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GS Paper: GS3

  • Online Pharmacy Regulation in India

    In the last week, India’s online pharmacy market saw two significant merger and acquisition deals. This has suddenly caused activity in a sector from which large investors have shied away due to lack of proper regulations.

    Try this easy question:

    Q. Discuss the prospects and benefits of online pharmacy in India. (150W)

    How is the pharmacy market in India currently shaped?

    • Unlike the US, where the top three pharmaceutical distributors have a 90 per cent share in the market, India’s is a fragmented market with over 8 lakh pharmacies.
    • This gives online pharmacies an opportunity to capture their space without opposing large traditional retailers.
    • Currently, companies in the Indian e-pharmacy space mainly operate three business models — marketplace, inventory-led hybrid (offline/online) and franchise-led hybrid (offline/online) — depending on the way the supply chain is structured.

    Rules governing the pharma sector

    • Work on regulations specifically for e-pharmacies has been in progress for several years now.
    • In the absence of clear regulations, online pharmacies currently operate as marketplaces and cater to patients as a platform for ordering medicines from sellers that adhere to the Drugs and Cosmetics Act and Rules of India.
    • Other regulations, like the Information Technology Act and the Narcotic Drugs and Psychotropic Substances Act, also apply.

    What do the draft e-pharmacy regulations propose?

    • Draft rules for e-pharmacies sought to define the online sale of medicines, what an e-prescription means and what type of licences online firms would need to get from regulators to operate.
    • The draft had proposed to allow e-pharmacies to get a central licence to operate from the country’s apex drug regulator, which could be used to allow it to operate across the country.
    • It also proposed to define e-pharmacies in a way that would allow them to distribute, sell and stock medicines.
    • The proposed regulations prevent them from selling habit-forming drugs like cough syrups specified in Schedule X of the Indian drug regulations.

    Current status

    • Regulations for online pharmacy players have been in the works since 2016 but are yet to come out.
    • The last attempt to clear these regulations saw the draft rules being pushed through two expert committees under the Central Drugs Standard Control Organisation–India’s apex drug regulatory body–in June 2019.

    Online pharma is growing in scale

    • While Covid-19 and the subsequent behavioural shift towards e-commerce may have catalyzed growth for online pharmacies, the sector was already poised to grow seven-fold by 2023 to $2.7 billion.
    • This was mainly on account of the challenges faced by physical pharmacies that gave their online counterparts a problem to solve.
    • Experts believe that e-pharmacies will be able to solve the problems that traditional pharmacies couldn’t.
    • But for this, they need to have a large-scale presence that calls for either huge investments or consolidation.

    Conclusion

    • The e-pharmacy sector holds immense potential to address the persisting issue of affordability and accessibility of medicines in India.
    • Steps should be taken to foster the e-pharmacy sector with sufficient safeguards and under regulatory control to protect the interest of the consumers.

  • National Strategy for Financial Education

    The National Strategy for Financial Education (NSFE): 2020-2025 documents has been released by the Reserve Bank of India (RBI).

    Try this question for mains:

    Q.What is the role of Financial Education in ensuring financial inclusion in India?

    What is the Strategy?

    • The NSFE for the period 2020-2025, the second one after the 2013-18 NSFE, has been prepared by the National Centre for Financial Education (NCFE) in consultation with all the Financial Sector Regulators (RBI, SEBI, IRDAI and PFRDA.
    • Other stakeholders include (DFIs, SROs, IBA, and NPCI) under the aegis of the Technical Group on Financial Inclusion and Financial Literacy (TGFIFL) under the Chairmanship of Deputy Governor, RBI.

    Key recommendations

    • The strategy recommends the adoption of a multi-stakeholder approach to achieve financial well-being of Indians.
    • The document has recommended a ‘5 C’ approach for dissemination of financial education in the country. These include an emphasis on:
    1. development of relevant content in the curriculum in schools, colleges and training establishments,
    2. developing capacity among the intermediaries involved in providing financial services,
    3. leveraging on the positive effect of the community-led model for financial literacy through appropriate communication strategy, and
    4. enhancing collaboration among various stakeholders

    Other objectives

    • The strategic objective is also towards improving usage of digital financial services in a safe and secure manner; as well as bringing awareness about rights, duties and avenues for grievance redressal.
    • To achieve the vision of creating a financially aware and empowered India, certain strategic objectives have been laid down including:
    1. Inculcating financial literacy concepts among various sections of the population through financial education to make it an important life skill
    2. Encouraging active savings behaviour and developing credit discipline

  • A dicey dollar could yet revive Keynes’s Bancor currency plan

    The direct question in the exam from this article is not expected. Nevertheless, it is important to get a general understanding of the important role dollar plays in the world economy and the reasons for any viable alternative to it.

    Context

    • The dollar fell in July to a two-year low against the euro.
    • When the covid-19 pandemic went global in March, the dollar strengthened on the back of safe-haven flows into US Treasury bonds.

    What the depreciation of dollar indicate?

    • The dollar’s subsequent depreciation reflects the changing prospects of the US and European economies.
    • Some observers point instead to the agreement by European leaders to issue €750 billion ($884 billion) of European Union (EU) bonds.
    • With the spread of covid-19 investors expect the Fed to keep interest rates low for longer.
    • In the eurozone, the virus is under better control, and data from purchasing managers’ surveys are surprising on the upside.
    • This improving outlook doesn’t mean that the European Central Bank (ECB) will start raising its policy rate in the near future.
    • Interest rates determine the exchange rates as per the “interest parity” theory.

    Factors responsible for holding currency

    • 1) Normally, investors hold a currency when the issuer’s policies are sound and stable.
    • 2) Banks and firms hold a currency when it is useful for invoicing and settling trade with the issuing country.
    • But President Donald Trump’s administration has done more than any in living memory to disrupt US trade.
    • 3) Governments, for their part, hold and use the currencies of their alliance partners.

    Resilience of dollar

    • The most striking takeaway from recent experience is the dollar’s resilience.
    •  US policy has been risky and erratic.
    •  But President Donald Trump’s administration has done more than any in living memory to disrupt US trade.
    • Under Trump, the US today is no longer the reliable alliance partner it once was.
    • Despite all this, countries continue to hold the dollar.
    • The currency’s international role has not diminished significantly.
    • It has declined only along select dimensions—its share in central banks’ foreign-exchange reserves, for example—and even there, only marginally.

    No alternative

    • The euro is not an alternative to the dollar.
    • The stock of safe euro assets remains segmented along national lines.
    • Nor is the renminbi a viable alternative.
    • Given heightened tensions with China, no Western government will encourage its residents to depend on the People’s Bank of China for liquidity.

    Conclusion

    The only solution to this conundrum is more resources for the International Monetary Fund, so that it can supply countries in a crisis with the dollars that a future Fed fails to provide. This, of course, is the solution that John Maynard Keynes offered in 1944, albeit by another name-Bancor.

  • Micro-plastic Pollution in Atlantic Ocean

    The Atlantic Ocean contains 12-21 million tonnes of microplastics — about 10 times higher than previously determined — according to new research published in Nature Communications.

    Highlights of the report

    • In the study, scientists studied pollution of the Atlantic Ocean caused by three types of plastics: polyethylene, polypropylene, and polystyrene, which were suspended in the top 200 metres of the ocean.
    • These three types of plastic are most commonly used for packaging.
    • Scientists say that pollution caused by microplastics has been “severely” underestimated in previous assessments.
    • They also estimate that based on plastic waste generation trends from 1950-2015 and considering that the Atlantic Ocean has received 0.3-0.8 per cent of the global plastic waste for 65 years.
    • To date, a key uncertainty has been the magnitude of contamination of the ocean and our findings demonstrate that this is much higher in terms of mass than has been estimated previously.

    Try this PYQ:

    Q. Why is there a great concern about the ‘microbeads’ that are released into the environment? (CSP 2019)

    (a) They are considered harmful to marine ecosystems.

    (b) They are considered to cause skin cancer in children.

    (c) They are small enough to be absorbed by crop plants in irrigated fields.

    (d) They are often found to be used as food adulterants.

    What are Microplastics?

    • Microplastics are plastic debris smaller than 5mm in length, or about the size of a sesame seed.
    • While they come from a variety of sources, one of them is when larger pieces of plastic degrade into smaller pieces, which are difficult to detect.

    How does plastic reach the oceans?

    • There are multiple pathways for them to reach the oceans.
    • For instance, riverine and atmospheric transport from coastal and inland areas, illegal dumping activities and direct-at-sea littering from shipping, fishing and aquaculture activities, scientists have said.
    • According to the IUCN, at least 8 million tonnes of plastic end up in the oceans every year and makes up about 80 per cent of all marine debris from surface waters to deep-sea sediments.

    Why is plastic pollution especially harmful?

    • Plastic can take hundreds to thousands of years to decompose depending on the type of plastic and where it has been dumped.
    • Some marine species such as zooplanktons show preferential ingestion of smaller particles, making them easier to enter the food chain and their conversion to fast-sinking faecal pellets.
    • Over the past few years, various news reports have shown that marine animals such as whales, seabirds and turtles unknowingly ingest plastic and often suffocate to death.
    • While all sorts of marine species are prone to get impacted by plastic pollution, typically, bigger marine species tend to get more attention because of the amounts of debris they can hold up.

    Impact on humans

    • For humans, too, marine plastic pollution is harmful if it reaches the food chain. For instance, microplastics have been found in tap water, beer and even salt.
    • One of the first studies to estimate plastic pollution in human ingestion that was published in June 2019 said that an average person eats at least 50,000 particles of microplastic each year.
    • Consumption of plastic by humans is harmful since several chemicals that are used to produce plastics can be carcinogenic.
    • Even so, since microplastics are an emerging field of study, its exact risks on the environment and human health are not clearly known.

  • Job Losses during Lockdown

    The data by the Centre for Monitoring Indian Economy (CMIE) briefs us about the job losses due to lockdown restrictions imposed because of the COVID pandemic.

    We can utilize this data as examples for answer writing.

    CMIE data on job losses

    • Salaried jobs: They suffered the biggest hit during the lockdown, with a total loss estimated to be at 18.9 million during April-July.
    • Informal and non-salaried jobs: They have shown improvement during the same period increasing to 325.6 million in July from 317.6 million last year, an increase of 2.5 per cent.
    • Small traders, hawkers and daily wage labourers: They were the worst hit by the lockdown in April, comprising 91.2 million of the jobs lost from the total loss of 121.5 million in that month.
    • Farm employment: A sharp rise was seen in June to 130 million, with good rains and the consequent sowing absorbing a lot of the labour that was lost in non-farm sectors.

    About CMIE

    • CMIE, or Centre for Monitoring Indian Economy, is a leading business information company.
    • It was established in 1976, primarily as an independent think tank.
    • CMIE produces economic and business databases and develops specialised analytical tools to deliver these to its customers for decision making and for research.
    • It analyses the data to decipher trends in the economy.

  • Digital Quality of Life Index, 2020

    India ranks among the lowest in the world in terms of Internet quality, according to the Digital Quality of Life Report.

    Note the following aspects:

    1)Organisation publishing the report

    2)India’s rank and its comparison with neighbors

    3)Rankers at the top

    Digital Quality of Life Index

    • It is global research released by online privacy solutions provider SurfShark.
    • It releases a report on the quality of digital wellbeing in 85 countries (81% of the global population), in terms of e-infrastructure.

    India’s ranking: Hits and Misses

    • India occupies 79th place, ranking below countries including Guatemala and Sri Lanka.
    • India makes it into the top 10 in terms of Internet affordability. With a ranking of nine, it outperforms countries such as the U.K., the U.S. and China.
    • Additionally, when it comes to e-government, India occupies the 15th place globally, just below countries like New Zealand and Italy.
    • However, at position 78, India’s Internet quality is one of the lowest across 85 countries analysed in the research.

    Global rankings

    • The report found that seven of the 10 countries with the highest digital quality of life are in Europe, with Denmark leading among 85 countries.
    • Canada stands out as a country with the highest digital quality of life in the Americas, while Japan takes the leading position in Asia.
    • Among the countries in Africa, people in South Africa enjoy the highest quality of digital lives whereas New Zealand leads in Oceania, outperforming Australia in various digital areas.

  • Dilemma the RBI faces

    Limitations and contradictions in the functioning of RBI

    • The Reserve Bank of India, along with the monetary policy committee, has undertaken measures to address the fallout of the COVID-19 pandemic.
    • Their actions are guided by multiple considerations — inflation and growth management, debt management and currency management.
    • These multiple considerations have inadvertently exposed the limitations of and the inherent contradictions in the central banking framework in India.

    Monetary policy functions

    • The MPC is guided by the goal of maintaining inflation at 4 plus/minus 2 per cent.
    • In its August policy, despite dire growth prospects, MPC chose to maintain the status quo.
    • This decision was driven by elevated inflation i.e. above 4 plus/minus 2 per cent. 
    • This raises the question: At the current juncture, should the MPC be driven by growth considerations or should short-term inflation concerns dominate?

    Understanding the nature of current inflation

    • The current rise in inflation is driven by supply-chain dislocations owing to the lockdowns.
    • This is evident from the growing disconnect between the wholesale and consumer price index.
    • Since April, while WPI has been in negative territory, CPI has been elevated.
    • The MPC’s mandate is to deliver stable inflation over long periods of time, not just a few months.
    • Yet, it would appear as if it is more concerned about elevated inflation in the short run.
    • Equally puzzling is the refusal of MPC to provide any firm projection of future inflation.

    Manager of government debt

    •  As manager of the government debt, the RBI is tasked with ensuring that the government’s borrowing programme sails through smoothly.
    • To this end, it has carried out several rounds of interventions popularly known as operation twist.
    • in operation twist government RBI intended pushing down long-term Gsec yields, and exerting upward pressure on short-term yields as a consequence.
    • In doing so, the RBI ended up doing exactly the opposite of what the MPC was trying to achieve by cutting short term rates, well before it reached the lower limit of its conventional policy response.

    3) RBI’s intervention in currency markets

    • The RBI’s interventions in the currency market have constrained its ability to carry out open market operations as these would have led to further liquidity injections into the system.
    • Put differently, its debt management functions have run up against its currency management functions.
    • Underlining the complexity of all this is the talk of sterilisation — the opposite of injecting liquidity in the system.

    Consider the question “RBI’s functions at the current juncture suffers from contradicting functions. Examine such contradictions in its role and suggest the ways to avoid such contradictions.”

    Conclusion

    The central bank must develop a clear strategy on what to do. At this juncture, there is a strong argument to look past the current spurt in inflation, and test the limits of both conventional and unconventional monetary policy. At the other end, while it may want to intervene to prevent the rupee’s appreciation, in doing so, it is constricting its debt management functions which will have its own set of consequences. There are no easy answers.

  • PM CARES Fund is a “public charitable trust”: SC

    The Supreme Court has endorsed the PM CARES Fund as a “public charitable trust” to which donors contribute voluntarily.

    Try this question:

    Q. The creation of PM CARES fund is violative of the provision of the Disaster Management Act, 2005. Analyse.

    What is the case?

    • The petition had argued that the PM-CARES Fund was not subject to CAG audit.
    • It was not under “public scrutiny”. Contributions to it were “100% tax-free”.
    • It was accused that there was statutory fund already in existence under the Disaster Management Act of 2005 to receive contributions to finance the fight against a calamity.

    About PM CARES Fund

    • The Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) were created on 28 March 2020 following the COVID-19 pandemic in India.
    • The fund will be used for combat, containment and relief efforts against the coronavirus outbreak and similar pandemic like situations in the future.
    • The PM is the chairman of the trust. Members will include the defence, home and finance ministers.
    • The fund will also enable micro-donations. The minimum donation accepted for the PM CARES Fund is ₹10 (14¢ US).
    • The donations will be tax-exempt and fall under corporate social responsibility.

    What did the Court rule?

    • There is “no occasion” for the Comptroller and Auditor General (CAG) to audit a public charitable trust independent of budgetary support or government money.
    • The court said that PM-CARES is “not open” for a PIL petitioner to question the “wisdom” that created the fund in an hour of need.
    • The court dismissed the idea that the PM CARES was constituted to “circumvent” the National Disaster Response Fund (NDRF).
    • The Bench also refused to direct the transfer of funds from the PM CARES Fund to the NDRF. It said they were two separate entities.

    Also read:

    PM-CARES Fund

  • Re-imagining and reinventing the Indian economy

    The COVID-19 pandemic has disrupted the global economy and India is no different.  Besides the stimulus package totalling ₹20 lakh crore, a lot more needs to be done, however, to resuscitate the country’s growth engine.

    Try this question:

    Q.Economic reconstruction needs a multi-pronged strategy apart from economic stimulus. Discuss.

    Need for a two-pronged strategy

    • At this critical juncture, India needs a two-pronged strategy to successfully navigate the current crisis and recover strongly thereafter.
    • First, minimise the damage caused by the COVID and clear a path to recovery and second, rebooting and re-imaging India by promptly exploiting new opportunities unleashed by evolving business scenarios.

    Identifying the four major economic drivers:

    1. Big Business Houses which are a major contributor to GDP and large employment generators
    2. MSMEs which are the lifeline of the country, generating wealth for the middle class
    3. Startups which bring innovation and transformation to our country’s economy
    4. Approaching Indian Diasporas for driving foreign investments

    Following suggestions by the author gives a way forward strategy to recover the economy:

    1. Tax incentivization

    • Big business houses should be supported by the government to reopen their operations by way of tax incentives or ease of procurement of raw materials or other goods and services on credit.
    • This will energize consumer demand and boost the functioning of the vendor or ancillary industry in the MSME sector (which has huge potential for job creation).

    1. Ensuring seamless credit flows considering NPAs

    • The RBI should consider Single One Time Window for restructuring business loans, as required, by all banks.
    • There is a high probability that non-performing assets are likely to rise once the prevailing moratorium is lifted by RBI.
    • The government and RBI also urgently need to assure banks, that their business decisions will not be questioned, to encourage credit flows.

    1. Calibrating Make in India

    • The ongoing distrust on Chinese manufacturing amid US-China spat can be very well garnered by India.
    • Making India a global trading hub – devise an incentive regime for companies setting up global trading operations from India.
    • The govt. should think of establishing self-contained “industrial cities” that earmark space for manufacturing, commercial, educational, residential and social infrastructure.
    • The Centre can prepare a five-year plan on getting at least 60 per cent of those companies, desiring to move manufacturing out of China to India.

    1. Encouraging sunrise sectors

    • It should also encourage sunrise sectors as part of re-imagining Indian economy such as battery manufacturing (storage systems)/ solar panel manufacturing.
    • The government can also consider giving impetus to “Deep Tech”-leveraged businesses — blockchain, robotics, AI, machine learning, augmented reality, big data analytics, cybersecurity, etc.

    1. Creating an ecosystem to boost startups

    • India is amongst the top start-up ecosystems globally. Several of them are in pre-Angel or Angel-Funding stages and are under significant pressure to stay afloat in view of a lack of adequate liquidity.
    • Start-ups not only help drive innovation but also create jobs, which will be very important going forward.
    • The government needs to provide significant support to the start-up ecosystem.

    1. Auto-sector reforms

    • The auto industry which contributes significantly to GDP (nearly 9%) deserves special treatment.
    • In addition to reducing GST rate, old vehicle scrap policy with tax incentives for creating a demand for new vehicles may be formulated.
    • There is a need to recognise the Auto Sales Industry channel partners as MSMEs.

    1. Plug-and-Play model for foreign investment

    • Maharashtra has created a turnkey ‘plug-and-play’ model for foreign investors.
    • Similarly, other States must get their act together, be it on land acquisition, labour laws and providing a social, environment and other infrastructure.
    • Land should be made available for projects with all necessary pre-clearances — at Centre’s level (including Environmental), State’s and Municipal dispensations.

    1. Labour law reforms

    • Reforms in labour laws do not only mean permission to hire and fire.
    • Leeway should be given to strictly enforce discipline within the factory premises and demand higher productivity.
    • The moves by U.P., M.P. and Gujarat are welcome signals.
    • The government should provide health insurance for migrant labourers as experimented by certain States.

    1. Encouraging Diaspora

    • Investments of NRIs and OCIs in India should be treated on par with those of Resident Indians as regards interest and dividend repatriation and management control of Indian companies.
    • It may be mentioned that the Chinese government had called on rich overseas Chinese to invest in China with minimum government control, and massive investments followed.
    • This has contributed to China’s prosperity and economic rise.
    • A similar investment boom can take place in India through NRIs and OCIs who have the resources and expertise in manufacturing and technology.

    1. Creating off-Shore investment centres

    • Off-Shore investment centres like Singapore can be opened in Mumbai where Indian domestic laws and taxation will not be applicable.
    • MNCs may route their investments into India through the Off-Shore Centre in Mumbai.
    • Foreign legal firms and banks along with domestic institutions can be invited to have a presence in the Off-Shore Centre.

  • Bioethanol Blending in Petrol

    The government has set targets of 10 per cent bioethanol blending of petrol by 2022 and to raise it to 20 per cent by 2030 to curb carbon emissions and reduce India’s dependence on imported crude oil.

    Try this PYQ:

    Q.Given below are the names of four energy crops. Which one of them can be cultivated for ethanol?(CSP 2010)

    (a) Jatropha

    (b) Maize

    (c) Pongamia

    (d) Sunflower

    What is Ethanol Blended Petrol (EBP) Program?

    • Ethanol Blended Petrol (EBP) programme was launched in January 2003 for the supply of 5% ethanol blended petrol.
    • The programme sought to promote the use of alternative and environment-friendly fuels and to reduce import dependency for energy requirements.
    • OMCs are advised to continue according to the priority of ethanol from 1) sugarcane juice/sugar/sugar syrup, 2) B-heavy molasses 3) C-heavy molasses and 4) damaged food grains/other sources.

    Bio-ethanol blend in India

    • 1G and 2G bioethanol plants are set to play a key role in making bio-ethanol available for blending but face challenges in attracting investments from the private sector.
    • 1G bioethanol plants utilise sugarcane juice and molasses, byproducts in the production of sugar, as raw material, while 2G plants utilise surplus biomass and agricultural waste to produce bioethanol.
    • Currently, domestic production of bioethanol is not sufficient to meet the demand for bio-ethanol for blending with petrol at Indian Oil Marketing Companies (OMCs).
    • Sugar mills, which are the key domestic suppliers of bio-ethanol to OMCs, were only able to supply 1.9 billion litres of bio-ethanol to OMCs equating to 57.6 per cent of the total demand of 3.3 billion litres.

    Hurdles in meeting the demand

    • Lack of infrastructure: Many sugar mills are best placed to produce bioethanol do not have the financial stability to invest in biofuel plants. There are also concerns among investors on the uncertainty over the price of bio-ethanol in the future.
    • Lack of raw materials: Presently there is no mechanism for depots where farmers could drop their agricultural waste. The central government should fix a price for agricultural waste to make investments in 2G bioethanol production an attractive proposition.
    • Rigid pricing mechanism: Sugars mills have to pay high prices for sugarcane set by the government even when there have been supplying gluts. The prices of both sugarcane and bio-ethanol are set by the central government.

    Way ahead

    • The government should provide greater visibility on the price of bioethanol that sugar mills can expect by announcing a mechanism by which the price of bio-ethanol would be decided.
    • 2G bioethanol not only provided a clean source of energy but also help provide greater income to farmers and prevent them from having to burn agricultural waste which can be a major source of air pollution.