Page 16 - The Indian EYE 051322

OP-ED MAY 13, 2022 | The Indian Eye 16

Inflation challenge,

Rupee and Ruble’s recovery

Views and opinions from the top commentators in Indian media

he Reserve Bank of India’s to Russia, but the life force was ebbing.
monetary policy committee
Ttook the financial market by -- Raghav Bahl, BQ Prime
surprise yesterday. A little over three The medicine gap
weeks after the six-member MPC The debate between the global
voted unanimously to hold the policy North and the global South regard-
repo rate at 4%, they changed course ing the enforcement of intellectual
and increased it to 4.4% in an off-cy- property rights in the pharmaceuti-
cle meeting. It’s the first increase in
repo rate since August 2018. RBI will cal industry is well-known. This has
generated policy interest in the effect
separately increase the cash reserve
ratio maintained by banks by half a of IPRs on the market, technology
diffusion, foreign direct investment,
percentage point to 4.5%. This is ex- imitation and innovation. Studies re-
pected to suck out Rs 87,000 crore of
liquidity. Monetary tightening is well veal that pharmaceutical companies
in the global North are urging India
underway now.
to strengthen its commitment to en-
MPC was expected to nudge forcing its IPR laws.
Conventionally, IPRs are seen
up interest rates later this as an economic or legal issue, em-

year. The question therefore bodied in the rights to ‘ownership’
and, thus, to the exclusive use of
is, what triggered an unsched- Opposition parties’ supporters wear garlands of vegetables to demonstrate against inflation innovations across sectors. Innova-
and hike in fuel prices in Bhopal, MP. on Thursday (ANI Photo)
uled meeting to advance this? tion is predominantly led by phar-
maceutical firms in the global North.
The answer is a combination rather than as a change in the mone- The CRR rate hike is thus an import- The innovations are driven through

of elevated inflation and the tary policy stance. We believe this is a ant tool to possibly manage G-sec technology transfer to and collab-
orations with the global South. The
yields. The markets may have missed
pragmatic decision as the CRR hike
uncertainty around inflation’s may be just an attempt to build up a the fine print of this move. agreement between Dr Reddy’s Lab-
trajectory. A volatile geopoliti- war chest on the liquidity front. To be -- Soumya Kanti Ghosh, oratories and Novartis or that of Sun
Pharmaceuticals and AstraZeneca
more precise, liquidity inflows to the
cal situation has fueled a surge financial system could be either pol- The Indian Express are some examples.
in prices of many commodities. icy induced by the central bank (for Putin’s strategy Indian pharmaceutical firms
example changes in reserves, open Since I am very wooden with enjoy significant market powers,
market operations etc.) or non-policy comedy, but do understand a whiff right from developing generic drugs,
The pain has already shown up
in India – retail inflation in March induced (foreign exchange reserves, of geoeconomics, I shall stick to the over the counter medicines and ac-
tive pharmaceutical ingredient/ bulk
ruble. It is the world’s second oldest
government cash balances, and cur-
was 6.95%, led mainly by a jump in rency in circulation). Given that currency (after the pound sterling), drugs, vaccines, contract research
food prices. This surge in inflation non-policy induced liquidity inflows dating back to the 14th century. It and manufacturing, biosimilar and
has come at a time when even if ag- have been recently impacted (out- floats freely and, before the war, biologics. Data show that the FDI
gregate demand is back at pre-pan- flows of portfolio capital) and giv- was the 17th most-traded currency inflow in the Indian drugs and phar-
demic levels, it’s not yet robust. en the huge size of the government in 2019. But its death was foretold maceuticals sector stood at $18.12
The abrupt turn in monetary policy, borrowing programme, the RBI also when the western nations, led by billion between April 2000 and June
therefore, was catalyzed by a further needs to support the market through America, slapped crippling sanctions 2021, with the highest number of US-
apprehension.
some means. Impounding bank re- on Russia. FDA compliant pharmaceutical man-
-- Editorial, The Times of India serves through the CRR (Rs 87,000 Of course, even as the ruble ufacturing plants outside America.
crore) could give some space to the was gasping, a couple of tiny but
The rate hikes central bank to conduct open mar- critical vials of oxygen were keeping -- Arindam Banik, Pinaki Dasgupta,
The most interesting aspect of ket purchases of bonds from banks it alive. Vials of natural gas and oil, Sampada Kumar Dash,
the rate hike today is the continua- and thus inject concomitant liquidity which Russia supplied in humongous The Telegraph (India)
tion of the accommodative policy sometime in the future if the need quantities to Europe, China, India, Every week, we look at what the top
stance. While the markets seem to so arises. The RBI had followed a Canada, Japan, and South Korea, commentators in the Indian media are
have been taken aback, we believe similar strategy during 2003-08 when among several others. Nobody could talking about and bring to you a slice
today’s rate hike should be seen the market stabilization bonds were risk switching off this energy lifeline of their opinions and comments
more from a strategy perspective, introduced, the CRR was also hiked. abruptly, so dollars continued to flow

www.TheIndianEYE.com