Arbitrage Magazine - May 2020 - Finance & Investment Club | IIM Rohtak

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May 2020 Vol 4 Issue 3

MSME- Decoding the Relief package

Strategy to revive the economy post lockdown

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INDEX

S.No.

Article

Page No.

1

MSME- Decoding the relief package

3

2

Strategy to revive the economy post lockdown

7

3

Indian economy explained through Maslow’s Hierarchy of Needs

12

4

Rising above the crisis

14

5

India and its twin-deficit challenge

17

6

Bad Bank- Solution to India’s NPA Problem

23

7

The Enigma of reviving the economy: Deciphered

27

8

The Nutrient Conundrum

32

9

Negative Oil prices and Saudi Aramco

36

10

Why couldn’t Covid-19 prevail over God’s own country?

39

11

Regional Comprehensive Economic Partnership

43

12

Revisiting Mudra Scheme- Its Impact on Banking System

45

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MSME- Decoding the relief package A candy, Vitamin or a Painkiller?

By: Anoushka Paliwal & Sushri Padhi (SRCC) COVID-19 has invaded our nation, inflicted fear amongst consumers, and has further made inroads into our lives by traumatising our livelihoods, dragging even the most vibrant economies to a screeching halt. The economic and financial experts are gravely concerned that the looming economic crisis will shutter most of the businesses –, especially MSME. Micro, Small & Medium Enterprises, or as we call it MSME in short, are on the verge of collapsing, reasons being disrupted supply-demand chains, workers fleeing back to villages and, of course, the nationwide lockdown which has disrupted the movement of raw materials.

However, even before this Covid pandemic, MSMEs were facing a problem related to classification. The original classification of businesses categorized them into micro, small and, medium based on the amount invested in plants, machinery and equipment. In a normal conventional scenario, if business conditions are favourable, your enterprise will expand and you will seamlessly ascend on the next category scale. However, there is a hidden snag to uninterrupted expansion. Indian enterprises fear that as soon as investments increase and move forward on the category scale, they will graduate out of benefits that they received earlier. Indian enterprises were smart enough to figure out strategies to circumvent the old norm and keep receiving benefits.

And the fear of losing advantages wasn't the only major turn down in the old norm. The classification was based upon self-declared investments, which were undeniably subject to manipulation and self-serving manoeuvring. These specifications were also a major impediment for a new entrant into a sector that required a large amount of capital investment. On top of that, there was no guarantee of proper and absolute books of accounts, owing to their informal way of doing business. The dilemma was so crucial that the government had to intervene.

The Government introduced a new norm which classifies them based on their annual turnover and erases the difference between manufacturing and service enterprises as specified earlier.

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It paints a more clear picture, removes the unnecessary inspection requirements, and can be easily aligned to the GST regime. Authorities can peg the sales figures from reliable GST networks and the annual turnover figures from MSMEs. Apart from the classification, the government also wants the guardian angels of financial support (Venture Capital firms and Private Investors) to walk in and buy stakes in these enterprises so that MSMEs can easily raise growth capital and meet basic operational liabilities. And to provide the much needed financial relief, the government has added another provision in the long list of pending alterations.

A Fund of Funds (FOF) has been set up along the lines suggested by the UK Sinha committee report.

The basic premise is simple. A mother fund of 10000 crore will be set up, which will be further divided into smaller daughter funds and the government will buy 15% equity in 25 lakh triple A rated MSMEs spread across India. And if all goes as planned, the initial corpus amount of 10000 crore is expected to increase 4x or even 5x and to show results just like the fund of funds for start-ups (SIDBI) did. It leveraged 3798 crores from government and then raised close to 20,000 from VC networks.

However transforming MSMEs into a lucrative asset class for private investors is easier said than done because of one simple reason, VCs have a hunger appetite for high growth prospects while exponential growth for Indian enterprises is a distant dream. And this brings us to the debt problem that MSMEs face.

For quite some time now, MSMEs have been suffering from a serious debt problem where they are unable to pay back the loans taken. In fact, in September 2019, there were massive Rs 9.40 lakh crore worth pile of bad loans in India.

SOURCE:CEIC, Kotak Institutional Equities via Quartz

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This low-risk appetite of banks has induced a sharp reduction in incremental credit given by banks. With the lockdown in place, banks are now hesitating, even more, to lend money to these enterprises. Why? Well, simply because they are even more likely to commit a default as businesses have been shut for months. Since banks are the predominant sources of finance by MSMEs, lack of money will completely shut thousands of businesses within a year. And let's not forget that MSMEs employ 120 million Indians currently who could become unemployed very easily.

So after looking at all of this, Finance Minister announced Rs 3 lakh crore, out of Rs 20 lakh crore Atmanirbhar Bharat Package, to act as a credit guarantee for MSMEs. Under this, MSMEs (with up to Rs 25 crores of total borrowings) can further avail new loans up to 20% of the total outstanding borrowings from the financial institutions, with Government acting as guarantor in case of default. In other words, instead of giving the actual money, government has instead decided to take the credit risk for MSMEs. Hence, banks will be more willing to lend as even if these enterprises are unable to pay back, the government will compensate these banks 100%.

As if this all wasn’t enough, the government has also decided to disallow global tenders for government projects of up to Rs 200 crore to help MSME grow and be able to match global prices someday. This is obviously a good push towards Make In India.

Now isn’t this a jolly solution?!

Well, not exactly. While protectionism sounds good and all, it works out to be quite demanding on government finances as foreign enterprises can often get the work done at a much cheaper rate with better quality compared to Indian manufacturers. Moreover, the 3 lakh crore package is going to expose the government, at the current delinquency level, to contingent liabilities of Rs30,000 crore at least, as stated by the Kotak financial expert.

In fact, under these economic circumstances, delinquencies might become higher leading to a rise in government liabilities. These short term benefits are going to help only 8%, i.e. 50 lakh, of the total MSMEs while subjecting the country to such long term liabilities.

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SOURCE:RBI via quartz Even after all the changes in reverse repo rate, lending rate, and economic package, Banks are still parking most of their money with RBI than lending it. The reason behind it is simple survival nature i.e. banks are themselves in a bad position right now and they don’t want to take unnecessary risks. No one knows if the government will be in a position to repay them (in case of default) after 4 years. To make matter worse, foreign investors have fled from the bond markets, just as when Indian embarks on a huge borrowing plan. Current Foreign Funds have been the lowest in 3 years.

Nonetheless, there is no doubt that something had to be done after all MSMEs are no less than the backbone of our economy, accounting for more than 1/3 of the GDP. Without the adequate fiscal support, the damage that has already happened is going to start working through the multiplier in the coming future, leading to a bigger catastrophe. However, it is too soon to say anything for sure right now. It’ll take at least a year to see the whole effect of the package on the MSMEs and the economy as the demand side is still uncertain.

REFERENCES: ● https://indianexpress.com/article/explained/coronavirus-india-lockdown-msme-sectorcrisis-government-relief-package-6395731/ ● https://www.indiatoday.in/business/story/coronavirus-relief-package-government-slowrecovery-weak-demand-recession-1682075-2020-05-26 ● https://theprint.in/economy/modi-govt-estimates-15-of-rs-3-lakh-crore-msme-loanscould-turn-npa-banks-fear-worse/431145/ ● https://indianexpress.com/article/business/banking-and-finance/despite-overall-fall-incommercial-bad-assets-msme-bad-loans-on-the-rise-6208802/

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Strategy to revive the economy post lockdown By: Nishant Satyam & Vasu Golyan (IIM Indore)

“This is not a one-time thing; this is our entire future.�

-

Greta Thunberg

Introduction The impact of the COVID-19 pandemic presents the most significant challenge post-World War II, the world has been facing. Across countries, disruptions have become the norm, rather than an exception, in all aspects of life. It is estimated that over 2.6 billion people (nearly a third of the global population) across 100 countries have been facing government-enforced lockdowns, implemented to arrest the spread of the highly contagious virus. Challenges, especially for India, in the form of supply-chain disruptions, suspension of economic activity, mass-migration of seasonal labour, availability of essential goods/services, and contact-tracing and testing in a highly populated country spread across vast demographics, all the while ensuring the norms of social distancing and limited health resources, are perhaps any government's worst nightmare.

However, what could be even worse, as numerous experts around the world have repeatedly stated, is not knowing when and how all this will be over? What type of exit strategies can governments apply? When will it be safe to move out of our houses? How will economic activity restart amidst a shortage of labour and norms of social-distancing? Can we minimize the impact that this pandemic will have on every aspect of our life?

As WHO has repeatedly stated, the coronavirus is here to stay. Until a cure or a potential vaccine is developed, it will continue to have an impact on how we function as a society, or how a government runs its economy.

This pandemic is thus, not just a one-time thing, but it is our entire future, and all that we could do currently, is to prevent its spread and deploy strategies across sectors, which minimize the impact of this deadly virus.

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Countering the Economic Impact After the healthcare sector, industries are the ones most affected. The lockdowns have suspended all economic activity. Be it heavy industries such as iron and steel, automobiles, cement, telecommunications, or the services sector, from ITeS to the tourism industry, all of which form a significant proportion of India's economy, have been negatively affected by the lockdown. Apart from the evident pains faced by big corporate houses, the Micro, Small and Medium Enterprises (MSMEs) are the most affected. They do not possess the financial ability to see through such long-periods of low-to-zero business. They are unable to pay their staff, or sell their existing inventory. MSMEs employ nearly 40% of India's workforce and contribute 29% to the country's GDP. Supply chain disruptions, absence of labour (who have migrated) and zero-demand of their products, has pushed such industries to the brink of bankruptcy.

•

Ensure financial security for MSMEs

The Indian government needs to ensure the survival of these industries, not just because of their significant contribution to the economy, but also because of the massive number of people they employ. During such unprecedented times, the government cannot afford to have the problem of unemployment as well on its hands.

Strategies in the form of tax reliefs, liquidity injections, an extension of moratorium on loans, working capital loans at cheap interest rates can go a long way in ensuring that this crucial sector survives the impact of the pandemic.

• Start-ups and MSMEs A golden opportunity would be for the start-ups in the country to team-up with the MSMEs and use their expertise and innovation in services and ITeS, to augment the productivity of the MSMEs manufacturing capabilities. This mutual collaboration can open up enormous opportunities for both the stakeholders, at the same time ensuring the survival as well value-addition for both during tough times. Onboarding the agriculture sector as well, along with technology, manufacturing and the vast supply-capacity of the rural farmlands, can fast-track India to growth, in the post-COVID-19 world. It will also augment the struggling incomes of the farmers, as well as allows MSMEs and start-ups to expand into a significant market-base.

•

Product Adaptation

The MSME sector, as well as the established MNCs, must adapt their products to suit the demand of the current times, i.e. to essential goods or services or start producing medical equipment or active pharmaceutical ingredients (APIs) etc. It can serve the dual problem of utilizing the idle manufacturing capacity and supplying items which are in short supply globally. Of course, such shifts in product-offerings must adhere to the highest quality standards, and government agencies across the country will need to authenticate and approve these new products on a fast-tracked priority basis.

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•

Tourism Revival

The suspension of all forms of travel, the ensuing economic lockdown and changed consumer perception regarding travelling for leisure purposes, will be a major setback for the tourism industry. As individuals will be reluctant to travel immediately after the pandemic has been brought under control, both the government, as well as the private sector, will need strategies which ensure that the sector can get back on its feet. The tourism sector currently has zero business going on, as people have been confined to their homes due to the nationwide lockdown, putting nearly 4-5 crore jobs at risk.

Moves such as deferring all statutory payments on rents, loans and taxes, short-term working capital loans, government contribution in providing for the salaries of the employees and considering a 6-month tax holiday etc. can help the industry survive, until hopefully, normalcy is restored by the end of 2020 or early 2021.

Significant support must also be provided to the already struggling aviation sector, in the form of tax-reliefs and fuel subsidy. A reduction in the government fuel cesses applicable on aviation fuel, given the historically low crude-oil prices, can also be considered to provide some sort of relief to airline companies, once services resume. •

Manufacturing Expansion Amidst the economic gloom, this pandemic also presents a great opportunity for India Inc., be it MNCs or even the MSMEs. Since China enforced restrictions on economic activities, manufacturers and countries across the world realized that they couldn't be too reliant on a single supply-node. Additionally, the dubious ways in which the Communist Party of China has handled the pandemic as well as threats of retaliatory measures from countries such as the USA, Australia create a sense of business uncertainty. Another trade-war like situation cannot be ruled out. Capital flight from China, in a post-pandemic world, is an eventual reality. And countries like India, which have low-labour costs, and a developing manufacturing base, can take advantage of this capital flight, and become the next global manufacturing hub. Policies which attract companies looking to shift production out of China (such as Japan's $2.2 billion to incentivize firms moving

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production out of China), ease restrictions on land-availability and raw material, tax-sops etc. can significantly accelerate the post-COVID-19 economic recovery in India. Make-in-India, tradesubstitution and complementing the strong service-sector in India, are great opportunities which the country can exploit, to accelerate the recovery of the industrial sector, in the post-COVID-19 phase.

•

Sports

The sports industry has been facing heavy losses to the tune of thousands of crores in India itself. The IPL stands suspended, with the BCCI looking at losses of around INR 4,000 Crores alone. Globally, marquee events such as Wimbledon have been cancelled, whereas the Tokyo 2020 Olympics has been postponed by a year. Major football leagues across the world have been suspended, and sports associations continue to lose money. A future action plan will involve strategies which leverage technology to extents never seen before, to get consumers to watch sports from the comfort and safety of their homes. Even post-normalization, since audiences will be reluctant to come out of their homes and join large crowds, live-streaming of sports events, with zero-to-minimal actual audiences, will be the norm for years to come.

Concluding Comments The ongoing pandemic has presented humanity with difficulties it seldom encountered before. Even though similar highly contagious diseases have spread previously in human history, but the relative isolation of countries and the absence of globalization ensured that country-specific outbreaks were quickly contained.

However, the extent of international integration and the advent of globalization has spread the virus across 212 countries, disrupting all facets of human life. Especially in a densely populated developing country like India, the challenges are multi-fold.

Innovative strategies which leverage technology, deploy international relations, promote innovation and adaptation, turn challenges into opportunities and fast-track relief measures are the need of the hour. The Indian government, as the custodian of the future of more than a billion people, faces the tricky task of reviving a shut economy, while controlling the pandemic, and simultaneously ensuring minimum-acceptable welfare of the people. In today’s world, despite what geography might say, no country is an island. The flows of capital, labour, technology and science all bind us together. International cooperation, strategic decisionmaking and innovation can only get the world out of this sticky situation.

Till then, adapting from Sir Winston Churchill’s speech, “we shall fight in the hospitals, we shall fight in the containment zones, we shall fight with advancing technology and medical research, we shall fight with all countries as one, and we shall defend humanity. We shall fight with all our resources, and we shall never surrender.”; the world will, through innovative strategies, tame the COVID-19 pandemic because, in the end, life always finds a way.

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References ● https://www.business-standard.com/article/international/over-22-000-healthcare-workersinfected-by-covid-19-globally-who-120041200086_1.html ● ● https://www.sciencealert.com/one-third-of-the-world-s-population-are-now-restricted-inwhere-they-can-go ● ● https://theprint.in/health/at-1-28-gdp-india-expenditure-on-health-still-low-althoughhigher-than-before/313702/ ● ● https://www.gigabitmagazine.com/ai/top-10-wearable-devices-help-during-covid-19 ● ● https://economictimes.indiatimes.com/news/sports/cancellation-of-ipl-2020-could-costbcci-rs-3869-5-crore-report/articleshow/74690141.cms?from=mdr ● ● https://www.businesstraveller.com/business-travel/2020/04/06/potential-impact-of-covid19-on-indian-aviation-and-tourism/ ● ● https://www.theguardian.com/sport/2020/mar/24/tokyo-olympics-to-be-postponed-to2021-due-to-coronavirus-pandemic ● ● https://www.bloombergquint.com/coronavirus-outbreak/covid-19-rescuing-the-msmesector ● ● https://www.ifpri.org/blog/addressing-covid-19-impacts-agriculture-food-security-andlivelihoods-india ● ● https://www.thehindubusinessline.com/economy/seven-major-consultancies-join-handswith-invest-india-for-economic-revival-post-covid-19/article31318796.ece

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Indian economy explained through Maslow’s Hierarchy of Needs By: Haareca Chintala (SIBM, Bengaluru)

It was around 2:00 pm in the afternoon when I was finally called in for my internship interview at RBI. Being one of the most prestigious institutions to hire interns on campus, just the idea of being shortlisted and appearing for an interview was terrifying enough, but another thing weighed on my mind as I made my way into the interviewer's cabin. The candidate who had gone in before me had told me that the questions were extremely technical but there was one question that had thrown him off, since it wasn't from any finance topic.

A question on Maslow's hierarchy of needs had cropped up during the interview and as students who were fresh from 1st semester, we could only relate the model to HR subjects. The question had completely thrown him off and to avoid anything similar, I started racking my brains as to why would an esteemed organisation ask a question if it did not relate to finance in any way.

And THEN, it hit me. Of course, it was important! In an economics course, we tend to come across indicators such as GDP, GDP PPP, PMI, HDI, etc. This, we assume, is sufficient to assess the performance of a country on the global map. But as most things, these indicators did not happen to be formulated out of thin air. They have a basis in the Maslow's hierarchy of needs. Let's take it one step at a time.

As shown in the figure above, Maslow's model is divided into two categories : deficiency needs and growth needs. To gain some perspective, let's consider a situation where we go on one of the fad diets which are so extensively advertised these days. Three days into the diet, you start feeling low, so low that at some point it becomes impossible to motivate yourself to get out of bed and go about your business as usual. Now, just

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replace yourself with the tens and thousands of people in our country who are on an indefinite diet due to lack of money. If the majority of a country is comprised of people in such a sorry situation, is it fair to expect the country to grow at a spectacular pace?

Unless the suffering of these people is alleviated, our country does not have the right to dream of a transition from a developing to a developed nation.

As with something as simple as hairfall, unless you rectify the deficiencies by providing the appropriate nutrition, how do you expect your hair to grow? Thus, as a way to rectify this issue, the government has come up with a plethora of initiatives such as MNREGA, encouragement of factory setup by MNCs, etc which is a way to improve the employment rates. This has definitely helped the people to some measure, wherein they've been able to come up a level in the hierarchy by being able to satisfy their basic needs of food, shelter and employment. But we do not see a major improvement while looking at the figures, why is that?

Government can only go as far as providing you the means, it is up to you to use the means to meet your ends.

Our country has been battling something as deadly as a virus since a very long time, much before COVID-19 came into play. It is the mindset of the people, especially in the rural areas. If you are not willing to work, what can anybody do to improve your situation? A measure was suggested to overcome even this issue: Universal Basic Income (UBI). Not to dismiss it completely, it definitely has its share of benefits but the reason that it is still open for debate is due to an unmistakable unease that it would just be an easy way out for people to rip off government coffers by giving nothing in return. If nothing motivates you to fulfil your deficient needs, what would ever motivate you to rise higher than that?

Our country has been touted to be an emerging global superpower; the question is how long would it take to reach there? The last point of difference between a developed and a developing nation is: level of contentment among the citizens of that country. Growth doesn't happen organically, it's only when a need to build your esteem and a place in the society arises, that you are motivated enough to strive for it. With the entire world battling COVID-19, the economies of even the most established and developed nations have been pushed back and it would take a long time for India to come back to where it was. But as they say, " A strong building cannot be built on a weak foundation" and a change in mindset might just be the solution to strengthen ours.

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Rising above the crisis By: Krishnan L (IFMR GSB) The Indian Economy’s growth already has been slowing down even before corona hit us with the lockdown.

We are presently at a point in time where the growth is at a standstill. This means that the government’s revenue has been falling and not meeting its targets. This is a classic case of widening and rising fiscal deficit.

India’s fiscal situation has been deteriorating since past two years. Recently, Fitch evaluations a month ago had cautioned that a further weakening in the monetary viewpoint because of lower development or financial facilitating could pressure the sovereign rating.

Date

Rating

20/12/2019 04/04/2019 11/15/2018

BBBBBBBBB-

04/27/2018

BBB-

05/02/2017

BBB-

07/22/2016

BBB-

12/07/2015

BBB-

India enjoys BBB- rating from Fitch since 2006 with different outlooks. Now, because of the economic slowdown and the upcoming crisis, The Indian Government will have to spend more money to start pushing the economy. But it seems like the government itself doesn’t have enough money to come up with a stimulus package. They have already announced that 1.7 lakh crores of the package is not going to be sufficient to pull out the economy from this crisis. It is a crucial period for the government to raise a capital in order to come with a stimulus package. It is obvious that India’s fiscal deficit will rise while raising capital. Since the past 2 years, our economy has been slowing down and the outlook has changed from positive to negative. At this point adding more debt to the capital may lead to rating downgrading.

What could be the impact of downgrading?

It is impossible to ignore the effect of downgrading, because they do play a major role in foreign direct investments. Foreign investors like Sovereign wealth funds and pension funds are not allowed to invest in noninvestment-grade bonds and securities, commonly called junk bonds. We might think that foreign investors are interested in an emerging market like India and there is no point in worrying about ratings, but losing them at this moment might add fuel to the fire and recovery might get delayed. Moreover rating downgrades or even an outlook cuts play a major role in investor’s confidence and will reflect even in the share market. We cannot afford another stock market crash while amidst the crisis.

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What’s more important?

According to CMIE data because of the locked-down, 30 days moving average of the unemployment rate is 25% (on 10th May 2020). In urban India, it is 25.7% and in rural India, it stands at 24.7%. Almost 4 times the average unemployment rate of the past 50 years.

The state-wise number mainly depends on the number of corona positive cases and how effectively lockdown is being implemented. States which depend on manufacturing and constructions is facing a higher unemployment rate. Even after lockdown, it’s actually very difficult to pull back the rate to normal. After lifting the lockdown Many MSMEs and small businesses will face working capital issues. This is the point where the government can provide loans to stressed firms to make sure there is a scope for economic growth

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and employability. further interest rate cut can speed up this process. To provide loans or to come up with a stimulus package how are we going to raise money? Without facing rating downgrading.

How can we raise capital?

Raising taxes on super riches, Introducing wealth tax and sort of inheritance tax may not work. They are regressive tax measure and higher tax measures more than a certain point have not worked in any country. The rates won’t be accepted and will lead to tax aversion and moreover India will become non-competitive when other countries were trying to give a competitive tax structure.

There is a potential to raise tax on foreign tech companies, E-commerce, and digital domain, which run their businesses in India. This digital tax can be levied on companies that have been leveraging on data to push for products and services in India. Companies like Google, Facebook, and Netflix currently pay meager tax of 6%. By doing this we are not making India non-competitive for foreign investments for the simple reason that if a foreign company wants to set up an Indian subsidiary, their tax rate will be as low as 15% if they enter into manufacturing. Thus fresh investment on Indian subsidiary or joint venture won’t be affected.

Like NSC certificates Government can introduce COVID bonds to raise money like our national savings certificates. This certificate offers 8% of annual interest. At this moment where the interest rates are reducing, these low-risk bonds with 8% interest can attract more investors and which can help us to raise further capital.

There is also a large scope for the government to save money from the existing budget of 26.99lakh of crores.

This is a time for the government to stop all the leakages in the cash flow and should seriously look into saving measures. And then even a 10-15% savings can rise around 2.7lakhs to 4 lakh of cores into the system.

The government should also consider raising capital from western markets where the interest rates are almost zero. The government should also consider increasing its fiscal deficit by at least 2 % of the GDP which can raise around 6 lakh crores. It’s time for the government to leverage itself to come up with a stimulus package.

And finally, to get money into the Indian economy we need to make our economy attractive and competitive.

It’s a time to attract foreign investors who are moving from china to other countries. If they come to India, they will bring jobs, Technology, foreign trade, and business this should be the solution for the long run.

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India and its twin-deficit challenge By: Umesh Kumar (IFMR GSB) Most of us are familiar with what a Budget Deficit is. It's basically if the Government expenditure exceeds the revenue it received i.e. the taxes, then there is a deficit, which is called Budget Deficit. But, if we notice there is another deficit which we can call a twin deficit to the above mentioned is, “Trade Deficit” which occurs when nation's imports value exceeds the exports value leaving a deficit.

If we look at the macroeconomic theories, there is a relationship between Budget Deficit and Trade Deficit.

The relationship is considered from National Accounting Model of Economy.

If we look at the GDP or National Income expression, Y = C + I + G + (X – M), where, Y denotes GDP or National Income, (X – M) represents net exports, G stands for Government Spending, I and C denotes Investments and Consumption respectively.

At the same time, The National Income or GDP can also be described as the total amount of individual income goes to Consumption, Savings and Taxes paid or simply the total output.

The representation will be, Y = C + S + T, where, Y denotes GDP or National Income, C stands for Consumption, S for Savings and I represents Investments.

If we observe both the equations,

C + S + T = C + I + G + (X – M) Therefore, (S – I) + (T – G) = (X – M) or Net Exports If (T – G) is negative, which means government spending exceeds taxes, it’s a budget deficit.

Let’s assume, economy has already a potential output which means Y is fixed. If a government facing Budget Deficit in above equation which means, (T-G) is negative, and saving remains the same, either Investment or Net exports must fall, which leads to a Trade Deficit.

So, here we will discuss a little on this twin deficit in Indian context, and why India must overcome its twin deficit problem.

If we go into a bit of our history, twenty-nine years ago, i.e. 1991 when Indian Government was compelled to airlift its national gold reserves to IMF and World Bank in exchange for a loan to cover the balance of payment dues as imports has grown due to the on-going Gulf War, leading India to encounter a budget deficit and trade deficit at same time, causing a Twin Deficit. Established rating agencies like Moody has degraded credit rating of India, and value of Indian Rupee depreciated sharply, which ultimately lead to liberalization of Indian economy.

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A significant effect has been on the Indian Economy from this pair of deficits. Because of the budget Deficit, Indian Government is restricted to spend enough on development projects like infrastructure, manufacturing because of which the supply side of the economy is becoming more brittle. If we compare the Budget Deficit % to GDP to various Asian Countries like Thailand, Bangladesh and Indonesia, Indian economy numbers are significant and very high. Both Inflation and Trade Deficit can increase because of huge Budget Deficit and may act as a barrier to macro and micro economic management.

As per the latest reports, India’s Budget Deficit stood at 5.07% of GDP in February, 2020 and expected to shoot to 6.2% of GDP in FY 2021 as per a report by Fitch Ratings. This is a worrying factor for government to meet its fiscal deficit target of 3.8% to GDP in FY 2020. In order to maintain these deficits, bonds been issued by the Central Government where state-owned banks or public sector banks plays a significant role.

This helps in pulling money and interests rates are generally rises in the market, thus becomes difficult for private enterprises to raise funds.

Till now we have observed one side of the coin, lets jump into the other side which is Current Account Deficit (CAD). Current Account Deficit is a resultant of Trade Deficit. It’s evident from the numbers that India is one of the developing nations which is highly dependent on foreign investments. In 2013, Morgan Stanley, one of the major global financial institutions has termed the expression called ‘Fragile Five”, the 5 countries which are highly dependent on FDIs, are India, Turkey, Brazil, South Africa and Indonesia. Though the list got revised in 2016 and India moved out of the list, because of significant improvement in CAD, inflation and reserves.

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In a statement released by Reserve Bank of India (RBI), the FDIs stood at 10 Billion USD in Q3 2019-20, compared to 7.3 Billion USD in Q3 2018-19. Foreign Portfolio Inflow stood at 7.8 Billion USD against an outflow of 2.1 Billion USD in Q3 2018-19, considering both debt and equity market purchases. Because of a rise in Net Service Receipts by 21.9 Billion USD, and with a lower trade deficit of 34.6 Billion USD, India’s Current Account Deficit (CAD) shrank to 0.2% of GDP in Q3 2019-20, from 0.9% in Q2 and 2.7% from Q3 2018-19. These numbers speak a lot, India on a trade note doing extremely well and almost wiped out the CAD.

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India’s foreign exchange reserves stood at 487.24 Billion USD as of March 6, 2020. The comfortable position of foreign reserves and encouraging numbers of CAD has set Indian market on a strong base. With a strong inflow of FDIs, India’s domestic consumptions and goods imports has risen.

One factor, India must focus at this present situation is crude oil prices and import of the same. India is a net crude oil importer, highly dependent and demand was always inelastic. Macro-Economic Stability factors like CAD are highly influenced by the movement in the crude oil prices. The rise in Crude Oil Prices will lead to a rise in CAD. As per a survey conducted by the LiveMint, with an average drop in Crude Oil Price by $10/Barrell globally, India’s CAD widens by $15 Billion which is around 0.5% of GDP and also if the domestic fuel prices remain unchanged the same situation will widen Budget Deficit by $3 Billion, which is 0.1% of GDP.

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If we compare the Budget Deficit vs Current Account Deficit of Top 10 Emerging Nations of the G20.

Budget Deficit vs Current Account Deficit Top 10 Emerging Nations of G20 League Budget FY 2015- FY 2018FY 2018Deficit 16 19 Current Account FY 2015- 19 Country (% of (% of % Deficit 16 (% of Wise GDP) GDP) Change Country Wise (% of GDP) GDP) Turkey 2.3 3.67 59.57% Russia -2 -2.1 Indonesia 2.5 1.75 -30.00% China -1.7 -0.4 Mexico 2.9 2.2 -24.14% India 0.7 1.8 Russia 3.7 -2.9 178.38% Brazil 1.3 2.2 China 3.7 4.66 25.95% Indonesia 1.8 1.6 South Africa 4 4.14 3.50% Mexico 2.2 1.9 Argentina 5.8 5.49 -5.34% Argentina 2.7 4.9 India 6.5 6.27 -3.54% South Africa 3.3 3.5 Brazil 9 7.17 -20.33% Turkey 3.8 2.6 Saudi Arabia 17.2 5.87 -65.87% Saudi Arabia 4.3 -9 "-" indicating the nation is in Budget Surplus "-" indicating the nation is in CAD Surplus The Symbol * indicates CAD deficit narrowed to 0.2% of GDP in Q3 FY 2019-20

% Change 5% -76% 157% 69% -11% -14% 81% 6% -32% -309%

Though India is progressing well in handling the CAD as well as Trade Deficit, but at the end of the day with a negative CAD, India need to maintain the Balance of payments with its Net Capital Inflow, which means India should focus more on FDIs rather FPIs, as stable source of Income.

In this current epidemic, many leading economies are on a verge of Economic Rescission, India must focus on its deficits and should work to overcome the twin-deficit issue. In order to do that, Indian government should focus more on attracting more FDIs, create a better environment for the business, need to relax regulations, and built all necessary infrastructure were few efforts can be taken into consideration.

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References ● International Monetary Fund, official website ● World Bank, official website. ● Reserve Bank of India, official website ● https://en.wikipedia.org/wiki/Twin_deficits_hypothesis ● https://www.livemint.com/ ● https://economictimes.indiatimes.com/news/economy/indicators/indias-currentaccount-deficit-shrinks-sharply-in-oct-dec-quarter/articleshow/74597222.cms ● https://www.thehindu.com/business/Economy/indias-current-account-deficitnarrows-to-14-bln-in-december-quarter/article31050409.ece ● https://www.firstpost.com/business/indias-current-account-deficit-narrows-to-1-4billion-in-december-quarter-as-net-services-receipts-rise-8145701.html ● https://www.business-standard.com/article/pti-stories/india-s-current-accountdeficit-narrows-to-1-4-bln-in-december-quarter-120031201245_1.html ● https://www.business-standard.com/article/economy-policy/inflation-twin-deficitsmay-mar-sustainability-of-india-s-growth-momentum-118080300186_1.html ● https://www.thebalance.com/what-are-the-fragile-five-1978880 ● https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab952b0c1a0179b&sId=1502895806834 ● https://www.business-standard.com/article/news-cm/india-s-forex-reserves-atfresh-record-high-of-us-487-24-billion-as-on-06-march-2020120031400237_1.html ● https://data.oecd.org/gga/general-government-deficit.htm

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Bad Bank- Solution to India’s NPA problem By: Nishita Vora & Prashant Sinha (TAPMI) India has been facing the issue of increasing Non-Performing Assets (NPA) and bad loans for a few years now. Corporates have been taking loans and have been committing frauds or are unable to repay it. This has shaken the financial and banking industry in our country. Already the country had been facing economic slowdown which was creating a lot of chaos. The current COVID-19 crisis has amplified the situation by multiple folds.

The current lockdown has affected many of the major industries like aviation, travel, and tourism, and hospitality bringing them to their knees. Along with them, many MSMEs, traders, transport operators are severely affected due to the current situation. The banking sector has exposure to all of these industries.

According to RBI sectoral data for January 2020, the outstanding loan for the following industries are:

Observing the prolonged lockdown to battle COVID-19, it has resulted in a complete business standstill for the above-mentioned sectors. This would affect their revenue generation and cash flows. Thus, creating a high probability for defaulting their loan obligations, leading to asset deterioration for the banks.

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If we observe the historical data, for the past few years it can be noted that the level of NPA has been increasing in India. With increasing NPA, a large portion of the bank’s assets would reduce to generate income for them, thus reducing the profitability as their ability to grant further credits. If the level of NPA keeps on increasing the banks have to increase their provision to book their losses. They have to set aside higher funds to anticipate for future defaults and losses. This along with many other structural issues could lead to lower profitability.

Profitability can be measured by Return on Assets (ROA), which has been decreasing for Indian banks over the years. This makes them more vulnerable to adverse economic shocks.

According to RBI, there could be an increase of 50 basis points in the NPA ratio for public sector banks. At the same time, for Private Banks (PVBs) and Foreign Banks (FBs) bad debt could increase up to 4.2% and 3.1% respectively. Cumulatively for the Scheduled Commercial Banks (SCBs) the NPA could increase up to

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9.9%. These projections were made in December 2019 and the impact of COVID would not have been factored. Hence, the situation could be even worse.

According to the S&P Global Ratings report, considering the COVID crisis, India is expected to face a sharp increase by 1.9% in the NPA ratio while the credit cost is projected to shoot up by 130 basis points. Even a report by Crisil denotes that due to the expected decrease in loan recoveries, the NPA is expected to be 1111.5% by March 2021 as compared to 9.6% in March 2020.

So, what could be a radical solution to overcome this issue? One of the solutions which have been in talks to solve this crisis is – Bad Bank!

Bad Bank is an institution that buys the bad loans and other illiquid holdings of financial institutions. They are generally set up during the time of crisis. We will take an example to understand the working of a bad bank.

Let’s say Bank A has provided a loan to XYZ institution and due to multiple reasons, the XYZ company defaults on the repayment of the loan. Now the problem for the bank begins. With time, these loans keep on accumulating and their interest payments also keep on increasing. This could look awful on the bank's balance sheet. This is because investors observe NPAs as a signal for financial weakness. It is an indicator of the bank’s inability to lend, borrow, and conduct business. This is where bad bank can play its role. Bank A would sell off its bad loans to the bad bank, at a discounted rate. These bad bank would be specialized institutes in recovering loans using the collateral and other means. This would deleverage the bank’s balance sheet and they could focus more on their operational business functions.

Indian Banking Association (IBA) in their draft, has pitched a proposal to set up a ‘Bad Bank’ with an initial investment of $2 Billion to initially buy Non-Performing Loan worth 1 trillion rupees. The name would likely be National Asset Reconstruction Company Ltd (NARCL), which would be set up for an initial period of 10 years and the NPA should be at least 5 billion rupees to qualify to be bought by the NARCL. The ‘bad bank’ would pay upfront 15% of the market value of assets in cash and the remaining would be paid in the form of security receipt.

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The idea of setting up a bad bank in India is not new. It was first suggested in 2015 when RBI commenced an asset quality review of sectors, to park the NPA in a bad bank. But the former RBI governor, Raghuram Rajan opposed it. Again, this idea was brought up in 2018 by a panel led by former Punjab National Bank chairman Sunil Mehta, under the Project Sashakt.

Now, those who are familiar with the Debt Reconstruction would wonder how this is different from the currently existing Asset Reconstruction Company (ARC)? The proposed Bad Bank would be similar to the Traditional ARCs but would operate on a mammoth scale. In addition to segregating or removing the bad assets from parent bank’s balance sheets, which traditional ARCs do, a bad bank structure has specialized management to deal with the problem of NPAs. This would allow banks to focus on their core business while the bad bank can specialize in maximizing value from the high-risk assets. Also, the ARCs bought the bad loans from the bank at high discount rates, and the bankers were left with no other alternative. A bad bank’s would be ideally a group that involves government and private investors. And unlike private institutions, the government’s interest would be to revive the economy and not earn major profits from these operations.

The financial crisis of 2007–2010 ushered the creation of bad banks in many countries. For example, a bad bank was created as part of the Emergency Economic Stabilization Act of 2008 to help address the subprime mortgage crisis in the US. In the Republic of Ireland, a bad bank, the National Asset Management Agency was created in 2009, in response to the financial crisis in that country. The first bank to use the bad bank strategy was Mellon Bank, which created a bad bank entity in 1988 to hold $1.4 billion of bad loans-namely Grant Street National Bank (GSNB). The collateralized securities were sold as bonds. Subsequently, all bonds were paid off at full. Grant Street's early investors made handsome profits. The bank was dissolved in 1995 after repaying all bondholders and meeting its objectives. There have been many success stories regarding bad banks, but would it be the same for India? With the proper hand-holding between government and other stakeholders, it can definitely be achieved. The question still looms over the execution part, since many perfect plans with good intention succumbed to bad execution. Hence this is something only time can answer!

Reference:

● https://www.spglobal.com/ratings/en/research/articles/200406-for-asia-pacificbanks-covid-19-crisis-could-add-us-300-billion-to-credit-costs-11359063 ● https://bfsi.economictimes.indiatimes.com/news/banking/banks-exposure-tocovid-impacted-sectors-high-can-relaxing-npa-classification-normshelp/74741654 ● https://www.indiatoday.in/business/story/india-private-lenders-band-bank-ideanon-perfroming-loans-restructuring-1677437-2020-05-13

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The enigma of reviving the economy: Deciphered By: Pratiti Gandhi (NIMIMS, Mumbai) "The true mark of a leader is the willingness to stick with a bold course of action. An unconventional business strategy, a unique roadmap, a controversial marketing campaign — even if the rest of the world wonders why you're not marching in step with the status quo.

In other words, real leaders are survivors that are happy to zig while others zag. They understand that in an era of colossal-competition and non-stop disruption, the only way to stand out from the crowd is to stand-up for something that you believe in."

As a student, writing the above paragraph seemed almost paradoxical, because most of us as leaders don’t work enough to thrive for a better tomorrow. We dwell deep in our past conundrums and don’t think of an optimum solution towards a better future.

The Corona Virus outbreak is primarily a human tragedy. A novel virus that has shaken a billion lives all around the globe. It has kept us contained in our homes for months now and is already reorienting our relationship to the government, to the outside world and even with each other.

As the COVID-19 pandemic continues to create stress and uncertainty across the world, it is creating a paradigm shift in the economy. For an entire generation of leaders, this shift will become “the next normal”.

The actions they take now, and in the weeks ahead will define how successfully they will emerge. The CEOs who were working to balance dozens of critical priorities each day are starting to focus on two leading questions: “How can we break-through this crisis and emerge stronger than others in our industry?” and “How can organizations learn through this experience to thrive in an unfamiliar new world?”

This abominable situation has tremendously stirred all major sectors and domains apart from essential services.

Adding fuel to the fire, the investments and ventures for all declared and undeclared projects have been put on hold, creating a massive dent in our economy.

The economy before the COVID-19 outbreak ran by consumption, now it is run by assumptions.

To overcome this, companies have committed themselves to two principles: act now to run the business today and plan now to reboot the business for the future.

Few have adapted a radically new, “under strain” financial operating model to be able to partially continue during the lockdown. The world, as a single community, needs to rethink strategies to drive resilience and emerge from this crisis.

To tranquilize the disruption caused by the crisis, the ‘Now, Next and Beyond’ phases of action are implemented. Speed and agility will be key levers of success and individuals will need to adopt a faster approach to both navigate the crisis “now” and to plan for the “next” and the “beyond”.

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I believe that the workforce strategy to recover of our finances is orchestrated through five critical actions: Reflect, Recommit, Re-engage, Rethink, and Reboot.

These approaches are majorly used by industries and businesses to regain the economic loss in various sectors.

Simple strategies and steps that can be adapted to overcome losses in various crucial sectors are:

1. Continuous Assessment and Analysis of data: • The first step is to assess the damage that the pandemic is causing daily and keeping a track of losses occurring every day.

• This data and information will help make an informed decision and analyze the aspects that lead to a planned regrowth.

2. Planning a time-to-time scenario: • Step 2 is to Create a Launch Map —For example, if the government has conditioned the lockdown in 4 stages; businesses should focus on planning strategy scenarios with respect to the ‘date’ at which the lockdown is to be released.

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•

These integrated solutions cover the points of short-term gains through intricate planning.

3. Planning long-term strategies: • The third step would be to a plan for a long-term strategy and ensure the shortterm wins are somehow fulfilling the long-term vision.

• Circumstances have now and again established that we must “live-through” and “strike-back” alongside the existence of this pandemic. The virus is spreading swiftly; and it will continue to do so once the movement resumes. Therefore, we must have a long-term vision to ensure the continuation of the projects.

4. Providing safety that will restore trust: • Emerging from lockdown, clients will be more attentive about their health and increase their demands on safety.

• In such situations, the company needs to proactively communicate with the employees and clients about the necessary precautions that will be taken.

5. Diversify the product range (Reviving demands): • As the demands have dropped drastically, many companies have thought out-ofthe-box and launched new schemes to meet the expectations of the current and post pandemic markets.

• For example, Reliance Capital has ventured into insurance, Indiabulls have tied up with real estate and automobile giants like Mahindra & Mahindra have launched ventilator masks and other surgical supplies.

6. Digitization: • The paradigm shift towards the “next normal” could be backed by digitization.

• A recent World Economic Forum study shows that; in India, Digitization of 20 years has been done in 2 months during this outbreak • We, as human beings, will have to rethink how technology can be a backbone in finance industries.

• The concept of ‘Work from home’ which was introduced a decade ago should be practiced and implemented by all Finance and IT related companies. For e.g.

Leading IT-giants like TCS have stated that 25% of their employees will WFH post-lockdown. A stride like this not only saves the resources of the company but will also aid in controlling the spread of the virus in future.

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7. Collaboration: • Times are callous, need for collaboration is necessary. Collaboration between two individuals, two companies, two industries and two countries are pressing.

Harnessing and harboring synergies is crucial to bring up the economy of the country.

• Larger economies and sectors should introduce more job opportunities for the ones who have lost theirs amidst these situations.

• In recent times, Cholamandalam investment have tied up with DBS group to launch Chola DBS, TATA Finance has collaborated with AIG group to venture into Insurance sector.

8. Mental health/Economic packages: • The outbreak is stressful, and many honest taxpayers have lost their jobs over it.

Leadership should make sure that additional PTO should be given, relief funds for street vendors and lower middle class should be set up, schedule flexibility and self-care packages to be made available.

To conclude, many around the world have been greatly affected by this pandemic. Lives have been disrupted for days and days. There is going to be a strong and impactful aftermath when the current situation is done and dusted. Initiatives like ‘Aatmanirbhar Bharat’ have also been taken by the government to pacify the situation.

One thing we can do is spread the word about MSME’s and encourage assess management companies to increase their funding as they are the worst hit by the spread of COVID-19.

The only way to overcome this is together— in global solidarity.

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Infographic: Self designed Sources and references:

● https://www.ey.com/en_in/covid-19 ● https://yourstory.com/2020/04/indian-economy-post-covid-19-positive-outlook ● https://en.wikipedia.org/wiki/Economic_impact_of_the_COVID19_pandemic_in_India ● https://economictimes.indiatimes.com/wealth/personal-finance-news/impact-ofthe-coronavirus-pandemic-on-the-world-economy-and-how-india-isplaced/articleshow/75217253.cms?from=mdr ● https://www.bain.com/insights/topics/coronavirus/ ● https://www.mckinsey.com/business-functions/risk/our-insights/covid-19implications-for-business ● https://www.pwc.com/gx/en/issues/crisis-solutions/covid-19.html ● https://www2.deloitte.com/global/en/pages/about-deloitte/articles/covid-19insights-collection-by-topic.html ● https://www2.deloitte.com/global/en/pages/risk/articles/covid-19-managingsupply-chain-risk-and-disruption.html ● https://www2.deloitte.com/global/en/pages/about-deloitte/articles/covid19/covid-19-workforce-strategies-for-post-covid-recovery.html ● https://www2.deloitte.com/global/en/pages/about-deloitte/articles/covid-19navigating-volatility-and-distress.html ● https://www.mckinsey.com/featured-insights/coronavirus-leading-through-thecrisis ● https://www.government.se/articles/2020/04/strategy-in-response-to-the-covid19-pandemic/ ● https://government.economictimes.indiatimes.com/news/education/covid-19pandemic-impact-and-strategies-for-education-sector-in-india/75173099 ● https://www.searchenginejournal.com/covid-19-crisis-recovery-seotactics/361030/ ● https://www.weforum.org/agenda/2020/03/this-is-the-human-impact-of-covid19-and-how-business-can-help/ ● https://www.strategy-business.com/blog/Seven-key-actions-business-can-taketo-mitigate-the-effects-of-COVID-19?gko=4c0d1

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The Nutrient Conundrum By: Arpita Rathi (Shri Ram College of Commerce)

Post liberalization period of the country has seen a startling phenomenon of declining calorie intakes even as people are getting richer. But, is this a sign of development or distress?

“The doctor of the future will no longer treat the human frame with drugs, but will rather cure and prevent disease with nutrition”. - Thomas Edison An undigested piece of Indian Development cake that has received attention of many a scholar over the past few decades is what Chandrashekhar and Ghosh (2003) called the ‘Calorie Consumption Puzzle’. [1] India is witnessing a paradoxical trend: Even as real expenditures and incomes of households have seen an increment; average calorie intake has not seen any blush of enthusiasm.

Cross-sectional evidence suggests a robust positive correlation between the two variables. In layman terms, a positive relationship means that people with higher real incomes and expenditures will consume higher calories. However, delving into the data released by the National Sample Survey concludes an unmistakable proof of calorie intake decline in the country. Average inflation adjusted monthly expenditure of households in rural India saw an increase of 28% as opposed to the calorie intake which declined by 16%. The decline is "especially marked" in rural India. “Average calorie consumption in India,” they write, “was already low by international standards. That it has actually declined despite apparently high aggregate economic growth rates is clearly something that merits much more attention”.[2] In short, something is appallingly deficient in the Indian State. Nutritionally, the diet of the people is off-course.

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Dubbed as a ‘puzzle’, numerous researchers have conducted studies and surveys in order to find pieces that will end any and all conjecture. Experts have ventured guesses as to why people from one of the world’s most populated nations are eating so less.

Decline in calorie needs argument There are several reasons to believe that the reason people are choosing to consume less calories is because they need less energy. Less energy needs itself can be attributed to the fact that the workforce of the country is gearing from physically demanding jobs to low-intensity white collar jobs. This can be taken as an inevitable consequence of mechanization of agriculture and use of labor-saving technologies in the country gaining traction. However, there is no clear relationship between decline in calorie needs and decline in average calorie intakes. The real question is what prevents people from consuming calories in excess of their “needs”?

Food Budget Squeeze argument Another chilling argument posited by academicians is that the impoverished communities in the country are witnessing a decline in calorie intake simply because they do have money to spend on food. Non-food items have taken precedence in household expenditure lending food budget no room for expansion.

A basic assumption of conventional consumption theory in economics is that households aim at maximizing their utility subject to their budget constraints, which ultimately plays a role in determining their spending decisions. However, structural changes in the economy, far beyond the ambit of these households, decide the context in which these decisions are made. There are a number of examples to explain this.

1) An appraisal of the changes in social services supply by any state can affect household expenditures on healthcare and education.

2) Decline in livelihood options may force people to migrate to other places located over long distances, increasing expenditure on transportation.

3) Accessibility issues to common property resources such as forests or rivers due to privatization, urbanization, etc. can cause an increment in private expenditure of water, fuel, etc. because they can no more be availed outside the market.

Thus, an increase in non-food expenditures can squeeze the food budget. And it most certainly has in case of India because almost the entire increase in real MPCE (Monthly Per Capita Expenditure) in the past two decades is due to a considerable increase in spending devoted on education, health, transportation etc., while food budgets have remained moribund in real terms.[4]

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Diversification of diets argument In the face of stagnant real food expenditures, slow but steady diversification of diets can also be seen as a reason of interest. People are increasingly preferring more expensive food items that are low in calories instead of traditional dishes with high calories. After all, expensive and fancy food does seem more appealing than the humdrum everyday dishes we are accustomed to eat.

Penetration in rural areas argument An increased effort with respect to penetration of the rural markets gives ample scope of reducing the proportion of food consumed out of home production. Therefore, if structural transformation of the economy and commercialization forces households to seek a larger share of their consumption needs through market transactions, perverse price and income dynamics might kick in to reduce calorie intake.

In a study “The Calorie Consumption Puzzle in India: An Empirical Investigation,� Deepanker Basu and Amit Basole propose that the food budget squeeze explanation to the puzzle is the most likely cause. Moreover, if this is in fact the case, this type of malnutrition will work to perpetuate poverty in India.

If C is taken to be total calorie consumption, then C = f (wnfe, E/pf, CN, wc, NMf), This implies that there are five sets of factors that are the proximate determinants of calorie consumption by households in rural India: The share of total expenditure devoted to non-food essentials (wnfe), the level of calorie needs (CN), the total expenditure deflated by the food price index (E/pf), part of food budget spent on cereals(wc), and the availability of non-market food. (NMf).

Even though rural expenditures have increased, they have not increased enough to accommodate both, the increased need for spending on non-food essentials, as well as sustained nutritional intake.

If we draw a comparison between the average calorie intake in India and the norms set by Indian Council for Medical Research, we will see that a vast majority of the population has calorie intakes much below the required level.

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People of the country are falling short of basic nutritional requirements. The effects of malnutrition will last throughout their lives and can be manifested as lower weight and height and a greater vulnerability to disease and infection. Moreover, being raised malnourished is a key factor in prolonging poverty. Resolving this complex puzzle is of utmost importance because the capability to be adequately nourished will organize the foundation of leading a good life.

References [1] http://www.thehindubusinessline.in/2003/02/11/stories/2003021100210900.htm.

[2] http://www.macroscan.org/fet/feb03/print/prnt110203Calorie_Puzzle.htm [3]https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1146&context=econ_workingpap er [4] https://www.epw.in/journal/2009/07/special-articles/food-and-nutrition-india-facts-andinterpretations.html

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Negative oil prices and Saudi Aramco By: Anjaney Sudhakaran (IIM Indore) On April 20, 2020, the world watched in utter disbelief at their screens as oil, for the first time in history, was

priced below $0. The West Texas Intermediate (WTI) May futures contract dropped about 310% to $38.45/barrel on the day. In a world where low-prices of oil were an anomaly, negative prices are unprecedented. At the time, few analysts may have dismissed the result as a "pure financial trickery" rather than a true reflection of the market, like Bjarne Schieldrop of the SEB, considering that the June futures contract of the WTI settled at the $20.43/barrel mark on the same day. But the incident was a grim reminder of how demand-supply equations had been changed over the year.

The purpose of this article, henceforth, will be to analyze how much of an impact the novel coronavirus situation has had on The Saudi Arabian Oil Company or, as its better known, Saudi Aramco, a giant in the oil industry that recently went public, or at least 1.5% of its equity did for a whopping $25.6 Billion.

Let's start with the most obvious question to ask: How did Brent Crude fare during this debacle?

Why this question in particular? Well, for starters, Aramco produces five different grades of crude oil. These are Arabian Super Light, Arabian Extra Light, Arabian Light, Arabian Medium and Arabian Heavy.[1] The Brent Crude benchmark has a very high correlation with the Arab Heavy and Arab Extra Light indices. The two indices represent the prices of the grades of crude that Aramco produces primarily. Apart from this, the Brent Crude benchmark is also the most widely used. To quote the Economist: Brent Crude is the benchmark against which the majority of the 100m barrels of crude oil traded every day are priced.[2] Naturally, it follows that it provides the average consumer with a pretty good idea about how the oil industry is doing.

Let's get back to that question put forward earlier - How did the Brent Crude benchmark fare on April 20 as the WTI index fell below zero? The answer is, not that bad at all! The Brent crude contract weakened only 7.55% on the day according to Fortune[3], landing at the $25.96/barrel mark before the close. That's a brief primer on the oil crash itself, but how has Brent Crude been faring on the whole after the advent of the novel coronavirus pandemic? Not well at all.

The Brent Weighted Average index closed at its highest in the year during January 06, trading at $69.41/barrel.

By February 10, it had fallen to $53.84/barrel. It rose to $59.40/barrel on February 20, and almost free fell to close at $22.59/barrel on March 30.[4] That's a fall of 61.97% over 39 days.

Figure 1: Brent Weighted Average Index.

Source: https://oilprice.com/oil-price-charts

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the world as a result of the lockdowns imposed by governments due to the pandemic. There is excess oil in the market that not many want to buy and storages across the world are overflowing. This drives down the prices to unreal levels. On April 20, with the WTI May futures reaching its maturity the next day, this problem was exacerbated by the apparent lack of storage area. It reached a point where giving away the oil by PAYING the BUYER was cheaper than actually storing it. Hence, the negative rates!

To put this into perspective, India’s oil tanks were already about 95% full as on 22nd April 2020.[6] In Singapore, even as of 9th April, the price of storage had climbed at least 38% since the outbreak of the epidemic. Apart from this, the oil industry is also affected as the world itself tries to move towards more sustainable forms of energy. This implies more and more stringent standards being imposed on the oil companies themselves, hence reducing efficiency.

Now that we've listed out all the major problems faced by the Oil Industry, let's talk about one of its major players. What of Aramco? How successful have they been in weathering the storm?

Aramco was at the forefront for receiving the major brunt of the blow. Their disagreements with Russia in early March sparked an oil war in which they stepped up their production and drove down oil prices in the process, leading to their shares dropping to SAR 28.35 on March 09 and an all-time low of SAR 27.80 on March 16. Currently, their shares prices have returned to levels seen before this incident and, as of the 31st of May, the price per share is SAR 33.00.

Aramco released the report of their performance in the first quarter of 2020 on May 12. It reported a net income of $16.7 billion. A high number considering the circumstances, but still 25% down from the net income of $22.2 billion they reported in Q1-FY19. Dividends of $13.4 billion were paid in respect of Q4 FY-2019, and reportedly Aramco will pay $18.5 billion in dividends for the first quarter in the second quarter.[5]

Figure 2: Saudi Aramco Share Prices.

Source: https://www.saudiaramco.com/en/investors/investors/shareprice

Accurate numbers cannot be quoted on how hard the drop in prices on April 20 affected Aramco. The share price fell from SAR 30.15 on April 19 to SAR 29.40 on April 21. Hardly a "riyal" fell. This fall is quite strange, considering the already bleak landscape of the oil industry and shaky confidence in the company itself due to the recent oil war, as mentioned above. While one might never be able to reason it out, statistics can be misleading. A fall of SAR 0.75 is still a fall of 2.49%. For a company with trillions of dollars in market cap, that percentage implies an absolute fall in the range of tens of billions, in terms of market capitalization.

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Let's do a bit of math. There are 200 billion shares of Aramco, of which 3 billion are floating around in the market. Each share fell from a SAR Valuation of 30.15 to 29.40. On April 20, 2020, the conversion rate was about 7.99 SAR received per dollar exchanged, or, more specifically, 1 SAR was worth approximately $0.125.

Therefore, a fall of SAR 0.75 implies a fall of $0.09375. Multiply this to the existing number of shares, that's a total market cap fall of $18.75 billion. Quite the number, yes?

It is clear that Aramco, like any other oil company, has been affected quite severely by the crisis at hand. It is quite interesting to think about what the scenario will be when the lockdowns begin easing in countries. Will, the situation ease into a comfortable equation that is familiar and similar to the one that existed before this debacle or will demand shoot up drastically so that the supply will take about a month to cope wherein we'll see the complete opposite of what happened on the historic day of April 20, 2020?

Only time, dear reader, will tell.

References [1] The Saudi Arabian Oil Company. (2020a, April 15). Oil Production. Retrieved May 28, 2020, from https://www.saudiaramco.com/en/creating-value/products/oil [2] B. F. (2018, October 29). What is Brent crude? Retrieved May 28, 2020, from https://www.economist.com/the-economist-explains/2018/10/29/what-is-brent-crude [3] Dunn. (2020, April 21). 'Unreal': Oil prices go negative for the first time in history. Retrieved May 28, 2020, from https://fortune.com/2020/04/20/oil-prices-negative-crash-price-crudemarket/ [4] Ethics Explainer: Virtue Ethics. (n.d.). Retrieved May 05, 2020, from https://ethics.org.au/ethics-explainer-virtue-ethics/ [5] The Saudi Arabian Oil Company. (2020, May 12). Aramco announces first quarter 2020 results. Retrieved May 28, 2020, from https://www.saudiaramco.com/en/newsmedia/news/2020/aramco-announces-first-quarter-2020-results [6] Sundria, S., & Chakraborty, D. (2020, April 22). India’s Oil Tanks Are 95% Full as Refiners Hastily Dump Fuel. Retrieved May 28, 2020, from https://www.bloombergquint.com/markets/oil-tanks-are-95-full-in-india-as-refiners-dump-fuelin-haste

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Why couldn’t Covid-19 prevail over God’s own country?

By: Rahul Sinha (St.Xaviers University, Kolkata) Our goals can only be reached through a vehicle of a plan, in which we must fervently believe and upon which we must vigorously act. There is no other route to success.

– Pablo Picasso

Abstract: This article gives us the insights of Kerala’s fight against COVID-19. It gives an analytical explanation of the infrastructure and healthcare model that Kerala implemented in order to keep its citizens safe. The article states the importance of proper and stringent execution of plans and cooperation between the government and public.

Introduction: From motivating the public through press conferences to imposing restrictions and resisting the shocks, Kerala’s efforts are praiseworthy. Kerala invested a lot for its human capital over a long period of time, the literacy rate touches the sky, the healthcare facilities are significant. Kerala’s political history states its in-depth linkage with communism. But when it comes development and welfare the ideologies are compromised.

Kerala’s healthcare system is highly privatized with healthy division of labour between private and public sectors. Kerala also has one of the highest doctor-patient ratios in the country. The doctor-patient ratio in the state, which nearly stands at 1:400, which is much higher than the World Health Organization recommended 1:1000.

Even before nation-wide lockdown, Kerala implemented various actions like shutting down schools and banning public gatherings. The mid-day meals were delivered to the children at their homes, this effort was admirable and was cherished by various eminent personalities.

History of disaster management: Kerala even managed to cope up after the floods in 2018 due to its decentralized and effective system.

Kerala also took lessons from its last experience dealing with the Nipah virus, which neither had treatment nor proper vaccine. The state recognized certain protocols like isolation, contact tracing and alert community surveillance system, which they also implemented during their war against the Corona Virus.

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The first case: The first case of the COVID-19 pandemic in Kerala, which was also the 1st case in India, was confirmed in the district of Thrissur on 30 January 2020. The number of active cases primarily emaciated at 266 on 6 April before diminishing. For the first time in over 45 days, there were no new cases on 1 May. However, following the return of Keralites from other countries and states, more cases were reported in mid-May, with the highest single-day spike (62 cases) on 23 May. As of 25 May, there have been 896 confirmed cases with 532 (59.38%) recoveries and five deaths in the state. Kerala has the lowest mortality rate of 0.67% among all states in India.

Kerala's accomplishment in containing COVID-19 has been widely praised all over the world.

The Timeline: 30 Jan 20 Feb 9 Mar 10 Mar 22 Mar 23 Mar 24 Mar 25 Mar 28 Mar 10 Apr 13 Apr 5 May 20 May

First confirmed case All affected individuals recorded Second wave of cases Shutdown of colleges and schools Janta Curfew Statewide lockdown till 31st march 100 confirmed cases Nationwide lockdown First death 100 reported recoveries Recoveries > Active cases 500 cases confirmed 500 reported recoveries

“Break the chain” Campaign: On 16th of march, Kerala launched “Break the chain” campaign to combat Covid-19 at its primitive stage.

The Pinyari Vijayan led government took this initiative and installed water taps at public spots like the entrance and the exit of the railway stations with hand wash bottles. The main aim of the campaign was to educate people about importance of hygiene. This campaign to limit the spread of corona virus was undeniably successful.

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Figure 3: source - wiki

As of 26th May, 2020, the active cases have been portrayed in the following map.

The effects on the economy: The tourism sector, which is the major contributor of the state’s economy is suffering a lot. The bookings and the tour packages got cancelled, creating a great burden on the industry. The Liquor sales in Kerala is a publicsector undertaking, the government earned a noteworthy amount of revenue but due to the indefinitely elongated lockdown the sales were insignificant. The economic slowdown in the gulf countries are expected to have a direct impact on Kerala. The state-owned transport system KSRTC reported losses worth crores due to the lockdown and less number of travelers.

Steps taken by Kerala: 1. Preparing Route Maps: After certain amount of spread the district authorities prepared route maps of the infected people specifying the places they travelled after the initial symptoms were noticed. These maps were published and circulated to keep the unaffected people away from the infected areas.

2. Providing “Quarantining Comfort”: Kerala is quarantining people for 28 days instead of 14 days, as recommended by the center. The patients in quarantine were blessed enough to have choice of meals, wi-fi services and counselling.

3. Stress relief initiatives: The Anti-Covid task force led by renowned doctors and administrators used a hotline to provide stress relief to affected people.

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4. Division of work and responsibilities: At a point of time the state faced a shortage in supply of hand sanitizers due to excessive demand during the initial days and due to hoarding of the product. A Public-Sector Undertaking named Kerala State Drugs and Pharmaceuticals ltd assured the government that it would produce enough sanitizers for the state at a minimal rate of 125/- for a 500 ml bottle.

5. Active cyber cell and online information platform: One of the most disgusting factor recognized during this lockdown period is spreading of rumors and fake news, it not only initiates unnecessary rivalries but it also affects out mental health. The government of Kerala not only asked the police to take strict actions against people who are behind the menace, but also launched its app GOK Direct.

Conclusion: The states multilayered combating strategies including healthcare (not only physical but also mental), proper communication system and stringent policies helped it to set an example in front of the whole world during this time of global distress. The instance showed us the importance of government and public cooperation and over and above, the importance of well nurtured human capital. The government may impose various policies, act in a stringent manner but the recovery process depends on the citizens of a nation/state. The war is not yet over but Kerala is very well prepared to defeat COVID-19.

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Regional Comprehensive Economic Partnership By: Siddharth Gupta (NMIMS)

Trade has been, for long, considered as the oldest and most effective weapon of war. India’s superiority in trade some centuries ago, was one of the primary reasons for its lucrativeness, attracting invaders from across the world. Similarly, for centuries, many countries have tried using trade as an instrument to exert their influence over the world. It is no wonder, therefore, that Regional Comprehensive Economic Partnership (RCEP), the new trade deal between ASEAN countries and its group of Free Trade Agreement (FTA) countries, is garnering so much interest and caution.

RCEP is an FTA pact led by China, promoting a zero-tariff trade regime among the partner countries in a phased manner. With India included, the RCEP countries account for 50% of the world population, and 30% of the world GDP. However, India remains wary of joining the deal in a haste. Only last month, Indian prime minister Narendra Modi famously pulled India out of the proposed trade deal in its current form, citing inability of the partner countries to take credible steps to address India’s concerns.

There have been both, critiques and endorsers of the government’s move, with credible arguments coming out from both the sides.

Leaving RCEP will result in significant foregone benefits for India, according to many. Asian market is huge in terms of number of consumers, and their consumption appetite (read income) is only growing. This will result in exponentially increasing demand from Asia. Letting go of the RCEP would mean India turning its back on this very demand. Catering to Asian market would result in potentially humongous export levels for India, something it desperately needs to achieve its self-imposed $5-trillion GDP target by 2024.

India cites the concerns of its vulnerable industries as one of the major reasons for it to shelve the RCEP. These industries will be negatively impacted from any FTA that India signs with the RCEP countries, is what it argues. However, note that industries have always resisted any change in the status quo, as was the case in

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1991 reforms as well, but the benefits of 1991 policies are for all to see. Sure, India’s trade deficit has increased manifold since 1991, but so has its GDP. Empirically, the increase in trade deficit has been proportional to the increase in its GDP, and for a majority of import categories, India’s exports have increased faster than its imports. New industries took off with higher competitiveness and better efficiency, and consumers have been offered more variety of higher quality goods to consume, at a cheaper price.

The benefits of the trade liberalization have indeed been immense, but this is no 1991.

The picture is vastly different today. With China laying hold of highly efficient manufacturing, it is fairly obvious that it aims to increase its dominance in the global exports market, especially after its trade war with the USA has resulted in foregone benefits of trade.

Sure, Asia is a growing market. But a growing market is exactly what cheap exports from China look for. Just signing an FTA will not be enough to increase India’s exports volume. The country will need to improve the competitiveness and the quality of its exports for that to happen. Better and efficient production capability is what India needs right now, to fully benefit from any FTA it signs. Without such a change, signing up for free trade pacts may cause more harm than good to the Indian industries. Exposing domestic industries to highly advanced international competition might be one of the ways to improve their efficiency levels, but it is one of the easiest ways to kill them too.

Further, note that India’s trade deficit with China is large. It accounts for almost 40% of India’s total trade deficit. Signing a trade deal in its current format would only worsen this deficit, and result in flooding of Indian markets with cheap imports from China.

The geopolitical implications of not signing up for RCEP are also hugely undermined. India, by rejecting RCEP, has implied that it will not be swayed into signing anything and everything. This is a welcome boost to India’s perceived soft power, while at the same time, partially deflating China’s. Rejection of a China-led RCEP highlights its inability to influence any country it wants. Moreover, this also gives the USA a higher bargaining power in its ongoing trade war with China.

Consequently, it remains fairly probable that China will try and address India’s concerns regarding the trade deal. In that way, a deal beneficial to India may be bargained for, hence being mutually beneficial to all the partner countries. An improved deal under RCEP would help India increase its productive efficiency further, increase agricultural income, integrate India into the global value chain, among other benefits. A deal which lets India tap Chinese markets will also provide a huge potential to industries which Indian producers are more efficient in, like pharmaceuticals. It is therefore, safe to say that whatever perceived losses there may be from rejecting the RCEP, these are only temporary.

Note that we do not favor protectionism in any of its form. However, I fully take cognizance of the fact that trade deals need to be negotiated carefully, which must benefit all the countries involved, and not just the ones with higher bargaining power.

Till the time such a deal is reached at, India is right in holding back. Signing up for RCEP today would mean conceding the trade superiority to China. And as old wisdom says, it’s better to avert a war, than to surely lose it.

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Revisiting Mudra scheme- Its Impact on Banking System By: Shweta Sachdeva & Baibhav kr. Singh (IIM Vishakhapatnam)

Under the aegis of Pradhan Mantri Mudra Yojana (PMMY), the primary product of MUDRA will refinance lending to micro businesses. With an aim to provide last mile credit delivery, the interventions have been named ‘Shishu‘-which covers loans up to 50000, ‘Kishor‘-above 50000 up to 5 lakhs and ‘Tarun‘- above five lakhs up to 10lakhs. This denotes the stage of growth/development and funding needs of the beneficiary microunit/entrepreneur.

Eligibility: Every Indian citizen who is pursuing business in non-farming sectors such as Service Sector, Trading, or Manufacturing is eligible to take a loan up to Rs.10,00,000. For availing this loan, they must approach the nearest branch of any of the Public Sector Banks (PSUs), Regional Rural Banks (RRBs) and Non-Banking Financial Institutions (NBFCs)

Current Status of MUDRA: Loans disbursement: As per current scheme, MUDRA Banks is in agreement with a total of 27 public sector banks, 17 Private sector banks, 31 RRB’s, 4 Co-operative banks, 36 micro-finance institutes, and 25 NBFC’s.

As per the Sanctioned loan, the borrower can use 10% of the loan amount through credit card.

Loans Disbursed: Scheme Shishu Kishor Tarun

Amount Sanctioned (Cr.) 1,06,000 86,732 60,943

NO. of Loan Acc. 42669795 4653874 806924

Avg. Size ₹ 24,883 ₹ 1,88,548 ₹ 7,61,792

Structural challenges: An average microenterprise in India is dependent on personal borrowings and unregulated financial practice, which sometimes convert into predatory loan practices and loan sharks.

The most challenging task with MUDRA has been registration on thousands of microfinance institutes (MFI).

The MFI’s are registered as NBFC’s with self-regulating status. Due to minimal regulation, there have been enforcement on borrowers for repayment of loans, short repayment cycles, and high-interest rates. With strict restrictions on the door to door loan recovery methods by MFIs, recovery rates in the state falling down causing the closure and downsizing of several MFIs. The effect was increasing cost of borrowings by 60% which led

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to dependency on unregulated financial agencies again. Therefore it is essential for MUDRA to keep a balance between regulation and over-regulation in order to provide entrepreneurs with suitable credit source.

How the structure works: To Banking sector MUDRA provides 3 functionality 1) Refinancing of Loans: Refinancing is generally associated with inability to pay the debt in time.

Financing loans Refinancing Loan Guarantee MUDRA Corpus & Credit Guarantee

Banks

MFI’s

Commitment to Sanctioned amount

RRB’s

The loans are refinanced for various reasons: • For better interest rates • To reduce risk like switching from floating rate to fixed rate loans • To infuse liquidity by freeing up cash • Refinancing form FY 2017 to FY 2018 increased by 133%.

A staggering growth compared to the amount disbursed. Which indicates that the loans sanctioned in previous two years, has gone again for refinancing. A bad indication on the finance part.

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Refinancing amount by Banks in (â‚š Cr) 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

4405

1886

FY 2017

FY 2018

Refinancing amount by RRB's in (â‚š Cr) 600 516 500 400 300 200

181

100 0 FY 2017

FY 2018

Source Link: https://www.mudra.org.in/Default/.../Annual_Report_Of_Mudra_2017-18.pdf

2) Securitisation of Loans: MUDRA provides support to Banks/MFIs/NBFCs for raising funds by participating in securitization of loan assets against micro enterprise portfolio, by providing default guarantee for credit enhancement. They are also participating in investment of PTCs i.e. Pass Through Certificates as a junior/senior investor. Till 2017-18, MUDRA bank has subscribed to 23 PTCs. According to annual report there is a growth of 160% till 2017 with cumulative subscription up to 1024.5 Cr.

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3) Portfolio Credit Guarantee: Since the loans provided under the MUDRA scheme are collateral free, to mitigate this issue of collaterals, Mudra is offering Credit Guarantee Product in which guarantee is extended by “Credit Guarantee Fund For Micro Units”. It provides a portfolio guarantee because the individual loan sizes are small and number of loans are large. Thus Risk sharing is provided for homogeneous loan portfolio rather than individual loans. The Credit guarantee is one of the key inventions for bringing down cost of funds for beneficiaries to improve its credit worthiness.

Problems with Mudra: The Mudra scheme calls for disbursal of loans up to Rs.10 lakh micro/small finance entities. It is aimed at lower sections of society by providing them some kind of income generating opportunities. Problems with the scheme are: • The loans given under this scheme are unsecured, i.e., no collateral is required • The very nature of businesses supported by these loans are volatile • There may not be a fixed location for the business • The average loan amount under this scheme is somewhere around Rs. 47000 which is usually not enough capital to start a business that can create employment opportunities for others. Also, there is no record of any employment being generated through this scheme.

• The banks under pressure from the government to disburse these loans to meet its disbursal target under this scheme. This results in a lack of “due diligence” when sanctioning loans under this scheme on the part of the banks as the government wants the banks to lend to anyone who comes in.

All these factors act as threats to the Mudra scheme which may lead it to fail. People like Raghuram Rajan are even hinting at Mudra Scheme as the next source of Banking crisis due to the credit risk of the loans under this scheme.

Loan Monitoring: The official figures suggest that the NPA ratio of the Mudra loans is less than 5 percent. This is much less than the acceptable NPA ratio of 10 percent for the banks. The total amount of loans disbursed under this scheme amount to more than 6 lakh crores. However, the NPA ratio under this scheme has seen a spike in recent times which led RBI to caution the finance ministry indicating the need for a better loan monitoring system. The fact that RBI is worried that this could be the next source of Banking crisis shows the inherent risk associated with the loans disbursed under this scheme.

Repayment: As mentioned, the loans under this are mostly non-collateral loans. This presents a huge challenge when the loans are not repaid. Also, these businesses may not have a fixed location. The public banks may not be

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prepared for this kind of work. Also, whom does the bank go after for collection of these loans? Most banks may prefer to track the loans with high denomination rather than the ones with a lower denomination.

Criticism: 1. MUDRA has a biased CRAR ratio, As per the annual report, all refinance provided to Scheduled Commercial Banks including RRBs are assigning zero risk weight, as per RBI letter No. DNBR(PD)No. 0026/03.10.001/2015-16 dated July 03, 2015. This equals refinance loans to government bonds, the safest securities. It also means MUDRA doesn’t need to keep equivalent capital for this type of loan amounts.

The Current trend shows that CRAR for Mudra has decreased from 56% in FY 2017 to 45% in FY 2018.

Further evaluation is also required for the Refinanced and financed amount calculation to understand the actual impacts.

2. Shadow Banking: As Mudra’s operations are not administered and regulated by RBI, it seems to be promoting shadow banking.

Shadow Banking is discouraged as it is considered as a flaw in financial system and could lead to global crisis.

As a result, there is a chance of potential Operational Risk when MUDRA bank expands and grow in size.

References 1. Annual Report of Mudra 2017-18 2. https://www.livemint.com/Industry/Y2okGijIZJr9a9KoyUHmTP/Mudra-scheme-fills-a-gap-inthe-lending-ecosystem-Kshatrapa.html 3. https://www.mudra.org.in/offerings 4. https://www.indiatoday.in/india/story/mudra-yojana-is-a-mission-or-mess-5-point-factchecker-1244538-2018-05-29 5. https://www.bloombergquint.com/opinion/is-there-bang-for-the-mudra-buck 6. https://www.academia.edu/37440869/IMPACT_OF_MUDRA_LOAN_ON_MICRO_SMALL_and_M EDIUM_ENTERPRISES 7. Reference paper on : Study on impact of PMMY

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