Economy

1.     ICMR to get royalty from Covaxin sale

The News:

·        ICMR has confirmed that it would receive royalty payments as, the intellectual property governing the use of Covaxin, jointly developed by Bharat Biotech and the Indian Council of Medical Research, was “shared”.

·        The Public-Private Partnership was executed under a formal Memorandum of Understanding (MoU) between the ICMR and the BBIL.

·        The memorandum includes a royalty clause for the ICMR on net sales and other clauses like prioritisation of in-country supplies.

·        It is also agreed that the name of ICMR-National Institute of Virology (NIV) will be printed on the vaccine boxes.

ICMR-

·        Indian Council of Medical Research (ICMR) is India’s supreme body to formulate, coordinate and promote biomedical research.

·        It was formed in 1911 when it was known as Indian Research Fund Association (IRFA). In 1949, IRFA was renamed ICMR.

·        It comes under the Department of Health Services (DHS), Ministry of Health and Family Welfare (MoH&FW).

·        India’s first indigenous COVID-19 vaccine named ‘Covaxin’ has been developed and manufactured by Bharat Biotech in collaboration with ICMR.

       Missions of ICMR

·        Translating work into practice to boost people’s health.

·        The development, management and distribution of information.

·        To concentrate on work on health problems among vulnerable and deprived parts of the community.

·        Adopting and promoting the use of modern biology tools to tackle country health issues.

·        Promote creativity in diagnostics, care, vaccinations and other disease prevention methods.

Intellectual Property Rights:

Intellectual Property rights mean providing property rights through patents, copyrights and trademarks. Holders of intellectual property rights have a monopoly on the usage of property or items for a specified time period.

Intellectual Property Rights are important to stimulate and promote research and development. If the inventions and ideas of individuals and organizations are not protected then the concerned people or organizations will not reap the benefits of their hard work and naturally, it will lead to discontent and reduce the efforts in the field of research and development, which is extremely important for the growth and development of humanity.

2.     No GST on imports of vaccine, medical oxygen

The News:

The Finance Ministry has granted a conditional ‘ad-hoc’ Goods and Services Tax (GST) exemption on the imports of COVID-19 relief material, including vaccines, medical oxygen and Remdesivir vials, till June 30.

The imports of these items had already been granted exemption from  customs duty and health cess, but IGST ( Integrated GST ) was being levied on such imports, which will be withdrawn for two months for ‘relief materials being donated from abroad’.

3.     Serum Institute of India set to invest ₤240 million in U.K.

The News:

·        Downing Street has announced as part of plans for a GBP 1 billion India-UK Enhanced Trade Partnership creating around 6,500 jobs in Britain, that

The Serum Institute of India will invest GBP 240 million in the UK to expand its vaccine business and set up a new sales office creating a large number of jobs.

·        Serum Institute of India (SII) has started phase one trials in the UK of a nasal vaccine against coronavirus.

·        Serum’s investment will support clinical trials, research and development and possibly manufacturing of vaccines. This will help the UK and the world to defeat the coronavirus pandemic and other deadly diseases.

About: Serum Institute of India

·        Serum Institute of India Pvt. Ltd. is now the world's largest vaccine manufacturer by number of doses produced and sold globally (more than 1.5 billion doses) which includes Polio vaccine as well as Diphtheria, Tetanus, Pertussis, Hib, BCG, r-Hepatitis B, Measles, Mumps and Rubella vaccines.

·        It is estimated that about 65% of the children in the world receive at least one vaccine manufactured by Serum Institute.

·        Vaccines manufactured by the Serum Institute are accredited by the World Health Organization, Geneva and are being used in around 170 countries across the globe in their national immunization programs, saving millions of lives throughout the world.

·        Serum Institute of India is ranked as India's No. 1 biotechnology company.

4.     Factory Output growth decelerates:PMI

The News:

Amid the intensification of the COVID-19 crisis , India’s manufacturing sector activity was largely flat in April, as growth rates for new orders and output eased to eight-month lows.

The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.

5.     OPEC share slid as India’s Oil imports shrank 11.8%

The News:

·        OPEC’s share of India’s oil imports fell to the lowest in at least two decades in the year to the end of March as overall purchases by Asia’s third largest economy fell to a six-year low, data obtained from industry and trade sources showed.

·        Total crude imports by the world's third-biggest oil importer fell to 3.97 million barrels per day (bpd) in the 2021 fiscal year to March 31, down 11.8% from a year earlier, the data showed.

·        India bought more U.S. and Canadian oil at the expense of that from Africa and the Middle East, reducing purchases from members of the Organization of the Petroleum Exporting Countries to around 2.86 million barrels per day and squeezing the group's share of imports to 72% from around 80% previously.

·        That is the lowest share since at least the 2001/02 fiscal year, before which crude import data is not available.

OPEC: Organization of the Petroleum Exporting Countries.

It is a permanent, intergovernmental organization, created at the Baghdad Conference in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Currently, it has 13 members to discuss ways to increase the price of crude oil produced by their countries, and ways to respond to unilateral actions by the MOCs.

Economy

GST on oxygen concentrators cut

·        Oxygen concentrators received as gifts or ordered online from overseas would attract Goods and Services Tax (GST), but the GST rate payable was reduced from 28% to 12% by the Finance Ministry.

·        The government had notified changes to the foreign trade policy to allow the import of oxygen concentrators for personal use through e-commerce portals, post or courier till July 31, 2021.

·        Customs clearance will be granted for such imports by treating them on par with “gifts”.

·        So far, such an exemption was only allowed for life saving drugs and rakhis.

·        This would provide much-needed relief against the COVID fight.

Cotton production estimated to be lower at 360 lakh bales

·        The Committee on Cotton Production and Consumption expects Cotton production during the current season (October 2020 to September 2021) to be at 360 lakh bales, slightly lower than the 2019-2020 estimate of 365 lakh bales.

·        According to Southern India Mill’s Association (SIMA), textile mill consumption and exports this year may be lower than the estimates because of the spread of COVID-19 and its impact on industrial activities.

Impact of Covid-19:

·        Worker shortage is the main challenge for textile mills.

·        Exports to China and Bangladesh had slowed.

·        With huge closing stock, domestic cotton prices are likely to be stable.

Record GST mop­up of ₹1.41 lakh cr. in April

·        Goods & Services Tax (GST) collections hit a record ₹1.41-lakh crore in April. This is seventh successive month of the mop-up exceeding ₹1-lakh crore.

·        The revenues for the month of April 2021 are 14 per cent higher than the GST revenues in the last month of March.

·        During the month, the revenues from domestic transaction (including import of services) are 21 per cent higher than the revenues from these sources during the last month.

Reasons for GST mop-up:

·        The continuing focus on improving Tax compliance.

·        The steps taken to curb Tax evasion.

·        Since its the year end, most companies close their books and raise invoices during the financial close. That is perhaps one of the reasons for the spurt in GST collections in April. 

The real challenge lies ahead as most parts of the country are again in a lockdown and most industries are temporarily shut.

Economy

‘Limited sops make scrappage policy for vehicles unattractive’

The News:

According to a report by ratings agency Crisil Research, limited sops would make the vehicle scrappage policy unattractive.

·        The report states that limited incentives and poor cost economics for trucks in the Vehicle Scrappage Policy, coupled with lack of addressable volumes for other segments are unlikely to drive freight transporters to replace their old vehicles with new ones.

·        Eg: The potential benefit from scrapping a 15-year-old, entry-level small car will be ₹70,000, whereas its resale value is around ₹95,000.

·        However, it said that though the scrappage volume of buses, PVs and two-wheelers are expected to be limited as well, the policy’s impact on new commercial vehicle (CV) sales could be sizeable.

·        The policy proposes to de-register vehicles that fail fitness tests or are unable to renew registrations after 15-20 years of use.

Vehicle Scrapping Policy:

• It was first announced in the Union Budget for 2021-22.
• The new policy provides for fitness tests after the completion of 20 years in the case of privately owned vehicles and 15 years in the case of commercial vehicles. Any vehicle that fails the fitness test or does not manage the renewal of its registration certificate may be declared as an ‘End of Life Vehicle’.
• All government vehicles and those owned by PSUs will be de-registered after 15 years.
• According to the policy, the automobile industry in India will see a jump in turnover to ₹10 lakh crore from ₹4.5 lakh crore.
• It would reduce pollution, improve fuel efficiency, and increase the government’s revenue collection from the sale of new vehicles.
• To encourage owners to take their old vehicles to scrapping centres, the government has announced several incentives, including advisories to the States to give up to 25% rebate in road tax for personal vehicles and up to 15% rebate for commercial vehicles.
• The government will also offer a waiver of registration fees on the purchase of new vehicles.
• Timeline:

• The policy will kick in for government vehicles from April 1, 2022.
• Mandatory fitness testing for heavy commercial vehicles will start from April 1, 2023.
• For all other categories of vehicles, including personal vehicles, it will start in phases from June 1, 2024.
• The Ministry has proposed that commercial vehicles be de-registered after 15 years in case of failure to get the fitness certificate, and a private vehicle will be de-registered after 20 years if it fails fitness certification.

‘FPIs likely to withdraw $3-4 bn in short term’

The News:

·        Amid a worsening COVID-19 crisis in the country, a foreign brokerage firm has said that Indian stocks may witness more foreign funds outflow in the coming days.

·        Foreign portfolio investors (FPIs) have pulled out $2 billion from Indian equities over fears of rising COVID-19 cases and are likely to withdraw $3-4 billion more in the short-term. 

·        FPIs had pumped in a record $39 billion in FY21.

Details:

·        Various states have imposed restrictions of varying degrees to curb the sharp rise in Covid-19 cases. The fear of rising coronavirus cases and currency depreciation has led to FPI outflows in this month to date.

·        Electronics and chip-exporting countries South Korea and Taiwan are witnessing positive FPI flows, whereas others are witnessing no major inflows.

·        The overall sentiments have got impacted due to the spread of coronavirus across multiple states as reflected in the fact that except for the Pharma Index, all sectoral indices ended in the red last week

·        Future FPI flows will depend on how the second wave of the pandemic and restrictions on economic activity pan out.

·        Since global economic recovery is strong and emerging markets like India are to benefit from that, FPIs are unlikely to be big sellers in the coming days.

27 April 2021

Economy

India expected to invest $1 billion in AI by 2023

·        Global enterprises are expected to invest $98 billion in artificial intelligence (AI) by 2023 and India’s share in it will be about $1 billion.

·        However, worryingly, 55% of this proposed global investment may go waste due to a lack of familiarity or understanding of newer practices, technologies and tools and the inability to optimise data. The corresponding wastage in India will be around $484 million. Further, poor management practices may also lead to further losses.

Indian Economy

‘RBI intent is key to curb further rupee weakness’ 

 The News:

Reserve Bank of India's intent on preventing any further depreciation in the currency as the surge in COVID-19 cases hits jobs and growth.

·        Rising cases have been one of the main factors behind the recent fall in the rupee, but the RBI’s decision to commit to large bond purchases has added to downside momentum.

·        The RBI has committed to buying ₹1 trillion worth bonds in the April-June period in its effort to temper the rise in bond yields to help the government borrow from the market at low interest rates.

·        RBI said it would do more going forward, and this would be alongside its regular open market bond purchases and special open market operations (the simultaneous sale and purchase of government securities over different tenors), the equivalent of the U.S. Operation Twist.

Depreciation / Undervaluation of Currency: Meaning

·        The currency of a nation is said to be undervalued when its value in foreign exchange is low.

·        A cheaper (undervalued) currency renders the nation’s goods (exports) more affordable in the global market while making imports more expensive. After an intermediate period, imports will be forced down and exports to rise, thus stabilizing the trade balance and bring the currency towards equilibrium.

Indian Economy

Retail asset quality concerns re-emerge as cases surge: ICRA

The News:

As per ICRA (Investment Information and Credit Rating Agency of India Limited) , if the case severity due to fresh COVID-19 related restrictions in place increases, then, microfinance and unsecured SME loan pools would likely face the most stress.

Impact:

1.       The restrictions on movement would have a bearing on collection efforts for the NBFCs.

2.       Commercial vehicle loans could also face stressif the inter-State restrictions are reimposed.

3.       While it is too early to comment on the extent of impact on the asset quality of retail loans due to the rising COVID cases, there is reason to be cautious.”

4.       a severe drop in collections for most asset classes has been witnessed.

5.       The restrictions at present are localised and less harsh, but the severity has been gradually increasing as the surge in COVID cases is yet to be brought under control.

6.       Securitisation volumes had dropped in the first quarter of last fiscal due to the nationwide lockdown.

7.       Following the second wave of the pandemic, ICRA said it expected securitisation volumes to again get impacted in the first quarter of this fiscal as NBFCs and HFCs will be more selective in fresh lending.

ICRA:

There are six credit rating agencies registered under SEBI namely, CRISIL, ICRA, CARE, SMERA, Fitch India and Brickwork Ratings.

·         It was created in 1991 by prominent financial institutions and commercial banks in India with a devoted crew of experts for the MSME sector

·         Moodys, which is considered as the International credit rating agency holds the major share.

Microfinance:

·         Microfinance is a basis of financial services for entrepreneurs and small businesses deficient in contact with banking and associated services.

·         The two key systems for the release of financial services to such customers include ‘relationship-based banking’ for individual entrepreneurs and small businesses along with ‘group-based models’  where several entrepreneurs come together to apply for loans and other services as a group.

·         Similar to banking operation traditions, microfinance entities are supposed to charge their lender’s interests on loans.

·         In most cases the so-called interest rates are lower than those charged by normal banks, certain rivals of this concept accuse microfinance entities of creating gain by manipulating the poor people’s money.

The term “microfinancing” was first used in the 1970s during the development of Grameen Bank of Bangladesh, which was founded by the microfinance pioneer, Muhammad Yunus.

SME loans:

Loans for Small and Medium Enterprises are business loans extended only to medium sized enterprises.These loams are tailor made  to suit the needs and requirements of SMEs.

COVID impacts 82% of small businesses, shows survey

The News:

The survey(evenly split between the manufacturing and services industries, having a turnover of Rs 100-250 crore yearly) conducted by data firm Dun & Bradstreet has shown 82 per cent of businesses have experienced a negative impact during the pandemic year.

Survey Findings:

1.       Over two-thirds of those surveyed, or 70 per cent, said it will take them nearly a year to recover demand levels prior to COVID-19.

2.       Over the past year, India has emerged to be one of the worst-affected nations globally by the COVID-19 pandemic, as demand disappears along with dip in income generation.

3.       The top-three challenges earmarked by the surveyed companies, which might hinder small businesses to scale up their businesses, include market access (flagged by 42 per cent), improving the overall productivity (37 per cent) and having access to more finance (34 per cent).

4.       Access to markets and better credit facility has been the major challenges in scaling up their operations.

Way Forward :

·         Better credit facilities was the top-most voted aspect by companies.

·         59 per cent of them say that better credit facilities can aid in post-pandemic revival, followed by

o   better marketing support (48 per cent) and

o   adoption of technology (35 per cent).

Conclusion:

"The rate of recovery of India's commercial enterprises, and thereby the economy, will be determined by the strength of the recovery of small business,"

Indian Economy

Exporters fret over delay in rebate rates

The News:

Commerce Secretary had said that the rates under the RoDTEP (Remission of Duties and Taxes on Export Products) scheme, which came into effect on January 1, would be notified in the ‘very, very near future’.

Background:

Exporters have been urging the government to lift the uncertainty over the benefits that would accrue to them under the scheme, as they are it finding it difficult to price fresh global orders in the absence of the crucial information especially in sectors with thin margins.

The New Hope:

·         “The trade and industry is hopeful that the scheme’s operation would be smooth, and concerns would be addressed in the early stages of operationalisation,” it was noted in a white paper on the scheme.

·         “Due to COVID-19, India’s exports may require more stimulus and the exporters hope that RoDTEP would not be an impediment to their business plans,” .

RoDTEP (Remission of Duties and Taxes on Export Products) scheme:

·         RoDTEP is a scheme for the Exporters to make Indian products cost-competitive and create a level playing field for them in the Global Market.

·         It has replaced the current Merchandise Exports from India Scheme, which is not in compliance with WTO norms and rules.

·         The new RoDTEP Scheme is a fully WTO compliant scheme.

·         It will reimburse all the taxes/duties/levies being charged at the Central/State/Local level which are not currently refunded under any of the existing schemes but are incurred at the manufacturing and distribution process.

 Need of the Scheme:

·         The scheme was announced last year as a replacement for the Merchandise Export from India Scheme (MEIS), which was not found not to be compliant with the rules of the World Trade Organisation.

·         Following a complaint by the US, a dispute settlement panel had ruled against India’s use of MEIS as it had found the duty credit scrips awarded under the scheme to be inconsistent with WTO norms.

 Oil slips as India’s COVID surge dents outlook

The News:

Oil prices fell for a second day on Wednesday, weighed down by concerns that surging COVID-19 cases in India will drive down fuel demand in the world’s third-biggest oil importer.

·         “India is a major crude oil consumer. So rising virus cases and thereby restrictions to limit the spread will dampen the demand outlook,” said Ravindra Rao, vice president for commodities at Kotak Securities.

·         “Global crude markets remains well supplied with OPEC and its allies scheduled to hike production in coming months. So, if the demand picture does not improve significantly, prices may correct further.”

·         India, also the world’s third-largest oil user, on Wednesday reported another record increase in the daily death toll from COVID-19, at 2,023, and another record rise in cases at more than 295,000.

·         The country, where large parts are now under lockdown due to a huge second wave of the pandemic, is facing an oxygen supply crisis to treat patients.

·         “You’ve seen refiners there (in India) scale back runs because demand has fallen with the spread of lockdowns. That’s clearly weighing on the market and sentiment,” said Lachlan Shaw, head of commodity research at National Australia Bank .

·         Further battering the market, data from the American Petroleum Institute (API) industry group showed U.S. crude oil and distillate stocks rose in the week ended April 16, according to two market sources, compared with analysts’ forecasts for drawdown in inventories.

 Care Ratings lowers FY22 GDP forecast to 10.2%

 The News:

Care Ratings has revised downwards the GDP growth forecast of India to 10.2 per cent in 2021-22 (FY22). Earlier this was estimated between 10.7-10.9 per cent. This cut in the GDP is based on the fact that economic activities are getting affected across the country due to curbs imposed by states amid a surge in COVID-19 cases.

There are six credit rating agencies registered under SEBI namely, CRISIL, ICRA, CARE, SMERA, Fitch India and Brickwork Ratings.

Care Ratings:

·         Credit Analysis and Research Limited Ratings was established in 1993.

·         It is supported by Canara Bank, Unit Trust of India (UTI), Industrial Development Bank of India (IDBI), and other financial and lending institutions.

·         This is considered as the second-largest credit rating company in India.

·         The headquarter of Credit Analysis and Research Limited Ratings is in Mumbai