📰 India set to participate in WHO’s medicine trial
4 drugs or combinations to be tested
•India is all set to join World Health Organisation’s “solidarity trial” aimed at rapid global search for drugs to treat COVID-19. The country has stayed away so far from this multi-country trial “due to its small sample size and because our contribution would have looked minuscule,” said Head of Epidemiology and Communicable diseases at Indian Council of Medical Research (ICMR) R. Gangakhedkar on Friday.
•The Solidarity Trial will test four different drugs or combinations — remdesivir, a combination of two drugs, lopinavir and ritonavir, the two drugs plus interferon beta, and chloroquine — and will compare their effectiveness to what is called standard of care, the regular support hospitals treating COVID-19 patients use now.
•Speaking of where India stands in terms of developing a drug or vaccine against COVID-19, Dr. Gangakhedkar said: “We have to prioritise what we need right now to deal with the situation. ICMR is currently looking at re-purposed drug molecules to find treatment for COVID-19. We don’t have the luxury of time right now.”
•He added that vaccine development wasn’t a priority for ICMR currently. “There are 30 vaccine groups that are operational worldwide right now looking at COVID-19, with five having gone into animal-toxicity study. India will express its interest to participate in the trial for the Indian population when we feel the time is right,” he said.
To ease impact of lockdown, repo and reverse repo rates reduced; EMIs deferred for three months
•The Reserve Bank of India (RBI) has opened up the liquidity floodgates for banks even as it reduced the key interest rate sharply by 75 bps and allowed equated monthly instalments (EMIs) to be deferred by three months in a move to fight the economic impact of the countrywide lockdown to check the spread of novel coronavirus.
•The repo rate was reduced to by 75 bps 4.4% while the reverse repo rate was cut by 90 bps point to 4%. The higher reduction in the reverse repo rate was aimed at prompting banks to lend more rather than keeping their excess liquidity with the RBI.
Unprecedented crisis
•“We are living through an extraordinary and unprecedented situation. Everything hinges on the depth of the COVID-19 outbreak, its spread and its duration,” RBI governor Shaktikanta Das said.
•“Clearly, a war effort has to be mounted to combat the virus, involving both conventional and unconventional measures,” Mr. Das said.
•The meeting of the Monetary Policy Committee (MPC) which was scheduled for March 31 and April 1,3, was advanced to March 27 due to the unprecedented crisis.
•While cutting benchmark rates, the RBI has continued with its accommodative stance. Four of the six members of the monetary policy committee voted in favour of a 75 bps rate cut.
•Apart from cutting the repo rate, RBI has also reduced the cash reserve ratio of banks which released Rs. 1.37 lakh crore liquidity. This, along with other measures, will see an infusion of Rs. 3.74 lakh crore into the banking system.
•RBI has also allowed banks to defer payment of EMIs on home, car, personal loans as well as credit card dues for three months till May 31. Since non-payment will not lead to non-performing asset classification by banks, there will be no impact on credit score of the borrowers.
•State Bank of India, the country’s largest lender, promptly responded to the RBI’s action and reduced the lending rates linked to a external benchmark and the repo rate by 75 bps. Interest rate on external benchmark linked loans was cut from 7.8% to 7.05% and those are linked to repo rate were cut to 6.65%. “Consequently, EMIs on Home Loan accounts get cheaper by around Rs. 52 per 1 lakh on a 30-year loan,” SBI said.
📰 Liquidity floodgates opened
Central bank to infuse Rs. 3.74 lakh cr. into banking system
•In a move to infuse sufficient liquidity into the banking system, the Reserve Bank of India has reduced the cash reserve ratio (CRR) requirement by 100 bps, increased the cap for liquidity available under the marginal standing facility, and will auction long-term repo of Rs. 1 lakh crore. These three measures will infuse Rs. 3.74 lakh crore into the banking system.
•The cash reserve ratio — the proportion of liabilities which a bank has to set aside as cash — has been reduced from 4% to 3%. The 100 bps reduction in CRR will free up Rs. 1.37 lakh crore liquidity for the banks. For State Bank of India, lowering of CRR will release Rs. 31,000 crore.
•The minimum daily requirement of maintaining CRR balance has also been reduced to 80% from 90%, effective from the first day of the reporting fortnight beginning March 28, 2020. “This is a one-time dispensation available up to June 26, 2020,” the RBI said.
•Banks do not earn any interest for maintaining CRR balance. With this reduction, they can deploy the liquidity in interest-earning assets.
•RBI also increased liquidity available to banks under the marginal standing facility from 2% of the statutory liquidity ratio (SLR) to 3% with immediate effect. This measure will be applicable up to June 30, 2020.
•“This measure should provide comfort to the banking system by allowing it to avail [itself of] an additional Rs. 1,37,000 crore of liquidity under the LAF window in times of stress at the reduced MSF rate announced in the MPC’s resolution,” the RBI said.
•The monetary policy committee reduced the repo rate by 75 bps to 4.4% and consequently the MSF rate was reduced to 4.65%.
•Observing that large sell-offs in the domestic equity, bond and forex markets had intensified redemption pressures, the central bank decided to infuse Rs. 1 lakh crore through targeted long-term repo operations (TLTRO).
•The RBI will conduct auctions of targeted term repos of up to three years’ tenor for a total of up to Rs. 1 lakh crore at a floating rate, linked to the policy repo rate. “Liquidity availed under the scheme by banks has to be deployed in investment grade corporate bonds, commercial paper and non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 25, 2020,” the RBI said.
•RBI also said investments by banks under this facility would be classified as held-to-maturity (HTM) even in excess of 25% of the total investment permitted to be included in the HTM portfolio.
📰 World is now in recession: IMF
Virus-hit developing nations need dollops of funding
•The COVID-19 pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said Friday.
•“It is clear that we have entered a recession” that will be worse than the one in 2009, following the global financial crisis, she said.
•With the worldwide economic “sudden stop,” Ms. Georgieva said the fund’s estimate “for the overall financial needs of emerging markets is $2.5 trillion.”
•But she warned the estimate “is on the lower end.”
•Governments in emerging markets, which have suffered an exodus of capital of more than $83 billion in recent weeks, can cover much of that, but “clearly the domestic resources are insufficient” and many already have high debt loads.
•Over 80 countries, mostly with low incomes, have already requested emergency aid from the International Monetary Fund, she said.
•“We do know that their own reserves and domestic resources will not be sufficient,” she said, adding the fund is aiming to beef up its response “to do more, do it better, do it faster than ever before.” She also welcomed the $2.2 trillion economic package approved by the U.S. Senate, saying “it is absolutely necessary to cushion the world’s largest economy against an abrupt drop in economic activities.”
📰 Shift to upscaling food rationing now
Expanded rations will not only bring relief in this pandemic but also help sustain a nourished and healthy population
•Two days ago, the Finance Minister Nirmala Sitharaman announced a Rs. 1.7-lakh crore package of social security measures to deal with the COVID-19 pandemic in the period of the 21-day lockdown. In respect of food security, the package falls far short of what is needed. I argue that we need to immediately ensure universal rationing with an expanded food basket, and special measures for cooked food in urban areas for the vulnerable population.
•The burden of the current lockdown is borne disproportionately by the large unorganised workforce, comprising hundreds of millions of casual daily wage-workers and self-employed workers. India already holds the record for the largest number of malnourished persons in the world. As their ability to purchase food diminishes, a growing population of working people and their families will soon enter a phase of hunger and undernourishment. The answer to this looming and very real scenario of food insecurity lies in a massive programme of food rationing, far greater than what the Finance Minister has promised.
Lessons from history
•To ensure that all people have access to adequate food in the midst of this unprecedented health and economic crisis with potentially high levels of mortality, we must immediately expand our food security system. Before I come to the components of such an expanded programme, let us briefly look at the lessons provided by the experience of other countries in using rationing in times of scarcity.
•In the United Kingdom in the 1940s, rationing or a policy of “fair shares” was introduced in a period of war and scarcity. Starting in 1939, each and every person was issued a ration book, with a weekly entitlement that could be collected at a local grocery store. Rationing encompassed many commodities, starting with butter, bacon and sugar, and later augmented by eggs, biscuits, tinned food, meat, cereals, etc. A remarkable outcome of the war years was, as Amartya Sen has demonstrated, a significant improvement in vital statistics including a rise in life expectancy and a decline in the mortality rate. Despite heavy war casualties and a decline in consumer expenditure per capita, life expectancy actually improved. In the first six decades of the 20th century, the decade from 1941 to 1950 saw the largest increase in life expectancy in England and Wales.
India’s timeline
•In India, the British introduced rationing in six cities in 1942, mainly to supply industrial workers with adequate food. Following demands from a strong political movement, Malabar became the first rural area to implement rationing in 1943. In the mid-1960s, the system of rationing or the Public Distribution System (PDS) was made a national universal programme, which steadily expanded till 1991. In the 1990s, the policies of liberalisation led to the withdrawal of universal rationing and its replacement by a policy of narrow targeting. Differential entitlements were provided for BPL (Below Poverty Line) and APL (Above Poverty Line) households. In 2013, the landmark National Food Security Act (NFSA), ensured legal entitlement to rations and other food-based schemes (such as mid-day meals in schools). Around 75% of rural households, and 50% of urban households, that is, a total of two-thirds of all households, were eligible for inclusion (now termed priority households) in the NFSA.
•The implementation of the NFSA — notably the PDS, the Mid-day Meal Scheme, and the Integrated Child Development Services scheme — varies significantly across States; nevertheless, the infrastructure for distribution of food is in place in all parts of the country.
China’s strategy
•In China, the National Development and Reform Commission (NDRC), a planning body, was the key coordinator along with the Ministry of Commerce (MOFCOM) in ensuring supplies of basic foods and price stability to the poor, especially in Wuhan province, the epicentre of the current pandemic, which was under lockdown since January 23, 2020.
•The Chinese strategy had multiple components, which included public corporations and ministries, 300 large private companies, 200,000 private stores, and local government institutions. To illustrate, State-owned companies such as COFCO or the China National Cereals, Oils and Foodstuffs Corporation, and Sinograin (China Grain Reserves Corporation) supplied key commodities to Wuhan. This included 200 tonnes of rice, 50 tonnes of flour and noodles, and 300 tonnes of edible oils each day during the peak of the pandemic in February 2020. The National Grain Trade Centre has to date supplied 155,000 tonnes of corn and 154,000 tonnes of soyabean to Wuhan. Special delivery trucks for transport of vegetables were arranged, and the local government organised open-air markets.
•Kerala was the first State in India to announce a package with income support measures and in-kind measures including free rations of 15 kg (grain) and provision of cheap meals. The government of Tamil Nadu announced free rations of rice, sugar, cooking oil and dal to all ration card holders. The supply of rations for unorganised workers is to be through Amma canteens. The Delhi government will give 1.5 times existing entitlements at no cost to all ration card holders.
Key points of a plan
•In India a system of expanded rations must have the following components. First, for all rural households, free rations of rice and wheat at double the normal entitlement must be distributed. The current entitlement is about half the quantity of daily cereal intake recommended by the Indian Council of Medical Research: the new quantities should be the actual minimum requirement per person per day. The government of India has now doubled rations (rice or wheat) to all priority households, from 5 kg to 10 kg per person per month. However, this falls short, as the rations are not to all households but only priority households; the rations are not free (only the additional 5 kg is free).
•The provision of rations must be universal: this is not the time to demarcate households by type of ration card or whether they have a ration card or by any form of biometrics. The system of identification of priority households is not error-proof, and no household wrongly excluded should be outside the ambit of rationing today. This upscaling is feasible as the country has stocks of 58 million tonnes of rice and wheat; and the wheat harvest is currently underway in north India.
•Second, for all rural households, additional rations of cooking oil, sugar, salt and lentils should be provided on a regular basis. Soap must also be included in this list. As supplies have to be arranged, the distribution could be weekly or fortnightly in order to ensure smooth availability. It is good to see that the government of India has announced one kg of dal per household, but it needs to provide more commodities quickly.
•Third, if milk, eggs and vegetables (or one or more of them) can be supplied, we can not only ensure basic food security at the time of a major health crisis, but actually address our burden of malnutrition.
•For urban areas, we need a combination of provision of dry goods and of cooked food. All households with ration cards can be given the same entitlements as proposed for rural households.
•For the vast numbers of workers and migrants in towns and cities, however, we must set up arrangements for preparation and delivery of cooked food. The large numbers of closed community kitchens (schools and colleges, company and office canteens, for example) and restaurant workers now sitting idle or laid off can be brought together to undertake a massive programme of provision of cooked meals at subsidised rates. Kerala has taken the lead here. This will require careful planning and technology to distribute food while ensuring physical distancing. The answer is not to simply close the Indira Canteens (serving low-cost meals) as Karnataka has done.
•All the measures proposed must continue for at least three months, and be reviewed afterwards.
•An imaginative massive exercise of expanded rations could not only provide succour in this pandemic but also bring in a policy shift that will help sustain a nourished and healthy population.
