is stalling yet again. Policy must respond by stepping up expenditure from the budget, and prioritising resumption of stalled real estate projects, as these can absorb investment without delay and have the capacity to generate downstream demand for cement, steel, paint, furniture, fittings, curtains, cushions and lots of labour. Greenfield projects are, indeed, important, but shovel-ready projects are imperative to give the economy the stimulus it requires.
Welcome Uncle Sam To Global Tax Reform
US Treasury Secretary Janet Yellen wants a minimum rate of global corporate income tax. It shows US readiness to join the global effort to reform corporate taxation, led by the Organisation for Economic Cooperation and Development (OECD), which has been trying to rally support for ending base erosion and profit shifting and to forge a multilateral pact on digital taxation.
No More Lockdowns, Shed Covid Fatigue
A man steps in the same river twice, held Greek philosopher Heraclitus, on the ground that constant flow has changed the water of the river and that the man himself has changed. It is futile to try and contain the second wave of Covid visible now in some parts of the country with the lockdown that was imposed to contain the virus in the initial phase of the pandemic outbreak.
Making Alternatives Mainstream Investment
The recent move of capital markets regulator Sebi to amend norms for Alternative Investment Funds (AIFs) is forward-looking, designed to shore up transparency and boost efficiency. The alternatives typically tend to perform differently than stocks and bonds, and adding them to an investment portfolio can well provide broader diversification of risks and, in tandem, enhanced returns. An AIF is a privately pooled investment vehicle that is supposed to collect funds from savvy investors.
Against senseless e-commerce terms
Certain proposals for a new ecommerce policy, backed by lobby groups, are currently doing the rounds. The government would do well to reject them in the interest of systemic efficiency, promoting small and medium enterprises and defending their interests against the domineering influence of big retailers, and fairness in the treatment of foreign investment in the country.
The clean water and fuel opportunity
Budget 2021 talks of Swachh Bharat Mission (Urban) 2.0, and allocates Rs 1,41,000 crore for wastewater treatment and solid waste management (SWM). The Mihir Shah committee report on water reforms had brought out the startling fact that only 2% of our urban areas have both sewerage systems and sewage treatment plants. The government must draw up multi-year projects for sewage treatment via public-private partnerships (PPP), and also to boost municipal capacity to that end.
Target inflation? Just smell as sweet
As sweet cometh the hour, cometh the policy, whether clothed as inflation targeting, recession fighting or financial sector stabilising. What the conduct of the central bank has shown in the recent past is that whatever the nominal rigidity in the objective of monetary policy conduct, the policy, in practice, flexibly targets the immediate problem at hand.
Let inflation-indexed bonds fix oversight
The government was wise to hastily withdraw the order slashing interest rates on assorted small savings schemes, not so wise to have announced such rate cuts during vital state polls. The government tweeted that the orders (read: to cut interest rates) were issued by ‘oversight’. Elections are underway in five crucial states, inflation is rising, and the country is facing the second wave of the pandemic that has hurt incomes and livelihoods.
May GoI live up to spending boasts
As the new financial year begins, all eyes are on the government living up to its brave expenditure commitments. No spring of recovery is guaranteed to trail behind a winter of economic distress. A vigorous recovery that brings comatose businesses back to life, restores jobs and generates new ones, while filling the government’s coffers with taxes, depends on effective delivery of the promised growth stimulus.
Planning to stem a second Covid wave
The move to forge district action plan to control the spread of Covid-19 marks a step forward in tackling the second wave. This effort will be critical not just to avoid state-wide and nation-wide lockdowns but also to target vaccine distribution. It is not just about directing vaccines where most required but also about ensuring supply and minimising wastage. Ten states are registering more than 1,000 new cases a day.
Welcome Moves for Better Reporting
It is welcome that capital markets regulator Sebi has tightened disclosure and reporting norms for listed companies, to shore up transparency. It has now put in place new rules for sustainability reporting, streamlined the delisting process, and revamped the rules on calls to analysts to address information asymmetry for investors at large. To proactively improve corporate governance, Sebi has announced a host of investor-centric changes in listing regulations.
Give It Three More Months of Rethink
The Reserve Bank of India (RBI) should wait three more months to begin enforcing its new rule on alerting customers about transacting standing instructions and requiring their authentication with an OTP when the sum involved is larger than ₹5,000. Banks have not readied themselves to comply and if RBI proceeds to follow through on its 2019 directive, customers stand to be majorly inconvenienced.
Govt should bear cost of interest waiver
When the Supreme Court ordered that borrowers who had availed themselves of a moratorium on servicing their loans during the pandemic should not be asked to pay interest on the unpaid interest, it did not specify who should bear the cost. Now, the government reportedly says the banks should bear the cost. This is unreasonable. The government is best placed to bear that burden.
Rein in the urge to lock things down
There has been a steady rise in the number of Covid-19 cases in the country. The pace of infection has been rising, with India registering a million cases in 35 days. Nearly 69,000 fresh cases were reported in the last 24 hours. Nearly 85% of the new cases are from eight states, with Maharashtra accounting for 40,000 cases. There is strong pressure on governments to show they are taking countervailing action and to announce lockdowns.
A relationship to build and build on
Narendra Modi’s visit to Bangladesh to mark 50 years of independence and the birth centenary of Bangladesh’s founding leader Sheikh Mujibur Rahman marks an important milestone in the bilateral relationship. The foundation stone for a memorial for the Indian soldiers who died in the Bangladesh Liberation War is concrete acknowledgement of the key and special place India holds in that country’s self-perception. The past has not been easy but India and Bangladesh ties are now on an even keel.
A Welcome End to Tata Instability
The Supreme Court’s verdict in favour of the Tatas and overruling the order of the National Company Law Appellate Tribunal (NCLAT) reinstating Cyrus Mistry as Tata Sons chairman is welcome, on two counts. It puts an end to the possibility of disruption and dysfunction in one of the country’s largest companies. Two, it upholds the right of a shareholder majority to make appointments to key managerial and leadership positions.
Boosting Vaccine Supply - India’s Job
Domestic demand for Covid vaccines is set to ratchet up, as a larger population cohort comprising anyone 45 years of age or older turns eligible for the shot. India and the US are the largest manufacturers of Covid-19 vaccines, and India must step up its capacity to meet rising domestic and international demand. Curtailing exports for the time being will make more vaccines available for domestic needs but does nothing to augment global supplies.
Full statehood to solve tussle over Delhi
The tussle between BJP that holds office at the Centre and its self-proclaimed challenger the Aam Aadmi Party (AAP) has resulted in denial of self-rule for the two crore people of Delhi, a population larger than many countries of the world and bigger than several states in India.
Roadworthiness, not vintage, for scrapping
The Centre’s new motor vehicle scrappage policy can be sensible, provided it is implemented right. Older vehicles contribute disproportionately to tailpipe emissions and guzzle fuel. Recycling unfit, road-unworthy vehicles would have considerable economic benefits, too, provided the import duty on steel scrap is kept at the same level as on steel, to allow a domestic scrap industry to develop. The policy calls for mandatory road fitness tests for commercial vehicles that are 15 years old.
Clarify taxation of PF contributions
The government needs to clarify, at the earliest, its amended provisions relating to taxation of the interest earned on contributions to a recognised provident fund (PF). The budget proposed limits on the contributions, the interest on which is eligible for tax exemption, to `2.5 lakh by the employee. The latest amendment would appear to raise the exempt contribution cap to Rs 5 lakh, but only when made to a fund to which the employer does not contribute.
Supreme Court chooses right
The Supreme Court’s refusal either to extend RBI’s six month moratorium on loans being classified as non-performing or to grant a complete waiver of interest during the moratorium period is welcome. By upholding RBI’s stand against a blanket extension of the loan moratorium it had offered to businesses hurt by the pandemic-induced lockdown, the SC has averted a conflict with the regulator.
Mumbai Police Force: For radical overhaul
Sunlight is the best disinfectant. The specific charges made by former Mumbai Police Commissioner Param Bir Singh about Maharashtra Home Minister Anil Deshmukh deserve thorough investigation. Following the National Investigation Agency findings on Sachin Vaze, it is essential that all his cases be reviewed. Sunlight is exactly what the Maharashtra government and the Mumbai Police need. To this end, it is critical to protect the investigation from influence, particularly by those being investigated.
Don’t Trivialise Laws of the Land
Sections of India’s judiciary trivialise crimes against women, especially sexual violence, and this must be corrected. That is the prime message the Supreme Court delivered to judges across courts on Thursday, a message that needed to be told in so many words. Quashing a Madhya Pradesh High Court order that linked an accused molester’s bail application to his victim tying a rakhi on his wrist, the apex court found such ‘extra-judicial suggestions’ unacceptable.
Stabilising Options Of Renewable Power
Reports say that Greenko Energy’s upcoming Rajasthan project, a solar and wind power hybrid facility, would have a 2,520 MW pumped-hydroelectric plant as well. It would provide costeffective and utility-scale energy storage in synergy with solar and wind power. The solar-wind-pumped hydro hybrid model needs replicating. Power from renewable energy sources is both intermittent and variable, and we do need innovative storage that is both energy- and cost-efficient.
More power to SEBI to check misconduct
Assorted malpractice is rife in our capital markets, say insiders. Markets regulator Securities and Exchange Board of India (Sebi) is understaffed and under-armed to deter or penalise the culprits. This must change. Sebi must be able to deploy surveillance and levy fines that are large enough to deter, to protect the interest of investors and the integrity of the securities market. Sebi can access call records, but does not have the powers to ask for interception of telephonic conversations.
Give and take of poll promises
It is election season and promises of material munificence fly thick and fast. Minimum income to every family and student credit cards figure in the east. Down south, voters run the risk of taking nasty knocks on their heads from more tangible things like television sets and tablets being showered down on them. With so much and competitive give, what is there to take? Governance is the short answer.
Courts should relax on vax details
With the prime minister and chief ministers meeting today to develop a plan of action to tackle the surge in Covid-19 cases, it is critical that the Supreme Court does its bit to enable the executive to focus on the job at hand. The court must direct high courts and lower courts to transfer all Covid-related cases to it, and encourage them not to entertain cases that prima facie appear to transgress into the executive’s domain. The danger posed by the pandemic is far from over.
No in through the out door with IBC
The Supreme Court’s ruling to bar defaulting promoters from hanging on by hook or by crook reaffirms the spirit of the Insolvency and Bankruptcy Code (IBC). The law is meant to ensure quick creditor seizure of defaulting companies followed by a resolution, or a conclusive auction of assets. The verdict has held that a person ineligible under IBC to submit a resolution plan can’t take recourse to the companies law to file a plan. This is logical.
Follow Up on Call To Make for World
It is welcome that Prime Minister Narendra Modi, in his Independence Day address, recalibrated his definition of Atmanirbhar Bharat — self-reliant India. While making his first reference to Atmanirbhar Bharat, the PM had, indeed, referred to making for the world. But subsequent policy announcements had overt tones of protectionism and import substitution. This is a prescription for inefficient production and anti-export bias.
Forex Build Up: Get More Projects Going
The Reserve Bank of India (RBI) board is right to worry about the steady rise in foreign exchange reserves, which touched $538 billion on August 7, up $80.7 billion since the beginning of the year. Large reserves are seen as a source of stability, and an indication that India will not default on payments for its imports or debt servicing. The current level of reserves provide a 15-month import cover against the below 12-month cover before the pre-Covid period.
Welcome move on digitising healthcare
The National Digital Health Mission is a welcome step towards improving the delivery of health services in the country. Digitised health records become portable across hospitals and geography, lend themselves to medical research, clinical research, economic research as to costs and comparative costs and improved insurance. However, digitisation of personal data calls for specific protection, of data integrity and data security.
Contempt law needs a rethink
The Supreme Court has, in the past, commented how it has broad enough shoulders to tackle criticism directed at it. By holding lawyer Prashant Bhushan guilty of contempt for his tweets, not only does it seem to have diminished its own earlier described virtue, but it may also be making a mountain out of a molehill. Britain, from which India freed itself 73 years ago, for instance, officially abolished scandalising judges as a crime in 2013.
Air India could fly high with Tatas
It is welcome that the Tata Group is reportedly considering bidding for takeover of ailing national carrier Air India. Much is at stake. J R D Tata, of course, pioneered civil aviation in India, and he did make Air India world class in its halcyon days in the 1950s. The beleaguered airline now needs urgent turnaround to soar high again. It is significant that the government is seeking 100% divestment of Air India, including its real estate assets.
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