News & Events
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1.Time to expand the role of cat bonds
The budget announcement raising the foreign direct investment (FDI) limit in the insurance sector from 49% to 74% is most welcome. With greater capitalisation, together with ongoing reform of the corporate bond market, we can efficiently boost not just provision of long-term funds for infrastructure but also the market for high-yield debt instruments such as catastrophe bonds, to better manage disaster risks.
The recent landslide and glacier burst in Uttarakhand’s Chamoli district, and other extreme events nationally, point to the express need to leverage financial markets for improved risk mitigation. Catastrophe bonds, or cat bonds, provide a sound mechanism to transfer hazard risks to wide section of investors. The bonds offer a sufficiently attractive coupon to cover for the heightened risk, and have a short maturity period of 3-5 years.
In the event of a disaster, the principal is written off or suitably renegotiated. For the issuer of cat bonds, insurers, reinsurers and, increasingly, sovereign entities, it can mean large financial protection. It should be possible for all regions prone to natural hazards to insure themselves. They could either buy insurance from a sufficiently large and versatile insurance company, which would issue cat bonds, or the relevant local or state governments could directly issue cat bonds.
Of course, how high the coupon on cat bonds has to be to attract investors would be a function of the probability of extreme events, and which, in turn, call for heightened awareness and attendant best practices when it comes to infrastructure and built spaces. The bottom line is the speedy need for innovation to proactively manage a whole gamut of risks using new financial instruments and products.
The National Disaster Response Fund could, perhaps, buy policies against specific kinds of disaster, for specific areas. Note that assets under management by pension funds and insurance companies here are now over `55 lakh crore, and what’s required is systematic allocation of resources to better insure extreme events well.
2.Address doctors’ vaccine anxiety
India’s Covid inoculation programme needs more vigour. The first phase focuses on healthcare and frontline workers — doctors, nurses, other medical personnel, sanitation workers — most exposed to Covid.
Only 56% of those who are eligible have been vaccinated. Vaccine hesitancy in the medical community will spread with greater virulence to the general population. This will impede India acquiring herd immunity, and its interactions with broader global community. Government and its agencies, medical institutions and vaccine developers and manufacturers must step in to remedy this situation.
Failure to allay genuine and unfounded concerns will have disastrous consequences for India’s post-Covid recovery. The absence of Phase III trial data for either Bharat Biotech’s Covaxin or the India-specific version of the Oxford-AstraZeneca vaccine, Covishield, might underlie the medical community’s vaccine scepticism.
This can be rectified by making the relevant data available to doctors and medical institutions. The government must step up efforts to bridge the information gap. Interactions with the Covid vaccination programme administrators from other countries can help in devising ways to counter this problem.
In the meantime, effort must be made to minimise vaccine wastage. Broadening the target group of those eligible for the vaccine each day would help, as would changing vaccine delivery units to facilitate greater flexibility and zero wastage. Broadening the scope of eligibility for vaccination would help accelerate the pace of vaccination. Vaccine hesitancy undermines the fight against the pandemic. It is vital to nip this problem in the bud and vaccinate as many as can be covered before new variants spread. Resolute action is called for.
3.Strategic tech: Becoming Atmanirbhar in batteries and chips is a national security imperative
In a welcome move with strategic implications, the Union road transport ministry is roping in agencies such as DRDO, Isro and IIT-Kanpur to carry out research in new battery technologies to reduce India’s dependence on China for lithium-ion batteries. China is a world leader in this sector, controlling over 80% of the world’s raw material refining, 77% of the world’s cell capacity, and 60% of the world’s component manufacturing. And it’s on the strength of this lithium-ion battery manufacturing capacity that China is looking to dominate the global electric vehicle (EV) market.
With the EV revolution knocking at our door, India must move quickly to ensure that its own EV industry isn’t forced to dance to the tunes of Chinese suppliers. In fact, India has an opportunity here to leapfrog lithium-ion batteries – known to occasionally burst into flames – and invest in rechargeable aluminium batteries that charge faster and have a longer life. And if government identifies this as a priority strategic area and provides the right inputs – subsidies, land, power etc – India could emerge as an alternative hub for the global rechargeable battery supply chain.
Similarly, another strategic area that government would do well to hand hold is semiconductor manufacturing. Semiconductor chips are used in everything from smartphones to cars and military equipment. Annually, China consumes 50% of all semiconductors and has set the goal of becoming a global leader in all segments of the semiconductor industry by 2030. The recent global shortage of semiconductor chips – which has hit the automobile sector hard – shows how vital this industry is. But here too India has an opportunity to lay the foundation of a vibrant semiconductor industry by leveraging its huge market.
In fact, government in December had invited proposals from companies to set up semiconductor fabrication facilities in the country. But semiconductor manufacturing is a capital intensive process with a substantial gestation period. For example, Taiwan’s TSMC – the world’s largest contract chip manufacturer – is the product of the Taiwanese government’s concerted efforts at semiconductor manufacturing since the 1970s. If Taiwan, a nation of 23 million people, can become a semiconductor powerhouse, India can certainly take advantage of its scale here. Identifying rechargeable batteries and semiconductors as strategic areas for Atmanirbhar Bharat is a good idea. Given that China today is our main strategic rival, we cannot have Beijing dominate us in these two sectors. It is a national security imperative.
4.Rare bipartisanship: Parliament could do with more displays of friendship, affection and consensus
The emotional farewell accorded by Prime Minister Narendra Modi, who is also leader of the House in Lok Sabha, to Ghulam Nabi Azad, leader of opposition in Rajya Sabha, was a rare moment to savour in these divisive times. Ordinary citizens accustomed to scenes of bedlam and name calling in Parliament and legislative assemblies, would surely wish to see more of such bonhomie and bipartisanship between netas. Elected houses as the abode of debate and discussion becoming identified with perpetual bickering has greatly hurt the cause of democracy.
Azad, late President Pranab Mukherjee and NCP supremo Sharad Pawar count among the top opposition netas Modi often recalls on warm terms. All three have a reputation for pragmatism, bridging divides and refraining from personal attacks. In the era of coalition politics, those skills were valued and utilised well. But even a single party government cannot afford to brush aside the opposition as the impasse over farm reforms highlights. The laws are badly needed to help farmers without MSP support benefit from market reforms.
The dangerous take-no-prisoners approach that’s become fashionable in politics – one reason for its dominance these days is that populism demands seeing a political opponent as the enemy – must give way to more consensual approaches. Here, BJP as the dominant national party must take the onus for nurturing a more harmonious politics. Such an approach can bring on board parties whose opposition isn’t ideological but driven more by extreme political polarisation. On coming to Delhi in 2014, PM Modi articulated the principle of cooperative federalism drawing upon his experiences as Gujarat CM. In the months ahead, this spirit of political cooperation and his personal outreach will be crucial to resolving the farm agitation, smoothly disinvesting from non-strategic PSUs, and taking other critical steps forward for the country.
5. The right place of the border dispute | HT Editorial
By HT Editorial
UPDATED ON FEB 11, 2021 06:34 AM IST
In an article, titled China and the World in the Year of the Ox, published on a website, The Policy Chronicle, China’s ambassador to India, Sun Weidong, has written that the two countries should “put the boundary dispute in the appropriate place in bilateral relations, address differences in a rational and constructive manner, and not allow differences to become disputes”
In an article, titled China and the World in the Year of the Ox, published on a website, The Policy Chronicle, China’s ambassador to India, Sun Weidong, has written that the two countries should “put the boundary dispute in the appropriate place in bilateral relations, address differences in a rational and constructive manner, and not allow differences to become disputes”. The core argument of the piece is that the cooperative element of the India-China relationship outweighs the areas of differences, common interests are greater than inconsistencies, and the two sides should respect each other, enhance mutual trust, and shelve differences while meeting each other halfway.
As reasonable as this sounds, China is wrong. The appropriate place of the border dispute is at the centre of the relationship at this juncture. Yes, India has recognised — at least since 1988 — that there is no easy resolution of the border dispute. That is why both countries evolved a framework to keep peace at the border, while maintaining their respective stated positions on it, and deepening other elements of the bilateral ties. The unilateral and unprovoked Chinese aggression at the border in eastern Ladakh, the clash at Galwan, and the prolonged military stand-off, however, have changed things. If the border is not peaceful, if India’s territorial integrity is at stake, and if Indian lives have been lost, then no Indian government can proceed with the relationship in business-as-usual mode.
If China wants to repair overall ties, there is a simple solution. In the Year of the Ox, it can disengage, demobilise and restore status quo ante at the Line of Actual Control. Reports of disengagement from the Pangong Tso area on Wednesday evening are positive — but India must carefully monitor whether Beijing translates words into meaningful action.