Thursday, April 30, 2020

Modi’s India Is Hurting. It Needs a Roosevelt

Small Indian companies getting decimated by the world’s harshest coronavirus lockdown finally see a ray of hope.

Details are still sketchy, but the Indian government plans to backstop banks if they increase overdraft limits by 20%, providing 3 trillion rupees ($39 billion) of new working capital to smaller enterprises, Bloomberg News has reported. A state-sponsored fund will absorb losses.

Seeing how the U.S. Small Business Administration’s paycheck protection program has been overwhelmed by demand, India needs to match urgency with careful design. My colleague Shuli Ren has noted how Chinese business owners have diverted anti-virus funding to property or wealth management products. This could happen in India, too. Yet it would be a bigger mistake to dither indefinitely because some fiscal assistance may be misused.

Three out of four Indian employees work casually for others or at family firms and farms. It’s perfectly normal for even white-collar workers to get paid in cash with no social security. Migrant blue-collar workers are either walking hundreds of kilometers back to their villages or have already returned, scared and scarred, from the cities. If broad-based help isn’t offered to small businesses, the strides the country has taken in lifting hundreds of millions out of poverty over the last 30 years might be at risk.

Since the goal is to protect workers by giving employers an incentive to pay them, hitting that objective in a highly informal economy is the first challenge. The second is channeling credit when banks, nonbank financiers and debt mutual funds — like the six local Franklin Templeton entities put into suspended animation last week — are gripped by a mistrust of borrowers that predates the pandemic. Fiscal fear-mongering is the third obstacle.

I’m assuming the state-backed advances would be offered at a concessional rate, with the interest subsidy borne in the federal budget. Banks would make loans for a fee, and turn them over to the guarantee fund, which would issue bonds to fund the purchase. Since non-payments will be made good by New Delhi, the bonds can be sovereign-backed. Who will buy them? Even if foreign investors don’t bite because of nervousness about the rupee, local banks are flush with liquidity. State Bank of India will still make money even if a customer defaults, if it sells its exposure to the fund in exchange for special sovereign bonds.

Every nudge by the Reserve Bank of India to make lenders take credit risk has fallen flat because they want the sovereign to lead. That’s where the guarantee comes in. At 1.4% of GDP, taxpayers’ exposure isn’t minor. Yet the backstop won’t meet pent-up demand. Amplifying its effect, and ensuring that banks don’t just throw money at politically connected borrowers, will require lenders to keep some skin in the game. Say the fund buys $80 of every $100 of risk, leaving $20 with banks. Just as with the U.S. protection program, lenders ought to be able to get cheap term loans from the RBI to finance their portion.

Small firms’ working capital needs swell because large customers, including the government, take too long to pay. A parallel push to get all vendor bills on a discounting platform will improve cash flows. To ensure that the extra credit actually reaches workers, New Delhi may have to defray a part of the wage bill for some time. Businesses taking the help would demonstrate regular payments into social security accounts, topped up by the government. This expensive separate arrangement might require the central bank to fund it by printing new money. With the jobless rate in excess of 23%, this isn’t a time to worry about losing India’s investment-grade sovereign rating. The country’s chances of slipping into junk-bond status are low this year anyway.

Prime Minister Narendra Modi has given little indication that he wants to be India’s version of President Franklin D. Roosevelt. But migrant workers tossed out of cities with no food, shelter or transport won’t return without a New Deal: nest eggs for old age and healthcare. China’s hukou — or city permits — discriminate against rural workers. In India, where urbanization and labor mobility are weapons against built-in caste prejudice, a lifeline to small businesses is an economic and a moral imperative. As long as the recipients become the building blocks of universal social security, it will be $39 billion well spent.
By: Andy Mukherjee | Bloomberg.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Veteran actor Rishi Kapoor dies at 67 in Mumbai

New Delhi: Veteran actor Rishi Kapoor breathed his last on April 30. The actor was admitted to HN Reliance Hospital in Mumbai on Wednesday morning.

Veteran Actor Rishi Kapoor.
Rishi Kapoor was battling cancer since 2018, and was in the US for treatment for a year. The actor's brother, Randhir Kapoor, told the media on Wednesday night that he was admitted to the hospital due to his health deteriorating.

Amitabh Bachchan confirmed the news of Rishi Kapoor’s demise on Twitter.

The tweet by Amitabh read, “T 3517 - He's GONE .. ! Rishi Kapoor .. gone .. just passed away .. I am destroyed !”

Rishi was diagnosed with cancer in 2018 and he returned to India from New York in September last year, after his cancer treatment. He was taken to the hospital on Wednesday morning, his brother Randhir Kapoor said yesterday.

In March this year, Neetu Kapoor took to Instagram to post a ‘meal out’ photo with Rishi. She wrote, "Meal out after a long period becomes so special!! You value each moment, enjoy every dish!”

Rishi Kapoor was last seen in the web series The Body on Netflix. He had also shot for a film in Delhi earlier this year.

Rishi Kapoor, the son of Raj Kapoor, broke on to the Indian cinema scene with his first film itself, Mera Naam Joker, in which he played the role of a child artiste. The actor received a National Award for Mera Naam Joker.

In 1973, Rishi Kapoor made his film debut as an adult, with Bobby, opposite Dimple Kapadia. The first film made Kapoor an overnight star and gave the country a new hero.

The actor's last Bollywood film was the 2018 film 102 Not Out alongside Amitabh Bachchan.

Rishi Kapoor is survived by wife and actor Neetu Kapoor, son Ranbir Kapoor and daughter Riddhima Kapoor Sahni.
Source: India Today.

World has historic opportunity for green technology boost: IEA

London: Global efforts to minimise the economic fallout from the coronavirus pandemic present an historic opportunity to scale up the technologies needed to speed a transition to cleaner energy, the head of the world's energy watchdog says.

Fatih Birol, executive director of the International Energy Agency (IEA), said support from governments could drive rapid growth in battery and hydrogen technology to help the world to reduce its reliance on fossil fuels.

"I believe there is an opportunity - and I call it an historic opportunity here," Birol, an economist who took the helm of the Paris-based IEA in 2015, told Reuters.

"The big time is about to come, but they need a push," he said, adding that the economic stimulus packages being delivered worldwide offer an ideal vehicle for change.

After weeks of extraordinary turmoil in oil markets, the IEA - created to ensure steady energy supplies to industrialised countries after the oil crisis in the early 1970s - has emerged as a leading proponent of "green recoveries" from the pandemic.

Birol wants governments to broaden support for well-established paths to reducing carbon emissions, such as embracing greater energy efficiency and expanding renewable energy to create jobs and serve climate goals.

But he also wants governments to consider offering promising technologies the kind of subsidy and policy support that have helped to propel spectacular growth in wind and solar power from a low base over the past decade.

Global installed solar capacity increased from 40 gigawatts (GW) in 2010 to 580 GW in 2019, according to the Abu Dhabi-based International Renewable Energy Agency.

Birol singled out lithium ion batteries and the use of electrolysis to produce hydrogen from water as two technologies poised for rapid take-off.

Lithium ion batteries can be used for a wide range of purposes, from powering electric vehicles to storing energy generated by solar or wind plants to ensure a steady supply of electricity at night or when the wind isn't blowing.


Electrolysers can be used in products as small as household appliances up to industrial-sized units for power plants. They can create hydrogen from sources such as wind or nuclear energy, with the hydrogen then used for heating or transport.

"Nobody has a problem, as far as I see, to push the clean energy technologies," Birol said. "But they want to be convinced that those policies accelerating clean energy transitions would also help economic recovery."

Although rollouts of cleaner technologies will be needed to meet energy demand, climate scientists say that the world must also reverse plans to expand oil, gas and coal production to stand a chance of avoiding catastrophic climate change.

Birol cautioned against blanket categorisation of the oil and gas industry as "troublemakers", saying oil would still be used for years to come and that the coronavirus had underscored the importance of petrochemicals.

"Today the petrochemical industry ... is one of the most critical ones helping us with the masks we are using or the sanitisers we are using," he said.

Last year climate scientists, campaigners and the Institutional Investors Group on Climate Change, which comprises pension funds and insurers managing more than 30 trillion euros ($32.6 trillion) in assets, wrote letters to the IEA to ask it to produce more ambitious decarbonisation pathways to boost climate-friendly investment.

Birol said the IEA will publish a special edition of its annual World Energy Outlook on June 18 to spell out green job-creation policy options. The IEA is also due to host a Clean Energy Transitions Summit on July 9.

Hannah McKinnon, director of the Energy Transitions and Futures Program at Oil Change International, a research and advocacy group that has been critical of the IEA's energy modelling, said she was awaiting details.

"The IEA now has an opportunity and a responsibility to close its own climate credibility gap and set out an ambitious, just and green pathway for the future," she said.
Source: Reuters.

Other Posts