EDITORIALS & ARTICLES
2nd December 2020
Indian Economy Growth Story
Recently, the Indian growth story continues to expand as is demonstrated by the trends in FPI, FDI and Corporate Bond Market flows that indicate and underline the beliefs of investors in the strength and resilience of Indian economy.
- COVID-19 has drastically affected the investment climate in all economies of the world, causing a sharp decline in the demand and supply equilibrium everywhere.
- The investment sentiment in the Indian economy has been buoyed by the frequent and active intervention of the Government of India despite being hit by a world-wide pandemic.
Role of Foreign Portfolio Investment
- The October and November 2020 have witnessed a significant resurgence in FPI inflows driven primarily by equity inflows resulting in the highest ever FPI inflows for a month for India.
- The inflow in November 2020 is the highest amount of money invested ever since FPI data has been made available by the National Securities Depository Ltd.
- FPI flows are known to be less resilient and more sensitive to changing market conditions.
- The investments through the FPI route are therefore gauged through the metric of net inflow and outflow.
Role of Foreign Direct Investment
- The total Foreign Direct Investments (FDI) inflows into India during the second quarter of financial year 2020-21 have been US$ 28,102 million, out of which FDI equity inflows were US$ 23,441 million or Rs. 174,793 crore.
- It takes the FDI equity inflows during the financial year 2020-21 upto September 2020 to US$30,004 million which is 15% more than the corresponding period of 2019-20.
- Both FDI equity inflows and total FDI inflows into India have shown a secular rise over the years, with 2019-20 the year with the highest FDI in the last six years.
- The measures taken by the government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.
Role of Bond Market
- In the first half of the 2020-21, the total corporate bond issuances amounted to Rs. 4.43 lakh crore, 25% higher than Rs. 3.54 lakh crore in the same period last year.
- The narrowing spread with G-Secs (Government Securities) stands testimony to the improved risk perception of corporate bonds.
- The cost of funds also moderated for both the Government and the corporate, on the back of RBI’s monetary easing and liquidity infusion.
Peacock Soft Shell Turtle
Recently, a professor from Assam has rescued Peacock Soft Shell Turtle from being sold in a fish market.
- The species is confined to India, Bangladesh and Pakistan because it is widespread in the northern and central parts of the Indian subcontinent.
- The Indian peacock softshell turtle has a large head, downturned snout with low and oval carapace of dark olive green to nearly black.
- It is found in rivers, streams, lakes and ponds with mud or sand bottoms.
- It is omnivorous because juveniles observed feeding on mosquito larvae and fish, while adults consume snails, earthworms, prawns, fish, frogs, carrion, and vegetation.
- It is listed as ‘Vulnerable’ under the IUCN Red List of Threatened Species.
- It is protected under Schedule 1 of the Indian Wildlife Protection Act, 1972.
- It is also listed under Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
Ramayana Cruise Service
Recently, the Minister of Ports, Shipping and Waterways today chaired a review meeting for the implementation of ‘Ramayana Cruise Service’.
- It will be the first-ever luxury Cruise service on the Saryu river (Ghagra/National Waterways-40) in Ayodhya, Uttar Pradesh.
- It aims to give mesmerizing experience to devotees with one-of-its-kind spiritual journeys while cruising through the famous ghats of the holy river Saryu.
- The cruise will be equipped with all luxury comfort and facilities along with all essential safety and security features at par with the global standard.
Relation between Tree Rings and Floods
Recently, the scientists have studied the relation of tree rings and Brahmaputra floods.
- The new study analysed that the existing projections of the Brahmaputra flooding are based on observations of rainfall patterns.
- The study is based on examinations of tree rings, which showed rainfall patterns going back seven centuries i.e. long before discharge records were compiled.
- The rings showed that the post-1950s period was actually one of the driest since the 1300s.
Indication by Tree Rings
- The tree rings grow wider in years when soil moisture is high.
- Indirectly, wider rings reflect more rainfall and higher river runoff.
- The study looked at rings of ancient trees sampled at 28 sites in Tibet, Myanmar, Nepal and Bhutan, at sites close enough to be affected by the same weather systems as the Brahmaputra watershed.
- The records of river-flow gauge in northern Bangladesh showed a median discharge of some 41,000 cubic metres per second from 1956 to 1986, and 43,000 cu m from 1987 to 2004.
- The tree rings, in contrast, showed that 1956-1986 was in only the 13th percentile for river discharge, and 1987-2004 was in the 22nd.
- The researchers said their findings mean that using the discharge record would underestimate future flood hazard by 24-38%, without factoring in climate warming.
- The higher temperatures drive more evaporation of ocean waters, and in this region that water ends up as monsoon rainfall.
- The high discharges will continue to be associated with an increased likelihood of flood hazard in the future.
Purchasing Managers’ Index (PMI)
Recently, the latest Purchasing Managers’ Index (PMI) has indicated that nation’s manufacturing sector lost momentum in November.
- The seasonally adjusted Purchasing Managers’ Index (PMI) highlighted a strong improvement in business conditions.
- All three broad areas of the manufacturing industry recorded expansion, with growth led by consumer goods which was the only sector to see a stronger rate of increase.
- The activities in November could not keep pace with October, but that was still higher than pre-Covid activities.
- India’s manufacturing sector activity lost momentum and fell to a three-month low in November amid slower increases in factory orders, exports and buying levels.
Purchasing Managers’ Index (PMI)
- It is an economic indicator that is calculated from monthly surveys of purchasing managers and supply executives from specific companies.
- The Purchasing Managers’ Index (PMI) data are compiled by IHS Markit for more than 40 economies worldwide.
- The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories.
- The Purchasing Managers' Index is based on five major indicators are new orders, inventory levels, production, supplier deliveries and the employment environment.
Significance of Purchasing Managers’ Index (PMI)
- The PMI Manufacturing gives an indication of the economic health of the manufacturing sector.
- The investors use PMI surveys as leading indicators of economic health, given their insight into sales, employment, inventory, and pricing.
- The purchasing managers' index is an extremely important indicator for international investors looking to form an opinion on economic growth.
J&K’s Roshni Act
The Jammu & Kashmir administration has recently released a series of lists of alleged beneficiaries of the Roshni Act of 2001 which gave ownership rights to the unauthorized occupants of state land against payment of a premium.
- The Roshni Act was targeted to earn ₹25,000 crore by transferring 20 lakh kanals of State land to existing occupants against payment at market rates.
- It was implemented with the aim of boosting the farming sector and "generating substantial revenue" for funding power projects.
- The land-related law, popularly known as the Roshni Act, was brought into force in 2001.
- The law aimed to grant ownership rights of public land to occupants.
- The Act also sought the conferment of proprietary rights of around 20.55 lakh kanals of land (1250 hectares) to the occupants.
- The law initially set 1990 as the cut-off year for encroachment on State land, based on which ownership would be granted.
Why Roshni Act is scrapped?
- The Roshni Act declared "unconstitutional" by the Jammu and Kashmir High Court which fell prey to corruption over the course of the last decade.
- The CAG report pointed to irregularities in the implementation of the Act as the cause of its failure to generate the expected revenue.
- The report listed irregularities such as "arbitrary" reduction in prices of the land and said that the reduction was aimed to benefit politicians and other affluent people.
- In the past, politicians, businessmen, and bureaucrats have been accused of misusing the Act by transferring public land under their name and that of their family members.
- In 2009, the Jammu and Kashmir vigilance organisation registered an FIR against public officials for alleged criminal conspiracy to illegally possess and vest ownership of state land to occupants who didn't satisfy the criteria under the Roshni Act.
- The details of the applications received under the Act, the valuation of land, amounts paid by the beneficiary, the orders passed under the act, and the persons in whose favour the vesting was done.
Emergency Use Authorisation (EUA)
Recently, the US drug-maker Moderna said it was applying for emergency use authorisation for its Covid-19 vaccine after Pfizer applied for emergency use authorisation for the vaccine it has developed in collaboration with BioNTech.
- Vaccines and medicines, and even diagnostic tests and medical devices, require the approval of a regulatory authority before they can be administered.
- The approval for vaccines and medicines is granted after an assessment of their safety and effectiveness, based on data from trials.
- In emergency situations, regulatory authorities around the world have developed mechanisms to grant interim approvals if there is sufficient evidence to suggest a medical product is safe and effective.
- The final approval is granted only after completion of the trials and analysis of full data and until then, emergency use authorisation (EUA) allows the medicine or the vaccine to be used on the public.
Granting of Emergency Use Authorisation (EUA)
- In the US, the Food and Drug Administration (FDA) grants an EUA only after it has been determined that the “known and potential benefits outweigh the known and potential risks of the vaccine”.
- It implies that an EUA application can be considered only after sufficient efficacy data from phase 3 trials had been generated.
- The EUA cannot be granted solely on the basis of data from phase 1 or phase 2 trials, although these too need to show the product is safe.
- The FDA, for COVID vaccines, has specified that it would consider an application for EUA only if phase 3 data showed it was at least 50% effective in preventing the disease.
Emergency Use Authorisation (EUA) in India
- In India, the regulatory authority is the Central Drugs Standard Control Organisation (CDSCO).
- India’s drug regulations do not have provisions for an EUA, and the process for receiving one is not clearly defined or consistent.
- The CDSCO has been granting emergency or restricted emergency approvals to Covid-19 drugs such as remdesivir, favipiravir and itolizumab.
India’s Q2 GDP data contratcts
Recently, India’s gross domestic product (GDP) contracted by 7.5% during the second quarter of 2020-21.
- The contraction implies that in Q2 of 2020-21 India produced 7.5% fewer goods and services when compared to what India produced in Q2 of 2019-20.
- In the process, India’s economy has now formally entered into a technical recession because India has had two consecutive quarters when GDP growth rate has declined.
- Economic recovery is fairly broad-based: The GVA data provides a measure of national income by looking at the value-added by different sectors of the economy in that quarter.
- The most surprising aspect of Q2 data is the positive growth registered by India’s manufacturing industry.
- The exports and imports have shrunk but imports have shrunk relatively more than exports and, as such, net exports have improved marginally.
- The importance of nominal GDP especially from the point of view of India’s forthcoming Budget.
- The experts now expect that by Q4, the nominal GDP growth rate will recover so far that even after subtracting inflation rate; India would register positive real growth in at least the fourth quarter.
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