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Distribution: weekly

  • Don’t worry about the deficit

    The devastation caused by the second wave calls for the government to shed its worry over the fiscal deficit. The article deals with this issue.

    Role of fiscal policy to support economy through second wave

    • As India battles to contain the surge in COVID-19 cases, several states have already imposed severe restrictions at the local level.
    • The services sector has been hit the most as a consequence of these lockdowns and it would be difficult for India to deliver on this optimistic growth projection.
    • Against this background, the role fiscal policy can play to support the economy needs consideration.
    • The monetary policy is already accommodative and may not have enough room to further boost the economy.
    • With headline as well as core inflation inching up in recent months, the RBI may not be in a position to further cut the policy rate.
    •  As per the latest Union Budget, the fiscal deficit is estimated to moderate from 9.5 per cent of GDP in FY21 to 6.8 per cent of GDP in FY22.
    • This expected decline in fiscal deficit is not on account of lower fiscal spending but because of expectations of sharper revenue growth.
    • The revenue receipts are estimated to grow by 15 per cent and fiscal spending by 1 per cent this financial year.
    • With the debt to GDP ratio already more than 90 per cent, additional fiscal expansion will not be an easy choice for the government.

    Government need to create fiscal space

    • Extraordinary times call for extraordinary measures and the government will have to find ways to create fiscal space.
    • This has become especially important as the economy is yet to shrug off the impact of the previous lockdown.
    • Under these difficult circumstances, immediate measures must aim at providing the requisite social safety net to the poor and the vulnerable.
    • The central government has already announced it will distribute an additional five kg of grain to the 800 million beneficiaries of the National Food Security Act, which is welcome.
    • However, given the unprecedented uncertainty brought about by this COVID wave, the ration support under the PDS should be raised further.
    • The government should also consider transferring cash to the bank accounts of the poor, just as it did last time.
    • This becomes important as MGNREGA  may not provide the safety cushion that it is indeed to as long as lockdown measures remain in place.
    • The best stimulus perhaps would be to provide free vaccinations to the population as the benefits of faster and wider vaccine coverage more than outweighs its monetary cost.
    •  Immunisation is a public good. As we get over this crisis, the government must increase its outlay on physical and human health infrastructure.

    How to finance additional cost?

    •  Part of this additional cost may be financed by reducing non-essential government expenditures and use it for COVID-related expenditure.
    • The government may need to resort to additional borrowings from the market than budgeted earlier.
    • The RBI may allow inflation above the upper bound of 6 per cent only in the short run.
    • The plausible rise in interest rates may also be crucial to prevent capital outflows, given the global “economic outlook” when the US economy adopts an easy monetary policy combined with a huge fiscal stimulus.

    Conclusion

    The government should not be deterred by a worsening fiscal deficit in the short run as the additional growth that it generates may make debt consolidation easier when things normalise.

  • [pib] DRDO conducts maiden trial of Python-5 Air to Air Missile

    Tejas adds Python-5 in its capacity

    • Tejas, India’s indigenous Light Combat Aircraft, added the 5th generation Python-5 Air-to-Air Missile (AAM) in its air-to-air weapons capability on April 27, 2021.
    • Trials were also aimed to validate enhanced capability of already integrated Derby Beyond Visual Range (BVR) AAM on Tejas.
    • The test firing at Goa completed a series of missile trials to validate its performance under extremely challenging scenarios.
    • The trials met all their planned objectives.
    • The missiles were fired from Tejas aircraft of Aeronautical Development Agency (ADA) flown by Indian Air Force (IAF) Test pilots.
    • The successful conduct was made possible with years of hard work by the team of scientists, engineers and technicians from ADA and HAL-ARDC along with admirable support from CEMILAC, DG-AQA, IAF PMT, NPO (LCA Navy) and INS HANSA.

  • Govt leverage in Covid-19 vaccine pricing

    How government regulate prices of drugs

    • The Supreme Court flagged the issue of differential pricing for vaccines among States and the Centre and directed the central government to clarify it in an affidavit.
    • To ensure accessibility, the pricing of essential drugs is regulated centrally through The Essential Commodities Act, 1955.
    • Under Section 3 of the Act, the government has enacted the Drugs (Prices Control) Order (DPCO).
    • The DPCO lists over 800 drugs as “essential” in its schedule, and has capped their prices.
    • The capping of prices is done based on a formula that is worked out in each case by the National Pharmaceutical Pricing Authority (NPPA), which was set up in 1997.

    So, why the government is not regulating price of vaccines through DPCO

    • This is because the regulation through DPCO is not applicable for patented drugs or fixed-dose combination (FDC) drugs.
    • This is why the price of the antiviral drug remdesivir, which is currently in great demand, is not regulated by the government.
    • To bring vaccines or drugs used in the treatment of Covid-19 such as remdesivir under the DPCO policy, an amendment can be brought.

    What other options government can explore to deal with the vaccine price issue

    1) Patent Act 1970

    • The Patent Act 1970 has two key provisions that could be potentially invoked to regulate the pricing of the vaccine.
    • Section 100 of the Patents Act gives the central government the power to authorise anyone (a pharma company) to use the invention for the “purposes of the government”.
    • It enables the government to license the patents of the vaccine to specific companies to speed up manufacturing and ensure equitable pricing.
    •  Under Section 92 of the Act, which deals with compulsory licensing, the government can, without the permission of the patent holder, license the patent under specific circumstances prescribed in the Act.
    • Section 92 can be invoked in case of circumstances of national emergency or in circumstances of extreme urgency or in case of public non-commercial use.
    • After the government issues a notification under Section 92, pharma companies can approach the government for a licence to start manufacturing by reverse engineering the product.
    • However, in the case of biological vaccines like Covid-19, even though ingredients and processes are well known, it is difficult to duplicate the process from scratch.
    • The process will also entail new clinical trials to establish safety and efficacy, which makes compulsory licensing less attractive.

    2) The Epidemic Diseases Act, 1897

    • Section 2 of this law gives the government “power to take special measures and prescribe regulations as to dangerous epidemic disease”.
    • These broad, undefined powers can be used to take measures to regulate pricing.
    • However, the law lacks the teeth to implement such an important policy framework.
    • Violation of the Act is penalised under Section 188 of the Indian Penal Code, which deals with “disobedience to order duly promulgated by (a) public servant”.

    3) Direct procurement by the Centre

    • Apart from these legislative options, experts suggest that the central government procuring directly from the manufacturers could be the most beneficial route to ensure equitable pricing.
    • As the sole purchaser, it will have greater bargaining power.

  • Major oil and gas producers form Net Zero Producers’ Forum

    About the Net Zero Producers’ forum

    • Five of the world’s major oil and gas producers are working together to ‘develop pragmatic net-zero emission strategies’.
    • Qatar, the US, Saudi Arabia, Canada and Norway, collectively responsible for 40% of global oil and gas production, will come together to form a cooperative forum that will develop pragmatic net zero-emission strategies.
    • Energy producers are faced with unique responsibilities to furnish the world with energy but the climate crisis requires serious leadership and a strong alliance to deliver a path to net-zero.

    Strategies and technologies

    • The Net Zero Producers’ Forum will consider strategies and technologies which include methane abatement, circular carbon economy approach, development and deployment of clean energy and carbon capture and storage technologies, diversification from reliance on hydrocarbon revenues etc.

    Source:

    https://www.energy.gov/articles/joint-statement-establishing-net-zero-producers-forum-between-energy-ministries-canada

  • Making social welfare universal

    The article highlights the need for universal social protection scheme in India and suggests a way to achieve it.

    Need for universal social security

    • The pandemic has revealed that leveraging our existing schemes and providing universal social security is of utmost importance.
    • This will help absorb the impact of external shocks on our vulnerable populations.
    • The country has over 500 direct benefit transfer schemes for which various Central, State, and Line departments are responsible.
    • However, these schemes have not reached those in need.

    Lessons from Poor Law System in Ireland

    • An example of a universal social protection scheme is the Poor Law System in Ireland.
    • In the 19th century, to deal with poverty and famine, Ireland introduced the Poor Law System to provide relief that was financed by local property taxes.
    • These laws were notable for not only providing timely assistance but maintaining the dignity and respectability of the poor while doing so.
    • They were not designed as hand-outs but as necessary responses to a time of economic crisis.
    • Today, the social welfare system in Ireland has evolved into a four-fold apparatus that promises social insurance, social assistance, universal schemes, and extra benefits/supplements.

    Issues with the existing social protection schemes in Inda

    • Existing schemes in India cover a wide variety of social protections.
    • However, they are fractionalised across various departments and sub-schemes.
    • This causes problems beginning with data collection to last-mile delivery.

    How universal system would help

    • Having a universal system would improve the ease of application by consolidating the data of all eligible beneficiaries under one database.
    • It can also reduce exclusion errors.
    • The Pradhan Mantri Garib Kalyan Yojana (PMGKY) is one scheme that can be strengthened into universal social security.
    • It already consolidates the public distribution system (PDS), the provision of gas cylinders, and wages for the MGNREGS.
    • Generally, social assistance schemes are provided on the basis of an assessment of needs.
    • Having a universal scheme would take away this access/exclusion barrier.
    • For example, PDS can be linked to a universal identification card such as the Aadhaar or voter card, in the absence of a ration card.
    • This would allow anyone who is in need of foodgrains to access these schemes.
    • It would be especially useful for migrant populations.
    • Making other schemes/welfare provisions like education, maternity benefits, disability benefits etc. also universal would ensure a better standard of living for the people.
    • To ensure some of these issues are addressed, we need to map the State and Central schemes in a consolidated manner.
    • This is to avoid duplication, inclusion and exclusion errors in welfare delivery.
    • The implementation of any of these ideas is only possible through a focus on data digitisation, data-driven decision-making and collaboration across government departments.

    Consider the question “What are the issues with existing social security schemes in India? What would be the benefits of replacing all these social security schemes with universal social security scheme?”

    Conclusion

    India is one of the largest welfare states in the world and yet, with COVID-19 striking in 2020, the state failed to provide for its most vulnerable citizens. This underlines the need for a universal social protection scheme in India.

  • The Supply Chain Resilience Initiative (SCRI) formally launched

    Tackling the supply chain disruption through SCRI

    • The Supply Chain Resilience Initiative (SCRI) was formally launched on Tuesday by the Trade Ministers of India, Japan and Australia.
    • The three sides agreed that the pandemic revealed supply chain vulnerabilities globally and in the region and noted the importance of risk management and continuity plans in order to avoid supply chain disruptions.
    • Some of the joint measures they are considering include supporting the enhanced utilisation of digital technology and trade and investment diversification, which is seen as being aimed at reducing their reliance on China.

    How China reacted

    • China’s Foreign Ministry on Wednesday described the move as ‘unrealistic’.
    • The formation and development of global industrial and supply chains are determined by market forces and companies choices, it said.
    • It also said that the artificial industrial ‘transfer’ is an unrealistic approach that goes against the economic laws and can neither solve domestic problems nor do anything good to the stability of the global industrial and supply chains, or to the stable recovery of the world economy.

  • Antimicrobial resistance

    The article highlights the challenges posed by anti-microbial resistance (AMR) and suggests ways to deal with it.

    Understanding the severity of challenges posed by AMR

    • Antimicrobial resistance (AMR) is the phenomenon by which bacteria and fungi evolve and become resistant to presently available medical treatment.
    • AMR represents an existential threat to modern medicine.
    • Without functional antimicrobials to treat bacterial and fungal infections, even the most common surgical procedures, as well as cancer chemotherapy, will become fraught with risk from untreatable infections.
    • Neonatal and maternal mortality will increase.

    How AMR will affect low and middle-income countries

    • All these effects will be felt globally, but the scenario in the low- and middle-income countries (LMICs) of Asia and Africa is even more serious.
    • LMICs have significantly driven down mortality using cheap and easily available antimicrobials.
    • In the absence of new therapies, health systems in these countries are at severe risk of being overrun by untreatable infectious diseases.

    Factors contributing to AMR

    • Drug resistance in microbes emerges for several reasons.
    • These include the misuse of antimicrobials in medicine, inappropriate use in agriculture, and contamination around pharmaceutical manufacturing sites where untreated waste releases large amounts of active antimicrobials into the environment.

    Stagnant antibiotics discovery

    •  The Challenge of AMR is compounded by fact that no new classes of antibiotics have made it to the market in the last three decades.
    • This has happened on account of inadequate incentives for their development and production.
    • A recent report from the non-profit PEW Trusts found that over 95% of antibiotics in development today are from small companies, 75% of which have no products currently in the market.
    • Major pharmaceutical companies have largely abandoned innovation in this space.

    Measures to deal with the challenge of AMR

    •  In addition to developing new antimicrobials, infection-control measures can reduce antibiotic use.
    • A mix of incentives and sanctions would encourage appropriate clinical use.
    • To track the spread of resistance in microbes, surveillance measures to identify these organisms need to expand beyond hospitals and encompass livestock, wastewater and farm run-offs.
    • Finally, since microbes will inevitably continue to evolve and become resistant even to new antimicrobials, we need sustained investments and global coordination to detect and combat new resistant strains on an ongoing basis.

    Way forward

    •  A multi-sectoral $1 billion AMR Action Fund was launched in 2020 to support the development of new antibiotics.
    • The U.K. is trialling a subscription-based model for paying for new antimicrobials towards ensuring their commercial viability.
    • Other initiatives focused on the appropriate use of antibiotics include Peru’s efforts on patient education to reduce unnecessary antibiotic prescriptions.
    • Australian regulatory reforms to influence prescriber behaviour, and initiatives to increase the use of point-of-care diagnostics, such as the EU-supported VALUE-Dx programme.
    • Denmark’s reforms to prevent the use of antibiotics in livestock have led to a significant reduction in the prevalence of resistant microbes in animals and improved the efficiency of farming.
    • Finally, given the critical role of manufacturing and environmental contamination in spreading AMR there is a need to curb the amount of active antibiotics released in pharmaceutical waste.
    • Regulating clinician prescription of antimicrobials alone would do little in settings where patient demand is high and antimicrobials are freely available over-the-counter in practice, as is the case in many LMICs.
    • Efforts to control prescription through provider incentives should be accompanied by efforts to educate consumers to reduce inappropriate demand, issue standard treatment guidelines.
    • Solutions in clinical medicine must be integrated with improved surveillance of AMR in agriculture, animal health and the environment.
    • AMR must no longer be the remit solely of the health sector, but needs engagement from a wide range of stakeholders, representing agriculture, trade and the environment with solutions that balance their often-competing interests.
    •  International alignment and coordination are paramount in both policymaking and its implementation.

    Consider the question “Anti-microbial resistance (AMR) represents an existential threat to modern medicine. What are the factors contributing to AMR? Suggest the measures to deal with it.”

    Conclusion

    With viral diseases such as COVID-19, outbreaks and pandemics may be harder to predict; however, given what we know about the “silent pandemic” that is AMR, there is no excuse for delaying action.

  • How IPR served as barrier to the right to access healthcare

    Request for waiver

    •  Last year, India and South Africa requested WTO for a temporary suspension of rules under the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
    • A waiver was sought to the extent that the protections offered by TRIPS impinged on the containment and treatment of COVID-19. 
    • The request for a waiver has, since, found support from more than 100 nations.
    • But a small group of states — the U.S., the European Union, the U.K. and Canada among them — continues to block the move.
    • These countries have already secured the majority of available vaccines.
    • But for the rest of the world mass immunisation is a distant dream.

    Grounds on which patent laws are justified

    • Patent laws are usually justified on three distinct grounds:
    • On the idea that people have something of a natural and moral right to claim control over their inventions.
    • On the utilitarian premise that exclusive licenses promote invention and therefore benefit society as a whole.
    • On the belief that individuals must be allowed to benefit from the fruits of their labour and merit.
    • These justifications have long been a matter of contest, especially in the application of claims of monopoly over pharmaceutical drugs and technologies.

    Patent laws in India

    • In 1959, a committee chaired by Justice N. Rajagopala Ayyangar objected to monopolies on pharmaceutical drugs through colonial-era patent law.
    • The committee found that foreign corporations used patents to suppress competition from Indian entities, and thus, medicines were priced at exorbitant rates.
    • The committee suggested, and Parliament put this into law through the Patents Act, 1970, that monopolies over pharmaceutical drugs be altogether removed, with protections offered only over claims to processes.
    • This change in rule allowed generic manufacturers in India to grow. 

    How TRIPS goes against the interest of developing countries

    • WTO has into its constitution a binding set of rules governing intellectual property.
    • Countries that fail to subscribe to the common laws prescribed by the WTO would be barred from entry into the global trading circuit.
    • It was believed that a threat of sanctions, to be enforced through a dispute resolution mechanism, would dissuade states from reneging on their promises.
    • With the advent in 1995 of the TRIPS agreement, this belief proved true.
    • The faults in this new world order became apparent when drugs that reduced AIDS deaths in developed nations were placed out of reach for the rest of the world.
    • It was only when Indian companies began to manufacture generic versions of these medicines as TRIPS hadn’t yet kicked in against India, that the prices came down.

     Argument in support of the patent regime

    • Two common arguments are made in response to objections against the prevailing patent regime.
    • One, that unless corporations are rewarded for their inventions, they would be unable to recoup amounts invested by them in research and development.
    • Two, without the right to monopolise production there will be no incentive to innovate.

    Issues with the argument in support of patent regime

    • Big pharma has never been forthright about the quantum of monies funnelled by it into research and development.
    • Moderna vaccine in the U.S. emanated out of basic research conducted by the National Institutes of Health, a federal government agency, and other publicly funded universities and organisations. 
    • Similarly, public money accounted for more than 97% of the funding towards the development of the Oxford/AstraZeneca vaccine.
    •  Therefore, the claim that the removal of patents would somehow invade on a company’s ability to recoup costs is simply untrue.
    • The second objection — the idea that patents are the only means available to promote innovation — has become something of a dogma.
    • The economist Joseph Stiglitz is one of many who has proposed a prize fund for medical research in place of patents.

    Consider the question “What are the issues with the patent regime under the TRIPS in the field of medicine?”

    Conclusion

    We cannot continue to persist with rules granting monopolies which place the right to access basic healthcare in a position of constant peril. In its present form, the TRIPS regime represents nothing but a new form of “feudal calculus”.

  • Understanding the Ct value in a Covid-19 test

    Recently, the Maharashtra government sought clarity from the Indian Council of Medical Research (ICMR) on the threshold Ct value to treat a person Covid-negative.

    What is Ct value

    • Short for cycle threshold, Ct is a value that emerges during RT-PCR tests.
    • In an RT-PCR test, RNA is extracted from the swab collected from the patient.
    • It is then converted into DNA, which is then amplified.
    • Amplification refers to the process of creating multiple copies of the genetic material — in this case, DNA.
    • Amplification takes place through a series of cycles — one copy becomes two, two becomes four, and so on.
    • Put simply, the Ct value refers to the number of cycles after which the virus can be detected.
    • The lower the Ct value, the higher the viral load — because the virus has been spotted after fewer cycles.

    Why Ct value is important

    • According to the ICMR, a patient is considered Covid-positive if the Ct value is below 35.
    • If the benchmark were to be lowered to 24 — the value mentioned in Maharashtra’s letter — it would mean that Ct values in the range 25-34 would not be considered positive.
    • A benchmark of 35, therefore, means that more patients would be considered positive than we would get if the benchmark were 24.
    • The ICMR has said lowering Ct threshold parameter may lead to missing several infectious persons.

    Does Ct score indicate the severity of disease

    • A small study published in the Indian Journal of Medical Microbiology in January this year found that there was no correlation between Ct values and severity of disease or mortality in patients with Covid-19 disease.
    • It found that the time since the onset of symptoms has a stronger relationship with Ct values as compared to the severity of the disease.
    • The Ct value tells us about the viral load in the throat and not in the lungs.
    • The Ct value does not correlate with severity – only with infectivity.

  • Growth of ARCs not in line with NPA trends

    Key takeaways from the RBI report

    • The RBI report states that notwithstanding the rise in the number of Asset Reconstruction Companys (ARCs), the growth in their assets under management (AUM) has been largely trendless except for a major spurt in FY14.
    • The growth of the ARC industry has not been consistent over time and not always been synchronous with the trends in non-performing assets (NPAs) of banks and non-banking financial companies (NBFCs).
    • During 2019-20, asset sales by banks to ARCs declined, which could probably be due to banks opting for other resolution channels such as IBC and SARFAESI.
    • The acquisition cost of ARCs as a proportion to the book value of assets declined, suggesting lower realisable value of the assets.

    Overview of ARCs in India

    • The ARC industry began with the establishment of the Asset Reconstruction Company India Ltd (ARCIL) in 2003.
    • Of the total AUM, about 62 per cent and 76 per cent was held by the top-three and top-five ARCs in March 2020, respectively.
    • After remaining subdued in the initial years of their inception, a jump was seen in the number of ARCs in 2008, and then in 2016.
    • Although the number of ARCs has risen over time, their business has remained highly concentrated.

    Role of the government

    • Indian ARCs have been private sector entities registered with the Reserve Bank.
    • Public sector AMCs in other countries have often enjoyed easy access to government funding or government-backed.
    • By contrast, capital constraints have often been highlighted as an area of concern for ARCs in India.

    Scope for new ARC supported by the government

    • The ARC proposed in the Budget will be set up by state-owned and private sector banks, and there will be no equity contribution from the Centre.
    • The RBI report supported the government’s proposal for a new ARC, saying that “such an entity will strengthen the asset resolution mechanism further.”
    • Introduction of a new asset reconstruction company for addressing the NPAs of public sector banks may also shape the operations of the existing ARCs, it added. 
    • The ARC, which will have an Asset Management Company (AMC) to manage and sell bad assets, will look to resolve stressed assets of Rs 2-2.5 lakh crore that remain unresolved in around 70 large accounts.