Daily Editorial Analysis for 10th April 2020

Kerala gets nod for trial of plasma therapy

GS Paper III

Topic: Science and Technology

Mains: Convalescent plasma therapy

What’s the News?

Kerala is not easing its level of preparedness or its efforts to stay ahead of the virus even when it is clear that the progression of COVID-19 epidemic in the State is currently well below the case progression graphs plotted by mathematic modellers.

Background:

• At present there are no specific antiviral agents which have been found to be effective in the treatment of COVID-19.
• Convalescent plasma therapy is not new and has been used by doctors to treat critically ill patients during earlier epidemics too, during H1N1, SARS and Ebola.
• When reports that HIV antivirals (lopinavir/ritonavir) might be potentially useful in treating COVID-19 patients, then too Kerala had sought ICMR’s early clearance for the protocol in January itself.

Coronavirus: Stages of a pandemic

• First stage: In the first stage of a disease cases of an epidemic are imported into a country in which the infection did not originate and it eventually takes the form of a pandemic sweeping the globe.
• Second stage: The second stage is when the virus starts being transmitted locally.

Local transmission means that the source of the infection is from within a particular area and the trajectory the virus has taken from one person to the next is clearly established.

• Third stage: The third stage is that of community transmission which means that the virus is now circulating in the community, and can infect people with no history either of travel to affected areas or of contact with an infected person.
• If and when community transmission happens, there might arise the need for a full lockdown because in that situation it is theoretically possible for every person, regardless of where they are from and who they have been in contact with, to spread the disease.
• Fourth stage: from pandemic to endemic It is when the disease, COVID-19 in this case, becomes endemic in some countries.

Convalescent plasma therapy:

• The procedure, known as convalescent plasma therapy, is carried out in the expectation that antibodies specific to the Novel Coronavirus that are present in the blood of the patient who has recovered will help generate immune response in the other patient.
• Convalescent plasma therapy, which was recently allowed by USFDA for investigational purposes, banks on the age-old concept of passive immunity. This is one of several therapeutic options being tried against COVID-19 the world over.
• CP therapy shows a potential therapeutic effect and low risk in the treatment of severe COVID-19 patients.
• As one dose (200 ml) of convalescent plasma with a high concentration of neutralising antibodies was well-tolerated by patients and that it can rapidly reduce the viral load in patients and improve clinical symptoms significantly.

Conclusion:

• While the ICMR has cleared the clinical trial protocol, the State might at some point need to submit an expanded access protocol to the council, so that severely ill patients can be administered the treatment on compassionate grounds.
• Drugs Controller General’s approval and institutional ethics committee approval would have to be there before the treatment can be administered.

WHO in the middle

GS Paper III

Topic: International relations

Mains: Reforming WHO

What’s the News?

US-China battle over its role in pandemic may be precursor to struggle about future of UN, multilateral institutions.

Background:

• As the record of the World Health Organisation in handling the coronavirus crisis becomes a bone of contention between the US and China, India should not lose sight of its significant interest in promoting long overdue change at the UN agency responsible for global public health.
• The time for a post-mortem, Delhi should insist, begins only after the war against the virus ends.

Causes behind:

• With the US likely to become the biggest victim of coronavirus, the debate about its origin, spread and management has begun to acquire a sharp intensity in America.
• Trump has criticised the WHO, for being too deferential to China during the crisis and underplaying the danger to the rest of the world.
• Trump is channeling the strong sentiment in the US that if the WHO had done its job, the world could have significantly reduced the casualties.
• The WHO, however, has rejected the criticism and insists that its actions have saved many lives.
• Beijing is standing firmly behind the UN agency. A battle royale is shaping up at the WHO between the US and China and this could well be the precursor to a broader struggle between the two for the future of the UN and other multilateral institutions.

Way forward:

• Delhi, however, should not view the WHO’s recent actions through the sole prism of US-China conflict.
• Many major countries, including India, were deeply wary of the WHO’s policy guidance during the crisis.
• India is better off for Delhi’s independent judgements. But that luxury is not available to most countries in the world, especially the developing nations that rely entirely on the WHO’s wisdom.
• Delhi owes it to itself and its traditional constituency in the global South to help ensure that there is an objective international investigation into the WHO’s performance in the war against the virus and identification of the correct lessons for dealing with future pandemics.
• That, in turn, should pave the way for a badly needed revitalisation of the WHO, the only collective framework the world has in dealing with challenges of global health.

A double whammy for India-Gulf economic ties

GS Paper III

Topic: Indian economy and International relations

Mains: Covid-19 impact on India-gulf relations

What’s the News?

The Gulf region is at the epicentre of a perfect storm not just from the COVID-19 pandemic but also an oil price meltdown.

COVID-19 impact on Gulf countries: 

• The pandemic has put nearly a third of the world’s population under some form of lockdown curbing the consumption of hydrocarbons, the mainstay of Gulf economies. COVID-19 had lowered the world crude consumption by 28 million bpd. The consequent oil glut began depressing the price.
• The economic outlook for the Gulf has indeed deteriorated, with Saudi Arabia’s fiscal deficit expected to cross 8% in 2020. The global economy is expected to have a recession induced by COVID-19 this year.
• Consequently, the oil prices went for a tailspin having fallen by 55% during March to an 18-year low on March 30.

Its impact on developing countries:

• The heads of OPEC and the International Energy Agency (IEA) warned that developing countries’ oil and gas revenues will decline by 50% to 85% in 2020 with potentially far-reaching economic and social consequences.
• The economic outlook for the Gulf has indeed deteriorated, with Saudi Arabia’s fiscal deficit expected to cross 8% in 2020.
• Even if they revive back to normal the national self-reliance on strategic goods such as pharmaceuticals may deter their trade, and the tourism and hospitality sectors.

Impact on India:

It will mainly impact the Indian economic symbiosis and India’s expatriate community.

• Bilateral economic ties are strong: the India-Gulf trade stood around $162 billion in 2018-19, being nearly a fifth of India’s global trade. It was dominated by import of crude oil and natural gas worth nearly $75 billion, meeting nearly 65% of India’s total requirements. Some of these countries have large Indian investments and some have planned large investments in India.
• Second, the number of Indian expatriates in the Gulf states is about nine million, and they remitted nearly $40 billion back home. Both these intertwined pillars of India-Gulf ties have been affected by the COVID-19.
• India being the world’s third largest importer of crude, a sharp and prolonged decline in oil prices helps its current account. However, in long-term it might decreased bilateral trade and investments as well as expatriates’ remittances — all of them adding to India’s current financial stress.

Concerns:

• The fresh recruitment stops, salaries are either lowered or stalled, taxes raised and localisation drives launched.
• In case the pandemic worsens in the lower Gulf, panic-stricken, wage-deprived Indians may prefer to come back.
• This would create an exodus of epic proportions, the nearest example being the evacuation of over 1,50,000 Indians from Kuwait in 1990-91, albeit for political reasons, an event that upended India’s economy.
• Apart from creating a logistical nightmare of transporting millions of expatriates back, they would need to be resettled and re-employed.

Conclusion:

• While hoping that the Gulf states are able to contain the pandemic and the oil shock, India needs to make some contingency plans in consultation with the individual countries.
• In the longer run, we need to find new drivers for the India-Gulf synergy. This search could begin with cooperation in healthcare and gradually extend outward towards pharmaceutical research and production, petrochemical complexes, building infrastructure in India and in third countries, agriculture, education and skilling as well as the economic activities in bilateral free zones created along our Arabian Sea coast eventually leading to an India-Gulf Cooperation Council Free Trade Area.
• Only then would we have sufficiently diversified the India-Gulf economic ties to protect them from such shocks.

Will COVID-19 affect the course of globalisation?

GS Paper III

Topic: Indian economy

Mains: Import substitution, role of WTO in facing COVID-19

What’s the News?

Import substitution, which had once become a bad word, may be back in currency due to the impact of the COVID-19 pandemic on free trade.

Import Substitution Development Strategy:

• A development strategy whereby a government restricts or forbids the import of industrial material and subsidizes local material. For example, a country may not allow the import of refined oil and instead encourage development of local oil refineries.
• The idea behind this strategy is to make a less developed country less dependent on international assistance and foreign direct investment until such time as it is can absorb investment more easily and also trade its own products.
• This development strategy was followed in Latin America and some other regions for most of the mid and late 20th century.
• It has its theoretical foundations in Keynesian economics, though some analysts have claimed that each nation industrializing after the United Kingdom has followed some form of import substitution.

History:

• When the world was hit by economic recession in 2008, trade dipped by almost 10% in 2009 when there was a 3% decline in global GDP. That’s roughly the relation between trade and growth. When there’s a boom, trade grows much faster than GDP.
• The World Trade Organization (WTO) has now estimated that in a worst-case scenario, global trade could dip as much as 32%, indicating the kind of dislocation they expect in large economies.

Indian scenario:

• In India, for instance, we can see the disruption that is taking place — almost 50% of our trade is directly linked with the micro, small and medium enterprises (MSMEs) sector as even large players have sub-contracted to the smaller producers.
• The COVID-19 crisis is a challenge never seen before and it is going to be a bigger shock for the world economy than the global financial crisis which was only driven by a demand shock.
• Developed countries as well as many in the Asia Pacific region that are highly dependent on tourism and commodities trading will also shrink.
• For India, however, there is a slight silver lining because of low oil and commodity prices as we are net importers and, also, since the government is not allowing a full pass-through of the lower global prices, it means that there is some fiscal space through commodity price reduction.
• Still, the disruption in work, especially in MSMEs that are the backbone of manufacturing, trading and services, is very serious. This is a very large shock to the world economy and many things will change after we come out of it.

Countries will reconfigure their economies to look at import substitution with a greater clarity now, as the perils and pitfalls of overdependence on foreign supplies become clear.

Chinese experience:

• China’s manufacturing sector is back, with Wuhan coming back into action. Other countries will remain in a lockdown phase for at least another two months and if the Chinese get this sort of a lead in getting their act together, they are going to consolidate their position in the global economy further.
• Looking at the two major events that took place in the last 20 years — the 9/11 attacks (which coincided with China joining the WTO) and the 2008-09 global recession.
• After each of these episodes, China came out stronger and acted with alacrity, did all the pump-priming to stimulate the economy and enhance their global heft.
• Countries are going to be extremely wary of the superpower that China will become and would like to disengage.
• Stimulus packages — be it in the S., France, Germany — have an overwhelming emphasis on small businesses, which really were at the heart of their post-war industrialisation strategy, and you will see industrial policy whose flip side will be import substitution.

So, globalisation will be defined in a very different way.

Steps needed:

• The first priority of every government would be to create jobs for its own people. In a high unemployment scenario, hiring expats won’t be in favour. In any case, there had been rising protectionism on this front already.
• This crisis has exposed the gaps in the health sector and social protection and the stimulus packages should focus on closing these gaps which will also help in achieving sustainable development goals.
• The first priority will be to create jobs for those rendered jobless.

Role of WTO:

• Trade rules have worked best when the global economy is booming and isn’t facing a crisis. The last time serious discussions took place at WTO was in 2008, before the complete repercussions of the crisis hit home, and it was all downhill after that.
• It’s only going to get worse, because if countries need to bring their domestic industries back, they would need space for policy flexibility.
• And WTO will be redundant there — for instance, on the issue of subsidies for small industries, no country will like the WTO to be telling them what to do or what not to do.
• The agricultural subsidies issue is going to be junked — on 31st March, India notified the WTO that it has crossed the 10% limit in rice subsidies as a good citizen.
• The G-20 should work out flexibilities within the WTO framework collectively.

Conclusion:

• In the last quarter of the twentieth century, we saw one driver of governance — market forces-oriented.
• But now, in major economies, governments have taken centre stage and depending on how long the pandemic drags on, the government will remain in the driver’s seat and markets will take a backseat.
• If governments have to do the heavy-lifting, then they want full force of their sovereign powers.