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CURRENT AFFAIRS – 26, 27 MARCH 2023
Understanding IMF bailouts
Why are Sri Lanka and Pakistan facing major macroeconomic risks? How does currency devaluation and price rise affect an economy? What is the International Monetary Fund? Why does the IMF impose certain conditions before lending money to countries?
The story so far: The International Monetary Fund (IMF) last week confirmed a $3 billion bailout plan for Sri Lanka’s struggling economy. IMF officials are also in negotiations with Pakistan for a $1.1 billion bailout plan as the country faces a severe economic crisis marked by a falling currency and price rise.
Why do nations seek an IMF bailout?
Countries seek help from the IMF usually when their economies face a major macroeconomic risk, mostly in the form of a currency crisis. For instance in the case of Sri Lanka and Pakistan, both countries have witnessed domestic prices rise rapidly and the exchange value of their currencies drop steeply against the U.S. dollar. Such currency crises are generally the result of gross mismanagement of the nation’s currency by its central bank, often under the covert influence of the ruling government. Central banks may be forced by governments to create fresh money out of thin air to fund populist spending. Such spending eventually results in a rapid rise of the overall money supply, which in turn causes prices to rise across the economy and the exchange value of the currency to drop. A rapid, unpredictable fall in the value of a currency can destroy confidence in said currency and affect economic activity as people may turn hesitant to accept the currency in exchange for goods and services.
Foreigners may also be unwilling to invest in an economy where the value of its currency gyrates in an unpredictable manner. In such a scenario, many countries are forced to seek help from the IMF to meet their external debt and other obligations, to purchase essential imports, and also to prop up the exchange value of their currencies.
Meanwhile, a country’s domestic economic policies can also have an adverse impact on its currency’s exchange rate and foreign exchange reserves. For example, economic policy that imperils productivity can affect a country’s ability to attract the necessary foreign exchange for its survival. Bad luck can also contribute to a crisis. In the case of Sri Lanka, a decrease in foreign tourists visiting the country led to a steep fall in the flow of U.S. dollars into the nation.
How does the IMF help countries?
The IMF basically lends money, often in the form of special drawing rights (SDRs), to troubled economies that seek the lender’s assistance. SDRs simply represent a basket of five currencies, namely the U.S. dollar, the euro, the Chinese yuan, the Japanese yen, and the British pound. The IMF carries out its lending to troubled economies through a number of lending programs such as the extended credit facility, the flexible credit line, the stand-by agreement, etc. Countries receiving the bailout can use the SDRs for various purposes depending on their individual circumstances. Currently, both Sri Lanka and Pakistan are in urgent need for U.S. dollars to import essential items and also to pay their foreign debt. So any money that they receive from the IMF is likely to go towards addressing these urgent issues.
The IMF was set up in 1945 out of the Bretton Woods conference. The primary goal of the IMF back then was to bring about international economic coordination to prevent competing currency devaluation by countries trying to promote their own exports. Eventually, the IMF evolved to be a lender of last resort to governments of countries that had to deal with severe currency crises.
Are there any strings attached to an IMF bailout?
The IMF usually imposes conditions on countries before it lends any money to them. For example, a country may have to agree to implement certain structural reforms as a condition to receive IMF loans. The IMF’s conditional lending has been controversial as many believe that these reforms are too tough on the public. Some have also accused the IMF’s lending decisions, which are taken by officials appointed by the governments of various countries, to be influenced by international politics.
Supporters of the IMF’s lending policies, however, have argued that conditions are essential for the success of IMF lending. For one, countries that seek an IMF bailout are usually in a crisis due to certain policies adopted by their governments that turned out to be inimical to economic growth and stability. It may thus not make sense for the IMF to throw money at a country when the policies that caused its crisis remain untouched. So, for instance, the IMF may demand a country affected by high price inflation to ensure the independence of its central bank. Corruption is another issue. The IMF lending to troubled economies, may turn out to be a wasted effort because these economies have poor institutions and suffer from high corruption. In other words, these countries are most likely to squander the bailout money.
GS Paper III: What is biotransformation technology and how can I reduce packing waste?
A UK-based startup claims to have developed Biotransformation technology that can alter the state of plastics and make them biodegradable without leaving behind any microplastics
E-commerce giant Amazon generated an estimated 321 million kilograms (709 million pounds) of plastic from packaging waste in 2021 alone. This is a result of billions of boxes it shipped to its customers globally, according to a December 2022 report by Oceana. The ocean advocacy group notes that this is enough plastic to circle the Earth over 800 times as air pillows.
While Amazon refuted Oceana’s claim, stating that it follows a science-based approach to reduce packaging waste, there is a lot left to be done.
A UK-based startup, based at Imperial College in London, claims to have developed a technology that could alter the state of plastics and make them biodegradable. The company calls the process “biotransformation”. It claims the technology would digest the plastic packaging waste naturally with the help of microbes and biodegrade the waste without leaving behind any microplastics.
What is Biotransformation technology?
Biotransformation technology is a novel approach to ensure plastics that escape refuse streams are processed efficiently and broken down. The tech was co-developed by the Imperial College in London, UK, and a Britain-based startup, Polymateria.
Plastics made using this technology are given a pre-programmed time during which the manufactured material looks and feels like conventional plastics without compromising on quality. Once the product expires and is exposed to the external environment, it self-destructs and biotransforms into bioavailable wax. This wax is then consumed by microorganisms, converting waste into water, CO2, and biomass.
“This biotransformation technology is the world’s first that ensures polyolefins fully biodegrade in an open environment causing no microplastics,” said Niall Dunne, CEO of Polymateria.
Why do we need it?
India’s Environment Minister Bhupender Yadav, last year in New Delhi said, the country is generating 3.5 billion kgs of plastic waste annually and that the per capita plastic waste generation has also doubled in the past five years. Of this, a third comes from packaging waste.
In 2019, plastic packaging waste from e-commerce firms was estimated at over a billion kilograms worldwide, according to Statista.
A joint research project by Department of Management Studies, IIT Delhi, and Sea Movement noted that Amazon generated, nearly 210 million kgs (465 million pounds) of plastic from packaging waste in 2019. They also estimated that up to 10 million kgs (22.44 million pounds) of Amazon’s plastic packaging ended up in the world’s freshwater and marine ecosystems as pollution in the same year.
However, Amazon India has now eliminated the single-use plastics across its fulfilment centers. Flipkart has also done the same in 2021 across its supply chain.
Where can this technology be used?
Food packaging and health care industries are the two prime sectors that could use this technology to reduce waste. “The increase in cost is relatively small compared to conventional plastic that does not contain” this technology, said Mr. Dunne.
Is this being used in India?
Some well-known Indian firms in food and packaging industries deploy such technologies. Within healthcare and pharma industries, this technology provides biodegradable solutions for non-woven hygiene products like diapers, sanitary napkins, facial pads, etc.
Are we heading in the right direction?
The Indian government has launched multiple initiatives to move the country towards sustainability. They introduced a plastic waste management gazette to help tackle the ever-growing plastic pollution caused by single-use plastics.
Last year, the Indian government imposed a ban on single-use plastics to bring a stop to its use in the country.
The National Dashboard on Elimination of Single Use Plastic and Plastic Waste Management brings all stakeholders together to track the progress made in eliminating single-use plastic and effectively managing such waste.
An Extended Producer Responsibility (EPR) portal helps in improving accountability traceability, and facilitating ease of compliance reporting in relation to EPR obligations of the producers, importers and brand-owners.
India has also developed a mobile app to report single use plastics grievances to check sale, usage or manufacturing of single use plastics in their area.
What are the alternatives to reducing plastic waste?
A switch to jute or paper-based packaging could potentially cut down plastic waste. This could also build sustainability within the paper industry, and save on the import bill on ethylene solutions. The wooden packaging is yet another alternative, but that will make the packaging bulkier and increase cost.
The Government of Tamil Nadu, in Chennai, organised National Expo and Conference of Startups to raise awareness on alternatives to single-use plastics. The alternatives showcased were made using coir, bagasse, rice and wheat bran, plant and agricultural residue, banana and areca leaves, jute and cloth.
GS Paper III: MGNREGS wage rates revised by upto 10% for 2023-24 fiscal year
The Centre has notified a hike in wage rates under the rural job guarantee programme for the 2023-24 financial year with Haryana having the highest daily wage at ₹357 per day and Madhya Pradesh and Chhattisgarh the lowest at ₹221.
The Union Ministry of Rural Development issued a notification on the change in wage rates under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) on March 24.
The notification was issued under Section 6 (1) of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005, that says the Centre may, by notification, specify the wage rate for its beneficiaries.
The wage hikes, which range from ₹7 to ₹26, will come into effect from April 1.
Compared to last year’s rates, Rajasthan registered the highest percentage increase in wages. The revised wage for Rajasthan is ₹255 per day, up from ₹231 in 2022-23.
Bihar and Jharkhand have registered a percentage increase of around eight from last year. Last year, the daily wage for a MNREGA worker in these two states was ₹210. It has now been revised to ₹228.
For Chhattisgarh and Madhya Pradesh, which have the lowest daily wages at ₹221, the percentage increase from last year was recorded at 17.
In 2022-23, the two States had a daily wage of ₹204.
The increases in the wages for states range between two and 10%. Karnataka, Goa, Meghalaya and Manipur are among the States to register the lowest percentage increase.
The Mahatma Gandhi National Rural Employment Guarantee Scheme is a flagship programme aimed at enhancing livelihood security of households in rural areas by providing at least 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer for unskilled manual work.
GS Paper III: Will mega textile park help boost the sector?
Where are mega parks coming up in the first phase under the PM MITRA scheme? What has been the reaction to the announcement from MSMEs which dominate the textiles and apparel industry? How is the new initiative different from earlier textile park schemes?
The story so far: On March 17, the government announced that seven mega textile parks under the ₹4,445-crore PM Mega Integrated Textile Regions and Apparel (PM MITRA) scheme will be set up in the first phase. The notification for large-scale textile parks under PM MITRA had been given in October 2021. The scheme which seeks to streamline the textile value chain into one ecosystem, taking in spinning, weaving and dyeing to printing and garment manufacturing, is expected to generate investments worth ₹70,000 crore. It would also lead to the creation of 20 lakh jobs, according to Commerce & Industry and Textiles Minister Piyush Goyal.
What is expected in the first phase?
Under the first phase of the PM MITRA scheme, large textile parks, spread across at least 1,000 acres, will come up in seven States —Tamil Nadu, Karnataka, Telangana, Madhya Pradesh, Maharashtra, Gujarat, and Uttar Pradesh — housing the entire textile value chain, from fibre to fabric to garments. The parks will have plug-and-play manufacturing facilities and all the common amenities required.
The Central government’s budget outlay for the scheme, which is ₹4,445 crore, is to be spent till 2027-28. Special purpose vehicles, with a 51% equity shareholding of the State government and 49% of the Centre, will be formed for each park. The State governments will provide the land, be part of the SPV, and give the required clearances. The Central government will disburse Development Capital Fund of ₹500 crore in two tranches for each of the seven facilities. This is for the creation of core and support infrastructure. It will also give a Competitive Incentive Support of ₹300 crore per park to be provided to the manufacturing units.
Is it different from previous textile schemes?
The textile and apparel sector has benefited from different programmes, such as the Apparel Park Scheme announced in 2002 and the Scheme for Integrated Textile Parks launched in 2005, which supported development of common infrastructure. The PM MITRA scheme is envisaged to be a unique initiative and the differentiating factors are the emphasis on large-scale production and provision of plug-and-play manufacturing centres. The scheme is to be implemented jointly by the Central and State governments. The parks, which will be open for foreign direct investments, will be located in States that have inherent strengths in the textile sector. Each park will have effluent treatment plants, accommodation for workers, skill training centres and warehouses too. It is designed to attract investment from companies that are looking to scale up, and require integrated manufacturing facilities in one location.
What will be the impact on MSMEs?
The micro, small and medium enterprises (MSME) sector is said to control almost 80% of the textiles and apparels currently made in India. Further, the Indian textile and clothing units are more cotton-based. The industry has mixed views on the immediate impact of the huge investments that are expected to come into the parks in existing units.
However, with mounting challenges such as the global geopolitical situation, and overseas buyers exploring China as well as other sourcing options, the past two years have seen notable shifts in supply chains. Orders are transitioning to suppliers who are highly price competitive and have sustainable production processes. Even those who cater to low-volume orders are going in for value addition for better price realisation. Thus, manufacturers with vertically integrated facilities are at an advantage compared to smaller, standalone players. The MSME exporters are also realising that there is a need for integrated, larger facilities and these factors are expected to drive the industry’s investment plans.
Does the industry expect a boost in exports?
Indian textile and clothing exports have stagnated at around the $40-billion mark over the past four years, and stood at $44 billion last year; the aim is to achieve $100 billion in exports and target a domestic business of $250 billion by 2030. The PM MITRA parks aim to augment the export potential of the sector. Cotton-based products make up approximately 65% of the total textile and apparel exports. Indian exports, which cover a gamut of products, are mainly known for yarn, bedsheets and towels, T-shirts and denim fabric. Expanding the fibre and product line will give India a larger share in the global market, from the current 5%. In order to make a giant leap in exports and domestic sales, the industry has to also be price competitive right from the raw material stage and gear up to meet the sustainability and traceability demands of international buyers. The State governments and developers should give thrust to the PM MITRA parks for sustainable and cost-effective solutions for pollution control and other issues that the value-adding segments of the textile chain face. India can take a cue from countries such as Turkey where integrated textile parks are highly efficient. Some of the MSME players who have the appetite to invest but are in need of resources are hoping the government will combine the Production Linked Incentive scheme II with PM MITRA, though guidelines issued in January last year say incentives under PM MITRA will be available only to those companies that have not availed of benefits from the PLI scheme. The Central and State governments have to encourage MSME units to invest in the PM MITRA parks and scale up, say insiders. Else, India faces the risk of missing out on the opportunity to become the prime destination for textile production and exports.
GS Paper III: Why did India reject J&J’s patent on TB drug?
How will it help the treatment of multi-drug-resistant tuberculosis? What are the costs and production implications? How many people suffer from multi-drug-resistant TB? What is India’s target year to eliminate TB?
VASUDEVAN MUKUNTH
The story so far:
On March 23, the Indian Patent Office rejected an application by pharmaceutical giant Johnson & Johnson (J&J) to extend its patent on the drug bedaquiline beyond July 2023. Bedaquiline is a drug in tablet form used to treat drug-resistant tuberculosis (TB). This opens the door for drug manufacturers to produce generic versions of bedaquiline, which are expected to be more affordable and to contribute to India’s goal of eliminating TB by 2025.
What is drug-resistant TB?
As of 2017, India accounted for around one-fourth of the world’s burden of multi-drug-resistant (MDR) TB and of extensively-drug-resistant (XDR) TB.
MDR TB resists treatment by at least two frontline drugs in TB treatment, isoniazid and rifampicin.
XDR TB resists these two drugs as well as fluoroquinolones and any second-line injectable drug. XDR TB is rarer than MDR TB — there were 1,24,000 cases of the latter in India (2021) versus 2,650 cases of the former (2017).
TB incidence in India has been on the decline, but MDR TB and XDR TB endanger initiatives to locally eradicate the disease. In the first two years of the pandemic, there were reports that TB treatment was hit by disrupted supply chains, availability of healthcare workers for non-pandemic work, and access to drug-distribution centres.
A peer-reviewed 2020 study found that the incidence of MDR TB was “strongly correlated with treatment failure and spread through contact, and not to treatment compliance”.
How is drug-resistant TB treated?
TB is an infection of the bacterium Mycobacterium tuberculosis in the lungs, but often in other organs as well. It can be treated by strictly adhering to the doses and frequencies of drugs prescribed by a physician. Deviations from this schedule can lead the bacteria to become drug-resistant. Yet they happen because the drugs often have side effects that diminish the quality of life and/or because patients haven’t been afforded access to the requisite drugs on time.
Drug-resistant TB is harder to treat. One important option for those diagnosed with pulmonary MDR TB is bedaquiline. In 2018, the World Health Organization replaced two injectable drugs for MDR TB with an oral regimen that included bedaquiline.
At this time, bedaquiline hadn’t completed phase III trials. The recommendation was based on smaller studies, outcomes in TB elimination programmes worldwide, the difficulty of treating MDR TB, and close monitoring of patients receiving the drug.
How effective is bedaquiline?
Typically, bedaquiline needs to be taken for six months: at a higher dose in the first two weeks followed by a lower dosage for 22 weeks. This period is shorter than other treatment routines for pulmonary MDR TB, which can last 9-24 months. One phase II clinical trial observed that culture conversion (turning a patient’s sputum culture from positive to negative) “at 24 weeks was durable and associated with a high likelihood of response at 120 weeks”, due to bedaquiline.
Unlike second-line treatment options that are injected and can have severe side effects, like hearing loss, bedaquiline is available as tablets and is less harmful, although it has potential side effects of its own.
Studies until 2018 found that it could be toxic to the heart and the liver. This is part of why it is recommended only as a treatment of last resort.
India’s Health Ministry has guidelines for bedaquiline use as part of the Programmatic Management of MDR TB under the National TB Elimination Programme.
The WHO’s decision revitalised a debate about the ethics of making a much-needed but insufficiently tested drug available quickly versus lowering the safety threshold for pharmaceutical companies producing drugs for desperate patients.
Why was the patent application rejected?
J&J’s patent application was for a fumarate salt of a compound to produce bedaquiline tablets. Two groups opposed the patent: 1) Network of Maharashtra people living with HIV and 2) Nandita Venkatesan and Phumeza Tisile, both TB survivors, supported by Médecins Sans Frontières.
Both groups argued that J&J’s method to produce a “solid pharmaceutical composition” of bedaquiline is “obvious, known in the art” and doesn’t require an “inventive step”. According to the Indian Patent Act 1970 Section 2(1)(ja), an ‘inventive step’ is an invention that is “not obvious to a person skilled in the art”.
The latter also contended that the current application drew significantly from a previous patent, WO 2004/011436, which discussed a similar compound on which bedaquiline is based and whose priority date (2002) well preceded the new application.
The Patent Office rejected the application on these and other grounds, including Sections 3d and 3e of the Act. These pertain to “mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance” and “a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof”, respectively, which are not patentable.
Why is the rejection notable?
India has the largest population of people living with drug-resistant TB. J&J’s patent on bedaquiline meant the drug cost $400 (revised to $340 in 2020) per person, plus the cost of other drugs. The rejection is expected to lower the cost of bedaquiline by up to 80%.
So far, the Indian government has directly procured the drug and distributed it through State-level TB programmes. After July 2023, manufacturers of generic drugs such as Lupin will be able to produce generic versions of bedaquiline.
The argument based on WO 2004/011436 is also relevant to ‘evergreening’— a strategy whereby a patent-owner continuously extends their rights and/or applies multiple patents for the same entity. Indian law disallows this.
GS Paper III: Nikhat and Lovlina add more golden sheen
Nikhat Zareen celebrates after winning the 50kg gold in the IBA Women’s Boxing World Championships in New Delhi on Wednesday, March 26. | Photo Credit: Sushil Kumar Verma
Star boxers Nikhat Zareen and Lovlina Borgohain fought with every ounce of their being as the host matched its 2006 count of four gold medals and concluded its campaign in the World women’s boxing championships at the K.D. Jadhav Hall on a bright note here on Sunday.
Nikhat, who claimed her maiden World title in 52kg last year, secured her second successive gold medal in an Olympic weight, 50kg, in front of a vociferous home crowd.
An Olympic bronze medallist in 69kg, Lovlina Borgohain achieved her target of breaking her ‘bronze jinx’ and settled down in 75kg ahead of the Paris Games by picking her maiden World crown.
With Nitu Ghanghas (48kg) and Saweety Boora (81kg) delivering gold medals earlier, India dealt with only gold in the event.
The taste of gold was sweeter for Commonwealth Games champion Nikhat, who became the second Indian woman after M.C. Mary Kom to win more than one World title. Her sixth bout turned out to be the toughest as Nikhat avenged her defeat to Vietnam’s two-time Asian champion Thi Tam Ngyuen with a 5-0 verdict.
Nikhat moved in to connect body and head shots on taller southpaw Thi, who was penalised for holding, and won the first round 5-0.
Lovlina Borgohain claimed the 75kg honours in the IBA Women’s Boxing World Championships in New Delhi on Wednesday, March 26. | Photo Credit: Sushil Kumar Verma
Thi stepped up aggression and took the second round 3-2 as Nikhat was punished for bending too much.
With standing counts on both amidst trading of punches, Nikhat gave it her all despite receiving a cut on her upper lip, which was once affected by herpes, and opened up during the bout. After being declared the winner, she knelt down to offer a prayer.
“I wanted to put every ounce of my energy and win the final,” said Nikhat, dedicating her victory to the home crowd.
Asian champion Lovlina managed to pip two-time Commonwealth Games medallist Caitlin Parker 5-2 through bout review to pocket her maiden World title.
The lanky Lovlina replied to the Aussie’s attacks with counters and stayed 3-2 up in the first round.
After Caitlin bagged the second round, Lovlina, boxing from a long range, made good use of her left jabs to emerge triumphant in the spectacular tussle.
“I was stressed. I couldn’t succeed fully in my plan, lacking in a few things. Feels good to become a World champion,” said Lovlina.
The results (finals): 50kg: Nikhat Zareen bt Thi Tam Ngyuen (Vie) 5-0; 54kg: Hsiao-Wen Huang (Tpe) bt Yeni Arias (Col) 5-0; 60kg: Beatriz Ferreira (Bra) bt Paola Valdez (Col) 5-0; 66kg: Liu Yang (Chn) bt Janjaem Suwannapheng (Tha) 5-0; 75kg: Lovlina Borgohain bt Caitlin Parker (Aus) 5-2; +81kg: Khadija Mardi (Mar) bt Lazzat Kungiebayeva (Kaz) 4-1.