Inclusive Growth in India

Absolute poverty has fallen substantially over the last couple of years, with most of this decline contributing positively to rapid economic growth in developing countries. However, the acknowledgment that economic growth often does not meet the needs of the poor has encouraged the current discussion on the need for inclusive growth. Economic growth in the absence of measures to ensure the sustained impartial and reasonable distribution of the benefits of growth has frequently disseminated the concentration of wealth in the hands of those already better off. As a consequence, Governments and donors in many developing countries have come to comprehend that in order to considerably reduce poverty they must promote inclusive growth. A commonly used definition, employed by the World Bank, which defines inclusive growth as an absolute reduction in poverty associated with the creation of productive employment rather than direct income redistribution schemes. The World Bank maintains that inclusive growth should take into account both ‘the pace and pattern of growth’; these are considered to be linked and should therefore be addressed together.

Defining inclusive growth, rapid pace of economic growth is necessary for substantial poverty reduction and for the growth to be sustainable in the long run, it must be broad based across sectors and inclusive of large part of a country’s labour force.

Promoting inclusive growth requires policymakers to address both growth and income distribution, so it requires an understanding of the relationships between growth, poverty and inequality. Economic growth is a prerequisite for poverty reduction when income distribution is held constant. The acknowledgment that inequality affects the impact of growth on poverty reduction has led to a broad agreement that it is necessary to look beyond a ‘growth-first’ agenda in order to successfully deliver inclusive growth.

A robust inclusive growth strategy will complement policies to stimulate economic growth with those that foster equality of opportunity, alongside a social security net to protect the most vulnerable. As such, economic policies to promote structural transformation and create productive employment for poor people will need to be complemented by investments in human capital and other programmes to support social inclusion and equal access to jobs.

The United Nations 17 Sustainable Development Goals (SDG) are

Countries have committed themselves to time-bound targets of prosperity, people, planet, peace, partnership (five P’s) keeping in line with the United Nations 2030 agenda and the Sustainable Development Goals. The Paris Agreement, which is part of the SDG framework, requires every country to achieve net zero greenhouse gas emissions by mid-century (Masson-Delmotte et al. 2018). In order to achieve results in SDG, policy frameworks adopted by the Governments play a crucial role. The three principle layers to measure government efforts to implement the long-term objectives of the 2030 Agenda and the Paris Agreement:

  • High-level public statements by governments in support of sustainable development [monitored by- a) tracking the existence and the content of Voluntary National Reviews (VNRs) under the High-Level Political Forum for the 2030 Agenda; b) monitoring heads-of-states’ and cabinet members’ speeches in support of the goals];
  • Strategic use of public practices and procedures for the goals (coordination mechanisms, budget, procurement, human resource management, data and audits);
  • Content of government strategies and policy actions.

The SDG index summaries countries’ current performance and trends on the 17 SDGs.India ranks 115 in 2019.

In the context of India’s inclusive growth trajectory, the strategies of Inclusive growth and development came into the attention in the progressing policies of emerging market economies (EMEs) with higher economic growth rates. With an accelerated economic growth rate, Indian policy makers too moved their concentration on Inclusive growth and expansion while formulating the 12th five-year plan.Thus, the plan targeted deprived sections of the Indian population, health, employment, rural urban infrastructure, women and child development and social security measures against the backdrop of the strategy.

From a peak of 8.1% in the fourth quarter of 2017-18, growth in gross domestic product (GDP) has now decelerated to a six-year low of 5% in the fiscal first quarter, with a slowdown visible across all sectors. Particularly important in this context is the compression of government expenditure, Central government revenue grown only 6% last year, more than 11% short of the budget estimate. Accordingly, expenditure growth was compressed to 6.9% last year, down from more than 11% the year before. Weak revenue growth meant devolution to states also fell short, forcing them to cut expenditure. This compression of government spending at a time when all major components of aggregate demand were already slowing has been an important driver of the sharp decline in economic growth. The country is now requiring an inclusive macroeconomic strategy to revive aggregate demand in the short run, while initiating structural reforms to sustain growth over the long-term. For inclusive growth in India macroeconomic activities, initiated and supported by the government, should be planned to uplift the standard of living of common people and must not be concentrated only to increase the pace of the growth process.

In this regard, while assessing India’s progress on SDG, we note that India submitted the VNR in 2017 and is due in 2020 again. According to VNR 2017 developed by NITI Aayog, Government of India is strongly committed to Agenda 2030, including the SDG.

Following goals were focused on performing SDG India Index at State level:

·         SDG 1: No Poverty

·         SDG 2: Zero Hunger

·         SDG 4: Quality Education

·         SDG 5: Gender Equality

·         SDG 6: Clean Water and Sanitation

·         SDG 8: Decent Work and Economic Growth

·         SDG 9: Industry, Innovation and Infrastructure

·         SDG 10: Reduced Inequalities

·         SDG 11: Sustainable Cities and Communities

·         SDG 15: Life on Land

·         SDG 16: Peace, Justice and Strong Institutions

The Index tracks the progress of all the States and UTs on a set of 62 Priority Indicators, measuring their progress on the outcomes of the interventions and schemes of the Government of India. The SDG India Index is intended to provide a holistic view on the social, economic and environmental status of the country and its States and UTs. A composite score was computed for each State and UT of India based on their aggregate performance across 13 of the 17 SDGs. The SDG Index Score for Sustainable Development Goals 2030 ranges between 42 and 69 for States and between 57 and 68 for UTs. Among the States, Kerala and Himachal Pradesh are the front runners with an SDG India Index score of 69. Among the UTs, Chandigarh is a front runner with a score of 68.

Need for inclusive growth strategy

According to the Planning Commission of India (Planning Commission, 2007), the concept “Inclusion” should be seen as a process of including the excluded as agents whose participation is essential in the development process, and not welfare targets of development programs.

In the context of the above interpretation of the term, sustained inclusive growth in India possibly requires changes in prevailing growth approach and a definite line of deed to include the excluded representatives. After pursuing the current growth strategy for a long time, economic inequality in India is still very severe.

Key elements of inclusive growth

 Since globalization, significant improvement in India’s economic and social development made the nation to grow strongly in the 21st century. The following factors encouraged India to concentrate more on inclusive growth:

  • India is the 7th largest country by area and 2nd by population. It is the 12th largest economy at market exchange rate and 4th largest by PPP. Yet, India is far away from the development of the neighbourhood nation, i.e., China.
  • The exclusion in terms of low agriculture growth, low quality employment growth, low human development, rural-urban divides, gender and socialite qualities, and regional disparities etc. are the problems for the nation.
  • Reducing poverty and other disparities and raising economic growth is the key objectives of the nation through inclusive growth.
  • There are so many studies that estimate that the cost of corruption in India amounts to over 10% of GDP. Corruption is one of the ills that prevent inclusive growth.
  • Although child labour has been banned by the law in India and there are stringent provisions to deter this inhuman practice, still, many children in India are unaware of education as their lives are spoiled to labour work.
  • Literacy levels have to rise to provide the skilled workforce, required for higher growth.
  • Economic reforms in the country are overwhelmed by outdated philosophies and allegations by the politicians and opposition parties in India.
  • Achievement of 9% of GDP growth for country as a whole is one of the boosting factors which gives the importance to the Inclusive growth in India.
  • Inclusiveness benchmarked against achievement of monitor able targets related to
    • Income &Poverty
    • Education
    • Health
    • Women & Children
    • Infrastructure
    • Environment
  • Even at international level also, there is a concern about inequalities and exclusion and now they are also taking about inclusive approach for development.

Impact of Inclusive Growth

In the context of the above findings about income disparities and economic inequality in India, it appears that certain fundamental changes are to be initiated in the growth strategy to adequately enhance productive employment opportunities for the economically weaker sections of people. Accessing opportunity in the growth process by the hitherto excluded poor, low-income and the unemployed is to be ensured for any meaningful implementation of inclusive growth in India.

Extension of irrigation facility in India is one area which needs instantaneous attention in the interest of inclusive growth in the country. Conservative estimates show that nearly 60% of India’s arable land is rain dependent. It means only 40% of agricultural land is fully under all-season irrigation facility. Another estimate shows that yearly average rainfall in India is 3 lakh cubic feet and only one third of that is retained in the country and two lakh cubic feet drains down to sea. It implies that without distressing the ground water level and just by using a considerable part of the unutilized rainfall, irrigation capacity can be extended immensely. Hence, adequate investments to quickly extend the spread of minor/major labour-intensive irrigation projects will not only improve land yield but also provide access route of the previously excluded agents to enter the growth process. Certainly, there are hurdles for jumpstart extension of irrigation facility; but the hurdles should not be impossible in the interest of common people of India.

Secondly, everybody agrees that in the present global economic scenario, educated workers are more productive than illiterate labours. However, according to Census Data of India nearly 26% Indians were not literate at all in 2011 which is far below world average. Hence, erasing illiteracy and massive expansion of primary and technical education can enhance labour productivity and gainful employment opportunity of the excluded agents in the current growth process.

Thirdly, In India 70% of health-related expenditure is made by individuals and only 30% is spent by the government – just the opposite scenario of many countries. It is also estimated that only due to increasing medical expenditure 38 million Indians are joining below-poverty-line population every year. Hence for a meaningful inclusive growth and poverty reduction, massive extension of affordable healthcare, control of drug prices, free availability of drinking water and sanitation facilities are to be ensured.

Emphasis on the building of physical infrastructure, particularly roadways, railways, ports and cold chains, is another area which is to be improved rapidly. In a huge country like India physical infrastructure is far behind Asian front-runners. But targeted development of physical infrastructure can create large scale employment opportunity to the army of unskilled/semi-skilled workers in India.


Thus, the key implications from the above discussed concept of inclusive growth would essentially include ensuring fiscal health of India with ever increasing role of government in the economic sphere, effective use of resources and increasing devolution and decentralisation, strengthening competitive pressures, transforming workforce structure, size, and human resource management arrangements, changing budget practices and procedures, and introducing results-oriented approaches to budgeting and management thereby enhancing efficiency of public sector to achieve sustainable development goals. With an improved go-to-policy response of the Government, a conducive environment with a well-functioning financial structure provided by the government can help other relevant stakeholders and achieve broad based impacts on the economy.

Today, Indian companies too are mapping their business actions to SDGs. Broadly, companies focus on SDG 4 (quality education), SDG 8 (decent work), SDG 5 (gender equality), SDG 13 (climate action), SDG 6 (clean water and sanitation). Existing programmes of companies are also being linked to SDG while some are linking to their branding efforts. Essentially, the SDGs have the potential to provide a framework for mobilizing corporates to invest in sustainable development in an ongoing and scalable way while keeping their business interests intact. The SDG serves guidelines for businesses to assess and manage social, economic and environmental risk, while contributing to bettering their reputation, image and their strategic position in the world’s markets.

As inclusive growth is considered as a prime focus by the Government, policy reforms in this respect have a critical yet broad-based impact on industries and market. All players in the system are affected in a certain matter depending on nature of its business. In today’s scenario, amidst all the global happenings we pause to look at the domestic prevalent factors from a fiscal angle that drive businesses and contribute to markets and economy at large.

Scaling and Replication of Social Enterprises in India

In a nation with an estimated population of 1.37 billion people, an extensive range of social enterprises can make an impact. From public services to financial services, to technology, social enterprises can play a key role in a diverse economy like India. Ridley-Duff and Bull (2011) defined a social enterprise as an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing shareholder profits.

The development of this study is for  entrepreneurs to evaluate scaling opportunities in social enterprises that want to expand. Indian social enterprises have large national and international markets where their services can be having moving impacts.

This framework is geared towards replication and scaling of programs commenced by Indian social enterprises in market expansions. It includes methods/strategies for scaling impact for a broad set of investors and entrepreneurs to build such projects.

A social enterprise is legally structured as a for-profit entity with a clear social impact goal defined. In India, there are five options to set up a for-profit social enterprise: Sole proprietorship, partnership, limited liability partnership, a private firm and as a co-operative. 80% of Indian social enterprises are structured as a for-profit private limited company (PLCs).

Support at various stages of incubation

Over the years, the main operational problems faced by social enterprises have been accessing resources and funds, management challenges, task and mission challenges, and social perception challenges.

  • Idea/ seed stage incubation: Presently, social incubator UnItdIndia provides support to idea-stage social entrepreneurs that are looking to develop and pilot their social impact ideas, by providing capacity support, mentorship and small capital.
  • Early-stage incubation: Villgro based in Chennai is a comprehensive social incubator providing seed fund, mentorship; working space and network to social enterprises. It is also working on building active ecosystems in metro and tier 2 and 3 cities by conducting workshops, offering fellowships and organizing mentorship/ networking events.
  • Accelerator: Villgro also has an accelerator program. There are mainstream accelerators and programs that support startups and a small percentage (2-5%) of social enterprises.

 Corporate Structure, Competitive Analysis, and Market Entry

To understand the viability of a business model, we must understand whether the corporate structure allows for growth, requisite of licenses, participation and compensation of the board of advisors. Every social enterprise must assess competitors, make a market differentiator, and understand the customer’s perspective on the service rendered. Once the market entry impediments to startup are understood, we start building the business model of the enterprise.

Millennium Alliance, which is a consortium of public-private partnerships, has supported the scaling of social innovations in 22 states of India including low-income states such as Bihar, Uttar Pradesh, Odisha, Chhattisgarh, Madhya Pradesh, and Rajasthan. It funded Waterlife, which provides sustainable, affordable, and safe drinking water through Community Water Systems. Billions of people globally do not have access to safe water, leading to waterborne diseases. It built a successful operation in India in partnership with the government, NGO, Panchayats, SHG, Commercial institutions as well as international agencies. At present, this social enterprise has found a large market in Rwanda, where more than 60% of people do not have access to safe water.

 Business Models of Social Enterprises

 The business model is based on the social impact it wants to make or the social problem it is trying to solve. Key features of social enterprise are: the benefactors of the impact and target customers paying for the product or service might or might not be the same; enterprises can be structured for impact investments with options of debt or equity; and enterprises internally functions like any other commercial business in terms of management, operations, people and resources. A few business models operating in the social enterprise section are:

3.1. Self-Sufficiency Social Enterprise: Most self-sufficient social enterprises are brand-new social enterprises or companies that lack management talent. Such enterprises can merely break even and lack the resources to realize their social mission or create profits.

3.2. Mission-Driven Social Enterprise: Mission-driven social enterprises closely resemble non-profit organizations, and always work on a specific social issue more deeply than profit creating social enterprises do. Such enterprises have ideal social missions, but lack appropriate business models to realize those missions. Social Blood is an organization that helped the needy connect with blood donors through Facebook. Social blood has partnered with several blood banks in the U.S. and has helped over 300,000 people.

3.3. Profit Creating Social Enterprise: Profit creating social enterprises closely resembles for-profit organizations. The familiar problem faced by profit creating social enterprises is that they frequently can only help a small number of people, or only slightly mitigate a social problem. However, such enterprises create less social value than benchmark targeting social enterprises. Oorja Solutions is a relevant example of this business model. It is an energy services company in the business of replacing diesel engines with affordable, reliable solar energy systems for a productive power in rural markets. Their first service, Oonnati, provides irrigation water on a pay-per-use basis to smallholder farmers.

3.4. Benchmark Targeting Social Enterprise: Benchmark targeting social enterprise is the ideal form of social enterprise. Benchmark targeting social enterprises not only achieve profits from their products or services but also reinvest those profits into realizing their social mission. An example of such a social enterprise is Science for Society, another startup backed by Millenium Alliance. SCD is an electricity-free solar-powered food dehydrator that reduces moisture content in agro-produce so that it can be stored up to 1 year without any chemicals and earn additional income through the sale of such products. This leads to the creation of a scalable ecosystem of producers, local administration and monitoring partners and buyers of dehydrated products.

Case Studies on Expansion

1. Expansion Strategy of One Acre Fund in South Africa: More than 50 million smallholder farmers in Sub-Saharan Africa are locked in annual cycles of hunger because they’re unable to grow enough food to feed their families. Malnutrition can have serious, lifelong effects, especially for children, robbing them of their full potential as they grow up. One Acre Fund has catered to millions of such farmers to diminish such social issues. They appointed one manager who managed 5 staff recruited in South Africa who further managed 5 farmers. This model helped to scale One Acre Fund, at a very large and replicable model serving more than 800,000 farmers.

2.  Expansion Strategy of Robin Hood Army: India based Robin Hood Army is a zero-funded organization which helps to get surplus food from restaurants to serve less fortunate people. It has successfully served more than 20 Million people across 140 cities.

Untapped Potential Scope in Energy Market for Social Enterprises

According to the International Energy Agency, 77 million households in India still use kerosene for lighting. 280 million people in rural India and 24 million people in urban India are without access to electricity. Hence, more innovative social solutions need to come up with replicable and scalable models. Enterprises can provide electricity through micro/ mini-grids that use technologies such as biomass-gasifier, small hydro, solar photovoltaic and wind to supply power to unelectrified and under-electrified communities.

Many parts of India receive 300 days of annual sunshine which presents an opportunity for constant solar power generation. At present, solar only covers 3% of 100 GW potential capacity. Providing clean energy products (solar lanterns, solar home systems (SHS), solar pumps, solar photovoltaic water heating and energy-efficient cookstoves) for efficient lighting and heating/ cooking is one of the ways of using solar energy to generate power and heat.


At present, India has a large untapped potential in the social sector for an extensive range of services like Medtech, Agritech, EdTech, Skilling, Employability, Cleantech and Renewable Energy. In terms of scaling up impact,  the number of individuals and organisations benefiting from social enterprises can be substantial.

1. Finding Funds which support such social causes – Impact and Venture Capital funds are increasingly investing capital in such enterprises. In India, the social impact startups are growing at 20 per cent annual rate while there are more than 400 such startups The Indian government is planning to have its own stock exchange for social or impact startups, in the lines of Social Stock Exchange in the UK, SASIX in South Africa, Impact Investment Exchange in Singapore, SVX in Canada.

2. Understanding Economic Indicators – Social Enterprises may consider hiring a consulting firm to understand the international economic indicators impacting their market. Consultants may refer to Risk Mitigation Techniques which may help to improve trade in specific markets. Understanding the various political, economic, social, technological and legal factors impacting the market, is crucial for the success of a business.

3. Conduct Competition Analysis – Market share of each competitor, and the services rendered by them are one of the key elements in a market entry strategy. Enterprises stand a chance to have sustained success when bringing in innovation, which is scalable and impactful. Entrepreneurs must see if they can have intellectual property rights on such products and services innovated by them.

4. Investing in Potential Industries – As mentioned in this report earlier, solar power energy utilisation can lead to several impactful innovations. Moreover, with the graduation of thousands of engineers in India every year gives the nation the human capital we require to  meet this milestone. Further, the healthcare industry in India has grown to $81.3 billion (Rs 54,086 lakh crore) in 2013 and is now projected to grow to 17 percent by 2020, up from 11 percent in 1990. This industry promises huge potential to impact.

5. Build for A Cause – Entire ecosystems are collapsing. Animals are endangered because of climate change. Global warming is increasing precipitation, melting glaciers and expanding seas leading to an increase in floods, hurricanes, and storms. We should nurture a society of entrepreneurs, who will grow up to change thoughts to things because in a world where you can grow up to be a lot many things, grow up to be kind.

Author: Anisha Aditya

Corporate Performance Management – How Can it Benefit Your Company?

What is Corporate Performance Management (“CPM”)?

CPM is a broad term that encompasses the methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise (Source: Gartner).

In simple terms, to demystify the concept, CPM is a health check-up. Based on the results you take steps to change your lifestyle and improve the metrics where you went below the benchmark.

CPM is no different, but this time it is for an enterprise and not for a human being or a machine. It is a lot more difficult and each year the benchmarks keep changing.

Why is CPM important?  A challenging external environment!

 Leading a company in the 21st century, especially when globalization and free trade is under threat, is no easy task.   Disruption is always around the corner. Be it from regulatory bodies, technology disruption, economic disruption, or innovative business models. It is inevitable that someone or something is disrupting your industry or market.

A very astute observation made by an investor at a conference recently comes to mind -“There was a time when a company could/would stay on the S&P 500 for 40-50 years. Now this has reduced to 20-30 years”.

Corporate Performance Measurement

Needless to say, these are challenging times. So how does one ensure steady and sustainable growth?

How does one deliver a stellar corporate performance when faced with these challenges?

What does a stellar corporate performance look like? 

High operating profits, steady double-digit growth, excellent customer satisfaction levels?

Corporate performance can be measured in a myriad of ways, but at the end of the day does the organisation deliver consistent returns to its shareholders, excite its customers, reinvent itself when the time is right, innovate and solve the problems customers didn’t even know they had?

Expectations from corporates have changed drastically and keeping up with shareholder and customer expectations isn’t enough.  Going beyond the call of duty and delivering beyond their expectations is what a stellar performance looks like.

Why do many fail to deliver a consistent performance / why don’t companies succeed in transforming themselves? 

As an HBR article titled “Managing the right tension” points out, 3 issues plague organisations – Profitability vs Growth, short term vs long term, and the whole organisation vs the parts. Organisations struggle to handle these 3 seemingly conflicting issues.

These objectives can seem like they are conflicting or competing with each other. Progress in one is usually at the expense of another. Going for high growth damages profitability and working towards profitability hampers growth. At the same time a leader’s focus or efforts to build a long-term sustainable growth strategy for the company often comes at the expense of present-day performance.

Inevitably, most companies end up undertaking a transformation program focusing on a single lever – cost reduction / downsizing. This is done to deliver better bottom line numbers. But corporate performance isn’t dependent only on a single lever and isn’t a one-dimensional activity.

Another common pitfall is a Business Unit (“BU”) based approach. Each BU has its own set of goals and interests. If left to their own, the transformation will only benefit the BU and not the strategic interest of the organisation. While each individual BU will have to pull up their socks and transform, this must be done with the goals of the corporate entity in mind. The need of the organisation as a whole is primary.

Another common pitfall is a tactical one. Since KPI’s vary by function and BU, there is a lack of unity or consistency in data description/categorization among them. Decision making hence becomes difficult and reporting of data is the main culprit behind this. Resolving these inconsistencies can be costly in terms of both time and money.

These are a few common issues that organisations face and one should attempt to avoid them during the CPM Program.

Why do you need a CPM program? 

The question is no longer “Should I change / adapt”. You should have transformed yesterday.  It is therefore not a question about should you, but how do you transform. And what should you transform into?

This is entirely dependent on your external environment, stakeholders, and customers. It can be overwhelming at times, but a structured approach can be a north star and guide the organization along this process.

This approach ought to answer important strategic questions such as –

  • What do I need to excel at? Drivers of Excellence / Competitive Advantages
  • How do I know if I am in fact excelling at this?KPI’s
  • How much should I achieve now? Targets 
  • What do I need to do to excel at this?Initiatives
  • What will this require in terms of investments?Budgeting

What are the enablers of CPM?

The key enabler for CPM is access to quality information that is actionable. This is done through technology interventions.

  • Tracking the KPIs that are relevant
  • Data sets with appropriate and universal taxonomy across the organisation
  • Dashboards that are easy to read and act upon
  • Real time business analytics

enablers of CPM

Having an ERP system is a no brainer but how to effectively use an ERP is still an area on which most organisations still spend sleepless nights on. Analytic tools / BI tools play an important role in data analysis and representation, and ERP/CRM systems are important when it comes to data collection


Building long-term growth strategies must be based on credible and comprehensive market, customer, and competitor insights. These insights must then be translated into specific growth opportunities, and a strategy is then designed to capitalize on those opportunities.  This foundation helps ensure that the resulting strategic plan is connected to meaningful targets for the company as a whole.

A 3 phased approach such as the one shown below which has been adapted from those of leading institutions such as MIT Sloan and of CPM practitioners, can be used by organisations to give their CPM programs a structured approach. Beginning with a Strategic Alignment exercise, followed by measuring existing and to be states, and creating a sustainability framework to ensure continuous transformation is ingrained into the culture of the organisation, the CPM program can deliver sustained benefits and transform the organisation to deliver stellar performance in the long run.


Strategize – This phase focuses on aligning the organisations interests with functional and individual interests. Identifying the KPIs relevant for the pressures faced by the organisation both externally and internally.


Measure – In this phase the focus is on collecting relevant quantitative and qualitative data which will be analysed, and the insights presented to the leadership in a well structured and articulated format, ripe for decision making.


Sustain – Performance is also enabled by the organisations culture, systems, and processes. This phase will see the organisation taking pragmatic steps towards institutionalizing the changes into the DNA of the organisation.


Key Takeaways

  1. CPM involves conducting a health check for the organisation with real actionable data and insights and taking decisive strategic actions basis the insights.
  2. Sustained stellar corporate performance can be achieved through a structured program
  3. Align strategy at the corporate, functional/department, and individual level
  4. Measure the KPI’s and enable this through technological interventions
  5. Sustain the change through a cultural shift by institutionalizing systems and processes

A Comparative Study of China and India’s AI Policy

The output of human civilization has so far been primarily driven by human intelligence and when machine intelligence combines with human intelligence, the sky is the limit. Artificial Intelligence has gained significant disruptive power over the last two decades. The 4th Industrial Revolution (Industry 4.0) pioneered by AI implementation shall be the differentiating factor for economies to establish prowess in today’s connected world. Established enterprises, start-ups, and even non-profit organizations continue to develop solutions with the help of government initiatives, fostering growth in AI implementation in diverse fields.

Countries across the world are becoming increasingly aware of the potential economic and social benefits of AI development and the AI+X mechanism – the concept of choosing a process and its synchronization with AI.

The two biggest countries of Asia – China and India, boast of a strong AI talent pool and enterprises and institutions that continue to strive for advanced research and innovation. The increased leverage of AI in both these economies will see major disruptions not only in defense and manufacturing but also in social welfare and communication. Comprehending AI’s transformative potential, the bureaucracy has stepped up and formulated policies to govern and to incentivize AI-based implementation for a competitive global advantage in the crucial sectors. A comparative study shall help us evaluate our strategic positioning and understand where organizations can make further impact in an AI-driven economy. Here, we highlight the key aspects of the official AI policy reports of these two countries.

China’s Artificial Intelligence Development Plan, 2017

Chinese enterprises and institutions have made substantial progress in highly recognized AI research, and the government, recognizing its potential to propel China’s global dominance, has realized the urgency for legislative simplifications, infrastructure support, and grooming and retaining top AI talent. Thus, in July 2017, the State Council of China released a comprehensive AI policy report: ‘Artificial Intelligence Development Plan’ to develop the roadmap for AI leadership under an ethical and supportive regulatory system and open source collaboration.

The report covers strategic goals divided into three steps. The first step is the setting up of an AI infrastructure at an advanced level as compared to the world by 2020. The second step, which is to be completed in 2025, aims to establish China in the ‘world-leading level’ in AI breakthrough and to establish AI as the primary driving force behind China’s industrial transformation with the help of a ‘breakthrough’ in artificial intelligence basic theory. The industry scale of core artificial intelligence is estimated to be worth 400 billion yuan and that of the related industries to be higher than 5 trillion yuan. The third step is to achieve global supremacy in AI impact and be the ‘innovation center of the world’.

China plans to adhere to the ‘Three in One’ approach of promotion of R&D in the field of artificial intelligence, product and application development, and industry development and training to maximize productivity as well as enhance societal welfare. Artificial intelligence shall be used as the key driver to protect and safeguard national security.

The country is also focussing on interdisciplinary exploratory research to promote integration with diverse fields such as neuroscience, quantum science, psychology, mathematics, and sociology. To enhance China’s competitiveness, ‘open, stable and mature’ technology systems shall be developed in the form of algorithms, hardware, and the data. The system development shall have the potential to address multiple issues and yet be reconfigurable, energy-efficient and also possess a high learning ability. Extensive research and China’s AI ambitious goals shall be established through the construction of innovation platforms to invite and to expedite top research projects that will focus primarily on smart robots, intelligent vehicles, virtual reality, smart terminals and a new generation of Internet of Things (IoT). Cultivation of a high level of talent to build robust infrastructure shall be achieved via specialized channels such as revision of enterprise human cost accounting policies, cross-integration of AI training with professional education and incentivizing top-notch research work to encourage productive output.

National Strategy for AI discussion, NITI Aayog, 2018

India showcases a promising scenario, thanks to its strong talent pool, a notable list of world-class educational institutions and companies that are dominating the global IT landscape. However, India couldn’t achieve global recognition primarily due to the lack of top-notch research in AI at a significant scale. So, NITI Aayog has stepped up for the formulation of a comprehensive AI strategy with a core focus on infrastructure development and holistic collaboration. It aims for an #AIforAll campaign where AI shall also be used for social inclusion and not just for defense, military, and advanced computing applications. In an ‘AI+X mechanism’, where AI is an enabler for increased productivity and efficiency rather than a complete overhaul, the key focus areas for AI intervention shall be healthcare, agriculture, education, smart cities and infrastructure, smart mobility and transportation. The key challenges identified in these sectors include among others a low intensity of AI research, insufficient talent to research and to implement AI at scale, high resource cost, ambiguous privacy issues, and unattractive intellectual property regime to incentivize adoption.

The report provides more than 30 policy recommendations to develop a two-tiered strategy, which is aimed at improving the research ecosystem as well as developing skilling initiatives to feed the ecosystem. Initially, the ‘Centres of Research Excellence’ (CORE) shall enhance quality research and publications focussing on AI. Investment, both domestic and foreign, shall be made to develop a state of the art infrastructure in liaison with the concept of an ‘AI garage’. Just like the strategy of the Centre for Data Ethics and Innovation in the UK for implementing ethical research, the COREs shall be monitored by a consortium of Ethical Councils that shall define the standard practices, based on OpenAI charter, for the development of AI-based research and products.

The fundamental research activities shall be the feeder for the ‘International Centres for Transformational Artificial Intelligence’ or ICTAIs. They shall focus on investing, developing and accelerating AI-based applications, majorly in the domain of societal importance. It shall be a public-private partnership with a seed funding in the range of INR 200 – 500 Crore per ICTAI, to cover the operational expenses and infrastructure CapEx for the first 5 years. These institutions shall comprise of a strong governance board, comprising of leadership from both industry and academia and may allow a reasonable say in the board for an industry partner with a significant contribution. The ICTAIs shall be strategically located and preferably close to academic institutes to hire top-notch talent. National AI fellowships can be availed if finances are a constraint for talent attraction.

The policy also speaks about developing AI talent at the grassroot levels by introducing AI modules in the mainstream curriculum and incentivizing the development of MOOCs and open-sourced learning forums. Besides this, the development of a National AI Marketplace (NAIM) has been proposed in three different modules to minimize resource allocation for model development.

Overall, the strategy has been to develop India as a ‘playground’ for global AI development so that global enterprises or institutions can develop breakthrough and scalable solutions here. These solutions are expected to be capable of solving problems for both developed and emerging economies. It indicates that ‘Solve for India’ is claimed to be solved for 40% or more for the world.


The above discussion clearly reflects how the two countries have formulated their AI strategy with two different perspectives. China is clearly gearing up for a global supremacy with a totalitarian regime and wants to develop a state-of-the-art AI infrastructure in isolation.

On the other hand, India aspires to be the global AI lab for emerging economies. China plans to invest billions of dollars not only in AI but also in related industries to build up a robust infrastructure for AI proliferation. The ability to develop and maintain database for training models and ease of its accessibility hold tremendous competitive advantage for China, an area India must look upon. Planned investment by the Indian government is proportionately smaller but inviting FDI, highlighting low operational costs and collaborative research, can open doors to significant fund flow. ‘AI+X’startups and enterprises must have access to global VC funds and regulatory simplifications should be deployed for companies going beyond borders to solve problems. The new investment on COREs shall benefit India’s highly cited research output and improve its H-index, but similar to China’s strategy, incentivization of top talent to reduce brain drain needs a long-term plan. In short, there is little doubt that by leveraging globalization and unparalleled infrastructure, these two nations – India and China –  will emerge as the future AI labs of the globe.

–              Rajarshi Chowdhury

Cautious over Financial Instability, The RBI approves Surplus Transfer of Funds to the Government

The Central Board of the Reserve Bank of India (RBI) on August 27th 2019 decided to transfer a sum of Rs 1.76 Lakh crore to the Government of India (Government) comprising of Rs 1.23 Lakh crore of surplus for the year 2018-19 and Rs. 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting.

The Expert Committee led by Dr Bimal Jalan, reviewed the Extant Economic Capital Framework of the RBI including surplus distribution policy of RBI in the light of cross country practices, statutory mandate under section 47 of the RBI act and impact of RBI public policy mandate and financial stability considering on its balance sheet and risks.

In the RBI, there are three different funds that together comprise its reserves. These are the Currency and Gold Revaluation Account (CGRA), the Contingency Fund (CF) and the Asset Development Fund (ADF). Of these, the CGRA is by far the largest and makes up the significant bulk of the RBI’s reserves. The fund, which in essence is made up of the gains on the revaluation of foreign exchange and gold, stood at Rs 6.91 lakh crore as of financial year 2017-18. The CGRA has grown quite significantly since 2010, at a compounded annual growth rate of 25%.The CF is the second biggest fund, amounting to Rs 2.32 lakh crore in 2017-18. It is designed to meet contingencies from exchange rate operations and monetary policy decisions and is funded in large part from the RBI’s profits. The Investment Reserve Account (IRA) and ADF constitute a small portion of the RBI’s reserves.

A peek into RBI’s key reserves

The Math Behind the Transfer

The Jalan committee recommended that the RBI should maintain a Contingent Risk Buffer — which mostly comes from the CF within a range of  6.5-5.5% of the central bank’s balance sheet. Since the latest CF amount was about 6.8% of the RBI’s balance sheet, the excess amount was to be transferred to the government. The committee also decided, for the year under consideration, to use the lower limit of 5.5% of the range it recommended. So, basically, whatever was excess of 5.5% of the RBI’s assets in the CF was to be transferred. That amount was Rs 52,637 crore.

Regardingthe RBI’s economic capital levels — which is essentially the CGRA — the committee recommended keeping them in the range of 24.5-20% of the balance sheet. Since it stood at 23.3% as of June 2019, the committee felt that there was no need to add more to it, and so the full net income of the RBI — a whopping Rs 1,23,414 crore — should be transferred to the Centre.

As on June 30, 2019, the RBI stands as a central bank with one of the highest levels of financial resilience globally.

That Rs 1.23 lakh crore plus the Rs 52,637 crore is what comprises the Rs 1.76 lakh crore that the RBI has decided to transfer to the government. It must be noted that this Rs 1.76 lakh crore includes the Rs 28,000 crore interim dividends earlier transferred to the Centre and does not come over and above it. Given that the RBI has already paid an interim dividend of Rs 28,000 crore to the government, net amount transferrable will be around Rs 1,48,000 crore. For 2019-20, the government had already budgeted dividend of Rs 90,000 crore from the central bank.  This implies a clear windfall gain of Rs 58,000 crore ($8 bn) or about 0.3 percent of GDP in FY20.

How Is the Transfer Going to Impact the Economy?

Undoubtedly, the fiscal position improves materially to a large extent post RBI announcement on August 27. The 52,000-crore pay-out will help bridge the revenue shortfall and allow the government the space to still keep the fiscal deficit to the budgeted 3.3 per cent of GDP.

There is a distinct slowdown in the economy which can be attributed to tighter funding conditions, a sharp decline in consumer confidence, a negative central government fiscal impulse as well as global headwinds. The policy response so far is to mitigate the current slowdown has been mainly in the form of monetary action wherein policy rates have been reduced four times by 110 bps from August last year till date. The government has exercised restraint in easing fiscal policies. Despite the slowing economy, the FY20 Budget did not envisage any additional stimulus through the reported fiscal deficit figures, with the FY20 targeted fiscal deficit almost flat at 3.3 percent of GDP, compared to 3.4 percent for FY19.

The current slowdown seems more extended compared to previous episodes of growth deceleration seen during demonetisation or in 2013 following the taper tantrum. Hence, the government could utilise this amount for specific expenditure outlays. If the government chooses to do so, it will have a direct positive impact on growth and also create some inflationary pressures. It is worth noting that if the government decides to spend the amount to support growth, it will be first big push through fiscal stimulus during the last decade. In 2009 after the global financial crisis, the government had spent $6.5 billion, which was equivalent to 0.5 percent of the 2008 GDP, according to IMF.

In an alternative scenario, the government might not spend the windfall gain to propel growth. It could do so because given the slowdown, there is significant downside risk to tax collections. In such a scenario, the surplus from the RBI should help offset the expected shortfalls in various tax revenues in 2019-20 and aid the government in meeting its fiscal deficit target. While a lot depends on the manner of utilisation of excess proceeds, the surplus gain from the RBI is still positive news for equity markets. The surplus of Rs 58,000 crore can help the government tide over any future revenue shortfall implying that risk of fiscal slippage has reduced considerably.In all likelihood, surplus from the RBI will act as cushion against a possible shortfall in revenue collection in FY20 and not as a growth booster.

Furthermore, the RBI is expected to maintain surplus liquidity of around 1 per cent of NDTL (Net Demand and Time Liabilities) for some more months to come to allow the transmission of their rate cuts to flow through the banking system onto the economy. Also, continued lending rate cuts by the banks is expected in the months to come, implying lower returns from liquid and money marketfunds for investors.

Therefore, productive utilization of funds is critical as in the last few years share of capital expenditure as percent of GDP has been falling. In India, majority government spending is to boost consumption than investments, and thus, the RBI’s surplus funds is needed to be used appropriately to have a sustainable multiplier effect on overall development of the economy.

June 2019 Financial Stability Report Summary

This is an excerpt of the Financial Stability Report ( FSR) as published by RBI on 27th June, 2019. People looking to advise on the Budget or willing to assess the Budget in light of FSR, will find this report summary immensely helpful.

On 27th June, 2019, the RBI released the 19th issue of the Financial Stability Report which assesses financial risks and the resilience of the financial system while putting forward developmental and regulatory issues being faced by the financial sector.

In this report, under overall assessment of risks, it is declared that despite the emerging risks related to the global economy and geopolitical environment, the financial system remains stable. The report then outlines and elaborates on  three sub-topics: Global and domestic macro-financial risks, the performance and risks of financial institutions, regulation, and development in the financial sector.

The first sub-topic covers four major macro-financial risks, including a drop in the global growth forecast (currently 3.3%) in 2019, the easing of of the monetary policy stance of Advanced Economies, the weakening of private consumption and a requirement for the revival of private investment.

Under “Financial Institutions: Performance and Risks”, the report states that the credit growth for Scheduled Commercial Banks (SCBs) has picked up and Public Sector Banks (PSBs) are nearing double digit growth. The resilience of banks has been further increased as the Provision Coverage Ratio of all SCBs has risen to 60.6% in March 2019. The non-performing asset (NPA) cycle is stated to have been headed for the better and SCBs’ gross NPA ratio is predicted to decline from 9.3% to 9.0% by March 2020.

Market discipline is stated to have increased thanks to developments in the non-banking financial companies (NBFC) sector. A better capitalised public-sector banking system has also led to lower joint Solvency-Liquidity contagion losses to the banking system.

The “Financial sector: Regulations and development” section explicates on a revision of the RBI’s structure of bank supervision as well as its revised prudential framework on stressed assets and a revised Large Exposures Framework (LEF). The Security and Exchange Board of India has introduced the Guidelines for Enhanced Disclosure by CRAs and the Pension Fund Regulatory and Development Authority has amended investment guidelines for pension funds. Additionally, the Insolvency and Bankruptcy Board of India (IBBI) is working towards the resolution of stressed assets.

You will get the full report here:

Major Risks for Emerging Markets in 2019

Emerging markets or emerging market economies (EMEs) refer to the economies of developing countries that have high growth expectations. They possess certain key characteristics, such the presence of a transition from a closed economy to an open market economy, a young population that can initiate long-term growth rates, underdeveloped infrastructure, and increasing foreign direct investment (FDI). According to the MSCI Emerging Markets Index, 21 countries fall into this category, including Brazil, Russia, India, China and South Africa. These five countries have been widely accepted as the most lucrative emerging markets and have been given the acronym ‘BRICS’.

Since emerging markets are in the process of rapid development and industrialization, they possess higher growth prospects, but also a greater risk profile. Risks such as political instability, higher costs and less efficiency for businesses, heightened monetary and financial policy risks and an immature securities market add to the volatility of EMEs. As a matter of fact, volatility is a major aspect of these developing economies, and mishaps like natural disasters and price shocks have severe effects on the growth of the economies. For example, in EMEs like Thailand and Sudan, natural calamities like droughts or tsunamis have immense negative impact on the markets, since both of these are traditional economies focused largely on agriculture and natural resources.

Despite their potential instability, since emerging markets comprise over 80% of the world’s economy, they play a large role in driving global economic growth. In fact, in 2017, India and China made over $32.6 trillion worth of economic output, while also making up 40% of the world’s labour force and population. Additionally, in 2018, emerging markets and developing economies contributed 59.81% to the global GDP (based on PPP), making EMEs responsible for more than half of the global economic output (IMF, 2019).

The brunt of the global economic crisis, for most of the last decade, has been borne by the more advanced economies. However, at present, a number of new risks have established themselves as serious threats for some of the large emerging markets. These include a strong dollar, low commodity prices and a slower growing China. Poor policy making has also contributed to the crisis in emerging economies such as Turkey, which is currently in the midst of economic stagnation. This is due to the government’s slow response to surging inflation and other policy mistakes, including the increase of government leverage on the Central Bank and the detention of journalists and human rights activists with EU citizenships. Consequently, a deterioration of Turkey’s economic growth has been predicted for 2019, with -1.7% being the growth forecast for the year.

Given the above mentioned importance of EMEs in the global economy, as well as their susceptibility to a number of emerging crises, it becomes extremely important to examine some of the major risks these developing economies could face in 2019:

The Federal Reserve and the US Dollar

The capital flows to emerging markets reduced significantly in volume in the second half of 2018, when the US Federal Reserve raised its policy rate for five consecutive quarters and shrank its balance sheet. Though the Fed announced a pause in January, the strength of the US dollar, along with the large scale of dollar denominated debt continues to raise concerns for EMEs. Furthermore, the Fed might be forced to accelerate tightening in 2019, due to the current framework and the US-China trade war. Such tightening would both halt US economic activity and cause global financial turbulence, especially within emerging markets struggling with foreign currency debt.

While the Fed rate increase has ceased for the moment, after a 25 basis points hike to 2.25%-2.5% level in December 2018, a number of currencies have already suffered. The effects can be seen especially in countries with high external dollar liabilities and in those facing the softest growth conditions. In fact, due to the former, Argentine and Turkish economies have already contracted 6.2% and 3% respectively, effectively illustrating the dire state of emerging areas.

US-China Trade War

The Trump administration introduced tariffs on $200 billion worth of Chinese imports and China responded by levying tariffs of $60 billion worth of US imports. This approach has been both supported and criticized by governments and economic analysts.

The highest suffering due to these tariffs has been caused to China, and it has directly impacted Asian countries closely linked with China through global supply chains, such as Malaysia and the Philippines. Additional tariffs will negatively impact inflation, business and consumer sentiment, and eventually lead to negative global economic growth.

Additionally, the recent escalation of the US-China trade war has caused EM equities to fall by over 8%, which is twice the decline in developed market equities. EM equity exchange traded funds have experienced two weekly net outflows of more than $10 billion, after six previous weeks of net inflows.

Slowing world trade has also affected several EMEs, a number of which rely on thriving world trade to stimulate their economies, through the export of commodities or low-end manufacturing products and intermediate inputs to global supply chains. Even before the tariff rises in early May, The World Trade Organization had already expected growth in world trade to slow to 2.6% this year after the rise to 4.6% in 2017.

The trade war has also worsened the problem of weak global demand for many EMEs. The 14% year on year decline in import demand from China, in the first quarter of 2019, has simply reinforced the moderation in China’s trade with many emerging markets.

Slowing of China’s Economy

As mentioned earlier, a number of emerging markets are dependent on the growth of the Chinese economy, by virtue of being linked to China through global value chains and raw material exports. However, since the 2008 financial crisis, China’s debt has risen seven-fold. It now accounts for more than half the outstanding debt of all EMEs, according to the Institute of International Finance.

The fall in Chinese demand affects other emerging economies through low commodity prices and net primary commodity exporters, such as Indonesia, Brazil, and to some extent, Mexico, have suffered from the same.

The diversion of trade and investment flows from China due to US tariffs have helped cushion the impact of slowing trade on EMEs like Mexico, Brazil and several countries in Asia, including Vietnam. However, the benefits from this diversion and some supportive policy moves in the US and China cannot offset the overall weakness in trade and heightened risk sensitivity amongst international investors, with regard to EMEs.

Oil Price Volatility

Crude oil prices remain on rocky trading terms as demand wanes amid trade war jitters and slowing global growth. Trump’s tariff threats and ongoing US-China trade tension might further reignite downside risks to commodity assets like oil and emerging markets. Oil prices have turned back in a bear market with crude oil dropping 21% since the commodity topped out near $66 per barrel on April 23. For instance, countries like India, which is the third largest importer of oil, is likely to suffer from rising energy costs. It imports 80% of its oil requirements.

Higher oil prices pose clear threat to India’s fiscal health, stoke inflation and hurt the economy going forward. Brent is expected to surge to $100 per barrel by the end of 2019. This may lead to global GDP decline by 0.6% in 2020 with global inflation rising 0.7 percentage point. Countries like Philippines, China, India and Argentina would be the hardest hit economies.

Increase in crude prices also impact raw material supply chain of several manufacturing companies in India as the country is a major importer of oil requirements. Impact on demand and higher input costs effect operating margins and indirectly create additional burden on freight costs for companies. Although, these negative impacts will take shape if oil prices continue to remain elevated.

Thus, at present, these are the most prominent risks being posed to emerging economies for this year. Certain other issues, such as a possible US recession and Russian sanctions are also looming over EMEs. Nonetheless, emerging markets remain a lucrative investment opportunity for international firms. Their equity valuations continue to be attractive in comparison to developed markets equities and that is enough to attract multiple investors who are seeking higher relative growth prospects.

Monetary Policy and Inflation Dynamics in Major ASEAN Economies

In 1997, the Asian Financial Crisis (AFC) caused a series of currency and stock devaluations that were decelerated when the International Monetary Fund (IMF) and the World Bank intervened with financial support. Since then, inflation dynamics have undergone substantial changes in several Asian economies. This included the major five of the Association of Southeast Asian Nations (ASEAN)- Indonesia, Malaysia, Singapore, Thailand and the Philippines.

Inflation-targeting monetary policy frameworks implemented post-AFC in ASEAN-5 economies and other emerging market economies (EMEs) have helped reduce headline inflation and inflation volatility since the early 2000s. However, these frameworks have continued to face different challenges, and it was after the Global Financial Crisis (GFC) that it became evident that the monetary policies of many EMEs were imperfectly designed. The existing policies were unable to encompass the domestic macroeconomic and financial stability conditions and other concerns of these EMEs. Therefore, an evolution in policy frameworks by the central banks was required to strengthen policy autonomy and reduce risks. Accordingly, the framework was expanded to include macro prudential policies (MPPs) and capital flow management measures (CFMs) to manage capital inflow surges and deal with systemic risks. Foreign exchange (FX) intervention was also introduced to respond to potentially disruptive volatile capital flows and market conditions.

Inflation Expectations

It is this enhancement of monetary policy frameworks and operational practices implemented by the ASEAN-5 countries that have led to inflation dynamics becoming increasingly forward-looking since the AFC. Additionally, inflation expectations have become the primary driver of these dynamics. 60% of median inflation in the region can be explained through inflation expectations while economic slack, non-oil-import and oil price inflation can explain only 9%, 12% and 7% of the same respectively. For this reason, guiding long-term inflation expectations are a crucial element of modern monetary policy making. The credibility of monetary policy can be assessed by how consistent the private sector’s inflation expectations at medium-to-long horizons are with the central bank’s target. These stable long-term inflation expectations are essential to bring inflation back to target, in an environment with very low inflation.

In other developed economies like the US and Euro Area, monetary policies over the last few years after the financial crisis of 2008 have been largely accommodative with measures like quantitative easing. The Federal Reserve and the European Central Bank since then have been maintaining price stability through inflation targeting regimes. While inflation rates over the medium term have been restricted below 2% level, policy rates have moved to near zero. Alongside, these Central banks have resorted to quantitative easing mechanisms by bond purchases. Asian countries like Japan have also taken similar measures to contain inflation and maintain stability in the economy. Such shift to accommodative policy stance by advanced countries has been impacting emerging economies as well. Looking into such inflation and monetary policy interactions as adopted by several countries, we now focus on understanding this relationship among ASEAN nations. We consider the major five ASEAN countries- Singapore, Thailand, Malaysia, Indonesia and the Philippines in the next section.

Singapore’s inflation since 2013 have been at an average of 0.6% annually. In 2015 and 2016, inflation fell to 0.5% respectively. This was largely due to uncertainties over global oil prices and domestic one-off issues. Singapore’s Central Bank- Monetary Authority of Singapore (MAS) has not adopted any inflation targeting regime. However, core inflation on an average have been targeted to be kept just under 2%. The Central Bank’s monetary policy historically has been exchange-rate based. Singapore dollar NEER (nominal effective exchange rate) (index average at 100) has been determining the policy band of the bank. In 2013, MAS dollar NEER index was 121.74. Appreciation of Singapore dollar NEER mainly reflects weakening of the US dollar and any shift in US Fed policy stance and of the Euro and Sterling. Domestically, MAS monetary policy movements are captured by change in the slope of Singapore dollar NEER policy band.

The Malaysian Central Bank adopted a fixed exchange rate regime initially, in the aftermath of the AFC, but moved to a flexible rate regime in 2005. Their new monetary policy framework focused on price stability while also taking into account the impact of monetary policy on financial stability. Targeting inflation has also been a prime objective of the Central Bank to maintain stability in prices while considering economic developments in the economy.

The Central Bank has kept inflation well-contained with a median pace of 2.1% year on year since 2002 without the benefit of a formal target to anchor inflation expectations. More recently, a relatively high and even increasing forward-looking coefficient and stable long-run expectations have decisively contributed to limit disinflationary pressures stemming from falling oil and import prices since 2014. 2013 recorded headline inflation at 2.1%, while core inflation, an indicator of demand-driven price pressures, moderated to 1.8%. Against a backdrop of increased uncertainties on the balance of risks surrounding the outlook for domestic growth and inflation, the Monetary Policy Committee (MPC) maintained the Overnight Policy Rate (OPR) at 3.0%. Rise in inflation in the following year to 3.2% and increasing consumer debt, for the first time since mid-2011, drove the Central Bank to raise OPR by 25 basis points to 3.25%. Attempt to temper inflation continued for the next couple of years till 2017 saw a jump in inflation to 3.7%, policy rate was then at 3.0%. Raising interest rates by 25 basis points in 2018 was yet again resorted to as a step towards slowing down inflation going forward on the domestic front. Subsequently, as a response to the US Fed’s change in policy stance this decision was in line with moves of other Asian Central Banks.

The Bank of Thailand has conducted monetary policy under a flexible inflation targeting framework since May 2000. The Bank of Thailand not only ensures price stability through inflation targeting but also preserves economic growth and financial stability.

Under this framework the monetary policy committee agreed to maintain inflation target at 0.5% to 3.0% in each year from 2010 to 2014. It was expected that low and stable inflation would enable economic growth on a sustainable path in the long run, maintain country’s export price competitiveness and instill business and consumer confidences. In 2013, inflation was at 2.2% while core inflation was at 1.0%. Since 2014, the central bank has been revising its inflation target to capture deficiencies in core inflation, which was a proving deterrent to its effectiveness going forward. The medium-term inflation target in 2017-18 was at 2.5% +/- 1.5%. This level was considered conducive to supporting the economy. Interestingly, in 2017-18 inflation was maintained much below the target level at 0.7% and 1.1% respectively. Complimenting it, core inflation came in at 0.6% and 0.7% respectively. Monetary policy of the Central Bank had moved to “ease”, lowering from 2.5% in 2013 to 1.5% in 2018. This accommodative monetary policy stance is in line and is considered appropriate to monitor developments of economic growth, inflation, financial stability together with associated risks and challenges.

Bank Indonesia for 2016, 2017 and 2018 has targeted inflation at 4%, 4% and 3.5% with +/-1% deviation. These inflation targets are envisaged as benchmark for business and public in conducting their future economic activities and in doing so, bring inflation down to a low and stable level. These three years saw headline inflation at 3.5%, 3.8% and 3.2% respectively as compared to 6.4% in 2013 (4.5% +/-1% inflation target). Core inflation also moderated from 4.2% in 2013 to 2.8% in 2018.

One of the primary objectives of Bank Indonesia is to maintain stability of its currency, rupiah along with inflation consistency. Under this objective the Bank has been raising its benchmark interest rate over the last few years with an aim to strengthen its currency. Previously in 2013 the Bank has been battling accelerating inflation and weak currency by raising interest rates by 50 basis points at once. Such aggressive steps for the next two years had proved beneficial. Combating inflation and maintaining normalcy in other domestic fundamentals, the Bank slashed its policy rate in 2015 by 25 basis points for the first time since 2011. This decision was expected to contain inflation at the lower end of the Central Bank’s range for the year.

Bangko Sentralng Pilipinas (BSP) has adopted inflation targeting as a framework for monetary policy in 2002 and is measured through consumer price index (CPI). Currently the Bank’s inflation target is at 3.0%+/-1%. Previously from 2014 to 2016, the Bank had set its target range at 4%+/-1% and 3%+/-1%. We find that 2014 inflation rate was at 3.6% while core inflation was at 2.6%. However, inflation in 2018 rose significantly to 5.2% from 2.9% in 2017. 2018 witnessed inflation breaching its target range. Subsequently, core inflation was also on the higher side at 4.1%. The rise in inflation in 2018 was mainly driven by domestic factors. In a proactive action to help temper the rise in inflation the Central Bank raised its policy interest rates to 5.25% in 2018. This policy decision brought the total increase in benchmark rates to 175 basis points in that year to curb rising inflationary pressures. The last time a major policy rate movement was observed in 2016 when the bank slashed rates by hundred basis points to 3% as it shifted to a different interest rate system which was seen as an operational adjustment and not an easing of monetary policy.

Monitoring Inflation – Way Ahead

Our research provides quantitative evidence on the evolution of consumer price inflation dynamics in ASEAN-5 economies based on key inflation drivers such as inflation expectations, non-oil-import and oil price inflation. Inflation has become increasingly forward-looking (less persistent), with the contributions of inflation expectations becoming the most important component of inflation in all countries and monetary policy framework playing a significant role to shape inflation dynamics. The credibility of the inflation targeting central bank rests primarily on its ability to keep inflation within the target. The trend and variability of inflation will depend on the pace of economic activity and the propagation of supply shocks amongst others. Most importantly, this ASEAN forum should promote an international reform which does not require discarding rule-based monetary policy or inflation targeting in each country rather they have a responsibility to maintain more transparency about the monetary policy framework and how such country framework combine to form an international rule-based monetary policy framework to control inflation dynamics effectively.

Industry 4.0 Consulting: Digitizing the Life Science Sector

The invention of the steam engine set the stage for the first industrial revolution that took place in the 18th century, mechanizing a lot of works in the agrarian sector. The next revolution was fueled by electricity and paved the way for mass production. The third industrial era witnessed the rise of automation, powered by computers and robotics. And now we have entered the next phase of evolution in the manufacturing space — the Industry 4.0 era. The fourth industrial revolution has often been defined as the information-intensive evolution of manufacturing facilities where humans and machines interact via the Internet of Things (IoT) to optimize the operations and productivity. Life Science is one of the sectors that can gain an immense competitive edge by embracing a new, innovative business model, powered by advanced technologies.  Reports have suggested that the adoption of disruptive technologies can transform the manufacturing value chain in the Life Science industry. In fact, some big ticket companies in this sector have already started turning the innovations into new opportunities.

The Reimagining of the Life Science Sector in the Age of Industry 4.0

Life Science Sector in the Age of Industry 4.0

A few years back, in one of its blogs, the US Food and Drug Administration (FDA) pointed out why the pharmaceutical manufacturers should be encouraged to transition from batch manufacturing to continuous manufacturing. The pharmaceutical industry is becoming overly competitive with more generic drugs entering the market. In this situation, such a transition, according to FDA, would not only ensure the quality of drugs but also reduce the high costs relating to batch manufacturing. No wonder, some major life science and pharmaceutical brands have adopted the Industry 4.0 to reap the benefits of the new-age technologies.  Here are a few ways, these firms are reaping the Industry 4.0 benefits.

Ease of Supply Chain Management: First of all, with the increasing interaction between the physical and virtual, it will be possible to set up next-gen supply chains that are analytics-driven and can be monitored and controlled through a centralized system in real time. For example, in the developing countries that have a complex distribution and warehousing system,  Pharma companies are using cloud-based supply chain management solutions for the better management of inventory and support recalls.

A Widened Scope of Innovation: Clinical research involves dealing with an enormous amount of data. Massive and costly infrastructure is needed to mine, analyze and simulate the data. This costly process can be avoided by integrating cloud-based solutions across a company’s research facilities, irrespective of their geographical locations. These data can then be accessed by disparate teams stationed in different locations for analysis. This system is helping minimize the time and expenses relating to trials. This wider access to data and information is, in turn, making open innovations possible.

Modernization of the Operations Through Automation: Companies are bypassing manual steps with automation. An increasing number of medical device manufacturing facilities are integrating Process Analytical Technologies (PAT) system into assembly lines to speed up production while optimizing the batch quality and minimizing wastes and production costs.

The Life Sciences sector is currently under tremendous pressure resulting from several factors, namely an ever-ageing world population, a faster spread of diseases due to increasing international travel, and the phenomenal rise in the chronic diseases. The companies are struggling to meet huge consumer expectations of coming up with new, cutting-edge drugs that save more lives. In this situation, moving forward, it will become increasingly difficult for companies to stay in business unless they opt for an Industry 4.0 makeover.

The Path to Industry 4.0 Adoption

As with any major shift, companies should be prepared for facing challenges while adopting an Industry 4.0 model. Any technological misstep may translate into costly production outage. Even then, there are several reasons why growth-oriented pharma companies should consider taking the plunge albeit its challenges. They should explore ways to reap the benefits of Big Data solutions, integrate IoT and wearable technologies for a more accurate diagnostic and patient outcomes, and adopt a higher level of across-the-channel collaboration for a better patient experience to name a few. The question, then, is not if a company should become Industry 4.0 ready, but how to go about it. All, one needs is the right strategy and Industry 4.0 consultations.

Intueri’s Industry 4.0 Implementation Approach

We, at Intueri, believe that Industry 4.0 is not a finite system or think – it is a natural evolution using technology to add intelligence to all existing assets manufacturing/supply system. The main intention of the exercise is to drive efficiency, flexibility, quality and lower operating expenses throughout production. We think many companies tend to focus on technology first, forgetting to anchor it in the real issues and linking it to the actual problems on the shop floor. This strategy of “going full gadgets” is tempting, but it rarely creates any real impact.

Intueri’s approach to Industry 4.0 aims to tackle this challenge and is quite simple: start small with a proof of concept of Industry 4.0, realizing its benefits, and then scale-up to conduct organization-wide Industry 4.0 implementation.

To provide guidance and support to align business strategies and operations with Industry 4.0, Intueri uses an Industry 4.0 maturity model to systematically assess a company’s state-of-development in relation to the Industry 4.0 vision. The practical purpose of this work aims at rigorously evaluating a company’s Industry 4.0 maturity and reflect the fitness of current strategies.

Intueri manages the whole Industry 4.0 implementation into three phases. The first phase involves a Proof of Concept of Industry 4.0, by tackling the organization’s most pressing issue. In the second phase, Intueri conducts a comprehensive Industry 4.0 maturity and feasibility assessment for the organization, and roadmap design for Industry 4.0 implementation. The third phase will involve implementation and post-implementation monitoring.