Tag Archives: United States

India squeezed by QE3


US Federal Reserve chairman Ben Bernanke’s comment on rolling back the monetary stimulus package couldn’t have come at a more inopportune time for the Indian economy.

The rupee has crashed to a new low, nearly touching 60 and still counting. As portfolio investors pull out funds, the slide in equity markets continues.

Blame it on QE3. It sounds like the name of a scientific project, but it is essentially a financial market jargon for the third round of quantiative easing or QE by the US central bank.

It involves a large purchase of bonds by the Fed to pump in loads of cheap money into the financial system to aid the American economy. Part of these funds came to emerging markets such as India that were still delivering returns in high double-digits a year.

The tide has since turned.

Financial investors have begun selling Indian stock since the beginning of May and with the curtains likely to come down on the US stimulus package, one can safely expect more billions to move out.

A weak rupee can also fan inflation by making fuel and other imported goods costlier. Oil companies fear that if the trend sustains for a few more days, retail prices of transport fuel would have to be hiked again, which can fan inflation.

Higher inflation will also limit the RBI’s ability to cut interest rates, dimming hopes of lower loan EMIs for individuals.

Also, the record current account deficit (CAD) may restrict the RBI’s elbow room to prop up the rupee by dipping into its $290 billion of foreign exchange reserves, enough to cover imports for seven months, analysts said.

“A reversal of capital inflows would likely wreak havoc on the rupee, as financing the CAD becomes difficult,” said Sonal Varma, economist at research firm Nomura.

“Return of foreign capital in the short term will critically depend on adopting the right policy mix to attract higher investment inflows and improve growth prospects of the economy,” said DK Joshi, chief economist, CRISIL Research.


Struggling to move forward


Hindustan Times
New Delhi, June 24, 2013

It was telling that the storm over Washington’s attempts to hold open talks with the Taliban in Qatar all but drowned out the maiden Indo-US strategic dialogue of US secretary of state John Kerry. India and the US are now clearly moving apart on the issue of Afghanistan. The Barack Obama

administration is determined to have the US military withdraw from Afghanistan at all costs — including allowing Pakistan to broker a deal that would allow the Taliban to govern in Kabul.

India is strongly opposed to any talk of any future Afghan government that includes the Taliban seeing such a development as a major threat to its security and a fillip for the worst elements in Pakistan. The question is whether the nascent Indo-US strategic partnership can survive differences over Afghanistan — and thus Pakistan.

In a mature strategic relationship, it is not uncommon for partner nations to disagree fundamentally over specific issues while maintaining the larger relationship. France is a treaty ally of the US but has an unusually contentious relationship with the sole superpower.

One should expect India, whose relationship with the US is far more informal and recent, to have its fair share of differences with Washington. The Indo-US relationship is strengthening and deepening in a whole host of other areas.

At the strategic dialogue here, the two largest democracies see eye-to-eye on regions like East Asia and the Indian Ocean and in areas like energy and counterterrorism.

The two countries have dozens of dialogues on every conceivable topic — the kind of interaction that would have been inconceivable even a decade ago.

Yet it is clear that the initial expectations of the Indo-US relationship have not been fulfilled. It would be too much to expect something as large as the Indo-US civil nuclear deal to once again animate relations.

And much of the quiet in areas like defence is because of the bureaucratic hurdles both sides have thrown up against each other. Economic difficulties in both nations have taken the steam out of bilateral trade and investment, leaving only a residue of disputes and protectionist measures.

But what has muddied the waters the most has been the geopolitical uncertainty that has infected both countries. Obama initially flirted with China, went back and forth on Afghanistan, and now makes India wonder about where the US is going with the Persian Gulf.

New Delhi has since been reassured about the US commitment to the Asia-Pacific but believes its worst fears about Afghanistan may be coming true. Until these brushes on the larger canvas are made clearer to the satisfaction of both sides, the Indo-US relationship will struggle to move forwards in the smaller, tactical areas.

Kerry, Khurshid lob visa issue into IT industry court


The strategic dialogue also provides a roadmap to resolving other economic issues

The Fourth India-US strategic dialogue, co-chaired by External Affairs Minister Salman Khurshid and U.S Secretary of State John Kerry, did not resolve any of the economic issues during their sitting here on Monday but did provide a road map to resolving some of them.

India’s pressing concerns about a new law that will impose high fees for visas for software professionals will now be largely quarterbacked by corporates.

Reluctant America

India had wanted the issue to be discussed at a meeting of the Trade Policy Forum because it feels the higher visa fees is more of a non-tariff barrier than an immigration issue but the U.S. was reluctant. Both sides felt the industry, which would bear the brunt of the fee hike, should take it up with American legislators framing a new immigration law.

July meeting

Accordingly, this will be discussed at a meeting of the Indo-U.S. CEOs Forum on July 12 in Washington. This forum will also further develop joint initiatives and will discuss ways to overcome business challenges.

During the dialogue, New Delhi pointed out that Indian software professionals working in the U.S. was the pillar of the new closeness between the two countries.

Curbs such as a high upfront visa fee were a trade issue as it affected the working of Indian software companies in the U.S.

The U.S., on the other hand, pressed for a bilateral investment protection agreement but Indian diplomats wanted Washington to be patient as the new template was still being worked out by the Finance Ministry.

The existing format has the provision of a sovereign guarantee for every investment decision.

The Finance Ministry is now working on a model that not only keeps sovereign guarantees out but prohibits aggrieved companies from going in for arbitration if they lose their case in civil courts.

The dialogue also saw India expressing willingness on increasing the foreign direct investment limit in sectors such as defence and insurance although the Government’s ability to deliver on any likely commitment remains doubtful.


India assures U.S. a share of nuclear pie


Sandeep Dikshit

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U.S. Secretary of State John Kerry with External Affairs Minister Salman Khurshid during a press conference in New Delhi on Monday. Photo: R.V. Moorthy
The Hindu U.S. Secretary of State John Kerry with External Affairs Minister Salman Khurshid during a press conference in New Delhi on Monday. Photo: R.V. Moorthy

India and the U.S. on Monday agreed to set a timeline for operationalising the civil nuclear agreement. The Fourth Strategic Dialogue co-chaired by U.S. Secretary of State John Kerry and External Affairs Minister Salman Khurshid here reviewed several issues ranging from the status of civil nuclear ties between the two countries through defence trade to education and cultural exchanges — through some 30 bilateral panels.

The two ministers felt further high-level meetings should be held to achieve convergence and progress, especially in strategic issues. An example of such meetings will be the visit of U.S. Vice President Joe Biden scheduled for mid-July.

The new U.S. Af Pak envoy James Dobbin, fresh from a visit to Qatar where the Taliban has opened an office, will arrive this Wednesday to ensure India’s concerns are taken on board as the West prepares to politically integrate the insurgent group, Mr. Kerry said at a joint press conference with Mr. Khurshid.

At the press conference, Mr. Kerry almost let slip America’s chagrin at not having tasted the fruits of the India-U.S. civil nuclear agreement by drawing attention to the enormous domestic political capital invested by Democrats and Republicans to ensure New Delhi was given a special exemption by the Nuclear Suppliers Group (NSG).

The Kerry-Khurshid meeting set September as a possible timeline for resolving two issues that have thwarted Westinghouse from setting up six reactors in Gujarat. Another company GE will set up an equal number in Andhra Pradesh but its reactor design has not yet been cleared by the U.S. nuclear regulator. India had promised these multi-billion bonanzas in exchange for supporting its case at the NSG and the International Atomic Energy Agency.

While Washington was able to make India agree on a deadline for clearing Westinghouse’s mega civil energy project, India was handed an assurance for importing shale gas from the U.S., which is likely to accrue by 2016-17. The shipments are likely to originate at the proposed LNG export terminal at Cove Point, Maryland.

The U.S. also continued to press India on adopting clean energy technologies. Of the large number of joint fact sheets released on every conceivable subject discussed by the two sides, the one on this was the most comprehensive. On Sunday, Mr. Kerry spent nearly half of his 45-minute lecture in convincing India to adopt clean technologies.

Apart from Afghanistan, another sore issue was cyber-snooping by American intelligence agencies. Officials had earlier expressed concern over double standards followed by Internet companies — denying India access to emails while happily opening their vaults to U.S. intelligence agencies.

But Mr. Khurshid sought to play down the controversy, even telling a correspondent that concern was not the right word to use. Mr. Kerry told newspersons that notwithstanding vigorous American efforts to arrest the whistleblower, access by its intelligence agencies to emails and other electronic messaging was meant to track patterns and not to read the content.

Differing viewpoints on Iran cropped up during the press meet. Mr. Kerry was strident on Iran’s refusal to fall in line with the West’s intentions and lauded India for being “very cooperative in holding them [Iran] accountable for proliferation.”

He hoped New Delhi would step in to convince the new leadership in Tehran to fall in line with the West. Mr. Khurshid, recently back from Tehran, maintained that India greatly valued its relationship with Iran and would prefer to judge and test the intentions of the new leadership before considering such a plunge.

Unhappy with compensation

India did not raise the killing of one fisherman and the injuries caused to two others by a U.S. warship off the coast of Abu Dhabi in July last year. In the past, India had expressed dissatisfaction with the paltry compensation given to the injured as well as with a heavily crossed out U.S. Navy probe report which put the blame on the three Tamil fishermen.

Swiss money: India slips to 70th position; UK on top


Zurich/ New Delhi: India has slipped to 70th position in terms of foreign money lying with the Swiss banks and accounts for a meagre 0.10 per cent of total global wealth held in the Switzerland banking system.

While much hue and cry is made over huge amounts of illicit wealth stashed by Indians in Swiss banks, the latest official data released by Switzerland’s central bank shows that the money they owed to Indian clients at the end of last year was 1.42 billion Swiss francs (about Rs. 9,000 crore).

While the UK continues to account for the largest chunk of such funds, India has now slipped lower to 70th position – the lowest rank among all major economies of the world, shows an analysis of annual data released by Swiss National Bank (SNB) on all the banks present in the European country.

India was ranked 55th for such funds a year ago with a total amount of 2.18 billion Swiss francs belonging to the Indian individuals.

Among the top-ten jurisdictions in terms of source of money with Swiss banks, the UK is now followed by the US, West Indies, Jersey, Guernsey, Germany, France, Bahamas, Cayman Islands and Hong Kong.

The funds owed by the Swiss banks to their UK clients stood at 295 billion Swiss francs, accounting for about 22 per cent of total such funds (over 1.4 trillion Swiss francs).

The major countries ranked among the top-25 include include Singapore, Japan, Italy, Australia,  Russia, Netherlands, Saudi Arabia and Cyprus.

Besides, China was ranked 26th, Canada 28th, Brazil at 39th and South Africa at 50th. India’s neighbouring country Pakistan was also ranked one place higher at 69th, although countries like Mauritius, Hungary, Denmark, Finland, Libya, Brunei and Sri Lanka are positioned below India.

As per SNB data, the Swiss banks saw a decline in funds belonging to most of their foreign clients during 2012 and the funds belonging to their domestic clients surpassed those of overseas ones for the first time in their history.

The total funds with Swiss banks slipped by over nine per cent to a record low of 1.4 trillion Swiss francs at the end of 2012, while the Indians’ money also hit a record low with a fall of about 35 per cent during the year, as a global clampdown against the famed secrecy wall of Switzerland banking system made it unattractive for their global clients.

Total funds held by Indian individuals and entities included 1.34 billion Swiss francs held directly by Indian individuals and entities, and another 77 million Swiss francs through ‘fiduciaries’ at the end of 2012.

Fiduciaries are essentially wealth fund managers who hold the money of Indian private holders and families in the so-called numbered accounts.

The Swiss banks’ direct liabilities towards clients from India include funds held in savings and deposit accounts by Indian individuals, financial institutions and corporates.

The data has been released at a time when Switzerland is facing growing pressure from the US and other countries to share the foreign client details, while its own lawmakers are resisting such measures.

The funds, described by SNB as ‘liabilities’ of Swiss banks towards their clients from India, are the official

figures disclosed by the Swiss authorities and do not indicate towards the quantum of the much-debated alleged black money held by Indians in the safe havens of Switzerland.

SNB’s official figures do not include the money Indians or others might have in Swiss banks in the names of others. The sharp decline in Indian money in Swiss banks during 2012 followed a significant increase in the previous year, when such funds had risen for the first time in five years.

The quantum of funds held by Indians in Swiss banks stood at a record high level of 6.5 billion Swiss francs (over Rs. 41,000 crore) at the end of 2006, but has declined by over five billion Swiss francs (over Rs. 32,000 crore) since then.

For clients across the world, total funds in Swiss banks stood at a record high level of $2.6 trillion at the end of 2007, but has fallen by over $1 trillion since then.

In a White Paper on black money tabled in Parliament last year, the Indian government said that the total liabilities of Swiss banks towards Indians have been coming down since 2006 and fell by more than Rs. 14,000 crore during 2006-2010 period.

Amid allegations of Indians stashing illicit wealth abroad, including in Swiss banks, government has said it is making various efforts to bring back the unaccounted money.

While a new treaty has been put in place for sharing of information on issues related to tax crimes on a prospective basis, Switzerland has also agreed to a limited retrospective clause for such information exchange in case of India.

Experts have been saying that there has been a “perceptible flight of funds” of Indian holders from Swiss banks to other places in the recent years.

At the same time, the global pressure has been rising on Switzerland to ask its banks to share information about their clients with foreign governments.

It is being suspected now that Indians having illicit wealth in Swiss banks may be moving their funds in fear of being exposed due to growing scrutiny. At the same time, even those having legitimate funds in Swiss banks may be moving away, due to a growing level of negativity attached to them.

India, US to exchange information on corporate frauds: Sachin Pilot


New York: With an aim to avert possible corporate frauds and safeguard the interest of investors, India is looking for greater exchange of information and regulatory cooperation with the US.

Besides the US government, India will also engage with the companies, universities and other institutions in New York for enhanced cooperation in various areas, Corporate Affairs Minister Sachin Pilot said.

An increased interaction at different levels would not only boost the bilateral ties, but also help in building stronger checks against corporate frauds in the two countries, the minister told PTI in an interview here during his recent visit to the US.

“We need to ensure there is adequate transparency in the dealings of companies’ disclosures, keeping in mind the number of corporate frauds that have been unearthed in the recent past both in the US and in India,” Mr Pilot said.

The minister said that India and the US would share data to prevent such frauds from happening in the future.

“We want to work not just with the government, but also with the private sector, universities and institutions across the US, enhance training programs, exchange regulatory officers, and promote faculty research and staff training both in judicial and non-judicial areas,” he said.

During his visit, Mr Pilot had meetings with the US Federal Trade Commission chairman FTC Ramirez and Assistant Secretary of State Robert Blake, among others.

Emphasising on the need for greater transparency in matters related to corporate governance, the minister said, “We want to make sure that the aspect of corporate governance is taken into consideration while making laws and legislations.”

“At the same time, companies also need to have more transparency and disclosures in the interest of stakeholders and the general public,” he added.

Mr Pilot also expressed hope that the US investors would look positively at India, which is returning to its growth path after some stagnation for about one and half years.

“As we are moving up, we are looking at investments aggressively from the US. We are looking up to the US investment community in the areas of power, retail, aviation, real estate and infrastructure areas. We see a great interest in India in these areas,” he added.

“The economic downturn in last two years has impacted the sentiments of investors. There were some hiccups and we are working on them. India is still a favourable destination for investors,” Mr Pilot said.

He also hoped that the pending proposals, including those for greater foreign investment in insurance and pension sectors, would be cleared soon.

Story first published on: June 23, 2013 12:26 (IST)

Tags: Sachin Pilot, Robert Blake, Corporate frauds, US economy, Economic growth, Corporate Affairs Minister

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Will the rupee weaken further and breach the 60 level?
YesNoCan’t say

From Reuters

When the Ben and Beijing party comes to an end

On June 24, 2013 16:22 (IST)

When the Ben and Beijing party comes to an end Investors have always been able to count on backing from two sources – US Fed chief Ben Bernanke and Beijing.

As Asia embraces casinos, India hedges its bets

Another China central bank worry; companies push into lending

What’s wrong with economics, anyway?

The global middle class awakens

Market Data provided by © Accord Fintech.
© Copyright NDTV Convergence Limited 2013. All rights reserved.

Kerry asks India to play greater role in Aghanistan, Iran negotiations


Apart from seeking the implementation of the civil nuclear deal and various other topics, US Secretary of State John Kerry today said that they looked to India to play a greater role in resolving issues between the US and nations like Afghanistan and Iran.

Emphasising that any talks with the Taliban, following the setting up of a political office in Qatar, would be process led by the Afghan people, Kerry said that the US would be briefing Indian authorities about the process.

Thanking India for its support in Afghanistan, Kerry said that were in touch with Afghan President Hamid Karzai.

“This is an Afghan-led process,” Kerry said.

Noting that there were certain conditions to be met, like the Taliban severing ties from terror groups like the al-Qaeda, he said,” If these conditions are met, then negotiations will take place with the high peace council of Afghanistan.”

“It is better to explore the possibility of having a peaceful resolution if it is possible,” he said.

John Kerry and Salman Khurshid. AFP

John Kerry and Salman Khurshid. AFP

He said he hoped that talks with the Taliban would provide “an avenue for the reduction of violence,” but in the event that it did not, the US was prepared to continue to train and equip Afghan armed forces well beyond 2014.

The US secretary of state, who is on his maiden visit to the country, said he is certain that India will encourage President Karzai to ensure all provisions are made for free, fair and transparent elections in Afghanistan.

“The people of Afghanistan need to see and feel that the elections are free and fair,” he said, adding that India needed to help it.

The US also expects India to convince the new leadership in Iran to prove to the world that its nuclear programme was indeed for peaceful purposes as claimed.

Kerry said that the US understood India’s relationship with Iran and hoped that India will urge the new leadership there not to “miscalculate” the US’ intention.

“We urge Iran to prove to the world that their peaceful nuclear programme is indeed peaceful. We hope India will help us, ” Kerry said.

He also said the US is looking forward to the early implementation of civil nuclear deal with India.

The two ministers said that they have had substantial discussions on tackling terrorism, joint ventures in space co-operation, defence, development, education, agriculture and health.

Minister of External Affairs Salman Khurshid said that he and US Secretary of John Kerry have struck a right note during the bilateral talks.

“We have so far done a lot of good work to keep the India-US relationship growing and on a personal note Kerry and I seem to have struck a right note,” Khurshid said.

He said that the two countries have exchanged 112 senior officials in high level visits with the US and both the countries will continue to build on the good work done so far.

Kerry reiterating Khurshid’s opinion on having struck the right note and said Vice President Joe Biden will visit India towards the end of July to strengthen ties between the two nations.

Import barriers: Why US forgets Tariff of 1789 before blaming India


By Yonathan Benyamini

US Secretary of State John Kerry arrived in Delhi creating a flurry of activity even before the onset of this week’s Indo-US strategic dialogue. Kerry’s agenda is wide and includes bilateral trade, security and defence, science and technology and climate change.

But despite Kerry’s statement that the US regards India not as a “pivot” but “key partner” to re-balance in Asia, the US Chamber of Commerce, National Association of Manufacturers and other angry US business groups allege that the government of India is discriminating against US exports. Trade discussions with India were a point of concern, during the nomination of the new US Trade Representative. Michael Froman, who was appointed to the position last week, was chosen to press the US point of view. Forty US senators also signed a letter to Kerry, in which they urged him “to press for swift action make clear to your Indian counterparts that the United States will consider all trade tools at its disposal”.

US Secretary of State John Kerry in India on Monday. AFP

US Secretary of State John Kerry in India on Monday. AFP

Earlier the business groups had sent a petition saying the Indian government’s attempt to create domestic jobs was “unacceptable for a responsible middle-income country and rising global power”. They claim the import barriers established by India’s policy threaten the $60 billion bilateral trade relationship. They view it as an attempt to flout the economic system, as trying to strengthen their economy at the cost of hurting that of the US.

It’s a shame that they can’t recall such hypocrisy in the history of their own nation, though. It’s sad that they remain ignorant of their own distant past.

Yes, India’s decision to embrace the free market has justified the abandoning of its import-substitution policy. Capitalisation of its non-discriminatory trade has allowed it to experience decades of robust growth. But let’s say theoretically, India reforms its current trade practices. It could certainly maintain an open flow of trade. It could, without question, pursue a more innovative policy that would appease US businesses. And albeit this is all true, so is the insincerity of the United States.

It seems as if the US has forgotten its similar plight as a developing country. The precursor to the American Civil War, the Tariff of 1789 was a heavy tax on imports meant to encourage domestic manufacturing. As the first significant piece of legislation passed by the US Congress to create jobs, it effectively established precedent and basic principles for US trade policy.

A consequence of the onset of the Great Depression, The Smoot Hawley Tariff raised tariffs within the US to a historic high. Instated by then US president Herbert Hoover in desperation, the act elicited a storm of foreign retaliatory measures. US trade policy came to symbolize beggar-thy-neighbor policy — the very grievance of which the US now accuses India. The US department of State reported that US protectionism caused imports to decline from $1,334 million in 1929 to just $390 million in 1932, and exports from $2,341 million to $784 million – a decline in world trade by about 66 percent.

It is only after the realisation of this misfortune that the US assumed its position as a champion of free trade. A champion whose current president vows to create “jobs that pay well and can’t be outsourced”. An advocate that refuses to cut domestic farm subsidies, and places tariffs on technological and solar competitors in China. A paradigm that sanctions regimes, distorting the equilibrium of trade.

India was obliged to reduce its oil dependence on Iran for six months before being exempt, just the other day, from harsh US sanctions.

The United States would also be wise to realise that India holds the key to leveling the playing field with China. At the lower end of the greatest economic war to date, the US has failed to grasp that job creation is essential to maintaining the economic gap with China. Approaching a 1 percent growth of GDP per generation, the US will be surpassed by the Asian superpower within the next two years.

At the current rate, the year 2040 will witness China’ contribution of 40 percent of the world GDP, dwarfing the mere 14 percent produced by the US.

Perhaps the very frustration preoccupying US business groups intimates the inception of a new era, of an epoch no longer dominated by the presence of the United States.

Let’s set a global drug quality benchmark The crisis in Indian pharma is a chance to develop a new regulatory path


With Indian-made generics accounting for a US market share of over 25 per cent, it is not surprising that it is gaining significant mindshare of the American drug regulator, the Food and Drug Administration (FDA).

The spate of quality issues with leading Indian pharmaceutical companies in the past couple of years, however, should not be viewed in isolation.

Big Pharma in the West, too, has been facing increasing flak from the FDA and other regulators over good manufacturing practice violations. High profile names such as J&J, Genzyme (Sanofi), GSK, Sandoz, Watson, Teva and many others have encountered their share of quality problems and have been served with ‘warning letters’ from the FDA.

The real issue is of quality medication, and how we can ensure that every tablet or dose whether for home or overseas markets is of the highest quality. This is important since India has already taken its place at the high table of the global generics market with around $15 billion in exports expected to increase to $20 billion by 2020.

It is widely accepted that instances of good manufacturing practices (GMP) violations stem from negligence. This makes it vital for Indian companies to put in place checks and balances to prevent such slip-ups. While it is true that we have a crisis at hand, I do not believe that there will be any sustained damage as Indian companies can swiftly take corrective action and regain their reputation as a quality producer of affordable generics to global markets. This could even be an opportunity to create a quality benchmark for others to emulate.

Understanding Non-compliance
Non-compliance is not new to the global pharmaceuticals industry. It is due in part to the stringent and diverse regulations across markets that require compliance. The FDA is a highly vigilant regulator that relentlessly pursues non-compliance action against a large number of companies in the US as well as all over the world.

Given our fast growing share of the US generics market, the FDA has naturally been conducting inspections in India more assiduously and frequently. This has resulted in several notices being issued to Indian companies almost concurrently. Compounding this is the hefty fine levied on Ranbaxy for a past breach in compliance. The unfortunate impression it has created is that non-compliance is pandemic in the Indian drug industry

What Ails Indian Pharma
There are several factors that have led to this crisis in the Indian pharmaceuticals industry. One is that there are too many regulators and policy makers. Regulation and policy is governed by the ministries of health as well as chemicals and fertilisers.

For biopharmaceutical companies, in addition to these, there is the Department of Biotechnology and the Ministry of Environment. Manufacturers, thus, have to comply with overlapping, and at times contradictory directives, from three different departments. At the policy-making level, a single ministry for the pharmaceuticals sector is one way forward.

MUST READ: Long way to go for Ranbaxy to regain lost trust

The start can be made with biologicals and biosimilars by expediting the long-awaited Biotechnology Regulatory Authority of India under the Department of Biotechnology. Biosimilars, or biogenerics, particularly need to be regulated by a separate group within the regulatory system.

Take, for instance, the two to four-year timeline for pharmaceutical generics at a cost of $1 million to $2 million per Abbreviated New Drug Application (ANDA). In the case of biogenerics, which present the next big growth opportunity, regulatory barriers are steep and time to market is five to eight years at a steep price of $50 million to $75 million per ANDA-equivalent.

Another concern is the dual quality of drugs. The International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) guidelines mandate a much higher quality level for generics than the innovator products, which then adds to the cost.

LEADERSPEAK: Ranbaxy is not a lemon, says former owner Malvinder Singh

Emerging markets, on the other hand, require quality specifications to match those of the innovator, which is what causes the criticism. In any case, so long as the drug meets the quality norm of the market in which it is sold, that should not be a serious concern.

Finally, there is a huge gap between small and large pharmaceutical companies based on quality testing and automation in manufacturing infrastructure. This by itself creates quality issues and it is vital to ensure that we bring pharmaceutical manufacturers, irrespective of size, under the ambit of common quality standards.

Watchdog that Barks – and Bites
While the industry needs to heed the writing on the wall, there is much that government can do to redress the situation. To start with, we need uncompromising regulation along the lines of the US FDA. Existing regulation is completely derelict both at the central and state levels. The issuing of manufacturing licenses should be strictly regulated and the frequency of spot audits stepped up along with severe penalties for non-compliance.

Mere training workshops, which are the norm, will not suffice to upgrade the competence levels of regulators. Rigorous training programs for regulators of at least one year should be instituted and made compulsory. It is important that approval and regulation be conducted by people who thoroughly understand compliance requirements including quality, efficacy, immunogenicity and GMP – not just the quality standards handbook. Clearly, the government needs to look beyond the rank and file of its technocracy to induct experts with wider exposure to manufacturing and compliance for key regulatory and approvals positions.

Bottom Line
While there is much that the industry can contribute in terms of self-regulation, the government needs to sit up and notice that this poorly but over-regulated sector needs much more support than information technology, which enjoys virtually no regulation. Instead, it has saddled the pharmaceutical sector with an unfair tax structure, control prices and denied much-needed tax incentives for R&D, overseas development and international patents. The sector needs investment to upgrade infrastructure and expertise – and the government must act now to provide the enabling framework and policies.

For all the challenges however, I believe this crisis is a huge opportunity to develop a new regulatory path that others will follow. But to do that we must first earn the credibility of the outside world. The first step forward would be to evolve — one with a global standards quality framework and implemented it with zero-tolerance regulation.

Integrity is vital in the health-care business: Swati A. Piramal

Swati A. Piramal, Vice Chairperson, Piramal Enterprises

After the recent US Food and Drug Administration (FDA) episode involving Ranbaxy, there is a general apprehension that Indian-made medicines and drugs are sub-standard and that middle-class India is buying and consuming drugs that are questionable in quality. In fact, parents of young children are reluctant to give any drugs to them, fearing that they are sub-standard.

For Piramal Healthcare, quality manufacturing and operational excellence is critical for the safety of patients taking medicines made in our plants. I recall asking my Quality Control Group whether we could face FDA complaints. The clear answer was, “It is highly unlikely.” The team cited the multiple times the US FDA and other agencies such as the UK-MHRA (Medicines and Healthcare products Regulatory Agency), have inspected our plant at Pithampur (in Madhya Pradesh) and our Digwal plant near Hyderabad. They recalled the tremendous effort and investment that was made to get them to US FDA standards. We are also audited by our customers, which comprise large pharmaceutical companies, several times a year.

What is important about maintaining the highest quality standards and the highest integrity? It is the ethical culture of the organisation, independent reporting of quality, investment in continuous improvement, training of staff, and getting the values imbibed in each employee, even the lowest in the line function.

In our company, the ethical culture deeply pervades the organisation. The active whistleblower policy goes directly to the board, which goes into great details, on any complaints. The quality operations function reports directly to the Executive Director, and not to any line manager, who is responsible for sales and profits. The quality operation is, therefore, totally autonomous and independent.

The quality standards of global regulators are a constantly moving bar. They change every year and, therefore, education of personnel on continuous improvement, adhering to new standards and training are critical. We have a robust system of training and audits conducted by both internal and external experts. Of course, zero error is difficult to achieve. But it is a mighty goal in the search for excellence.

Integrity is vital in any health-care business, where we are saving lives when patients use our medicines. At Piramal, workers, even at the lowest level, are involved in continuous improvement. Operational excellence is rewarded. At 14 Piramal plants, from where products are exported to over 100 countries, many foreign regulators visit frequently. The quality team takes pride in having no major deficiencies or warning letters in the US FDA audit system. Workers are encouraged to report aberrations and deviations promptly. Such an open culture helps to quickly identify issues, and is less costly, in the long run.


Project revital India’s drug regulator is getting a makeover but better enforcement and safer medicines are yet a chimera.


Is everything in order in Indian pharma industry?

India’s pharmaceutical industry suffered twin blows recently when Ranbaxy Laboratories and Wockhardt, two of the country’s biggest drug makers, came under fire from US authorities. While Ranbaxy on May 13 admitted to fudging data , Wockhardt said on May 24 the US drug regulator had banned imports of medicines from one of its factories near Aurangabad in Maharashtra.

The incidents raise some pertinent questions: is everything in order in the Indian pharmaceutical industry? Are drug makers maintaining quality standards? And what are Indian authorities doing to ensure the medicines we consume are safe?

“We need to tighten our domestic laws and have a quality culture so short cuts are avoided and there is proper documentation,” says Kewal Handa, a former managing director at Pfizer India who now runs healthcare advisory firm Salus Lifecare. “One never hears of such stringent penalties in India ,” he adds, referring to the $500 million Ranbaxy agreed to pay to settle cases in the US .

G.N. Singh, Drug Controller, General of India
By 2017, you will see a totally different regulatory regime where we have a more systemoriented and sciencebased evaluation: G.N. Singh

Ranjit Shahani, Vice Chairman and Managing Director at Novartis India, agrees the government must come down heavily on companies that do not follow regulations. “The Indian government clearly has to allocate significant resources speedily to controlling quality. Incremental change will not make any difference,” says Shahani, who is also President of the Organisation of Pharmaceutical Producers of India, a group of global drug makers.

Such incidents “tarnish India’s image”, says Kiran Karnik, former president of the National Association of Software and Services Companies. Karnik has been tracking and writing on the subject of public health, among other areas, after his stint at NASSCOM.

The Indian drug landscape comprises two worlds. One world is relatively safe where companies such as Ranbaxy and Wockhardt, despite their weaknesses, meet stringent US and European regulations. According to the Drug Controller General of India (DCGI), there are 169 plants in the country approved by the US Food and Drug Administration (FDA).

Besides, 160 facilities are approved by European regulators and about 1,300 are certified by the World Health Organisation. The other world is a mix of players of different sizes with many of them small and escaping strict monitoring because regulatory agencies are under-staffed and under-equipped. Overall, the DCGI estimates there are about 8,000 manufacturing units across the country. Industry estimates put the number as high as 20,000 units.

A close look at the Indian pharmaceutical industry shows a complicated regulatory structure and a web of entities at the central and state levels tasked with monitoring the sector. Drug companies come under the purview of the chemicals and fertiliser ministry. The Central Drug Standards Control Organisation (CDSCO), the top industry regulator (see Between Many Stools) headed by the DCGI, comes under the health ministry. There is a separate agency for monitoring food products, the Food Safety and Standards Authority of India. In contrast, in the US, almost everything that goes into the human
body is regulated by the FDA.

In May 2012, a parliamentary standing committee report on the functioning of the Central Drugs Standard Control Organisation (CDSCO) pointed out that it was facing a severe staff shortage. It noted that, as of October 2011, only 124 of 327 sanctioned posts were occupied. The organisation’s headquarters was staffed by four deputy drug controllers and five assistant drug controllers.

These nine officers together handle 20,000 applications, attend more than 200 meetings, and respond to 700 parliament questions and about 150 court cases annually. That has changed in the past year, says DCGI G.N. Singh. “It is not nine officers now but 200,” he told Business Today. Singh said a total of Rs 3,500 crore would be spent on expanding the regulatory agencies in the five years to 2017. Of this, Rs 1,500 crore has been earmarked for strengthening the central regulator and a similar amount for state-level agencies. “By 2017, you will see a totally different regulatory regime where we have a more system-oriented and science-based evaluation,” he adds.

According to last year’s parliamentary report, the main problems are inadequate infrastructure, shortage of drug inspectors and lack of accurate data. The panel said a 2003 report by a group led by R.A. Mashelkar estimated a requirement of more than 3,200 drug inspectors.

Piramal Enterprises’s bulk drugs unit at Digwal village, about 100 km from Hyderabad, has had four US FDA inspections in the past decade. The company claims it has never had any adverse comments. Business Today visited the plant to see how the company ensures it meets FDA standards. The company maintains log books in the quality control laboratory where samples of the material produced are analysed before dispatch. In the documents section, there is a constant check on temperature as samples from each batch of production are stored there.

In the raw material warehouse, the focus is on labelling and ensuring clear identification of incompatible and hazardous raw material. During FDA inspections, the bulk drugs units are usually asked to show a complete manufacturing step conforming to the required quality systems. In the finished product area, the focus is on the particle size of ingredients based on required dosage and customer needs.

The panel said there were only 846 drugs inspectors against 1,349 sanctioned posts in states. Singh says the number of drug inspectors has now risen to about 1,200 and will cross 3,000 by 2017.

Singh denies the staff shortage has hampered regulatory work. “We are also good now and that is why the share of substandard drugs being sold in the Indian market is down from 10 per cent in 2002 to between four and 4.5 per cent today.”

Industry executives disagree. “The share of spurious drugs being sold in India may be over 20 per cent in India,” says Tobby Simon, founder and President, Synergia Foundation, a Bangalore-based applied research think tank. He adds the WHO estimate of the value of counterfeit drugs globally would be about $140 billion this year and could touch over $200 billion by 2020.

Two recent incidents indicate the severity of the situation. In April, a scandal involving purchase of spurious medicines by a government-appointed committee came to light in Jammu and Kashmir. On May 6, shops, other businesses, public transport and educational institutions remained closed in Srinagar to protest against fake drugs. Again, in April, the Gujarat Food and Drug Control Administration (FDCA) busted a racket of illegal manufacturing and sale of spurious drugs in Ahmedabad. Last year, the FDCA launched a system that notifies all chemists and druggists of recalled fake or substandard drugs through text messages. Other states are keen to implement a similar system.

Laboratory testing of samples is another big issue. At present, drug inspectors pick samples randomly to check for quality or following a complaint from a consumer. These samples are then sent to state laboratories for testing, and manufacturers asked for an explanation in case of an adverse report. Singh says about 50,000 drug samples are tested annually across the country. He says the aim is to enhance this number five to six times by 2017 and also to ensure quicker turnaround time.

Currently, it takes five to six months to get the final sample report. “We will have a fast-track system, and mobile labs equipped not only with modern equipment but also with trained manpower,” he says. The government is also planning to use the expertise of organisations such as the Centre for Cellular and Molecular Biology and the Indian Institute of Chemical Technology, both in Hyderabad, for this exercise.

Are these measures enough? No, say industry executives. The government’s main focus appears to be on controlling drug prices as part of its social welfare agenda. While price control benefits consumers, it may also encourage companies to cut corners.

Industry executives say that, as FDA-approved plants cannot match the prices of drugs made in non-certified units, many top companies do not take part in tenders that government hospitals and some large government organisations call for drugs supply, since the selection yardstick is the lowest price. Howsoever stringent, external supervision alone cannot tackle all problems the pharmaceutical industry is facing. The government and industry should encourage corporate executives as well as government officials to disclose wrongdoings in their organisations. “The government has had a whistleblower policy for the last two years with a reward of Rs 25 lakh for the whistleblower,” says Shahani of Novartis. “Have you heard of any whistleblower?”