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GS Paper: GS3

  • Reshaping the gig economy

    3 min

    The shockwave that pandemic sent through the economy has been reshaping the global job market. Gig economy would have to accommodate the new entrants. This article underlines the changes in the gig economy after the pandemic. Four areas that need attention are also discussed here.

    What constitutes gig economy?

    • The word “gig” includes in its current parlance all freelancers, disconnected from the workplace.
    • Example: drivers of Uber, delivery boys of Zomato, plumbers and electricians of Urban Clap.
    • The gig economy is not confined to low-skilled jobs. Skilled professionals are also part of it.

    How pandemic is reshaping the gig economy

    • Aviation, hospitality, automobile entertainment and retail are some of the hardest hit sectors.
    • The classic gig anchors- Uber and AirBnB, have laid off thousands of people.
    • In contrast to this, highly skilled professionals —laid off by employers — are joining the gig bandwagon.
    • Surely, job demand will far outstrip supply, at least in the short-term.

    What does the future hold?

    • A Deloitte report from April notes that Indian organisations are considering to expand the share of gig workers.
    • Declining full-time jobs will lead to increased assignment-based hiring.
    • For instance, a graphic designer working from home could be in demand with a media house or Netflix may hire AI designer paid by an hour to personalize streaming.
    • But, what is missing in picture? The national database is missing.

    4 focus areas of gig economy

    1. National database: A missing link

    • National database of job seekers and job creators can connect firms with qualified candidates.
    • A prospective employee would need access to a job database, sorted by skill, geography, duration and emoluments.
    • Companies should be able to dip into the data pool of talent, experience, location, qualification and expectation.
    • Currently, both data sets are fragmented and stored in silos.
    • The government could play the role of a facilitator, in partnership with the private sector.

    2. Regulatory protection to gig workforce

    • The gig economy increases employee vulnerability.
    • This segment of the economy so far has been outside the ambit of regulatory labour policies.
    • Social protection like wage protection, health benefits and safety assurance should be made available to gig workers.
    • The Karnataka government has considered introducing a new labour legislation focused on the gig economy.

    3. Prepare college students for freelancing

    • Apart from regular campus placements, the placement cells need to reorient and focus on preparing students for freelancing opportunities.
    • For the educated youth, this could be the first step towards entrepreneurship.

    4. Gender equality

    • Gender is another crucial dimension of the digital labour markets.
    • The low enrolment of girls for higher education in science, technology, engineering and math would constrict their opportunity in the gig world.
    • Going ahead, this would need greater policy attention to ensure gender parity.

    Consider the question “What is the gig economy? Suggest the policy measures to make it more resilient in the present economic context disrupted by the pandemic.”

    Conclusion

    The government and the private sector would need to collaborate along with academia to build adequate safeguards in the unfolding eco-system.

  • Financial Action Task Force (FATF)

    Indian officials attended the virtual 32nd special Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) plenary meeting, under the aegis of the FATF.

    Practice question for mains:

    Q. What is FATF? Discuss its role in combating global financial crimes and terror financing.

    What is the FATF?

    • FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
    • The FATF Secretariat is housed at the OECD headquarters in Paris.
    • It holds three Plenary meetings in the course of each of its 12-month rotating presidencies.
    • As of 2019, FATF consisted of 37 member jurisdictions.
    • India became an Observer at FATF in 2006. Since then, it had been working towards full-fledged membership. On June 25, 2010, India was taken in as the 34th country member of FATF.

    EAG of FATF

    • The EAG is a regional body comprising nine countries: India, Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan and Belarus.
    • It is an associate member of the FATF.

    What is the role of FATF?

    • The rise of the global economy and international trade has given rise to financial crimes such as money laundering.
    • The FATF makes recommendations for combating financial crime, reviews members’ policies and procedures, and seeks to increase acceptance of anti-money laundering regulations across the globe.
    • Because money launderers and others alter their techniques to avoid apprehension, the FATF updates its recommendations every few years.

    What is the Black List and the Grey List?

    • Black List: The blacklist, now called the “Call for action” was the common shorthand description for the FATF list of “Non-Cooperative Countries or Territories” (NCCTs).
    • Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.

    Consequences of being in the FATF grey list:

    • Economic sanctions from IMF, World Bank, ADB
    • Problem in getting loans from IMF, World Bank, ADB and other countries
    • Reduction in international trade
    • International boycott

    Pakistan and FATF

    • Pakistan, which continues to remain on the “grey list” of FATF, had earlier been given the deadline till the June to ensure compliance with the 27-point action plan against terror funding networks.
    • It has been under the FATF’s scanner since June 2018, when it was put on the Grey List for terror financing and money laundering risks.
    • FATF and its partners such as the Asia Pacific Group (APG) are reviewing Pakistan’s processes, systems, and weaknesses on the basis of a standard matrix for anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.

  • Asian Infrastructure Investment Bank (AIIB)

    The Government of India and the Asian Infrastructure Investment Bank (AIIB) has signed a $750 million agreement for “COVID-19 Active Response and Expenditure Support Programme”.

    Try this question from CSP 2019

    Q.With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements

    1. AIIB has more than 80 member nations.
    2. India is the largest shareholder in AIIB.
    3. AIIB does not have any members from outside Asia.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    What’s so special about this assistance?

    • This is the first-ever budgetary support programme from the AIIB to India.
    • The project is being financed by the AIIB and Asian Development Bank (ADB) in the amount of $2.250 billion, of which $750 million will be provided by AIIB and $1.5 billion will be provided by ADB.
    • The package aims to assist India to strengthen its response to the adverse impacts of the COVID-19 pandemic on poor and vulnerable households.
    • The current loan will be the second to India from AIIB under its COVID-19 crisis recovery facility apart from the earlier approved $500 million loans.
    • The primary beneficiaries would be families below the poverty line, farmers, healthcare workers, women, women’s SHGs, widows, PWDs, senior citizens, low wage earners etc.

    About AIIB

    • The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia, began operations in January 2016.
    • AIIB has now grown to 102 approved members worldwide.
    • AIIB is a brainchild of China. The prime aim of the AIIB is infrastructure development.
    • By establishing interconnectivity across Asia through advancement in the construction of infrastructure and other productive services, the AIIB can stimulate growth and economic development in the Asian Region.

    Must read:

    International Economic Institution’s: ADB, BRICS Bank, AIIB

  • Species in news: Horseshoe Crab

    Horseshoe crabs face an uncertain future in Odisha, their largest habitat in India, even as the world gets ready to celebrate the first-ever ‘International Horseshoe Crab Day’ on June 20, 2020.

    Try this question from CSP 2012:

    Q. Which one of the following groups of animals belongs to the category of endangered species?

    (a) Great Indian Bustard, Musk Deer, Red Panda and Asiatic Wild Ass

    (b) Kashmir Stag, Cheetal, Blue Bull and Great Indian Bustard

    (c) Snow Leopard, Swamp Deer, Rhesus Monkey and Saras (Crane)

    (d) Lion-tailed Macaque, Blue Bull, Hanuman Langur and Cheetal

    Horseshoe Crabs

    IUCN status: (Data insufficient for the Indian variant)

    • Horseshoe crabs are marine and brackish water arthropods. They are not true crabs, which are crustaceans.
    • The crabs are represented by four extant species in the world. Out of the four, two species are distributed along the northeast coast of India.
    • Only T gigas species of the horseshoe crab is found along Balasore coast of Odisha.
    • The crab was included on September 9, 2009, in the Schedule IV of the Wild (Life) Protection Act, 1972, under which, the catching and killing of a horseshoe crab is an offence.

    Their significance

    • The horseshoe crab is one of the oldest marine living fossils whose origin date back to 445 million years before the dinosaurs existed.
    • One of their ecological functions is to lay millions of eggs on beaches to feed shorebirds, fish and other wildlife.

    Threats

    • Poachers kill them for their meat that is popularly believed to have aphrodisiac qualities.
    • The blood of horseshoe crabs, which is blue in colour, is used for detection of bacterial endotoxins in medical applications.

  • We must aspire for nurturing economy

    The sight of thousands of migrant workers walking thousands of kms back home after lockdown has been the watershed moment for the collective conscience of our country. This made us think about the present economic model and policies we have been adopting. So, the answer to the problems created by the present model lies in building “nurturing economy”. What is nurturing economy? Read to know…

    Broadly, we can summarise the impact of pandemic as-

    • Unemployment is shooting up.
    • Supply chains of food and essentials have been disrupted.
    • Dark clouds of economic recession are on the horizon.

    Invisible cost of pandemic

    • The visible cost of the pandemic in terms of the lives lost are being counted by the day.
    • But the invisible cost of hunger and impoverishment of the most vulnerable sections is yet to be effectively addressed.
    • Vulnerable section- our workers, the poor and the migrants, particularly women, are at receiving end of these invisible cost.

    Health of economy before pandemic

    • The pandemic came at one of the worst possible times.
    • India’s economy has been in deep trouble since 2016.
    • In 2019-20, even before the pandemic happened, our GDP growth had dropped to 4.2 per cent, lowest growth seen in the last 11 years.
    • Even the oil prices dropped at their historic low.
    • Non-food bank credit is a good indicator of overall economic robustness.
    • By December 2019, the growth of non-food bank credit had dropped to below 7 per cent. ( lowest in the last 50 years.)

    What happened to economy after the pandemic?

    • After the pandemic arrived, matters, of course, got worse.
    • In March, $16 billion of foreign capital exited the country, which is an all-time record for India.
    • India’s unemployment rate shot up to a record high of 23.8 per cent in April.
    • In the same month, Indian exports dropped by 60 per cent.
    • This was one of the biggest drops seen in any emerging market economy in the world.
    • There is a genuine risk that this year our growth will drop to an all-time low, beating the record plunge of 1979-80.

    So, the pandemic has forced us to think about the building a nurturing economy, one in which Gandhiji’s Talisman is followed in word and spirit, one in which John Rawls ideas are implemented.

    So, What building a nurturing economy involves?

    • Our economic and political policies must not be ends in themselves.
    • Instead, these policies should involve instruments for building a society that is secular, inclusive and nurturing.
    • It should be a society where people of all religions, caste, race and gender feel wanted and at home.
    • Environment sustainability and focus on green economy is also part of nurturing economy.
    • We should strive to create a society that respects knowledge, science and technology, and culture.

    Threefold crisis emerging out of our exploitative behaviours

    • The outcome of our exploitative behaviour is a threefold crisis which describes India’s current predicament.
    • 1) Rising poverty and unemployment despite abundance.
    • 2) Rising intolerance and violence.
    • 3) Environmental catastrophe.

    Consider the question “Pandemic and the predicament of migrant labours has highlighted the lack of inclusive growth in our economy. And we must look for the solution to such shortcomings in our approach. In light of this, suggest the changes that our economy must embrace to ensure inclusive growth.”

    Conclusion

    Our ambition should not be to make India the richest nation in the world. India should be an example of an equitable society, where people are not abandoned without income and work, where no one feels the insecurity of being a minority, and of being discriminated against.

  • Issues with the ordinances on agriculture

    Following the announcement of reforms in the agri-sector, the government issued ordinances to make good on its promise. These ordinances deal with- ECA-1955, APMC Act and Contract farming. The author in this article examines whether these ordinances deliver on the promises made or not.

    1) Ordinance for amendment of APMC Act

    • ‘Farming Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020.’ seek to address the problems farmers face in selling their produce.
    • Due to the unionisation of middlemen (arhatias) and their financial clout, politicians in the states have been reluctant to amend agriculture marketing laws which are exploitative and don’t allow farmers to receive a fair price.
    • Rather than coax the states financially to correct the markets, an unregulated marketplace has been created where 15 crore farmers will be exposed to the skulduggery of traders.
    • Imagine the mayhem in stock markets if ROC and SEBI were similarly made redundant.

    Issues and benefits

    • Rather than replicate Punjab’s successful agriculture mandi model, now states will lose vital revenue to even upgrade and repair rural infrastructure.
    • The ordinance may be challenged by the states for its constitutional overreach.
    •  But, on the flip side, over time, the largest informal sector in the country will begin to get formalised and new business models will develop.
    • A different breed of aggregators will create the much-needed competition to the existing monopoly of local traders.
    • Additionally, henceforth, when farmers sell agricultural produce outside of APMC market yards, they cannot legally be charged commission on the sale of farm produce.
    • To survive, the APMCs across the nation will have to radically standardise and rationalise their mandi fee structure and limit the commission charged by traders on sale of farmers’ produce.

    2) ECA 1955: Not enough has been done

    • Here, the amendment was supposed to allay the genuine fears of traders emitting from the bureaucracy’s draconian powers to arbitrarily evoke stockholding limits etc.
    • Rather than forego its own powers for the larger good, the amendment’s fine print makes it ambiguous and leaves space for whimsical interpretations as before.
    • The trader’s uncertainty is compounded by the arbitrary import-export policy decisions which dilute the purpose of the amendment itself.

    3) Ordinance on Contract farming

    •  “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020” tries to placate the fears of both the farmer and the contractor when they sign an agreement.
    • For the farmer, the legal recourse is never a practical choice as the persuasive powers of the aggregators’ deep pockets cast a dark shadow over the redressal process.
    • Likewise, the tediously stretched legal proceedings are dissuasion enough to either not seek redressal or settle for unfavourable terms.
    • That produce derived from contract farming operations will not be subject to any obstructionist laws is a very good step.
    • Farmer-producer organisations and new aggregators will get a boost with these laws, and become harbingers of prosperity in some small corners of the countryside.
    • There are green shoots in the ordinances, but the downside dwarfs the upside.

    So, what are the implications of these 3 reforms?

    • The union of the three ordinances appears to be a precursor to implementing the Shanta Kumar Committee recommendations to dilute and dismantle FCI, MSP & PDS which will push farmers from the frying into the fire.
    • It may also be interpreted to mean that now the sugar industry needn’t pay farmers the central government FRP or the state government SAP price for sugarcane.

    Consider the question ” There was a mention of reforms related to agri-sector in the recently announced stimulus package. Examine the issues with segments of agri-sector which necessitated these reforms.”

    Conclusion

    The reforms in these 3 areas if carried out earnestly could go a long way in helping the farmers get out of the misery and help achieve the goal of doubling of farmers income in the set time frame.

    Back2Basics: Agriculture Produce Marketing Committee Regulation (APMC) Act.

    • All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”.
    • With the exception of Kerala, J & K, and Manipur, all other states have enacted the APMC Act.
    • It mandates that the sale/purchase of agricultural commodities notiïŹed under it are to be carried out in speciïŹed market areas, yards or sub-yards. These markets are required to have the proper infrastructure for the sale of farmers’ produce.
    • Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an ofïŹcial of the market committee.
    • Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly deïŹned, and no other deduction can be made from the sale proceeds of farmers.
    • Market charges, costs, and taxes vary across states and commodities.

    Essential Commodities Act 1955

    • The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
    • The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
    • It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
    • Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
    • The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.
    • The Centre can include new commodities as and when the need arises, and takes them off the list once the situation improves.

    How ECA works?

    • If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
    • The States act on this notification to specify limits and take steps to ensure that these are adhered to.
    • Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
    • A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.
    • This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished.
    • The excess stocks are auctioned or sold through fair price shops.

  • What makes Himalayan tourism spots vulnerable to landslides?

    This newscard talks about the city of Dharamshala where landslides occur frequently.

    Practice question for mains:

    Q.“Himalayan region is more susceptible to floods and flood induced landslides than the Western Ghats”. Discuss.

    Why is Dharamshala more vulnerable to landslides?

    • Dharamshala has a slope varying from gentle to steep, depending on different parts of the city.
    • It is located in Zone V in the earthquake hazard zoning map of India.
    • The large differences in slope between different parts of the city make it more susceptible to critical hazards like landslides.
    • The vulnerability of the geologically young steep slopes of Dhauladhar has increased because of anthropogenic activities and illegal construction due to the lack of availability of land.

    Why do landslides occur?

    • Increasing urbanisation, deforestation and encroachment of areas at high hill slopes, unscientific road cutting and water-intensive agricultural practices contributed to the increase in intensity and frequency of landslides.
    • The situation is worse during the monsoon when landslide-prone areas are washed away due to exposure.
    • This is due to the demand for living within the city. It is not just the difference between slopes, but also anthropogenic causes that lead to the emergence of hazards like landslides.

    Why tourist spots are more vulnerable?

    1) Road traffic is high

    • During the peak tourist season, the road is marred with traffic jams due to continuous sinking.
    • Several factors have continuously contributed to an increase in the road’s vulnerability. The first is Illegal construction and uncontrolled levelling of hillocks along the roads.
    • Hillocks are flattened to accommodate housing projects, commercial establishments, etc. The informal sector often starts residing in these areas which are more vulnerable to risks.
    • These areas have comparatively lower land values and fewer people come to settle here.

    2) Loss in green cover

    • The second is a loss in green cover, something that occurs as more people reside within the city, increasing soil erosion, risking the further vulnerability to landslides.
    • Due to the loss of green cover and steep gradient of the slope, water is not absorbed in the soil and washed away very quickly.

    3) Damaged topography

    • The third is the unscientific manner of cutting hills for widening roads and construction.
    • This causes the sinking of roads, which affects road width and causes traffic interruptions.

    4) Sewage failures

    • The fourth is the absence of a sewerage system in the area. Due to unavailability of sewerage systems, people construct septic tanks that are unsafe for soil strata.
    • Water from septic tanks drains to the upper layer of soil that has loose soil, making areas more vulnerable to damage from landslides.

    Also read

    The Northern and Northeastern Mountains | Part 1

  • Species in news: Hilsa Fish

    Fishermen in West Bengal are in for a pleasant surprise amid the COVID-19 gloom as they have exuded hope of a bumper yield of Hilsa, known as “maacher rani” (queen of fish).

    Try this question from CSP 2019:

    Q. Consider the following pairs:

    Wildlife Naturally found in
    1. Blue-finned Mahseer Cauvery River
    2. Irrawaddy Dolphin Chambal River
    3. Rusty-spotted Cat Eastern Ghats

    Which of the pairs given above are correctly matched?

    a) 1 and 2 only

    b) 2 and 3 only

    c) 1 and 3 only

    d) 1, 2 and 3

    Hilsa Fish

    IUCN status: Least Concerned

    • The Hilsa is a species of fish related to the herring, in the family Clupeidae.
    • It is a very popular and sought-after food fish in the Indian Subcontinent.
    • It is the national fish of Bangladesh and state symbol in the Indian states of West Bengal and Tripura.
    • The fish contributes about 12% of the total fish production and about 1.15% of GDP in Bangladesh.

    What’s so special about Hilsa?

    • Hilsa has a history of migrating to Allahabad in the Ganga river system from Bangladesh.
    • Though it’s a saltwater fish, it migrates to sweet waters of the Ganges from the Bay of Bengal.
    • It travels upstream of the river during the mating seasons and returns to its natural abode after spawning.

  • What explains the new mark crosses by our Forex reserves

    At first, it seems almost contradictory. And so it is. Our foreign exchange reserves touched new high of $500 billion for the first time, but the time in which this has happened makes it paradoxical. At the time when economies around the world are touching new lows, this rise in the Forex seems all but usual. In this article, you’ll learn about the 4 factors that made it happen.

    1. Decreased oil imports

    • Usually, we import a lot of oil.
    • But the payment here is dollar-denominated since very few countries are going to accept our currency (Rupee) as is.
    • So, you have to expend dollars i.e. the foreign exchange reserves to keep the flow of crude oil intact.
    • However, with the nationwide lockdown in place, our import bill has reduced drastically.
    • We simply don’t need as much oil anymore.
    • And considering oil prices have also taken a beating simultaneously, our Forex Reserves have been piling up.
    • Less oil import. More Forex reserves.

    2. Dollars coming with foreign investors

    • Contrary to popular opinion, foreign investors have been pouring money into India of late.
    • You could attribute a bulk of these inflows to Reliance Jio.
    • They’ve been enticing investors all over the world and they’ve been doing it at a pace that belies all rational expectations.
    • They’ve raised close to $15 Bn over the course of a few months and it doesn’t look like they’re stopping anytime soon.
    • So technically, dollar inflows have spiked and therefore, Forex reserves get a boost once again.

    3. RBI preparing itself for a bad time

    • Another popular explanation is that the RBI is preparing a war chest to stave off future uncertainties.
    • At a time when the world economy is reeling from an unprecedented crisis, it’s perhaps prudent to build up reserves for a rainy day.
    • So the RBI buys gold and dollar-denominated assets using our national currency and builds up the foreign exchange reserves.
    • Inadvertently, this increases the money supply within the economy.
    • There will be more “Rupees” floating around.
    • As more Indian currency keeps entering the ecosystem, the value of the rupee depreciates.
    • And yes, the value of rupee has tumbled recently, but we are not in dire straits yet.
    • But if India’s economy takes a turn for the worse, it becomes incumbent on the RBI to ensure price stability.
    • Imagine the value of the rupee starts fluctuating wildly because of economic uncertainties.
    • The RBI has to intervene.
    • It has to exchange the foreign reserves for the Indian currency.
    • If they keep mopping up the excess Rupees floating in the system, they could ensure the value of the rupee remains stable.
    • So long as the value of the rupee remains stable, prices of commodities will follow the same cue, all things remaining equal that is.
    • Now, there’s still no clear consensus on what kind of reserves we might need if things do go south.
    • Although there have been recommendations made in the past about hoarding too much, it’s still the RBI’s call at the end of the day.

    4. The RBI is doing it for the government

    • The RBI can turn a profit if it wants to.
    • And once it does turn a profit, it can transfer a part of the surplus to the government — as dividends.
    • Now if the RBI wanted to offer the government a higher dividend, it has to simply turn a higher profit.
    • One way to accomplish this is to simply let the value of the rupee depreciate. Do not intervene.
    • Do not forego the reserves. Let the rupee tumble.
    • And so long as you don’t intervene, all the dollar-denominated assets you own will be worth more in rupee terms.
    • Consider the hypothetical example-suppose the exchange rate was 1$= Rs. 71 in March 2020, then the rupee loses value and you see the same line item once again in June 2020 will be 1$=Rs. 76.
    • The extra â‚č 5 is treated as a profit. And this profit could be ploughed back to the government.

    Consider the question “With the economy in the tailspin amid pandemic, the news of India’s Forex reserves touching the $500 billion mark for the first time provided the semblance of solace. Examine the factors that could explain this increase.”

    Conclusion

    Though there will always be the debate over the optimum value of the Forex reserves, the new level it reached in such an uncertain time for the economy is, nonetheless, a cause for celebration.

     

    Reference Source : https://finshots.in/archive/india-foreign-exchange-reserves/

  • What are Biosimilars?

    Recently an Indian pharma company has been granted a USFDA approval for Insulin Glargine, a biosimilar. This article briefly introduces us to this term, complexities involved in its manufacturing and also explains why the USFDA approval create hype.

    The story of simple molecules and some difficult diseases

    • Ever since modern medicine started to emerge post the Industrial Revolution, simple molecules have been used to treat most diseases.
    • While these formulations are highly effective against some illnesses, they aren’t particularly effective against more complex diseases like cancer.
    • Our immune system has evolved over millions of years to specifically defend against outside intruders.
    • But cancer isn’t like most diseases.
    • It’s not caused by an invasion of a foreign pathogen.
    • Instead, it’s a byproduct of rogue cells that destroy our bodies from within.
    • To this end, using simple molecules to defend against a barrage of mutating versions of our own cells is an exercise in futility.

    What is biologic?

    • A biologic is manufactured in a living system such as a microorganism, or plant or animal cells. Most biologics are very large, complex molecules or mixtures of molecules. Many biologics are produced using recombinant DNA technology.
    • What we probably need is a biologic or a complex protein isolated from natural sources that can mimic our immune cells.
    • Maybe this would help us in fighting cancer.

    So, Biosimilars are..

    • A biosimilar is a biological product that is developed to be similar to an already FDA-approved biologic, known as the reference product. It can be tempting to think of a biosimilar as a “generic” version of the reference product.
    • But biosimilar is not an exact duplicate of another biologic. There is a degree of natural variability in all biological products; it is not possible to generate a precise copy of a product that comes from living cells. All biologics—including reference products—show some batch-to-batch variation.

    Utility of patents in the pharmaceutical industry

    • Success in this market is deeply intertwined with the research and development process that characterizes the pharmaceutical industry.
    • It might take 5 years for you to develop a new drug and you might still need another 10 years to clinically test the product and get the necessary approvals from the regulatory agencies.
    • This is a capital intensive process and the only way to remunerate the pharma company’s contribution is to protect their investment through patent laws.
    • This way the companies can be incentivised to invest more in research and we can ensure a steady supply of new drugs that could cure the greatest maladies of modern time.

    What happens when the patent expires?

    • Once the patent expires, other companies can market their own version of the drug (copycats) if they can figure out how to synthesize it.
    • Consider — Aspirin. It’s a simple molecule drug and it’s quite easy to replicate the manufacturing process.

    Why biologics would be difficult to replicate after the patent expires

    • Biologics are harvested from living cells and are often produced using complicated manufacturing processes.
    • Most modern biologics are assembled inside vats — or bioreactors — that house genetically engineered microbes or cell cultures and can often take a whole decade of research to perfect.
    • So replicating the process isn’t exactly a cakewalk.
    • Meaning if you want to market your own version of a “biologic” once all the patents expire, you need some expertise and India’s Biocon is at the forefront of this revolution.
    • For the past few years, they’ve been building a “biosimilar pipeline” — copycats of famous biologics and they’ve been using it to fight cancer, diabetes, and arthritis.
    • And it’s not all that easy for most pharma companies to enter this market.

    Why marketing a drug in the US gather headline?

    • Because the US provides an opportunity like no other.
    • Buying drugs here is expensive and pharmaceutical companies make a killing in the process.
    • It might not necessarily bode well for consumers.
    • But it does provide a lucrative market for potential Indian manufacturers who are looking to sell their products elsewhere.

    Consider the question “What is biosimilar technology? How is it different from generic medicine? Discuss its application.”

    Conclusion

    Growing expertise of Indian pharmaceutical companies in the complex research area bodes well for the Indian pharma sector which is known otherwise for the manufacturing of generic medicines.

     

    Reference Source: https://finshots.in/archive/biocon-and-the-world-of-biosimilars/