Reserve Bank of India bulletin included three articles and Current statistics in the July 2021 issue of its monthly bulletin that was released on July 15th, 2021[1]. The articles are about the state of the economy, monetary policy transmissions in India – recent developments, and drivers of Indian pharmaceutical exports.

There are brightened near-term prospects for the Indian economy due to the gradual reduction of the second wave and aggressive vaccination push. It has been stated in the bulletin that even though Several High-frequency indicators of the activity or recovering aggregate demand do not have a solid increase and have not taken a shape yet. Due to the revival of monsoon, the agricultural conditions are turning buoyant on the supply side but the issue lies with the recovery of the manufacturing and service sector which dealt with a heavy blow due to the second wave. Due to adverse supply shocks and sector-specific demand and supply mismatch caused by the pandemic, there will be a pick-up in inflation. However, they will ease up as the supply side measures take effect.[2]

It was stated in the issue that the transmission of policy repo rate changes to deposit and lending rates of scheduled commercial banks have improved substantially. The reason behind the improvement is the external benchmarking lending rate. The shares of outstanding loans linked to the external benchmark in total floating rate loans have increased to 28.5% by the end of 2020- 21 from 2.4% during September 2019, as per the data collected from banks. The market impulse for a quicker adjustment in deposit rates has been strengthened due to the adoption of external benchmark-based pricing of loans and a combination of surplus liquidity conditions amidst weak credit demand conditions has enabled banks to lower their deposit rates. The decline in the cost of funds for scheduled commercial banks was the result of lowering off deposit rates, it has prompted them to reduce the marginal cost of funds-based landing rates and in turn their lending rates.[3]

The issue talks about drivers of Indian pharmaceutical exports and attempts to capture the dynamic of the Indian Pharmaceutical industry as it has evolved in the last 20 years. The export market has been Specifically studied to understand the determinants of exports that can help the pharmaceutical sector leverage its export potential in the future. The imports of active pharmaceutical ingredients have pause Indian pharmaceutical industries to become heavily dependent on countries like China even when they have potential domestic research and development channels and can create joint ventures and domestic capacity improvements. The import intensity and research and development expenditures are two key determinants of export intensity as per the empirical analysis that uses the data of 42 pharmaceuticals firms of India from 2007 to 2019 that is over 12 years.  It was emphasized in the article that a timely diversification of import of raw materials and a long term approach towards research and development will help to elevate the global position of the pharmaceutical sectors of India.[4]

[1] RBI, Press Release: 2021-2022/534 https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51899

[2] IBID

[3] IBID

[4] IBID

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