Indian Current Affairs: 15.04.2009

Politics & the Nation

The government plans to amend the Drugs & Cosmetics Act to slap up to 10 years’ imprisonment and cancellation of licence for violating norms for testing drugs on humans in India.
The new set of guidelines would ensure that those who do not follow the norms approved by the Drug Controller General of India (DCGI) for conducting clinical trials on humans are brought to book and punished.
The move comes in the wake of the drug regulator’s failure to take action against several companies even after finding gaps in their clinical trials during audits, due to the absence of legal provisions.
The move is intended to improve the country’s image in this area, which has been sullied by some cases of alleged unethical and sub-standard practices.
India has become a hub for clinical trials of drugs with a clinical research market estimated at $389 million, which is forecast to touch $1 billion by 2010.
Want to know what are the various phases in clinical trials? Read this post in Discover It.

Time and again we have been looking keenly at the editorial comments that appear in ET regarding this. We find that the comments are very sanguine and deserve to be read at least once. A commentary that appeared today, which is well worth our attention:
It is undeniable that caste, class and communal paradigms remain central in deciding how the average Indian in the end casts his vote. The debate over the perceived weakness/ strength of Manmohan Singh or Advani has little meaning. The spectacle of candidates behaving as if it were all a matter of scoring points on the airwaves only further reinforces the gulf between the elite and the voting masses.
Despite the enormous churning Indian polity has witnessed post-Independence, the preponderance of competitive identity politics remains a core issue, and a central failing, within the political system. As long as parties only envisage politics as playing off one sectional interest against the other, and various groups see getting a share of the developmental pie as a matter of community identity, that rupture within Indian polity will endure. Till then, the sight of a party or coalition, with all the pretences of possessing a peculiar socio-economic and political vision, coming to power based actually on just how cleverly it micro-managed, say, caste equations at a local/regional level, will continue.

Finance & Economy

It refers to the International Statistical Classification of Diseases and Related Health Problems' 10th version.
Following this ICD 10 enables classification of diseases and the tracking of new diagnoses and procedures. This helps insurance companies in pricing their products.
Insurers want health service providers to have a standardised billing and also some standardisation in charges within the same zones.

Multi Family Offices
MFOs provide exclusive service to the families of the wealthy and their advices span a breadth of services, including investment, philanthropy, legal and taxation. They even provide concierge services for family members across generations. The concept is coming to India at a time when some of the ultra rich are setting up their own family offices.
While private banking services are available for those with Rs 5 crore of assets under management, MFOs are only for those with at least Rs 75-100 crore of family wealth.
There are around 6,000 families in the country with investible surplus of Rs 120 crore each. There are another 20,000 families with assets of over Rs 40 crore each.
MFOs help the families in investment management, trust and succession planning, educating the younger family members, identifying private investment opportunities. They also help these families in looking for funding opportunities and evaluating buy/sell opportunities for their business or for diversification.

Investors pulled out a whopping Rs. 54,54,650 crores from mutual funds in the financial year 2008-09. Last year the figure was about Rs. 43,10,575 crores.

It takes on an average ten years in India to settle a bankruptcy case, according to the World Bank’s ‘Doing Business’ report, and the creditors recover only about 13 cents to a dollar. In the UK, in contrast, the average time is only one year, which also makes it possible for creditors to salvage most of their investments — the recovery rate is over 92 cents to the dollar.

International

The recent G20 meet is criticised for prescribing more of the same medicine for managing systemic risk in retaining its focus on poor transparency, over-leveraging, outsized financial institutions, tax havens, bad incentives for financial bosses, conflict of interest issue for credit rating agencies etc. While all these are important, they miss one fundamental point.

Containing systemic risks requires recognising that these risks vary along with asset values. If institutions that were heavily exposed had understood this, they would have raised their capital buffers during the run-up in housing and equity prices in order to protect themselves against the inevitable reversals. But, they did not.
One reason for this failure is that pillar 1 of the Basel II Agreement, which outlines how banks around the world should assess credit risks and determine the size of capital buffers, makes no explicit allowance for long-swing fluctuations in asset markets. Instead, it relies on value-at-risk (VaR) measures that link risk to standard notions of short-term market volatility. The problem here is that these measures implicitly assume risk declines when markets are doing well: they demand less capital during calm periods and more capital during volatile periods. Indeed, because standard measures of the probability of default fall when the economy is doing well and rise when it is not, capital requirements based on these measures tend to be pro-cyclical. But this increases systemic risk, rather than reduce it.
So what are the counter-cyclical measures required? Banks’ capital requirements should vary inversely with the boom-and-bust fluctuations in the asset markets to which they are heavily exposed. Banks’ defences need to be fortified during excessive upswings in asset prices so that they are able to weather the inevitable reversals.

Indian Current Affairs