Finly ,May 2020

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ISSUE NO. 91, MAY 2020

Team Finstreet 2020-21 Dear Readers, Greetings from the Steering Team of Finstreet. We, at Finstreet, believe in imparting academic and professional excellence in the field of Finance to all its members as well as fellow mates. This academic year, we have planned to go a step further by introducing the Investment Club, which would focus on investing in the actual stock market, seeking to impart investment and technical skills to students. We are also working on our own blog 'The Finstreet Blog', which would bring to you our opinions on various macro indicators which we share in 'The Finstreet Journal' every week, frequent updates on the current topics taken in FINLY. Down the line, we also plan to collaborate with our Investment Club and would be sharing our Stock Recommendations (For educational purposes only). It’s a long way ahead and we would be needing everyone’s support to achieve these goals. And as Mark Twain has rightly said and I quote, “ The secret of getting ahead is getting started”. So, let’s get started on this journey together. Thanks & Regards, Milind Verma |Convenor| PGDM B

Swikar Gupta |Co-Convenor| PGDM FS

Srikant Kolluru |Co-Convenor| PGDM IB


CONTENTS 01

02

EDITORIAL

TEAM FINLY

03

07

COVER STORY

ECO SECTION

Re-assessing the world's dependency on China

2020 - The year of looming Recession

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15

SECTOR ANALYSIS

COMPANY ANALYSIS

Pharmaceuticals Sector

Cipla Limited

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22

FINTECH FUNDA Corona vs Developed Nations - What went wrong ?

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CALL FOR ARTICLES - RUNNER UP

BFSI amidst Covid-19: Churning impacts in India

CALL FOR ARTICLES - WINNER

Coronavirus & its impact on the oil industry

26 ALUMNI SECTION Amay Patale MMS | 17-19


ISSUE NO. 91, MAY 2020

Dear Readers,

Editor's Note

“If money is your hope for independence, you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience and ability.” – Henry Ford. Going with the times, this quote of a revolutionary industrialist holds. The world is going through a crisis, let’s make and not break ourselves through this pandemic. Let’s revel through the havoc of this unprecedented situation mankind is facing by leveraging the curiosity within us. It’s an opportunity to expand our knowledge by finding new ways to circumvent the circumstances, invest into the most intuitive ideas that come to our mind and surpass this havoc. As Ben Franklin has rightly said, “An investment in knowledge always pays the best interest”. On this note, we at Finstreet are proud to unveil the first edition of our monthly magazine “Finly” for the academic year 2020-21. Team FINLY has always been a strong set of focused individuals who put in a lot of efforts and dedication to stitch together this magazine and we can’t thank them enough for their constant support and initiative. We have received an overwhelming response for this month’s “call for article” competition, with some high-quality content from some of the best management colleges of the country. We thank all the participants for their sincere efforts. This month’s winner and runner-up articles are a recommended read. We are thankful to Prof. (Dr.) Pankaj Trivedi (Course Coordinator, PGDM Core and Faculty Coordinator, Finstreet) for providing the much required mentoring, support and backing to the Finly team. We would also like to thank all our readers and faculty members for their valuable reviews and feedbacks. Akshitaa Bahl |Editor-in-Chief| PGDM FS

Nilomee Savla |Editor -Finly| PGDM FS

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ISSUE NO. 91, MAY 2020

TEAM FINLY Faculty in-charge

Editor-in-chief

Editor - FINLY

Dr. (Prof) Pankaj Trivedi

Akshitaa Bahl

Nilomee Savla

Conceptualization & Design

Jugal Daiya

Riddhi Nagda

Rohan Thakur

Content Team

Hiral Mody

Pranit Sawant

Anjali Pandya

Joel Johnson

Mihir Mali

Nihar Shah

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| COVER STORY

REASSESSING THE WORLD’S DEPENDENCY ON CHINA Pranit Sawant | PGDM-FS |19-21 Hiral Mody| MMS | 19-21 In December 2019, a pneumonia outbreak was reported in Wuhan, China, and on 31st December 2019, an outbreak was traced to a novel strain of Coronavirus. The source of viral transmission to humans has been traced to the Huanan Seafood wholesale Market, notoriously the Chinese wet market. A global pandemic like this affects every inch of human life. Commercial establishments, educational institutions, entertainment hubs, events, have all taken a hit. The economy, of not just India, but of all the countries affected by this pandemic, is completely in a slump. Unsurprisingly, even before the Chinese government announced that it had a huge number of cases of people suffering from the disease, the virus had spread to neighbouring countries due to its contagious nature. Considering the domestic and international air travel from China to several countries around the world, the virus was a ticking bomb waiting to explode. It’s just a matter of time before the companies start to realize that its time to change their choice of manufacturing hub as China witnesses a lockdown.

SECTOR WISE Tech Companies: Many major technology have driven and electronics companies have decided to move out of China which is believed to be the origin of the Coronavirus outbreak. Google, Microsoft and Samsung Electronics are some of the major companies which have already started taking steps in this direction by reducing their dependence on China. Google is planning to manufacture its next generation flagship smartphone – the Pixel 5 which is expected to roll out in the second half of 2020 directly from the South Asian nation rather than China. Google also moved its data center to Taiwan in 2019 and started to manufacture small smartphones from there. Microsoft has decided to set up factories in Vietnam where production will begin at a small level in the beginning but will grow eventually in a phased manner. Retail Brands: Major retail brand H&M has 1899 3


| COVER STORY manufacturing centres worldwide of which, China contributes around 22%. H&M has decided to meet its requirements from other factories and has slowly reduced its dependence on Chinese factories. Other brands like Nike and Adidas have already made plans and have started taking steps to move away from China to avoid supply chain bottlenecks. Automobile Companies: China is considered to be a major hub for automobile companies as China has the resources, labour and proper supply chains. But since the Coronavirus outbreak in Wuhan, Hubei workers are not able to come to the factories due to the lockdown in the province .This has halted the production lines and costed millions to the automobile companies who are dependent for the production of the ancillary parts. Nissan produces around 1.5 million cars and Honda produces around 700000 units in the city of Wuhan. China has not only grown into an automobile power in the past 2 decades but has also been a major demand source of this production. Due to this unprecedented pandemic , companies are now trying to move away from China and looking at other viable options to avoid such situations in the future course of time. Chemical Companies: All the major chemical companies source their raw materials from China which is expected to provide around 70% of the total requirements. But the current scenario has made the companies to reconsider their decisions and move out of China because of facing supply chain issues. The trade of Carbon Black reduced in China at 8%

whereas it increased in South Korea to 13%. In Phenol, trade with China fell by 8% whereas increased 28% in South Korea. India is trying to make the most of this opportunity by attempting to establish Petroleum, Chemical and Petrochemical Investment Regions (PCPIRs) at an investment of over Rs. 8 lakh crores and employment to more than 34 lakh people. This will be a huge step for India for which it will yield rewards in the future as more and more companies are looking for a way out and a secured future. COUNTRY WISE Japan decided to withdraw from China: The Japanese government has approved a stimulus package of 108.2 Trillion Yen (US$993 billion) which is close to 20% of Japan’s economic output, to cushion the impact of corona Virus on its economy. Out of the total amount, the US $2.2 billion is earmarked to help its manufacturer to shift its production out of China. Under normal circumstances, China is Japan’s biggest trading partner. But due to the pandemic, imports from China slumped by almost half in February as the disease closed factories, in turn, starving Japanese manufacturers of necessary components. This is an opportunity for countries like India and other South-East Asian Countries like Vietnam and Bangladesh to become Japan’s next investment destination. India and Japan have had close civilisational ties for 1,400 years. As of now, there are 1,441 Japanese companies registered in India, up from 1,369 in 2017. These companies have 5,102 business establishments spread across states like 4


| COVER STORY Karnataka, Tamil Nadu, West Bengal and Gujarat, out of which Karnataka alone has 530 companies working in it, up from around 200 in 2015. USA and China Phase One Deal: USA and China are the two largest economies of the world. However, the trade between these two countries was lopsided with USA running a large and growing trade deficit (US$375.6 billion in 2017) with China, which became one of the major political issue in 2016 USA presidential Campaign. In July 2018, USA decided to put 25% duties on around US$34 billion of imports from China, which included cars, hard disks and aircraft parts. China retaliated by imposing a 25% tariff on 545 goods originating from the United States worth US$34 billion, including agricultural products, automobiles and aquatic products. This led to a trade war between the two largest economies of the world. However, in January 2020, China and the USA sign a phase one trade deal. As part of the deal, China agreed to buy an additional of US$200 billion of American goods and services over the next two years. The deal also included the suspension of a planned December tariff on around US$162 billion in Chinese goods, with an existing 15 per cent duty on imports worth around US$110 billion halved. Big companies from the US and Europe were reconsidering their China strategies even before the trade war started. China’s labor costs are rising, local companies are increasingly competitive, and the government has become less

accommodating. But, its skilled worker base, extensive highway and rail systems and vast consumer market make China tough to quit. Now after the Corona Virus Outbreak and shift of its epicenter from China to the United States and Europe and the blame game between these countries, the West will try even harder to lower its dependence on China. European Union and China: "There will be a 'before' and an 'after' the coronavirus [outbreak] in global economics," French Finance Minister Bruno Le Maire. Europe is trying to decrease its dependence on China, for the supply of certain products and strengthen its sovereignty in strategic value chains like cars, aerospace and medicines. While the prospect of "decoupling" or the untangling of deeply intertwined supply chain relationships that bind the West to China, seems premature, the virus is prompting a reappraisal of reliance on a single country. India’s dependence on China for API: With Corona Virus spreading rapidly across the world, it has given rise to apprehensions as to how much this epidemic will have an affect on the supply of active pharmaceutical ingredients (API) from China (who is the largest producer of APIs) to India and other countries. Some of the reasons of concern for India’s Pharma industry are as follows: 5


| COVER STORY Even though the inventories level is at a comfortable level for the next 2-3 months, a rise in medicine cost cannot be ruled out. As the virus cannot survive for more than four or five days in the open, hence it is very less probability the COVID 19 can travel through consignments India's imports close to 68-69% of its all Active Pharmaceutical Ingredients from China, which amounts close to $2.4 billion. These imports are then used to manufacture some of the key medicines in India such as paracetamol, the metformin, ampicillin and amoxycillin. This is not the first time such supply Chain disruptions have occurred. Some of the incidents from the past are – Beijing Olympics of 2008, for instance, these Manufacturing units were shut down on the issue of environmental concerns. However, interestingly such disruptions have boosted India’s API exports, which account for about a fourth of the country’s total pharma exports of $20 billion. Need for Self Sufficiency in India’s Pharma Sector: Acknowledging the need for self-sufficiency in APIs, Indian government had set up an ‘inter-departmental’ task force in 2018 to investigate the issue. Some committees earlier have also delved into the matter. China’s cost of production is way cheaper than India’s; even so, the domestic output must be regarded as a strategic prerogative. It will also enhance India’s negotiating capacity in future trade engagements with China. The public sector needs to play the major role while raising existing Research & Development incentives for the private players.

Union Budget of 2020 did not address this issue. Indian Drugs and Pharmaceuticals Ltd could be roped in to take up the task of making the necessary API’s. Its role in ramping up the production of tetracycline during the 1994 plague epidemic could be instructive in this regard. WAY FORWARD Katoch Committee made few recommendations on reviving the API production, which included reviving PSUs for manufacturing critical drugs such as penicillin and paracetamol. Other suggestions included setting up a professionally managed equity fund for producing APIs and giving duty exceptions for capital goods imports. Post-Corona, the Indian chemical and speciality chemical manufacturers which were till now relying heavily on two countries i.e. China and the U.S. for sourcing their raw materials should rethink on their sourcing strategies.

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| ECO SECTION

2020: THE YEAR OF LOOMING RECESSION Joel johnson | PGDM - Core| 19-21 Introduction

fallen to 1.6% in 2019 from a 2.2% growth registered in the previous year.

The global economy has been largely volatile since the 2008-09 financial crisis. The last decade has witnessed currency gyrations, high market volatility, and trade tensions which have caused economic anxiety. A lot of economies across the world have been plagued by the weakening of investments, falling productivity, rising debts, and extreme inequality for the past few years. As stated by the UN, a slower world growth threatens to undermine progress towards raising living standards, creating a sufficient number of decent jobs, and eradicating poverty. Navigating choppy waters Contrary to popular belief, the economic slowdown had begun before the coronavirus outbreak. The global economy was moving downhill for the past few years. According to the IMF, the global economy recorded its lowest growth of the decade in 2019, falling to 2.9 per cent. The World Bank in its semiannual publication, Global Economic Prospects, January 2020 estimated that the GDP growth of advanced economies has

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| ECO SECTION The GDP growth rate of emerging markets and developing economies (EMDEs) decelerated to 3.5% from a 4.3% growth registered in 2018. Almost all economies across the globe grew at a snail’s pace in 2019. India, China, US, Africa, and the EU have seen a fall in GDP growth for two consecutive years.

The slowdown can be attributed to trade tensions between the US and China and the rise in protectionist measures. The increase in the global fiscal and monetary stimulus is a sign that economies across the world have acknowledged that they are facing a slowdown and hence have been resorting to expansionary policies to overcome.

The global trade, investments, and consumption growth had also slowed down considerably which showed that global economies already faced an uphill task to revive growth in 2020. The slowdown in global trade from 4% in 2018 to 1.4% in 2019 is a matter of concern.

The productivity slowdown among the advanced economies has been dramatic in the last decade. The annual average rate of labor productivity growth has halved to 1.2% in 2010-17 from 2.3% in 2000-07. The productivity growth among advanced economies was 0.8% while it was a meager 3.5% for EMDEs in 2018. The contraction in economic activities in the last quarter of 2019 among a large number of economies across the world indicated that the global economy was slowly headed towards a severe slowdown. According to the World Bank, 90% of advanced economies and 60% of EMDEs had experienced a varying level of deceleration in 2019. Thus, the global macroeconomic indicators were clearly showing that a massive economic downturn was imminent, prompting UNCTAD to warn in 8


| ECO SECTION January, earlier this year, that weaker growth in both advanced and developing countries meant that the possibility of a global recession in 2020 was a clear and present danger. COVID-19: The catalyst for a global recession in 2020: The coronavirus outbreak which started in China has become a global pandemic affecting more than 210 countries, taking a toll on human lives and causing an economic threat. The pandemic is expected to cause a deep and negative shock to the already slowing global economy leading to recession as containment measures such as lockdown, severe restrictions, and isolation are affecting economic activities across the globe. The pandemic has disrupted the supply chains, lowered productivity, negatively affected private spending, tightened the global financial market conditions, and increased the volatility of commodity prices. The lockdown is expected to cause massive unemployment as firms lay off employees to cut down their expenditure. This has increased the risk of defaults. Hence, the lenders are hesitant to extend credit, squeezing the financial markets. There has also been a dramatic sell-off in equity markets The IMF projects the global economy to contract sharply by -3% in 2020 which is a downgrade of 6.3 percentage points from the January 2020 estimate by IMF. Global GDP growth below 2.5% is classified as a recession by the IMF. Thus, the ‘Great Lockdown’ as termed by the IMF will be the worst recession since the Great Depression seen in the 1930s.

It is pertinent to note that the -3% estimate is in a baseline scenario, under the assumption that the pandemic will fade in the second half of the year paving way for economic activities to normalize

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| ECO SECTION investment spending in the country. The economies of the UK and the Eurozone was already fragile. The Eurozone GDP increased by just 1% year on year in the last quarter of 2019 which was the weakest performance in six years. Italy and France had suffered quarter on quarter contractions while Germany and the UK’s economies stalled in 2019. With Europe becoming the new epicenter of the pandemic, the European economies are expected to enter into a severe recession. Japan is already facing a severe economic downturn with a 7.1% contraction in GDP quarter on quarter, annualized in the last quarter of 2019. It’s listed firms expects $17 billion in sales to be wiped off due to the pandemic.

Countries that are reliant on specific industries such as travel, hospitality, entertainment, and tourism will be the worst hit. The falling commodity prices will adversely affect countries which are producers and exporters of those items, especially those dependent on oil. The CEO of the IMF, Kristalina Georgieva disclosed in the last week of March that the coronavirus pandemic has finally driven the global economy into a recession. The GDP growth of advanced economies group is expected to contract this year to -6.10%. The US economy is expected to contract by -5.9%. More than 22 million US citizens have filed jobless claims since the lockdown began last month, which shows that the country is slowly sinking into recession. The decline in commodity prices, particularly oil prices is likely to reduce

The EMDEs face high risks due to poor health infrastructure and tightening financial markets. The group is expected to contract by -1.0%. At the beginning of the outbreak, China suffered the most before the virus spread to other countries. Its economy shrank by -6.8% in the first quarter of 2020, as compared to a year ago, registering its worst quarterly slump since 1992. However, they are slowly getting back on track, with the lockdown being lifted after controlling the virus spread. Australia is 10


| ECO SECTION expected to face its first recession after 30 years, with the GDP growth expected to fall by -7.2%.

ASSOCHAM has recommended a stimulus package of at least $200 -$300 billion to tide over the economic crisis. A slew of measures has already been announced by the RBI to boost the economy. Now, a comprehensive stimulus package by the government is desperately needed, and it is expected to be announced soon. While the global economy is slipping into a recession, India is expected to cling on and remain on the positive growth trajectory.

More than 80% of the countries are expected to experience negative per capita income growth in 2020, which is much larger than at the time of the 2009 financial crisis. This decline is attributed to the expected increase in unemployment due to layoffs and declining productivity. Coronavirus lockdown: A severe blow to the Indian economy The Indian economy was already bruised by a slowdown in 2019, with a fall in consumption demand, weakened investments, and contracted manufacturing activity. Now the economy is expected to be battered hard by the pandemic. Analysts say that the 21-days lockdown declared in March may have cost Indian economy Rs. 7-8 lakh crore and with the lockdown being extended, the economic woes are bound to aggravate. India’s informal economy has taken a bad hit and the informal workers are staring at a dark future. The automotive sector, travel & hospitality, manufacturing, and tourism has also been severely hit due to the stalling of industrial activities.

According to the IMF, despite the severe slowdown, the Indian economy is expected to grow at 1.9% in 2020, which is highest among the G20 countries. India is expected to make a sharp recovery in 2021 with a GDP growth rate of 7.4%. India has also got new opportunities as many companies are expected to shift their manufacturing bases outside China. But to leverage this opportunity, India needs to flatten the curve, bring the economy back on track, and address supply chain issues quickly. According to UNCTAD, India might be one of the two major economies least exposed to the global recession and one can only wish that it becomes true. It’s going to be a long fight. India should be prepared for the long haul. 11


| SECTOR ANALYSIS

PHARMACEUTICAL SECTOR Mihir Mali| PGDM - FS |19-21 Nihar Shah| MMS | 19-21 Overview The Indian pharma industry is making headlines these days. All thanks to the ongoing Covid-19 pandemic. And this highlights the importance of Indian pharma. But you are mistaken if you think that the Indian pharma industry has suddenly come into headlines. Indian pharma has been making news for a while now. It has made its mark on India’s foreign trade, emerging as a sector that generates trade surplus. According to Indian Pharmaceutical Alliance (IPAP), this sector generates a trade surplus of around US $11 billion. And this has not been an overnight success but a continuous effort spanning decades. Indian Government tweaked patent laws around the 1970s to benefit pharma companies. Using new laws companies could copy the end products as long as they used a different manufacturing process. Though this could continue till 2005 only, by then India had already developed extensive manufacturing capacities. That’s why scores of foreign pharmaceuticals wanted to do

business with India. The sector used this opportunity to build a state of art Research and Development facilities. And that just added more firepower to the industry. Today India exports pharma products to more than 200 countries worldwide. According to IPA annual revenue from the pharma industry which is around US$40 billion right now is expected to grow up to $120 to $130 billion by 2030. In the UK around 25% of medicines used are made in India. And this sector employs more than 2.7 million people in India. More importantly, India accounts for nearly 60% of vaccine production worldwide. We hope this much information is enough to give a brief overview of India’s pharma sector. Let’s understand more about the sector. Porter’s 5 Force Model The Threat of New Entrants The threat of new entrants is low to moderate. It has become essential for pharmaceuticals companies to focus on 12


| SECTOR ANALYSIS research and development to sustain their position in the market. There are high government norms for the approval of new drugs which also acts as a barrier. The threat posed by new entrants is low as with a team of good researchers they can find venture capital funds eager to provide millions in startup funding but they pose no serious threat to big pharma companies as their main strategy is to sell the startup to a big pharma company when the new products are in the initial development phase. The Threat of Substitutes If the drug is in the patent period then there is no substitute for that drug however once the patent period is over, its generic production begins and we could see various new substitutes in the market. The demand for generic drugs has increased due to the cost factor when compared to branded drugs. The main reason generic manufacturers offer the drug at a cheap price is that they do not incur any cost on research and development and regulatory activities such as FDA approval and clinical trials. Therefore, the threat of substitutes is moderate. Bargaining Power of Buyers Usually, hospitals and healthcare organizations buy in bulk quantities which makes it necessary for pharmaceuticals companies to keep prices in check. Also, there are several companies in the markets providing the same product. And lastly, pharmaceutical companies have one main feature that is the buyer is different from an influencer who is a doctor. Therefore, the consumer has no other options than buying

the drug as prescribed by the physician. Hence, the bargaining power of the buyer is medium. Bargaining Power of Suppliers The bargaining power of suppliers is generally low. It is because the sales in the pharmaceutical industry are from a handful of large players resulting in decreased bargaining power of suppliers. Also, the raw materials required for manufacturing drugs are commodity products in the chemical industry, which are available from many sources. Most of the equipment used in manufacturing is available from multiple sellers. Competitive Rivalry Due to the increasing demand for high-quality drugs with low to moderate entry barrier to the new entrant and the presence of different pharmaceuticals companies in the market, makes this market highly competitive. The high importance of intellectual property leads to strong competition for high-level workers and researchers. The current industry exhibits a pattern of firms merging and large firms acquiring smaller firms that have promising research or new drugs. Major Players in Indian Pharmaceutical Industry: In terms of total revenue, Sun Pharmaceutical Industries Ltd has a maximum revenue of Rs. 290 billion. Other major players are Aurobindo, Lupin, Cipla, Dr Reddy, etc. In terms of Net Profit, Dr Reddy has a maximum NP of 13%. 13


| SECTOR ANALYSIS hospitalization. The program was announced in Union Budget 2018-19. The Government of india has launched 'Pharma Vision 2020' that is aimed at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced drastically to boost investments. Future Outlook

If we look at segment-wise revenue Generic Drugs contribute around 70%. While OTC (Over the Counter) medicines contribute 21% to the total revenue. Patented drugs are only 9% of the revenue. So clearly the Indian Pharma industry is dominated by generic drugs. Government Policies The Government of India has recently provided guidance for various purposes such as submission of application in Form 40 to Central Drugs Standard Control Organization (CDSCO) for Registration Certificate, issuing License for import of drugs into India with CDCSO authority India, and for issuance of import registration certificate for import of drugs into India. In 2019, the Government of India allocated $8.9 Bn for the Pharmaceutical sector, which represents a rise of 13.6% as compared to the budget of FY18. The National Health Protection Scheme is the largest government-funded healthcare program in the world. This scheme will benefit 100 million poor families in the country. Under the scheme insurance up to Rs 5 lakh per family is provided annually for the secondary and tertiary care

The Pharma industry has been growing at a compounded annual growth rate of more than 15% over the last five years and has major growth opportunities due to the coronavirus pandemic. India's pharma and healthcare sector are nourished by increasing spending, improving accessibility and growing exports which will lead to another year of robust growth even as pricing and cost headwinds could force players to pause to catch a breath. It is expected that medical spending will grow at 9-12% over the next five years. This will help India to become one of the top 10 countries in terms of medicine spending. The Indian government has taken several measures to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is assured to benefit the Indian pharmaceutical companies. Also, the thrust on rural health program, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies.

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| COMPANY ANALYSIS

CIPLA LIMITED Business Overview Cipla Limited is one the leading pharmaceutical and biotechnology company in India. It has multinational presence and it is one of the world's largest manufacturers of generic pharmaceutical formulations. It has its headquarters situated in Mumbai, India. It was incorporated in the year 1935 by Dr. Khwaja Abdul Hamiedas. The current chairman is Dr. Yusuf K. Hamied. Cipla majorly develops medicines that help to cure respiratory, cardiovascular disease, arthritis, diabetes, weight control, and depression; currently, it has 34 manufacturing facilities in India that are cGMP compliant and conform to national and major international standards other medical conditions. The company provides affordable medicines and has played a steering role in HIV/AIDS treatment. It comes in the leading manufacturers of ARV (antiretroviral) drugs and was the world's first pharmaceutical company back in 2001 to supply ARVs to countries at less than a dollar a day. The Company manufactures more than 200 generic and complex APIs. The Company

has a total Active Pharmaceutical Ingredient manufacturing capacity of roughly 1,000 metric tons. 62% of the company’s revenue comes from exports. The Company manufactures medium-dose inhalers, dry powder inhalers, nasal sprays, nebulizers and a varied range of inhaled accessory devices. The Revolizer is a dry powder inhaler. Its respiratory products are available in over 100 countries such as United States, Europe, Australia, New Zealand, South Africa, Hong Kong, Turkey, Korea, Brazil, and Mexico. Cipla Vet is the animal health division of the company. It provides veterinary products like companion care, equine, livestock, poultry and aqua products. The product range consists of therapeutic segments such as anti-infectives, antiinflammatories, anti-thyroids, parasiticides, immunosuppressants, nutraceuticals, and feed additives .

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| COMPANY ANALYSIS Ratio Analysis

Source: Annual Report

Promoters hold a significant portion (37%) of share capital. Institutional investors' holding is little more than promoters. Institutional Investors hold 41% of share capital. Public holding is around 16%, and the rest is held by other shareholders. Corporate Governance Executive Directors are Dr. Y.K. Hameid, Mr. M.K. Hameid, and Mr. S. Radhakrishnan. NonExecutive Directors are Dr. H.R. Manchanda, Mr. Ramesh Shroff, Mr. V.C. Kotwal, Mr. M.R. Raghavan, Mr. Pankaj Patel, and Dr. Ranjan Pai. For the year ending March 2019, Cipla declared an equity dividend of Rs 3 per share which is 150%. At the current share price of Rs 599.40, this results in a dividend yield of 0.5%. The Operations and Administrative Committee of the Company on 13th April 2020 have allotted 3,910 equity shares of Rs.2/- each under the exercise of the stock options by the option grantees under Employee Stock Option Scheme 2013-A of the Company under the Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The company has consistently improved its Current Ratio that is 4 times as of 31st March 2019. For the year ended 31st March 2015, it was 1.9 times. But inventory forms a major part of the Current Assets. On 31st March 2015, it was 50% of Current Assets but the company has managed to reduce it to 30% as of 31st March 2019. As of 31st March 2019, Quick Ratio was 2.79 times, up from 0.94 times for the year ended 31st March 2015. Also, the company has maintained a very low Debt to Equity ratio of 2% for the last four years. Hence it can be concluded that the company has been able to maintain a strong liquidity position for itself. From the year 2015 to 2019 the company’s revenue has increased at a CAGR of 5%. In the last five years Company has maintained Net Profit in the range of 12-15%. The following graph shows the Return on Assets and Return on Equity trends.

Source: Annual Report

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| COMPANY ANALYSIS Future Outlook The company has increased its expenditure on research and development to invest in clinical trials and specialty portfolio. Regionwise, South Africa offers a lot of opportunities where Cipla is already a market leader in a few product categories. Also, Europe should be a major focus as for now it only contributes 4% to the revenue. Since the company is emerging as a leader in antiretroviral drugs and also has significant capacity to produce respiratory drugs, it can consolidate its position given the opportunities provided by the current COVID19 pandemic. Overall Health Care and Pharma, in particular, is emerging as a sector that is experiencing increased demand. The current situation will positively influence the healthcare sector. And a financially strong company such as Cipla can only benefit from this.

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| INTRIGUING INDEED

Corona Vs Developed Nations: What went wrong? Anjali Pandya | MMS |19-21 Corona Virus comes from a large family of viruses that causes illness in animals and humans. In humans, the coronaviruses are acknowledged to cause respiratory infections ranging from a mild cold to lethal diseases like Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). The most recently discovered coronavirus causes COVID-19 disease.

The source of the disease is said to be a ‘wet market’ in Wuhan, which would sell both dead and alive animals, fish and birds. In these types of markets, there is an elevated risk of viruses jumping from animals to humans; because of the hygiene levels maintained as the live animals are being kept and butchered on-site. Also, these markets are so crammed with people, that spread of the disease from species to species follows a very brisk speed.

COVID-19 is the contagious disease caused by a recently detected coronavirus. This new type of virus and disease were unidentified before its outbreak. COVID-19 is different from the other two coronaviruses in that the range of disease is extensive, with nearly 80 percent of the cases leading to a mild infection. There may be any number of people who may be carrying the disease, but not displaying any of the mentioned symptoms; making it very difficult to control its spread. The virus spreads similarly to flu or the common cold, in large droplets produced by coughs and sneezes. These germs can live on the surfaces for several hours.

Spread of the Virus all over the world Since first being registered in December 2019, in China; the COVID-19 coronavirus has spread all over the world and has been declared a global pandemic on 11th March 2020 by the World Health Organization (WHO). As of 21th April 2020, there are more than 2.5 million people confirmed cases of coronavirus in 185 countries and at least 174,726 people have died.

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| INTRIGUING INDEED Confirmed deaths by COVID-19

Confirmed deaths by COVID-19

(Data as on April 21, 2020) Source: Financial Times

As seen from the graph, more than half of the confirmed cases have been in Europe. Italy and Spain are the worst affected counties in entire Europe. Nonetheless, the USA now has more than twice as many confirmed cases as compared to any of the other countries. In India, there are 18,985 confirmed cases out of which 603 people have died and nearly 3,273 cases have made successful recoveries. America is the country with the maximum number of confirmed cases. With 8,03,575 confirmed cases it has more than five times the official number which was recorded by China. The disease has hit a few countries like Italy and Spain, and the USA, with particular cruelty.

EUROPE Europe became the focal point of coronavirus in the early days of March when the disease started to spread at an accelerated speed all over the continent. Italy soon became the country hardest hit by COVID-19 after China. Spain saw what happened in Italy, yet it

Source: Worldometer

overtook so many countries in its death toll. This was one of the darkest moments in recent Spanish history. Some of the main reasons for these countries to have the highest number of deaths in the world are demographics, social behavior, and lower testing capacity. Italy and Spain's death toll has sharply risen and is currently at – 24,648 and 21,282 respectively. France and Germany each have more than 1,00,000 confirmed cases each. However, the death toll of France lies at a ghastly number of 20,265; while the casualties of Germany are 4,939. Some of the reasons for such a failure in these developed nations can be: Slow Response Experts in the field believe that the spread of the virus occurred even before the people were aware of its presence. Also, in many of the European countries, the people assumed that the problem was elsewhere and this initial attitude led to the fast spread of the 19


| INTRIGUING INDEED virus in places such as Lombardy in Italy and Madrid in Spain; which quickly became global clusters of COVID-19. Testing Capacity The death rate of the disease is also linked to how many people are getting tested for the virus. The more the number of people gets tested, the better it is for the authorities to respond to it. As a consequence, places like China where people are getting tested quickly; the deaths are not as high as in Italy and Spain, where only people showing symptoms of the disease are being tested. Population In Italy, the first category of people to get hit by the virus was elderly. Italy has the second oldest population in the world, after Japan. The contact with the elderly helped spread the virus across Italy. Even though Spain does not have one of the oldest populations in the world, the coronavirus is affecting the age bracket of 50-80 years the hardest. Healthcare and Social systems The pandemic outbreak put pressure on the European healthcare system. In Lombardy, the region of northern Italy which is home to around two-thirds of the country's fatalities, hospitals are overrun and struggling to cope with the sudden spike in cases. The government of Spain also reacted very late and in a clumsy manner. Essential equipment like ventilators, protective clothing for doctors was not available. The virus laid bare the deep faults in the European care systems.

USA It has been more than two months since the first case of COVID-19 was identified in the USA. Since then, the virus has spread all over the country with more than 8,03,575 cases and over 43,663 deaths. The USA is now the global epicenter of the disease, quickly outpacing the number of deaths in China, Italy, and Spain. Some mistakes made by the USA while tackling the disease are: Medical Supply Shortage There was a lack of sufficient supply of masks, gloves, gowns, and ventilators. The insufficiency of such essentials forced healthcare workers to reuse existing sanitary garments or make their own makeshift gear. Testing Delays Experts say that raising the number of testing at an early date, which was done in countries like Singapore and South Korea would have been the key to controlling a viral outbreak like COVID-19. The inability of the USA government to do so was the critical failure from which the situation went on a downhill in the country. Politics The responsibility of delay in testing lies with the Trump administration, which severely downplayed the threat of the virus in the USA. President Trump’s failure to respond to the coronavirus pandemic can be seen by the 20


| INTRIGUING INDEED administration’s inability to send out millions of test kits and protective medical gears that are required to tackle the disease. Social Distancing Failures All across the country, there have been many examples of Americans failing to heed to the calls by public health professionals to avoid social contact. New York City residents filled subway cars. Florida beaches were jampacked with college students on Spring break. Even steps taken with the best of intentions might have had adverse consequences. Universities that sent students home may have contributed to the spread of the virus by returning infected individuals to towns not fully in lockdown. The lack of clarity in the President’s order to halt entry from Europe led to crushing crowds at airports where unscreened infected passengers could easily transmit the disease to others. Decisions taken by the developed nations have had dire consequences on the countries and their citizens. In Italy and Spain, the deaths have started to plateau. However, the USA, UK, and France continue to bring in more new confirmed cases and deaths. The ongoing death tolls in the developed nations forecast a looming disaster in the world's developing and least developed countries.

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| CALL FOR ARTICLES -WINNER

CORONAVIRUS AND ITS IMPACT ON THE OIL INDUSTRY Aditi Agarwal Delhi Technological University COVID- 19, more commonly known as Coronavirus has stirred up the world. Spreading incessantly, this virus that started from Wuhan in China has managed, only within a span of few months, to make its mark on around 210 countries across the world, overwhelming healthcare systems, taking more than 100,000 lives and most critically, severely threatening the global economy. One of the mainstays of the global economy is the oil industry. Since the inception of the COVID-19 pandemic, oil demand has evaporated and stock markets have tumbled. The Energy Information Agency (EIA) according to its most recent Short-Term Energy Outlook (STEO) has made ‘major revisions’ to it’s 2020 global oil forecast claiming that while earlier in the year, reductions in Gross Domestic Product (GDP) and oil consumption were primarily linked to China, South Korea, Japan and Italy, with the spread of the pandemic and the consequent imposition of lockdowns across most of Europe, United States, India and other

countries, oil consumption effects now span a significantly larger segment of the world population. The oil-price war between Saudi Arabia and Russia, combined with the coronavirus effect has caused global oil prices to slump. WTI is currently( April 15, 2020) trading at around $19 per barrel while Brent is trading at around $27 per barrel. The Indian Basket is trading at around $21 per barrel while the Canadian heavy oil is so low that it is cheaper than a pint of beer. This makes it very difficult for oil producers to survive and leaves the global oil market oversupplied. Hours after the International Monetary Fund predicted the deepest recession since The Great Depression, The International Energy Agency predicted the global oil demand in 2020 to fall by 90,000 barrels per day; that compares to a prediction in December 2019 that demand would go up by 900,000 barrels per day, wiping off a decade of growth. It issued a warning that there is “no feasible agreement that could cut supply by enough 22


| CALL FOR ARTICLES -WINNER to offset” the impact of the virus on the global oil demand. This comes after OPEC+ group agreed to cut oil output by ten million barrels per day- about a tenth of the global oil consumption, until recently. Given the global oil demand completely ravaged, a consequence of the lockdowns and the shutdowns due to the pandemic, nothing short of a demand squeeze of 25-30 million barrels per day could suffice. The poor outlook of oil prices can be attributed to two reasons. One, demand for oil is debilitated and uncertain, and is likely to remain so till the Coronavirus pandemic comes under control. Lockdowns and travel bans in major oil- consuming markets like India can lead to more damage to demand. Air travel bans have led to heavy reduction in consumption of Aviation Turbine Fuel (ATF). Not only this, the enforcement of complete lockdown in the majority of countries restricts almost all forms of mobility. In India, for example, rail, road and air travel has been suspended as a result of the lockdown, currently a second one, imposed on the country. Therefore, consumption by travel sector is bound to fall sharply. Infact, demand for fossil fuels except LPG and domestic natural gas is in free fall. Even after the lockdowns and restrictions are lifted, it will take time for things to get back to normal. Second, on account of surplus supply, there is a major inventory overhang in the oil market- both onshore and offshore storage space is running out quickly. For India however, the scenario is a boon as well as a bane. On one hand India, who meets about 85% of its oil needs through imports, can benefit from the crises. The oil crash can aid India’s macros by bringing

down the current account deficit, inflation, subsidies and forex outflows. On the other hand, PSU hydrocarbon producers, ONGC and Oil India are faced with a twofold blow one, the multi year low oil price realisations and two, a low demand of oil and gas as a result of the nation- wide lockdown. So while India can use this opportunity to fill storage and strategic reserves to capacity, both upstream and downstream oil companies have been badly hit and stocks of the oilsector have been hammered. Analysts at Goldman- Sachs have stated that the Coronavirus outbreak is ‘extremely negative for oil prices and is sending landlocked crude prices into negative territory’, and this in fact can be seen clearly. The global oil industry has evidently entered a turbulent phase where they might use their cash reserves to sail through, but in the long run capital intensive upstream would struggle to remain efficient. Oil importing nations, like India, might enjoy low prices, but exporting nations may have to resolve to alternatives. Oil industry being a linchpin of the global economy, governments and policy makers now must focus on its revival and survival.

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| CALL FOR ARTICLES -RUNNER UP

BFSI AMIDST COVID-19 - CHURNING IMPACTS IN INDIA Prajyut Kar |19-21 Xavier School of Rural Management What will be the possible scenario of the BFSI sector amidst COVID-19 in India? Is BFSI Sector able to withstand and still be able to shine amidst COVID-19? Everyone is observing economic aids from various countries like €750 billion by Germany that accounts for 22% of Germany’s GDP in nominal or $2.2 trillion by USA that accounts for 10% of USA’s GDP in nominal while our own country announced $22.5 billion which accounts for 0.75% of India’s GDP in nominal. Supply chain disruptions, manufacturing sector marching towards full stop or crippled health care amidst COVID-19 were some of the major consequences being observed. Surprisingly, the most anticipated economic recession is already on the way as per International Monetary Funds (IMF) reports. India’s growth rate, however, will be 1.9 amidst the COVID-19 as per the latest biannual report published by IMF in the month of April 2020. However, the sigh of relief announced in this bi-annual report also counts the fact that India is the only country along with China in the entire World who will be perceived as a positive economic growth in the financial year 2020. Meanwhile Moody

revised India’s banking system outlook to negative from stable stating that growth of solvency stress among the Non-Banking Financial Company’s (NBFC) will drive the risk towards banks’ asset quality. Impact on three pillars of BFSI i.e. Banks, NBFC’s and Insurers in terms of liquidity, credit quality and furthermore is observed where NBFC-MFI’s (Non-Banking Financial Company- Microfinance Institution) suffered most by RBI’s (Reserve Bank of India) moratorium decision. NBFC-MFI’s already tormented from lockdown due to COVID-19 is now not being bestowed with moratorium from Banks due to which fear of NBFC crisis further deepening since IL&FS and DHFL complete collapse. According to a report published by S&P Global Ratings, the NPA (non-performing asset) ratio of Banks in India is going to climb by about 1.9 percent as against 2 percent in China which indicates that more financial corporations will default monthly installments of loans. But, the surge in P2P (person-to-person) and P2M (personto-merchant) transactions in Fintech companies can be safely assumed in 24


| CALL FOR ARTICLES -RUNNER UP becoming the new paradigm. The best example we can imagine is of the shining term “neo-banks” which are 100 percent digital banks that provision of services like mobile deposits, free debit cards, credits and many more as like a brick-and-mortar bank. Various startups like Open, Niyo, Razorpay X and many more are the rising neo-banks in India. ATM’s on wheels services introduced by HDFC, ICICI and other banks are becoming key innovative models to sustainability. Even Kotak Mahindra Bank become the newest member in the list of financial institutions delivering the ATMs on wheels service. Companies like Reliance now employing NCD’s (Non-convertible Debentures) to take advantage of RBI’s recent Targeted Long-term Repo operations (TLTRO) 2.0 announcement. But looking at the TLTRO 2.0 announced by RBI this April very minutely, it’s a straightforward conclusion that financial institutions with low credit ratings and less bargaining power unlike giant institutions will face substantial difficulties while issuing the NCD’s in the market. BSE Sensex on April 20 shows a positive growth by 59.28 points while Nifty-50 was down by 4.90 points after the Federal Government of India decided to ease the lockdown. Positive news concluded from the stock market of April 20 was that various financial institutions like HDFC, HDFC Bank, Kotak Bank, SBI and others share prices have shown a positive tilt amidst the lockdown.

Do the steps taken by RBI like decreasing the Reverse repo rate by 25 basis points will motivate banks to disburse loans thereby ensuring a proper liquidity flow in the nation? There are some of the questions which all common citizens and economists are still pondering which will be surely answered briefly in the coming time. I powerfully conceive that the BFSI sector now must focus on digitizing and optimizing it’s backend operations, financial statements disclosures to maintain trust and gonna have to buzz away, innovate strategies, re-structure organization, move forward with gigantic positive energy and rise up from ashes with the new learning curve.

Will the relaxation in the ease amidst the lockdown by the Government of India after April 20 will facilitate in reviving the ailing financial institutions of India? How will financial institutions carry forward their policies to revamp from the already menace caused by the COVID-19? 25


| ALUMNI INSIGHTS

ALUMNI INSIGHTS Amey Patale | MMS |17-19 It feels great to get an opportunity to write for Finly every year and thus be closer to college. I thought of writing about my job profile in detail but then I thought maybe it would better to give my view about the current pandemic situation. In the end, I thought to touch both the points briefly. Â So, I will start with my job profile and later move on to the current pandemic situation. Â I am currently working with CRISIL GAC department in US Asset-Backed securities team (ABS). At CRISIL, the GAC department works with S&P Global which is its parent company. In ABS, I work on Unsecured Assets like US student loans, Credit Card debt, personal loans, etc. My job profile involves credit analysis of securitized bonds and presenting them to a committee, based on which S&P decides on the ratings. We also monitor triggers both defined by the issuer and defined internally by us to track the credit position of each securitized bond on a monthly basis. Credit Analysis of securitized bonds involves analyzing several risks to the transaction like credit, liquidity risks and

insolvency of SPV, and several other entities, of the transaction, etc. Analyzing these risks involves reading the prospectus, indentures, and monthly/ quarterly reports. The job profile is niche but very interesting. I would say my tenure till date with CRISIL and S&P has been amazing with steep learning. Since I work closely with the US credit markets; I tried to put forth views based on the US economy. To start with the 2007-09 crisis, which is also known as the SubPrime crisis. We often attribute the main cause to the defaults by subprime borrowers for the crisis. However, this view may not be completely correct.

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| ALUMNI INSIGHTS We see that a lower fraction of home purchase loans with appraisal inflation were to subprime than prime borrowers. This is in line with the view that higher price appreciation of houses made it unaffordable to the subprime borrowers leading to pricing out effect. So, it appears that the subprime boom may not be the primary reason but it was facilitating activities linked indirectly to the boom. Instead, price appreciation was the main driver and the prime borrowers were responsible for that. Next, let’s understand the reason for the 2007-09 crisis from an economic standpoint which would enable further to make comparisons with the current pandemic situation. We can associate certain fastmoving factors like Debt deleveraging and certain slow-moving factors like inequality, demographics as the key reasons for the crisis.

Clearly, house prices and subprime booms occurred at different places.

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| ALUMNI INSIGHTS We see from the above figure 1, the debt to income ratio was less than 100% of the disposable income in 2000 which then grew to approx 130% during the crisis. So, consumption and investment were essentially driven by borrowing which fuelled the boom. Now simplistically, let us consider that economy consists of two people. One person borrows money for consumption and the other one is the saver. We saw during crisis, the debt to disposable income rose to unsustainable levels which triggered debt deleveraging for the first person. Now, to maintain the level of consumption, the central banks reduced the nominal interest rates close to zero to motivate the saver to consume more and save less.

have the debt deleveraging going on, which leads to nominal rates brought down to zero. The production curve (IS) is dependent on the aggregate demand, which falls due to this debt deleveraging shock and thus the equilibrium moves from B to C. So, we see that increasing money supply doesn’t propel the price levels upwards when people have the view that in long term money supply will be constant i.e. once the crisis is over the central bank may suck out the liquidity injected. Also, labour which is one of the factors of production remains sticky in the short run. A theory of how debt deleveraging shock translates into an output slump can now be understood by assuming that either prices or wages do not adjust, so that output adjusts instead.

Once the nominal interest rates were reduced to zero, the real interest rates went into the natural negative domain but the frictions due to prices and sticky wages did not let the real interest rates reach to territory that ensures full employment. Based on the Fisher equation below, once real interest rates enter negative territory and nominal interest rates are zero bound, Prices in short term fall. Thus, to stimulate long-run inflation, the economy goes into temporary deflation.

The easiest solution that comes to our mind is that the central banks should increase the money supply by Open Market Operations either by using the reserve money or by printing more money. Based on the below figure we see, once the money supply is increased, LM1 to LM2, the equilibrium point moves from A to B. However, in hindsight we

The duration of the debt deleveraging cycle is now endogenously determined. It is characterized by an increase in the spread between the two interest rates, as observed during the crisis.

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| ALUMNI INSIGHTS number of loans available would further increase with muted demand for loans. This further pushes interest rates downwards. Now, coming to the current pandemic situation, the Feds response to COVID 19 has been quick and enormous.

Figure: Moody’s Seasoned Baa Corporate Bond Yield Relative to Yield on 10-Year Treasury Constant Maturity

The key prediction of the deleveraging hypothesis was that this should imply that interest rate should normalize or – if a central bank would not increase rate – there would be inflation. During 2013 and 2014, however, interest rate remained at zero in the US, there were very little inflationary pressures in the economy and, in general, there was an alarm about anaemic recovery. Slow-moving factors like rise in inequality, slowdown in productivity, and rise in life expectancy are somewhat responsible for the rates still being low. In terms of demographics, let us consider three groups of people – Young: Do not have many sources of income to save, they just borrow; Middle-Aged: They have considerable income and can save. They also have an ability to borrow; Old-Aged: They use their savings, pensions and they do not borrow. During and after the crisis the appetite for borrowing by young and middle –aged went down. So, the middle-aged were left with more income to save, this increased the supply of loans. The demand for loans remained muted though, causing the rates to remain low. Also, once the young enter into middle-aged groups, the

The FOMC reduced the Fed rate by 50 basis points on March 3rd and by additional 100 basis points on March 15th. Apart from these, the Fed applied tools that are rarely used and newly created, including several liquidity and credit facilities as below. In contrast to the 2007-09 crisis which originated from the financial sector, all the policies were directed towards the financial sector. The current pandemic situation has led to policy support in both financial as well as non-financial sectors as below. Another difference is the speed and scale with which the Fed responded. During the financial crisis, the fed funds rate stood at 5.25 percent in the summer of 2007. It was not until December 2008 that the target rate was first brought to the zero lower bound. In contrast, the response to COVID-19 has featured fed funds rate cuts, Treasury and 29


| ALUMNI INSIGHTS MBS purchases, liquidity facilities, and credit programs, announced in rapid succession over the course of just a few weeks. This reflects the alarming speed with which the pandemic and its impact spread, affecting economic activity and financial-market functioning. The COVID-19 pandemic is fundamentally a health crisis, it ultimately requires a medical resolution. Nonetheless, the Fed’s policy actions are important for alleviating the economic fallout until such a resolution is found and for facilitating the restart of the economy thereafter.

Going back in US history, the 1918 Flu Pandemic which lasted from January 1918 to December 1920, and spread worldwide can be comparable to the current situation. Based on the study by liberty street economics, we see the areas that were more severely affected by the 1918 Flu Pandemic saw a sharp and persistent decline in real economic activity. Second, we find that cities that implemented early and extensive NPIs (non-pharmaceutical interventions such as social distancing) suffered no adverse economic effects over the medium term. On the contrary, cities that intervened earlier and

Source: Liberty Street Economics

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| ALUMNI INSIGHTS more aggressively experienced a relative increase in real economic activity after the pandemic subsided. So, pandemics can have substantial economic costs, and NPIs can lead to both better economic outcomes and lower mortality rates

COVID pandemic, in contrast, came on suddenly, hitting the economy at full force in one month. Third, the current pandemic is widely viewed as a temporary situation with an endpoint, though how soon that endpoint is reached is of utmost concern and remains to be seen

Source: Trading Economics

Anecdotal evidence suggests that our results have parallels in the COVID-19 outbreak. Governments that implemented NPIs swiftly, such as those in Taiwan and Singapore, have not only limited infection growth; they also appear to have mitigated the worst economic disruption caused by the pandemic. Although many observers are comparing the current economic cycle to the Great Recession, the two situations are very different. First, the Great Recession was driven by economic and financial imbalances, while the current situation results from a non-economic shock. Second, the Great Recession developed gradually—first as a sub-prime mortgage crisis, then as a broader housing bust, and eventually as a full-blown global financial crisis and recession. The

If we try and compare the 2007-09 crisis from an economic standpoint and the current situation, we see that although the nominal interest rates are closer to zero, but there are no fast-moving factors like debt deleveraging that affect the aggregate demand and thus causing the IS curve to shift left. So, there are no structural problems in the economy. Although, the current lockdown measures have affected the IS curve to shift left, but then we may see this as a temporary situation until there is a lockdown. Several governments around the world have declared stimulus packages to alleviate the temporary lockdown situation. However, enforcement of lockdown would continue until people exercise NPI measures like social distancing. We categorised 2007-09 crisis as a structural problem in the economy, the current pandemic situation is rather a psychological problem and can be overcome quickly unlike the 2007-09 crisis, if strict NPI measures are followed by people across all nations.

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