If the FD range gets embedded in the FRBM Act, it will give sanction to slippages. It will defeat the purpose of fixing a target, which is to obligate the Govt to keep expenses in check
The Finance Ministry is building pressure on the 15th Finance Commission (15th FC) to allow greater flexibility while fixing the fiscal deficit (FD). It wants to adopt a flexible, range-bound FD target instead of a fixed number. With this aim in mind, the Modi Government is reviewing the Fiscal Responsibility and Budget Management (FRBM) Act. The issue was discussed at the Economic Advisory Council (EAC) of the 15th FC, wherein the chairman, NK Singh, cited a similar practice followed by the Reserve Bank of India’s (RBI) with +/- two per cent inflation target while deciding its monetary policy. The immediate prompt for this is the sharp contraction in the Gross Domestic Product (GDP) by about 24 per cent in the first quarter of the current financial year (FY) and a corresponding steep reduction in tax collections even as the expenditure commitments are on the upswing (courtesy the two stimuli already given). As a result, on May 8, the Government raised its gross market borrowing target for the FY 2020-21 to Rs 12,00,000 crore, up from the Rs 7,80,000 crore provided for in the Budget on February 1.
Of this, the Government had already borrowed Rs 7,66,000 crore during the first half of the current FY and plans to borrow the remaining Rs 4,34,000 crore by January 2021. At Rs 12,00,000 crore, the borrowing limit is already set at about 5.8 per cent of the GDP — 2.3 per cent higher than the budgeted FD target of 3.5 per cent. With this and demand for yet another Stimulus III gaining ground, it is not surprising that the Finance Ministry is building pressure on the 15th FC. During the current year, we have an extraordinary situation, so one can understand the desperation. But it is important to recall here that in his budget speech for 2016-17, the then Finance Minister Arun Jaitley had announced the Government’s intent to review the FRBM Act (2003) with a view to make the target flexible (that the announcement was made following the year 2015-16, when it had achieved the FD target of 3.9 per cent, sounds a bit anomalous). He had set up a committee under NK Singh (it included among others, the then Chief Economic Adviser, Arvind Subramanian, and the then Deputy Governor, RBI, Urjit Patel) to examine the issue.
The committee recommended a “glide path” for the next six years, beginning 2017-18. It recommended a FD target of 2.5 per cent, revenue deficit 0.8 per cent, combined Centre-State debt ceiling of 60 per cent and a Central debt ceiling of 40 per cent for 2022-23. Further, it fixed three per cent FD to be achieved during 2018-19. It also allowed the Government to breach the target — by up to 0.5 per cent — in case of “far-reaching structural reforms with unanticipated fiscal implications.”
In the amendment to the FRBM Act vide Finance Bill 2018-19, even while retaining the “escape clause” to cover unanticipated events, the Government adopted the glide path of achieving three per cent FD by 2020-21 instead of 2018-19 mooted by the committee. Further, it set the debt limit of 40 per cent for the Centre to be reached by 2024-25 instead of the committee’s mandate of 2022-23.
This cherry-picking may be seen in the backdrop of the Government missing the FD target for 2017-18 by 0.3 per cent and seeing no hope of achieving three per cent during 2018-19 as recommended by the committee. While presenting Budget 2020-21, Sitharaman has already invoked the escape clause of the FRBM Act to relax the FD targets for FY 2019-20 from 3.3 per cent Budget Estimate (BE) to 3.8 per cent in the Revised Estimate (RE) and for FY 2020-21, from three per cent as per the glide path required under the Act to 3.5 per cent. The one big thing that she did last year was reducing the Corporate Tax rate, which meant a revenue loss of close to Rs 1,50,000 crore annually. The reform was far-reaching and structural but one wonders whether this was an event not anticipated by the Government.
Ironically, the above numbers do not give the true picture of the FD as a lot of expenses, despite being a liability of the sovereign Government, are kept off its balance sheet. These are deferred subsidy payments (DSPs) and extra-budgetary resources (EBRs), a nickname for borrowings by Public Sector Undertakings (PSUs) and other agencies of the Government on its behalf. Including these off-balance sheet items, the FD for 2017-18 and 2018-19 would be about 5.9 per cent and 5.7 per cent respectively. For 2019-20, including DSPs alone, FD would be 5.1 per cent. Add EBRs and the deficit will gallop. For 2020-21, the likely deficit of 5.8 per cent is exclusive of DSPs and EBRs.
There is a short provision in the Budget: Food subsidy about Rs 1,03,000 crore and fertiliser subsidy around Rs 80,000 crore. Plus, there will be a huge shortfall in proceeds from disinvestment by at least Rs 1,50,000 crore as big ticket sales such as Bharat Petroleum Corporation Limited (BPCL) and Life Insurance Corporation (LIC) are unlikely to go through during the current year. This adds up to two per cent, taking the total to 7.8 per cent. Including EBRs, the FD could touch 10 per cent. Already, under the existing dispensation of FD being a fixed number, the Government has a lot of leeway — explicit as well as not so explicit. On the explicit side, we have seen the fiscal consolidation glide path made fairly liberal to suit the budget math as also the revised FD being significantly higher than the target — yet going unpunished (for instance, during 2008-09, the actual FD was six per cent against the target of three per cent as per the FRBM Act, 2003). On the not so explicit side, DSPs and EBRs have been used to camouflage the true deficit.
If the FD range gets embedded in the FRBM Act, this will amount to giving legal sanction to slippages. It will defeat the very purpose of fixing a target which is to obligate the Government to keep the excess of its expenses over revenue within a specified limit. The moment the law itself prescribes a range, say of three per cent-3.5 per cent, even the most discerning Government will take the higher end of the range as the benchmark as from a legal standpoint, violation will happen only when the actual exceeds 3.5 per cent.
To put it differently, providing for a range is a more subtle and sophisticated way of embedding in the legislation a more relaxed target without catching the attention of the not so discerning eye.
The comparison with inflation targeting under the monetary policy to justify FDI range is not all fours. While, the FD target has a direct bearing on budgeting by the Centre (a swing of 0.1 per cent either way makes a difference of Rs 20,000 crore in its borrowing limit), inflation targeting by the RBI does not impact the finances of banks. For a proper comparison, we need to look at the RBI mandated “provisioning” for a loan that becomes an NPA. That is a fixed number, say 25 per cent (for an account remaining unpaid for up to one year), not a range.
It is argued that a range brings an element of predictability in knowing how far the Government can go in expanding its borrowing programme and the resultant impact on crucial parameters like bond yields, interest rate; hence helpful in boosting investor confidence. This is a frivolous argument. Whether it is one fixed number or a range, there is predictability in both the scenarios. The difference is notional as in a range, one looks at the upper end. Unpredictability arises when things such as DSPs/EBRs are done outside the FRBM framework; sadly, those are swept under the carpet.
Another argument in support of range is what some experts describe as reinforcing “counter-cyclical” objectives. Put simply, when the economy is on a downswing, then the Government needs to undertake major investment to rein in the slide and put the economy back on the growth trajectory. It is primarily to tackle extraordinary situations such as during the current year that a 0.5 per cent cushion is permitted as per the 2018-19 amendment to the FRBM Act.
The incorporation of FD range does not offer anything better than what is already there in the FRBM law, i.e. fixed number FD target plus escape clause, unless it is the intent of mandarins in the Finance Ministry to have both, namely range as well as the escape clause. That would be disingenuous. The 15th FC should refrain from going for a range-bound FD. The extant arrangement should continue with suitable increase in the permissible breach under the escape clause. All hidden slippages such as DSPs and EBRs should be prohibited.
(The writer is a policy analyst)
Since market conditions are volatile, an experienced fund manager should have the expertise to switch between both the strategies to satisfy investors
The science of stock market investing has long been a mystery for normal retail investors and there are numerous debates about which strategy is better. There are two divergent ideologies: Active and passive investment. The passive strategy, which is mainly followed by the legendary Warren Buffet, is a long-term one that mirrors a particular index where the returns are generated due to the natural upswing of stock markets, ignoring short-term setbacks and even sharp downturns. The simplest way of embarking on a passive approach is to buy an index fund that follows one of the major indices like the S&P 500, Dow Jones and BSE Sensex or Nifty in India. These index funds automatically adjust their portfolios to any new additions or deletions to the original index in the same proportion. Passive investment is for conservative and risk-averse people who are looking for low-risk investment and are not overly concerned with seeing rapid gains. The idea behind this is the classic value investing style, which looks at long-term benefits of holding on to undervalued stocks with huge future earning power.
Active investing, on the other hand, aims to generate above market returns by an in-depth research and analysis and using the knowledge and expertise to manoeuvre into or out of a particular stock, bond or any asset, taking full advantage of short-term price fluctuations. Since it does not necessarily mimic any index, it provides the flexibility of buying stocks which could be hidden gems. Since active investors are not stuck with index stocks, they are able to exit any sector or stocks when the risk becomes too high and can also hedge their bets using various techniques such as short sales or put options. However, all the research overheads and frequent buying and selling make active investment very expensive. It is also a highly risky affair since higher returns can only be expected when the going is good but things can go terribly wrong during market downturns and therefore, due to its volatile nature, the active investment strategy is better suited for people who are aggressive and risk-tolerant. In passive management, one rises and sinks with the ship whereas actively managed funds have the ability to provide greater opportunity for profit, albeit, increasing the risk. According to researchers who propagate the efficient market hypothesis (EMH), stock markets are efficient in nature and, therefore, actively managed funds cannot outperform them over a long period of time.
So does active portfolio management create value? The debate about the merit of active vs passive portfolio management is supported by numerous researches worldwide. In the mid-1960s, Eugene Fama adjusted the EMH and suggested three forms of informational efficiencies; the weak form, semi-strong and strong. This hypothesis suggests that investors cannot beat the markets by actively managing portfolios, as stock markets incorporate all the publicly available and privately-held information into price movements. Therefore, fund managers cannot beat the stock markets and generate higher returns on a long-term basis. This theory is supported by many researches. In 1966, Treynor and Mazuy studied the performance of 57 mutual funds and their sensitivity to market fluctuations and concluded that maybe, no investor, professional or amateur, can outguess the market. A similar study in 1968 by Jensen found that average mutual funds produced low returns. In a study to understand the importance of selecting a good fund manager, Dunn and Theiser in 1983 found that there is only a 50-50 chance that an active fund manager can produce better returns than the bourses. This was reiterated by the Nobel laureate, Sharpe, in 1991 who showed that active fund managers cannot give better returns than passive investment strategies, mainly due to active management being expensive.
That brings us to the question, can anyone predict the stock market movements and earn abnormal returns? Nobel laureate Samuelson quotes Aristotle in explaining this, “The whole is greater than the sum of its parts.” This means that an investor cannot do better than the bourses. Sharpe explains this on the basis of costs and says since both active and passive management generate equal returns before costs, active management loses as it is costlier, and therefore generates less after-cost returns.
Modern portfolio theory assumes that all market participants are rational in their investment behaviour and invest only in stocks at their fair value. However, in reality, the markets consist of various investors who are driven by different emotions, impulses, experiences, risk tolerance, timelines and legal constraints. Since efficient market hypothesis presumes that all available information is reflected in the stock process accurately and timely, no investor can earn abnormal returns. They can, of course, earn normal returns, which are the market returns. This assumption is used as an excuse by people who have faced losses during any meltdown, as they take a break in using their prudence, creativity and perception to invest. But there is always a gap between theory and practice. The question now arises: Are stock markets efficient? Do they reflect all available information accurately and timely? There is evidence that market efficiencies may be lower in emerging markets that can give a chance to active fund managers to find arbitrage opportunities. After the 2008 financial crisis, the developed world has focussed on emerging markets, which have risen as engines for global growth, driven by younger populations, higher consumption levels, modernisation of infrastructure and integration with the world economy. According to UNCTAD’s World Investment Report 2019, FDI flows to developing economies rose by two per cent to $706 billion in 2018. Developing Asia, already the largest recipient region of FDI flows, registered an increase of four per cent to $512 billion, with positive growth occurring in all sub-regions. China attracted $139 billion, an increase of four per cent. Flows to South-East Asia rose by three per cent to $149 billion, a record level. This increase is for the third consecutive year. FDI flows to Africa expanded by 11 per cent to $46 billion. Emerging markets, being informationally inefficient, may provide opportunities for excess returns and portfolio diversifications through market timing and stock selection.
A study by Kremnitzer shows that actively managed mutual funds outperformed passive ones. The researcher, using data from TD Ameritrade Research and the Standard and Poors NetAdvantage database on all existing US mutual funds and exchange traded funds (ETFs), dedicated to emerging markets, found that the before tax returns of actively-managed mutual funds yielded superior returns of approximately 2.87 per cent over passively managed ETFs. So, which investment style should be chosen? An apt strategy could be to combine both active and passive investment styles, depending on the stock market conditions. Active fund management could be especially beneficial when stock markets are volatile. Passive fund management is a better strategy where the stocks and markets are highly correlated and move together.
Ultimately, it comes down to personal priorities, timelines and goals. An experienced fund manager should have the expertise to switch.
(The writer is Associate Professor, Amity University, Noida)
The print medium has the responsibility of countering the socially and morally devastating effect of the deplorable fare that some channels are churning out
The character assassinations and defamatory campaigns, witnessed on some television channels by some anchors and reporters against individual film personalities and the Mumbai movie industry, have understandably been strongly condemned. While the public response has mainly been focussed on the campaign and its gross violation of the principles of fair play, there is a compelling need to examine the character of television itself as a medium and its impact on society.
As a medium, television combines unfolding visuals with verbal narratives, besides bringing distant events to the homes of viewers, giving them a feeling of being in the midst of an unfolding development or its aftermath, with all its sights and sounds. In contrast, radio, which provides only audio accounts, does not give the feeling of being there and seeing it all. Not surprisingly, television coverage attracts more people than radio reportage and provokes more intense public reaction than radio.
The question arises: What are the consequences of its impact? One frequently heard in the 1960s that television coverage brought the horrors of the Vietnamese War into American drawing rooms and was a major factor in triggering massive protest demonstrations and rioting, hastening the United States’ withdrawal from Vietnam. Why go so far? We are now witness to the investigations into the rape and murder of a 19-year-old girl in Hathras, Uttar Pradesh, in the aftermath of a nationwide uproar sparked principally by television reports.
Pieces in the print media — daily newspapers and magazines—have cost important people their perches. Newspaper reports have caused riots, violent demonstrations and general strikes, paralysing entire countries. This, however, was when newspapers and magazines constituted the dominant media. Now television has replaced them. This is the result not only of the pronounced edge that audio-visual reportage has over audio or print coverage, but of the fact that reports appear on television the same evening — or even earlier. An event has occurred, and by the time it is in newspapers the next morning, people already know the broad contours of what has happened.
There is, however, a fundamental difference in popular response to television and print medium coverage respectively. It lies in not just the actions they trigger but the mindsets they create. This, in turn, follows from a basic difference in the character of the two. Visual images constitute the USP of television. An image is recognised; the mental process involved in cognition. A printed word is first decoded from the combination of the letters that constitute it, and is then linked by a mental process —association — to an object or an image. The ability to associate is central to the process of rational thinking and the latter is the principal instrument in the formulation of systems of thought or critical examination of the import of events.
Cognition primarily involves visual identification. It is not an act of intelligence though it can lead to one when externally stimulated. Much depends on the nature of the stimulus. In Amusing Ourselves to Death: Public Discourse in the Age of Show Business, Neil Postman states that entertainment is “the supra-ideology of all discourse on television. No matter what is depicted and from what point of view, the overarching presumption is that it is there for our amusement and pleasure.” This is hardly surprising. A very large section of people wants entertainment. Hence programmes that entertain earn higher Target Rating Points (TRPs) than those that do not, and advertisers, who sustain media, also prefer these.
There are doubtless television channels that consciously try to tread a different path and come up with programmes that inform and promote socially and politically relevant discourse. But even their programmes have an ambience of entertainment as they are preceded, followed and punctuated by music and advertisements featuring visuals of attractive models and products in the most arresting possible settings. For example, the advertisement of a car or a motorbike often shows it in shining colours, driven by a beautiful model or her equally attractive male companion, through a picturesque landscape. People enjoy watching these, sometimes more than the programmes themselves.
This writer has no quarrel with entertainment. Life would be terribly boring without it. He also believes that each person is entitled to his/her brand of entertainment within the limits prescribed by law and a very liberal definition of decency. There is, however, a dark dimension to what is happening now. Viewers, who remain glued to television sets while some anchors, reporters and talking heads gloat over the travails of film personalities and berate them hour after hour, behave in the same manner as the crowds in ancient Rome’s Colosseum, who roared in delight as a gladiator killed another or a lion. By catering to them, the mindset that television engenders is that of wanting to be perennially and brutally entertained. The result is a progressive coarsening of sensibilities and erosion of the virtues of compassion, tolerance and a sense of fair-play.
This is the most detrimental effect of television as a medium that needs to be countered. The print media is a very different cup of tea. It is the outcome of the written culture. Alvin Gouldner states in The Dialectic of Ideology and Technology: The Origins, Grammar and Future of Ideology, that writing confers a permanence to statements that verbal articulation does not. He argues that it also confers a certain finality. A mistake made during a conversation may be corrected then and there. A printed word cannot be easily recalled for correction once widely circulated. One, therefore, carefully seeks to avoid mistakes, embarrassing statements and faulty arguments while writing. This contributes to the drafting of informed and reasoned texts.
Besides, while one can interrupt and resume a conversation, one cannot do so in a written text where one has to proceed from premise to conclusion, rationally and convincingly, step by step — a process that leads to rational articulation and critical thought.
Doubtless, written communication lacks the advantages that a speaker has at a lecture. He/she can convey a great deal through gestures, facial expressions and body movements; a listener/ viewer can also glean considerable information about the speaker and what he/she is saying and stands for. Equally, excessive focus on the speaker can distract attention from the substance of the speech. There is no such distraction when it comes to looking at a printed text. The reader can concentrate solely on the latter, absorbing its contents and reflecting on the same. Reading conduces to thought and thought spurs further thought. This fact, as well as the capacity for rational argumentation from premise to conclusion that the print medium promotes, has led to the rise of great systems of thought which have come to be known as ideologies.
That is another story. What is important now is the fact that the process of critical thinking can — and often does — mediate in a person’s internalisation of the information generated by the print medium. Given this and some other of its attributes, those associated with it have a responsibility in countering the socially and morally devastating effect of the kind of deplorable fare that some channels are churning out. The process must begin by making people aware.
(The writer is Consultant Editor, The Pioneer, and an author)
Lady Irwin College, established in the year 1932, is one of the oldest and most reputed institutions of higher education for women affiliated the University of Delhi. Leading the way to a sustainable future, the college is proud to have established a 218 kWp Solar Photovoltaic (SPV) rooftop plant on its premises, taking forward the Government of Delhi’s scheme for solarization of government buildings. The plant was inaugurated on 14th October’ 2020 by Hon’ble Chief Minister of Delhi, Shri Arvind Kejriwal. In his inaugural address, Shri Kejriwal thanked and congratulated Lady Irwin College for taking leadership role through this initiative of Delhi government. He said, “Lady Irwin’s initiative will not only motivate other institutions to go solar but would also contribute in making Delhi the solar capital of India.”
Emphasizing the college’s commitment towards sustainable development, Dr. Anupa Siddhu, Director, Lady Irwin College stated, “The founding members of the college have built a strong foundation based on core values of sustainability for achieving excellence in all spheres of life. Taking into consideration the effect of global warming, we felt it was time to shift our dependency from fossil fuels to renewable sources of energy. The addition of this solar plant will not only fulfill our electricity needs but also help us reduce our electricity cost.” She praised and thanked the Delhi government, IPGCL and NDMC for making such enabling schemes. Dr. Meenakshi Mital, Convener, SPV project, Lady Irwin College reported, “the solar roof top project was conceptualized about two years back and subsequently we planned to go with IPGCL under the RESCO model. M/s. Oakridge energy was the empanelled vendor of IPGCL who undertook our project. The plant has been put up on three major buildings of college. The solar plant will generate about 3 lakh units of power each year and contribute greatly in Delhi’s fight against pollution”. Dr. Puja Gupta, Convener, SPV project, Lady Irwin College said, “the college has always been sustainable in its true sense and this project is going to take that legacy forward”. Dr. Gupta further thanked the hon’ble chief minister Shri Arvind Kejriwal and NDMC Chair, Mr. Dharmendra fro gracing the occasion with their presence.
The project was in the pipeline since last year wherein several visits were made by the installer to check the feasibility and the PPA was signed earlier this year. Dr. Meenal Jain, Coordinator, SPV project, Lady Irwin College who has been associated with the project since its conception and was instrumental in getting it installed appreciated the director of Lady Irwin College to have taken this initiative. She further said, “This SPV plant will not only cut down the emissions generated through the use of conventional grid-power, it will also set an example for others to go green”. She thanked Oakridge Energy, their development partner, for meeting the timelines for installing the solar plant, even during the pandemic.
The SPV plant has been installed and commissioned by M/s Oakridge Energy Pvt. Ltd. under the aegis of IPGCL, and has been net-metered by NDMC. Mr. Shravan Sampath, CEO,
Oakridge Energy praised the Delhi government and NDMC for their support. He said, “PPA has been signed for 25 years with the college and the solar plant will have immense cost savings over these years.”
Whether electronics harm the environment or not depends on how environmentally accountable the manufacturer is
Most phone and high-tech companies globally are investing in environmental accountability. For instance Apple, which recently launched its new range of products, would be shipping them without the customary charger and headphones being included in the box. Though this might put off quite a few of its customers, it is part of the company’s commitment to reduce carbon emissions and ramp up the use of clean energy. With over 700 million headphones and two billion power adapters already out there with the customers, the firm has taken a bold measure to stop including the same in its retail product pack to cut down electronic waste generation at source and reduce carbon emissions, which are generated in the process of mining for precious earth materials. Moreover, due to the removal of the charger and headphones, Apple has been able to reduce the size of its boxes, enabling it to fit 70 per cent more boxes and, therefore, transition to a more effective logistics template. By 2030 the consumer technology giant aims to achieve net zero climate impact from its entire business, including manufacturing, supply chain and product cycles.
Samsung, too, is setting up new standards in conserving the environment through its “circular resource management system” that hinges on recycling, green purchasing from vendors amid effective hazardous material management. The company is focussing on reducing greenhouse gas emissions (GHG) emissions to the extent of 70 per cent in the near future. Another global tech giant, Nokia, is redefining how products become more environmentally accountable. It calls this “Responsible Technology” and has gone a step further by joining 86 other like-minded companies to ensure that the strategic vision for the group is aligned with reducing the global temperatures by 1.5° Celsius in order to collectively battle climate change. This is in addition to the active initiative currently under way to completely remove single-use plastics across its production spectrum.
For a world that is drowning in electronic waste, especially in countries such as India where e-waste regulations are anything but effective, these firms are setting a benchmark in product responsibility and accountability towards the environment. However, they still have a long way to go since not all products end up getting 100 per cent recycled. The day they can recall their “end of life cycle product” back to the starting point for recycling is the day they can claim 100 per cent environmental accountability. However, their efforts are thought-provoking and make one wonder where do Indian companies figure in comparison? And why do none of the Indian-made products achieve such comprehensive environmental accountability? The answer lies in vision or the lack of it. Much of the corporate social and environmental responsibility in India is aimed at satisfying Government protocols and very little actually percolates to the ground level. One can still see the impact corporate vision has on some social project, but one is hard-pressed to effectively find an environmental project that has the stamp of a sincere corporate effort on it.
Indian manufacturing companies need to build a much-needed environmental dimension into their products. This is no easy task given the fact that sometimes even finding after sales service for many products we buy today can prove to be a harrowing experience. To graduate from this stage to a level where the companies produce a 100 per cent recyclable product is a long journey that needs encouraging policies and incentives from the Government and world-class corporate leadership. In this journey, innovative methods and ideas can lay the foundation for Indian companies to produce environmentally-accountable products. One of the initiatives that can be pursued is to create a category of “green” electrical and white goods which are made of 100 per cent recyclable material and have a clear-cut end of life cycle disposal plan. This category can be promoted and encouraged by the Government through tax and logistics sops besides finance options to manufacture them. On the consumer end, they can also carry compelling finance schemes or lucrative discounts. The clear environmental and viability-related benefits would surely drive manufacturing firms to increase their “green product” portfolio as it would also improve the company’s image and standing for being environmentally conscious. Similarly, the drive to produce at the lowest cost and sell at the maximum profit is the root of all evils because in the pursuit of driving down costs, manufacturers disregard all ecological concerns and use suspect material that is environmentally hazardous. Recycling then is impossible. Therefore, to give credence to the concept of “green products”, the Government must rein in the supply chain and third-party vendors for whom quality assurance and environmental responsibility are alien concepts. Surprise checks, quality control at Government laboratories and harsh penalties for defaulters can help infuse new-found respect for the environment. Products that we buy today continue to exist long after we dispose them. Whether they harm the environment or not depends on how environmentally accountable the producer is.
(The writer is an environmental journalist)
If we want to develop the ‘Made in India’ brand and compete globally, we have to upgrade all systems of manufacturing and services
Knowledge is the key to success. This has been proved time and again by the achievements of start-ups. In almost all fields, new businesses have not only challenged market leaders but also undercut them. Unicorns like Paytm, PhonePe, Flipkart, Netmeds, MakeMyTrip, OYO did not create a new market but rearranged the existing one and became leaders. A similar approach is needed in the manufacturing sector if we are keen to take on the world and are dreaming of becoming a $5 trillion economy.
The Micro, Small and Medium Enterprises (MSME) sector is key to the Indian economy as it is one of the biggest job generators. It has also created resilience to withstand global economic shocks and turmoil. With around 63.4 million units throughout India, MSMEs contribute to around 6.11 per cent of the manufacturing Gross Domestic Product (GDP) and 24.63 per cent of the GDP from service activities, as well as 33.4 per cent of the manufacturing output. Their export share is 40 per cent. The MSME sector is the second-largest employer after agriculture, giving jobs to more than 120 million people in rural areas. MSMEs are now contributing close to 15 per cent to the overall GDP of India.
If the Government wants to support MSMEs and equip them to meet global standards — as in the current scenario we are not only working to “Make in India” but also trying to “Make for the World” — we need to upgrade them in all aspects: Infrastructure, technology, manpower and capital. Plus, in addition to financial and logistics support, MSMEs need information technology (IT) support to upgrade themselves. They can be carriers of knowledge and experience and create a repository for others.
To match international standards and compete globally, upgraded IT infrastructure is needed for MSMEs and if the same is provided by the Government free or at reduced costs, then it will take a huge financial and operational burden off small entities.
In the current scenario, skilled manpower will be a challenge for MSMEs and with shared IT support, they can reduce their dependence on internal staff. Another big challenge in front of MSMEs will be limited budgets for upgradation of their existing IT infrastructure and affordability of operating costs. The requirement of research and development in MSMEs is different from that of big industries as they need cost and resource efficient solutions. MSMEs need continuous upgradation to compete globally and benchmarking is required so that they can produce world-class goods. Big industry players, who are cash-rich, always upgrade by deploying huge capital and beat small competitors like MSMEs.
By introducing shared IT infrastructure from the Government’s side, MSMEs can save on capital expenditure and operating costs, giving them better profitability. Owing to the nature of their business and size, most MSMEs don’t use a high level of IT support and lack badly in IT infrastructure. As these are promoter/owner-driven and focus more on their core job, their investment in core job IT and research is always lacking.
For example, a small auto-component manufacturer requires designing software to improvise designs or to reduce cost. New software could cost the business Rs 5-8 lakh, which is unaffordable for most. By using shared IT services, the manufacturer can improve the design, control quality and deliver a better product under stringent cost control. Such a requirement can be very diverse, starting from basic software, communication or meeting tools to highly-advanced Enterprise Resource Planning (ERP) solutions. It can be designed or categorised based on the requirement level or reach and can be priced accordingly. The biggest strength of MSMEs is their agility and ease of response to change as per the client’s requirement. If the same is supported by IT and other high technology, they can be a double engine of growth for India.
This can be designed on a PPP model and create employment for service providers too. Post the pandemic, the Government is budgeting huge growth in the MSME sector and planning multiple packages for them. IT is a consistent requirement and always looking for upgradation. Hence if the Government can provide IT infrastructure resources at a nominal fee or free of cost, then it will be a huge saving for MSMEs. On the other hand, due to the bulk purchase of such services, their total outgo will be considerably lower as compared to individual purchase.
If we want to develop the “Made in India” brand as a global signature and beat competition around the world, we have to upgrade all systems of manufacturing and service. This can only be done after improving the IT infrastructure. This one-point cost will save and support millions who are looking to grow and make India a manufacturing and services hub.
(The writer is Associate Professor, Atal Bihari Vajpayee School of Management and Entrepreneurship, JNU)
It is good that the RBI has kept the repo and reverse repo rates unchanged or else in the current economic scenario any further cut would have been infructuous
In the last bi-monthly Monetary Policy Committee’s (MPC) review announced by its Governor Shaktikanta Das on August 6, the Reserve Bank of India (RBI) had kept the policy repo rate unchanged at four per cent. It had also kept the reverse repo rate or the interest rate the banks get on their surplus funds parked with the RBI unchanged at 3.35 per cent. It continued with the “accommodative” stance of the monetary policy as long as necessary to revive growth and mitigate the impact of Covid-19, while ensuring that inflation remains within the target.
In the build-up to the next bi-monthly review (originally scheduled for October 1, which was postponed to October 9, due to the delay in appointment of three external members of the MPC), there was an expectation that there wouldn’t be any changes this time round. Things have happened on expected lines even as the RBI has maintained status quo on key policy rates.
There are four major reasons as to why any further action in gliding the policy rate on the downward trajectory — as demanded by a certain section of the industry — was totally unnecessary.
First, ever since the incumbent Governor took charge (December 2018), the RBI has handed out a cumulative reduction in repo rate of 2.5 per cent. Of this, during 2019, a total cut of 1.35 per cent was delivered in five instalments, the last one being under the policy review announced on October 4, 2019. This brought down the rate from 6.5 per cent in the beginning of the year to 5.15 per cent on its close. The apex bank also tried to boost the economy by pumping liquidity using policy instruments such as Open Market Operations (OMOs).
The above policy moves were made in the backdrop of the slide in the real Gross Domestic Product (GDP) growth that had commenced in the third quarter of the financial year (FY) 2018-19 and continued all through FY 2019-20, the intent being to not just contain the slide but also to revive it. Yet, the deceleration continued with growth plunging to a little over three per cent during the last quarter of FY 2019-20 and the yearly figure settling at a low of 4.2 per cent. But that did not deter Das from continuing with a cut in the policy rate.
On March 27, he reduced the policy rate by 0.75 per cent. This was followed by a further cut of 0.4 per cent on May 22, thus delivering a total reduction of 1.15 per cent post-pandemic. Das also announced on March 27 and April 17 measures like reduction in the cash reserve ratio (CRR), auction of Targeted Long-Term Repo Operations (TLTRO), hike in accommodation under the Marginal Standing Facility (MSF) and so on, to inject total liquidity close to Rs 5,00,000 crore.
Despite these measures, growth during the first quarter of the current FY plunged to minus 24 per cent. During the second quarter ending September 30, though the situation was not as bad, the growth was still lower than during the corresponding quarter of 2019 (for the whole of the current year, Das has projected a decline of 9.5 per cent — that, too, is predicated on positive growth during the last quarter). These trends clearly show that neither reduction in policy rate, nor pumping liquidity in the system are working.
Second, according to Das, of the 1.35 per cent reduction in the policy rate during the pre-Covid phase, only about 0.6 per cent was transmitted by banks by way of corresponding reduction in the lending rate. If transmission is not even 50 per cent then, why keep harping on a cut in the policy rate. Are we to infer that banks are pocketing the differential? The truth is, we are trying to see a strong correlation which either does not exist or is very feeble, if at all there is one. A bank fixes the interest rate it charges from borrowers based on the interest rate it pays on deposits, plus cost of its intermediation. It has also to factor in the cost of non-performing assets (NPAs) or loans which can’t be recovered. Even as the policy rate is posited as an external benchmark for determining lending rate, the latter can’t exactly follow the movement in the former. A perfect correlation would have been possible if only the RBI was its sole source of funding; but that is theoretical, to say the least. Third, despite the RBI opening several taps and banks flushed with funds for onward lending (this was done during FY 2019-20 and on a much larger scale during the current year), the latter have not stepped up lending. During 2019-20, bank credit grew by 6.1 per cent, less than half of the 13.4 per cent growth registered during 2018-19. The trend has got aggravated during the current year. Overall non-food credit off-take from the banking system declined by Rs 1,40,000 crore to over Rs 90 lakh crore during April-July, 2020.
On April 17, while announcing reduction in the reverse repo rate from the existing four per cent to 3.75 per cent, Das had argued it would goad banks to lend to businesses instead of parking excess funds with itself (they were then holding a gargantuan Rs 6,90,000 crore with the RBI). The rate has since been further lowered to 3.35 per cent to ensure that banks don’t keep the money with the apex bank; instead lend. Yet, the excess funds parked by them have crossed Rs 8,00,000 crore. Apart from the disruption caused by the contagion and the resultant compression in demand for credit, sanctions and disbursements have also been impacted by the banks’ increasing risk-aversion and conservative approach to lending.
Fourth, the initial uninterrupted spell of lockdown for three months and even thereafter, intermittent lockdowns at the State/local level, have exterminated demand on a scale never seen before. Apart from lakhs of businesses downing shutters, millions losing jobs or facing cut in wages and salaries, even those who survived the Covid onslaught and had surpluses, could not spend (due to the sheer compulsion of “social distancing”, forcing prolonged closure of a vast swathe of businesses especially in the service sector, like restaurants, cinema halls, multiplexes, tourist destinations and so on).
The gravity of incapacitation engineered by the pandemic can be gauged from the fact that currently, cash with the public is at a historic high of about Rs 26,00,000 crore or 15 per cent of the GDP (assuming 10 per cent contraction in nominal terms during FY 2020-21) — up from the Rs 17,00,000 crore it was at the time of demonetisation in November, 2016.
A major factor that has a profound impact on demand has a lot to do with scams galore. These involve siphoning off funds from banks, non-banking finance companies (NBFCs) or even directly from the public (say by builders) and so on. Running into hundreds of thousands of crores, these add to the personal wealth of a select few, which is either stashed abroad or kept within India as “undisclosed income” (black money). Had this money remained with millions to whom it actually belongs, this would have added hugely to the purchasing power, reduced the NPAs of Banks/NBFCs and increased their ability to lend more.
Unlike the pall of gloom surrounding the August meeting of the MPC, this time the RBI exudes confidence even as the Governor sees the “Indian economy entering into a decisive phase, seeing easing of contraction in various sectors. Deep contractions of Q1 are behind us and silver linings are visible in easing caseloads across India.” He also sees retail inflation to be moderating from the third quarter onward, driven by a bright agriculture outlook and oil prices remaining range-bound. The Governor has also promised measures as necessary “to assure market participants of access to liquidity and easy finance conditions” (Rs 20,000 crore-OMO auction next week and On-tap TLTROs of Rs 1,00,000 crore to be made available till March 2021 — linked to the repo rate — are some of the steps in this direction).
These are add-ons to the existing pool of measures in the same category. Just as those measures failed to deliver, it is unlikely that these incrementals will do any better. It is good that the RBI has kept the key policy rates like repo and reverse repo rates unchanged or else in the current scenario, when the economy is besieged with structural constraints, any further cut thereof would have been rendered infructuous. A holistic approach is needed to address the structural constraints of the economy. This should encompass policy reforms to lift business sentiment and boost investment; tackle NPAs on a war footing; goad banks into proactively taking up project lending; and result in stern measures to deal with scams with greater emphasis on prevention. Sans these, any stimulus won’t be of much use in lifting the economy.
(The writer is a New Delhi-based policy analyst)
This approach can help in reducing stock market movements and losses on the bourses
Ever wondered why stock markets have huge upswings or downswings? Most of the times, they are like a domino effect, a chain reaction, caused by herd behaviour. Herding is an inclination of investors to follow the crowd, thus destabilising stock prices. It is a very powerful bias, and in the process of mimicking each other, the impact on the stock prices gets intensified, leading to bubbles when the demand is high and crashes when investors detect overpricing.
This is contrary to the classical finance theory, which believes that investment decisions are taken by rational investors. But are investors really rational? A Boston-based research group reported in 2007 that an average stockholder earned 4.3 per cent per annum returns where the returns of American S&P 500 Index averaged at 11.8 per cent per annum. The reason for this variance was the irrationality of investors of buying high and selling low.
A peek into the past can show that players in the stock market have been irrational since the time the bourses have existed. One of the earliest instances of unreasonable herd behaviour is the Dutch tulip bubble of the 1630s, also known as “Tulip Mania.” When the tulip was introduced as a new variety of flower in the Netherlands, the Dutch people, because of some strange reason, became excited about this new exotic flower and vied to invest in tulip bulbs.
Progressively, the investments grew huge and at the pinnacle of this mania, a single bulb was sold at a price that was more than ten times the annual income of a skilled worker. But when people realised that investments in tulip bulbs were way more than their actual worth, they panicked and started selling tulip stocks, leading to a sharp fall in the stocks, resulting in huge losses.
This and many other subsequent events after this, like the dot.com bubble and the more recent real estate bubble, have led to the belief that investors do not behave rationally and that their decisions are mostly driven by emotions like panic, fear and greed. These instances are in contradiction of the traditional financial theories that are based on efficient market hypothesis, that assume that all the information is reflected in the stock prices efficiently and in a timely manner. So much so that the investors are unable to make any abnormal profits by buying stocks. There are four pillars of traditional finance: Rational investors; efficient markets; traditional portfolio designs; and linear expected returns-risk relationship.
However, stock markets in reality are largely inefficient, which is evident due to various market anomalies, speculative bubbles and over or muted reaction to any new information about stocks. These prevalent conditions in the stock markets suggest that investors are more emotional than rational about their investment decisions, leading to creation of bubbles.
A bubble is created when the stock price is driven higher than its fair value as people invest in these stocks, neglecting the fundamental valuation. Such investments strengthen the overpricing even more and put pressure on the stock prices to generate higher returns for investors, failing which, the selling starts and picks up momentum when investors follow one another, leading to the bursting of the bubble. Behavioural finance, as a discipline, emerged as an attempt to explain the psychology of financial decision-making and how the human angle affects the same. Several researchers believe that principles and morals of people influence their economic, social and financial decision-making. Sentiments like pride, shame, insecurity and egoism also play an important role in investment decisions. By accepting the fact that investors are irrational and have biased decision-making, behavioural finance entends the limitations of traditional finance theories into possible inefficiencies in the financial markets and provides a realistic view.
Research has identified two types of behavioural biases. The first one, a heuristic-driven bias, also known as cognitive bias, acknowledges that investors are investigative in nature and use rules of thumb to process data for decision-making. For example, people predict future performance of stock market movements through historical data. Emotions like overconfidence, anchoring and adjustment, reinforcement learning, excessive optimism and pessimism form a part of this bias. The second one, frame-dependent bias, is where the investors’ decision-making process is affected by the way they frame their options, like narrow framing, mental accounting and the disposition effect.
It can be concluded that awareness about behavioural biases is indispensable since it is unequivocally associated with human beings and its implications are far and wide. Ignoring such behaviour of the decision-making process can prove to be quite expensive in the financial markets as it can result in stock market anomalies. Financial investment managers and advisors can identify investment mistakes if they have a good understanding of this behaviour of retail investors and become more effective by understanding their clients’ psychology and needs. It helps them in creating a behaviorally-adjusted portfolio, which best suits their clients’ requirements. Investment bankers can put this knowledge to use by correctly timing the IPOs and understanding the general sentiment in the stock markets. Behavioural finance also helps financial analysts in forecasting future stock market movements and recommending appropriate stocks for investments. Finally, individual retail investors can use this expertise to make wise, rational and effective financial decisions.
Investors, financial advisors and fund managers are all humans and are subject to biases. Understanding the psychology of financial decision- making can help in reducing the stock market movements and reducing losses on the bourses.
(The writer is Associate Professor, Amity University, Noida)
Small business enterprises are given purchase preference quota in procurement by Government and Public Sector Undertakings (PSUs), a pooled quota in bank credit and interest subvention under some Government schemes. The Micro, Small and Medium Enterprises (MSMEs) were categorised, separately from the manufacturing and services sector, based on investment in plant, machinery and equipment under the MSME Development Act 2006 (MSMED Act). Many MSMEs do not increase their investment for fear of losing their tag and associated benefits. To address this concern, the definition of MSMEs was changed from July 1 this year. By bringing an additional criterion of turnover, a business entity is now classified as a micro enterprise if its investment is upto Rs 1 crore and turnover is upto Rs 5 crore. The corresponding figures are Rs 10 crore and Rs 50 crore for small and Rs 50 crore and Rs 250 crore for medium enterprises. Earlier, the classification was only based on investment, with separate investment limits for manufacturing and service sectors. The exports turnover will be excluded from reckoning for the qualifying turnover to encourage MSMEs to export more without losing their status tag and associated benefits.
The 73rd round of the National Sample Survey 2015-16 (NSS) estimated that there were 6.34 crore MSMEs (6.30 crore micro, 3.31 lakh small and 5,000 medium enterprises) employing 11.10 crore people. By January, only 86.11 lakh MSMEs had availed the facility of online, self certification-based, paperless registration on the MSME Ministry’s Udyog, Aadhaar, Memorandum portal. About 60 per cent are in the service sector and 40 per cent in manufacturing. After the revised classification from July 1, many erstwhile large business enterprises have also now become medium and medium have become small enterprises and so on. So 99 per cent business enterprises are MSMEs and 99 per cent MSMEs are micro enterprises. What is the significance and implication of this change? MSMEs complain of payment delays resulting in liquidity problems. Section 15-24 of the MSMED Act stipulates a 45-day time limit on payment to Small and Micro Enterprises (SMEs). On delayed payment of dues, the debtor is liable to pay interest at three times the bank rate notified by the RBI, compounded monthly. Under the Atmanirbhar package, in May the Government ordered all departments and PSUs to clear all pending MSME dues within 45 days of acceptance of supplies. In July, departments were asked to pay penal interest of one per cent per month on delayed payments. The dispensation applied to all MSMEs, including medium enterprises that were not entitled to legal remedy under the MSMED Act.
On May 14, the MSME Ministry’s Samadhaan website, an online delayed payment monitoring system for settlement of disputes by affected SMEs, listed pending claims of Rs 40,720 crore. Of this, 11.6 per cent were claims from the Central Government. By September 30, the outstanding amount on the Samadhaan portal had substantially come down to Rs 12,598 crore (37,520 cases) despite an increase in the number of SMEs from July 1 --- State Governments (Rs 2,349 crore/3,546 applications), Central PSUs (Rs 2,172 crore/2,211 applications), State PSUs (Rs 1,573 crore/1,355 applications) and proprietorship firms (Rs 852 crore/6,483 applications). The amount shown on the Samadhaan portal does not seem to reflect the true picture of the MSME working capital distress. The amount is insignificant in comparison to the total contribution of MSMEs in the economy (GDP of about Rs 44.5 lakh crore as contributed by MSMEs in 2016-17).
The MSME Minister had informed in May that outstanding payments to MSMEs totalled about Rs 5 lakh crore. Mere exclusion of medium enterprises from access to the Samadhaan portal can’t explain the big gap in figures. Probably many SMEs are reluctant to escalate their payment delays for fear of reprisals like denial of future orders or fault-finding in supplies. Or because they are merely outsourcing arms set up by large business units, unable to bite the hand that feeds it. Hence, there is no reliable data on actual distress caused by stalled payments. Bill discounting offers a solution to the problem of stalled cash flows to MSMEs. There are Trade Receivables Discounting System (TReDS) platforms for MSMEs to auction their trade receivables through online bidding. Multiple financiers buy their undisputed invoices at a discount. While the financier can wait for payment clearance, the MSME gets the discounted value of invoices upfront. In 2018, the MSME Ministry had mandated all CPSUs and all corporates with a turnover exceeding Rs 500 crore to be on-board TReDS platforms. However, many corporates are not yet registered on these.
By delaying even the acknowledgement of their liability to pay, they are avoiding giving a handle to MSMEs to drag defaulting buyers before insolvency courts. The recent changes in the Insolvency and Bankruptcy Code (IBC) have limited the scope of small operational vendors to trigger insolvency proceedings and a pause/stop button is in place on fresh defaults since March 25 for six months, extendable to one year. The Atmanirbhar package of May included the Emergency Credit Line Guarantee Scheme (ECLGS), a Rs 3 lakh crore window of collateral-free loans to MSMEs. Banks could extend an extra 20 per cent outstanding loan to creditworthy MSMEs having non-NPA accounts with Government guarantee. The four-year tenure loans carry a 12-month moratorium on principal repayment and a cap on interest rates, 9.25 per cent for banks and 14 per cent for Non-Banking Financial Companies (NBFCs). The scope of the ECLGS was later enlarged to include even non-MSME business entities, retailers and individual borrowers, proprietorships, partnerships, registered firms, trusts, limited liability partnerships and interested borrowers under the Pradhan Mantri Mudra Yojana, who are now eligible for ECLGS. By September 29, banks had sanctioned loans of about Rs 1.86 lakh crore to 50 lakh business entities and disbursed Rs 1,32,246 crore to over 27 lakh entities under the ECLGS.
MSME registration is voluntary. Only about 86 lakh MSMEs are registered while there were 633 lakh MSMEs as per a 2015-16 survey estimate. Just like unorganised labour, a majority of the MSMEs are not registered with the Government. Not being on the radar of the Government helps the “informal economy” to dodge Government regulations, some of which are indeed outdated and burdensome. They want Government help but are wary of getting registered with it. Many MSMEs don’t register out of ignorance of benefits or the assessment that the risks of getting entangled with the Government are more than the benefits of registration. Though it enables better support, registration leads to anxiety about formalisation and possible Government overreach. For MSMEs, getting relief from the Government without registering is not possible because the latter is accountable to keep a record of who has been helped and by how much. The MSME sector needs increased formalisation and digitalisation to get more commercial credit through digital lending. Under such a system, the sales and payments are recorded through digital payments and invoicing systems, which give the bankers reliable data on sales/turnover and help in the generation of a better credit history. Loans can be substituted with customised credit cards for better transaction level controls with links to the Goods and Services Tax (GST) system and logistics service providers for control on mortgaged inventories. Digital technology can take care of a lot of ills of the past. Even banks have to look out for high quality borrowers, so digital lending is a win-win for both bankers and borrowers. The Government has offered a rather hassle-free registration facility. May be there is a case for giving automatic MSME registration to ECLGS beneficiaries and GST-registered vendors. Of course, Aadhaar-based verification would be a must because there are reports of splitting of businesses to bring them within the lower tax threshold.
The Government expects businesses to become responsible, take care of public safety, employees, the environment and pay taxes. The Government would be emboldened to deregulate if self-regulation by businesses improves. The pace of deregulation is slow only because misdeeds of some keep the logic of regulation alive. An attempt should be made from both sides to address the mutual concerns on why there is low registration. Maybe there is a case for the Government allowing a limited period of regulatory forbearance and amnesty to erstwhile unregistered MSMEs. Without registering, relief would be slow and difficult to come by.
(The writer is a retired IAAS officer and former Special Secretary, Ministry of Commerce and Industry.)
The Monetary Policy Committee of the Reserve Bank of India has decided to keep interest rates steady for the time being but with a more accommodative stance, which one could read as allowing banks to be more liberal with disbursals. The meeting ended and the stock exchanges celebrated by climbing, not massively but still enough to display their approval of the decision. The RBI, however, expected the economy to contract by 9.5 per cent in the 2020-21 fiscal, thanks to the effects of the Coronavirus pandemic and the subsequent lockdown. However, one must ask whether the RBI is being a bit too optimistic, with several financial firms and ratings agencies predicting that India will have a double-digit economic contraction this year, thanks to the near-total loss of economic activity in the first quarter. But could there be a reason behind the RBI’s optimism? Some of RBI’s measures include rationalisation of risk weights to all new housing loans until March 2022, which is expected to ease credit availability for the real estate sector. Across several industries, demand has been picking up even before the start of the festive season. Car companies saw wholesale orders pick up dramatically in September. Sales of computers, mobile phones and other electronic peripherals have also increased dramatically. While some industries have changed forever thanks to the pandemic, things are even improving in sectors like hospitality. Deep Kalra, Chief Executive of online travel agency MakeMyTrip, mentioned in The Pioneer Conversations that hotels and resorts are getting booked out for weekends and people are indulging in “revenge travel.” Sure, things are not back to normal and they may never go back to normal or even recapture the sense of business as usual for at least another two years. However, things are improving and may be the third and fourth quarters of this fiscal year will be stronger than that of the past year and that is why the overall decline for the entire year could be less than expected.
At the end of the day, economic growth is a confidence game and if that is returning in the economy, it is contingent upon the Government and the RBI to ensure that it is sustained. India has not jumped in with a massive demand-side intervention as yet but slight rate cuts in GST or even direct taxes could see India’s top consuming class really start spending more, which might help India emerge even stronger from the pandemic. But we still feel it is too early to have such an optimistic outlook.
(Courtesy: The Pioneer)
Ravinder Pal Singh an award winning technologist, rescue pilot, angel investor all rolled into one
Ravinder Pal Singh shies away from attention, despite the fact that he’s one of the world’s most sought out experts in the field of Artificial Intelligence, Innovation and Robotics. Ravinder Pal Singh (Ravi), is an award winning Technologist, Rescue Pilot and Angel Investor with several patents. As an inventor, engineer, investor, highly sought global speaker and storyteller, his body of work focuses on making a difference within acute constraints of culture and cash, mostly via commodity technology. Ravi’s latest invention is arguably the world’s most affordable ventilator and what has fuelled him, in his own words, is – “Fear of human contact is not sustainable for civilization. Everyone has to contribute to overcome this fatigue and fatality of fear”.
His latest visionary creation is a blueprint to help humanity in the fight for survival against one of the most challenging health crises in the recent past. The impact of COVID-19 has prompted a reluctant but much needed change. According to Ravi, the cost of life should not come at the price of lifestyle. Intent for compassion has to translate into actual actions by everyone and every-where and every day. Disparity and im-balance take resources away from most people to live a basic life, so a minority can afford an expensive (lavish) lifestyle, and this is no longer sustainable. Secondly, the world, till now, has been driven by collaboration of conflict (potential of war) and/or economics (fiscal prudence), which should be changed towards collaboration to survive, keeping health as a priority. Healthcare infrastructures across countries needs to be revisited and global uniformity has to be established. Thirdly, how we design our lives places where we live, places where we work, places where we interact - should all change. The glorification of creating mega cities is no longer sustainable. In fact, the history of the demise of past civilizations has a commonality of 4 factors: A combination of an epidemic plus population movements plus the pressure urbanization put on rural lifestyles as well as climate change. There is still merit in non-political Gandhian theories based on De-centralization and Micro Markets, Rural development (ideal cluster of villages), Self-sufficiency while living harmoniously with nature and a greater equity or “distributive justice via creating institutions than solely profit driven businesses.
The inspiration for Ravi’s latest invention came from his own experience at the frontlines. The world faces a severe and acute public health emergency due to the ongoing COVID-19 global pandemic. It is a stark truth that COVID-19 can require patients to be on ventilators for significant periods of time and that hospitals can only accommodate a finite number of patients at once. Ventilator shortages are an unfortunate reality as the COVID-19 outbreak continues to worsen globally. Ventilators are expensive pieces of machinery to maintain, store and operate. They also require ongoing monitoring by health-care professionals. To solve the above situation, Ravi has invented and prototyped an affordable ventilator for all, using a minimalistic design which can be easily operated by anyone. The key design element is the ability to build it quickly for mass production so governments around the world can encourage existing industrial setups and start-ups to manufacture them locally to help save lives.
Ravi was baffled with the thought of why one would require an engineering degree to design, produce and manufacture a ventilator. He has built two different working prototypes on common platform design. The first version is the simplest and is an extremely portable ventilator, one which is intuitive, can be used by anyone and fundamentally takes air from the atmosphere, extracts oxygen, controls pressure and pushes the output to the lungs. The second one is an advanced version of this particular ventilator. It is on a similar design plat-form which converges artificial intelligence with electrical, mechanical, electronics and instrumentation, with the capability to supply pure oxygen. It has self calibration capabilities, a machine learning algorithm to adjust the air flow according to the needs and the resistive nature of the lungs of any patient. Both of them are based on common platform design thinking and that’s the real beauty of his patented design and platform thinking. The reason to work and produce outcomes has become purified through the stark reality of death. Driving Ravi’s imagination and the core to all of his inventions is the burning desire to create a meaningful body of work through compassion oriented design and architectural forms.
Ravinder Pal Singh (Ravi) is a Harvard Alumni and Award Winning Engineer with over several hundred Global Recognitions and Patents. His body of work, mostly 1st in the world, is making a difference within acute constraints of culture and cash via commodity technology. He has been acknowledged as one of the world’s top 10 Robotics Designers, #1 Artificial Intelligence Leaders in Asia and featured as one of the world’s top 25 CIOs. Ravi is the advisor to a board of nine enterprises where incubation and differentiation is a core necessity and challenge. He sits on the advisory council of three global research firms where he contributes in predicting practical future automation use cases and respective technologies.
Established in 2016, Annie Koshy Media Consultant has developed a reputation for expertise in Media Relations, PR and Promotion of those in the arts, media and entertainment industries, as well as in Marketing and Community Outreach. The multi-award winning media brand, has a vast network, both within the South Asian as well as the mainstream communities and has the leverage to develop meaningful associations amongst individuals, businesses and within the media fraternity. (www.anniejkoshy.com | www.findyourselfseries.com)
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