Economy 🧿

Getting money to the SMEs: Banks have replaced the development finance institutions, but without the necessary skill setsThe banking sector urgently needs to build and train a separate cadre which specialises in manufacturing-sector loan appraisals. Banks have replaced the development finance institutions, but without the necessary skill sets.

5 things are Quintessential for the revival of SMEs

1. A large FOF (Fund of Fund ) needed with fast implementation

2. Government- A guaranteed debt of 20 % to become Quasi-Equity and not debt

3. Relaxation In NPA criteria, and reduction in core capital requirement

4. Criteria of Internal credit rating to be liberalised

5. Reviewing of delays in credit sanction / Delays

Atmanirbhar Bharat: Reducing dependence on China for active pharmaceutical ingredients | Policy CircleThe vulnerability of Indian pharmaceutical industry on Chinese imports has become increasingly clear in the wake of COVID-19 pandemic.

The Hathi Committee (1975) which had looked into why Indian firms were not engaging in the production of APIs found that the capital invested to turnover ratio of APIs is much lower as compared to formulations. This ratio was 1:1 for APIs at best and 1:2.6 for formulations on average and in some cases as high as 1:7.2.

Chinese firms were able to develop cost-effective technologies, which contributed to their acquiring a competitive edge. Apart from technology, there are other factors such as the larger scale of operations which contributed to their competitive advantage in the cost of the chemicals and pharmaceuticals parks in China that have common utilities and effluent treatment facilities, mostly owned by the Government, which are provided to firms at subsidised rates.

This places Chinese producers in an advantageous position. While electricity costs Rs. 4.5 per KWH for firms in China, it costs Rs.7 per KWH in India. Similarly, effluent treatment costs Rs. 102 per KL in China whereas it costs Rs. 1920 per KL in India. All of these make Chinese APIs cheaper by 35-40% as compared to India (CII 2020).