How much World Bank lend money for India?

What is the purpose of this

borrowing?
The World Bank’s Board of Executive Directors approved a fast-track $1 billion India COVID-19 Emergency
Response and Health Systems Preparedness Project to help India prevent, detect, and respond to the COVID-
19 pandemic and strengthen its public health preparedness. This is the largest ever health sector support from
the Bank to India.

The project will immediately enable the Government of India (GOI) to scale-up efforts to limit human-to-
human transmission, including reducing local transmission of cases and containing the epidemic from
progressing further. In parallel, interventions to strengthen the health system will be rolled out to improve the
country’s capacity to respond to the COVID-19 epidemic and be better prepared to respond to emerging
disease outbreaks, including transmission between humans and animals.

Procurement of testing kits; setting up of new isolation wards — including turning hospital beds into intensive
care unit beds; infection prevention and control; and purchase of personal protective equipment, ventilators,
and medicines, particularly in district hospitals and designated infectious disease hospitals will be scaled up
under the project.

The project will also enhance the resilience of India’s health system to provide core public health prevention
and patient care to better manage COVID-19 and future disease outbreaks. It will help strengthen India’s
Integrated Disease Surveillance Program, revamp infectious disease hospitals, district, civil, general and
medical college hospitals, and build a network of high containment Biosafety Level 3 laboratories.

Today, about 75 percent of new infectious diseases begin with human-to-animal contact, including HIV/AIDS,
Ebola, and SARS. The project will develop capacity and systems to detect existing and emerging zoonoses,
support biomedical research on COVID-19 by Indian institutions, and upgrade viral research and diagnostic
laboratories for testing and research.

It will also help address potential significant negative externalities in the event of a widespread COVID-19
outbreak, including comprehensive health awareness and behavior change campaigns on hygiene practices,
wearing masks, social distancing, and mental health and psychological services for vulnerable communities.

The project is financed from the International Bank for Reconstruction and Development (IBRD) in the
amount of $1 billion, of which $350 million is provided through the World Bank Group’s COVID-19 Fast-
Track Facility. It will be managed by the National Health Mission (NHM), the National Center for Disease
Control (NCDC) and the Indian Council of Medical Research (ICMR) under the Ministry of Health and Family
Welfare.

The World Bank is going to top up the $1 billion health sector package announced on Friday for India with two
more for social security and the economy to help mitigate hardships due to the Covid-19 pandemic. They could
be worth over $1 billion, said people with knowledge of the matter.
“We are looking at a package for social protection followed eventually by support on the economic side, which
will be to small and medium enterprises (SMEs), creating lines of credit to providing credit enhancement,” said
Junaid Ahmad, World Bank country director for India. The health programme is the first of its kind anywhere
in the world.
The World Bank money will fund test kits, isolation wards, intensive care units, personal protective equipment,
ventilators and medicines, it said in a release. The government and the central bank have both announced
measures aimed at combating economic hardships for the poor and borrowers.
The social security initiative will seek to cover gaps in the safety net for urban groups, since the rural populace
is served by schemes such as PM-Kisan and rural jobs program.
What is the objective of Facebook acquiring Jio?
Betting on India’s digital growth story, global tech giant Facebook has signed a binding agreement to invest
₹43,574 crore in Reliance Industries Ltd’s (RIL) wholly-owned subsidiary Jio Platforms.
The investment by internet entrepreneur Mark Zuckerberg-founded Facebook is in lieu of a 9.99 per cent
equity stake in Jio Platforms. 
Facebook will also get a seat on Reliance Jio’s Board. The deal will help Zuckerberg finally get a piece of
India's digital growth story and Mukesh Ambani the financial firepower to invest more into 4G and 5G, even
as the oil price crash impacts the Jio’s parent firm Reliance Industries Ltd.
Concurrent with the investment, Reliance Retail and Facebook’s WhatsApp entered into a pact to accelerate
Reliance Retail’s JioMart by working closely with kirana shops. Mark Zuckerberg, Founder, Facebook, said
the deal with Reliance Jio was aimed at providing digital tools to small businesses and the unconnected at a
time when everyone is under a lockdown.

Reliance Industry Limited is one of India’s biggest multinational companies, owned by India’s richest man
Mukesh Ambani. As of January 2020, Jio is the largest mobile network operator in India with over 370 million
subscribers — a feat it had attained by initially offering the service free of charge

Reliance and Facebook have been anything but close allies in the tumultuous geo-economics debates that have
shaped Indian domestic cyber policy over the past couple of years. Since the Reserve Bank of India’s 2018
directive, which mandated the local storage of all payments data, various entities in the Indian government
have introduced a slew of data localization policies mandating some form of data localization. The most salient
of these was the mandated mirroring provision in the August 2018 draft of the Personal Data Protection Bill
prepared by the Justice B.N. SriKrishna Committee. This provision was diluted in the revised December 2019
draft that was tabled by IT Minister Ravi Shankar Prasad and restricted only to “sensitive personal data” and
“critical personal data” — both with key exceptions

The flag-bearer of the group of large Indian technology companies supporting data localization was the
chairman of Reliance Industries — Mukesh Ambani himself. He staunchly opposed “data colonialism” or the
extractive economic practices of technology companies, which profited from the data of citizens from the
Global South at the expense of economic growth and development in these countries. Interestingly, other big
fintech players — Paytm and PhonePe — were in the pro-localization camp along with Reliance (a detailed list
is on page 76 here). Anti-data colonialism ideology notwithstanding, the likely strategic thinking behind this
was that these large players had data centers already set up in India, thereby putting foreign technology
companies through the hurdle of setting up data centers afresh. Also with Reliance in the pro-localization camp
were big Chinese players — Alibaba and Xilinx — who had not only set up data centers in India but also made
key strategic investments in companies such as Paytm, as a recent report by Mumbai-based think tank Gateway
House demonstrated.

On the other side of the tussle were Bay Area companies led by Facebook, which were desperate to avoid the
onerous compliance costs of data localization and left no stones unturned in getting the Indian government to
renege on their data localization mandate. Facebook’s public policy vice president traveled to New Delhi and
teamed up with like-minded coalitions at industrial lobbying groups including the U.S.-India Business Council,
the U.S.-India Strategic Partnership Forum, and the National Association of Software and Service Companies
(NASSCOM) to drive home their point. They also took their message to the highest echelons of the U.S.
government, with Secretary of State Mike Pompeo and Commerce Secretary Wilbur Ross making data
localization a key sticking point in trade negotiations and strategic dialogue — in addition to President Donald
Trump explicitly opposing data localization at the Osaka G-20 Summit last year.

This acquisition benefits both companies. For Reliance, the equation is simple. The money is vital for fulfilling
Mukesh Ambani’s goal of making Reliance Industries debt free by 2021.
 For Facebook, the deal comes close on the heels of the nod from the Reserve Bank affiliated National
Payments Corporation of India (NPCI) to allow WhatsApp Pay to operate in India, and its decision to comply
with the data localization guidelines. Facebook has denied that this deal will help roll out WhatsApp Pay, it is
currently in its beta rollout stage.

Most importantly, it allows them to tap the vast economic potential of India’s digital ecosystem while
benefiting from the knowledge, reach, and political influence of a bohemian local partner. With Chinese
opportunities effectively closed to the Silicon Valley giant and the banning of its Free Basics platform in India
in 2016, this partnership was strategically important for Facebook to benefit from untapped data troves.
However, this sparks concerns of unfair market competition and structural concerns for consumer welfare in
India.

Vital implication is for India’s constitutional ethos and democratic fiber. Facebook and WhatsApp have taken a
stance for end-to-end encryption and staunchly resisted requests from the Indian government for tracing the
origin of messages. Jio, on the other hand submitted to TRAI last year that all Over The Top (OTT) platforms
should provide decryption keys and full access to user data when requested by law enforcement authorities. If
Jio Mart operates in conjunction with WhatsApp then some policy convergence will be necessary at some
point. Unlike Apple and Microsoft, which have fought against intrusive access requests from U.S. government
agencies, Facebook has not taken any significant steps in terms of standing up to regimes to preserve and
protect rights such as privacy. 

Thus, it remains to be seen whether Facebook will use its position on the board to resist the combined will of
both Jio and the Indian government on issues as end-to-end encryption. Big tech companies such as Facebook
are uniquely placed to lead and effect changes in favor of user rights, given their global and pan-jurisdiction
reach. These can be used either toward furthering or undermining the cause of democracy.
Amazon plan to invest 1 bn in India, Derive the intention of this
investment ?
Bezos announced a $1 billion investment in "digitizing small and medium businesses" in India. He added that
Amazon aims to export $10 billion worth of Indian goods by 2025.

Amazon Smbhav is a first-of-its-kind summit bringing micro, small and medium enterprises (MSME’s) under
one roof.

The company info confirmed that over a million artisans, weavers and women entrepreneurs are already part of
Amazon India and now going to get 10 million more such SMBs to be digitised by 2025 and export their
products too.

"The goal is to get more people so that they can participate in prosperity for India," Bezos said adding that the
announcement on more investment was because 'it's working and when something works, you should double
down on it and that is what we are doing now'.

He said the kind of Indian goods have global acceptance has no comparison. To give an instance, he said the
jacket he was wearing was from one of the SMBs he just met outside before the event.

On asked about future expectations from India, Bezos said  that the 21st century is going to be the Indian
century...the dynamism, energy...everywhere he goes  and meet people, they are interested in self improvement
and growth. This century has something special and it is democracy. This is going to be the Indian century.

He also said that in this 21st century, the most important alliance will be between India and the US.

"It's the alliance between India and the United States -- the oldest democracy and the world's largest
democracy," he added.
What is Open Market Operation (OMO)?

OMO is an activity performed by the central bank to either give or take liquidity to a financial
institution or a group of financial institutions and the aim of OMO is not only to strengthen the
liquidity status of the commercial banks but also to take surplus liquidity from them.

Steps of Open Market Operations

The central bank takes either of the following two main steps based on the economic conditions
which are known as Open market operations:

1. Buying government bonds from banks

2. Selling government bonds to bank

Buying Government Bonds from Banks

When the central bank of the Country buys government bonds the economy is usually in the
recessionary gap phase with unemployment being a big problem.

When the central bank buys government bonds it increases the money supply in the
economy. The increased money supply decreases interest rates. The decreased interest rates
cause consumption and investment spending to increase and hence the aggregate demand
rises. Increased aggregate demand causes real GDP to increase.
Thus, buying government bonds from Banks increases the real GDP of the economy hence
this method is also called Expansionary Monetary policy.

Selling Government Bonds to Banks

The central banks sell government bonds to banks when the economy is facing inflation.
The central bank tries to control inflation by selling government bonds to banks.

When government bonds are sold by the central bank, it sucks the excess money from the
economy. This causes a decrease in the money supply. A decreased money supply causes
interest rates to increase. An increased interest rate causes consumption and investment
spending to fall and thus aggregate demand falls. The decrease in aggregate demand causes
real GDP to fall. Thus, selling government bonds to Banks decreases the real GDP of the
economy hence this method is also called Contractionary Monetary policy.
There are two types of open market operations

1. Permanent Open Market Operations

This is involved in outright buying and selling of government securities.  Such an operation is
taken to have long-term benefits like inflation, unemployment, accommodating the trend of
currency in circulation etc.

2. Temporary Open Market Operations

This is usually done for the reserve requirements that are transitory in nature or to provide money
for the short term. Such an operation is done using either repo or reverses repos. A repo is an
agreement by which a trading desk buys a security from the central bank with a promise to sell it
at a later date. It can also be considered as a short-term collateralized loan by the central bank with
the difference in the purchase price and the selling price as the interest rate on the security. Under
a reverse repo, the trading desk sells the security to the central bank with an agreement to buy at a
future date. Overnight Repos and reverse repos are used for such temporary open market
operations.

Open Market Operations Examples

Let’s understand the Open Market Operations Examples with the help of one more example:
 The Federal Reserve Bank (Central Bank of United States) purchased $175 million MBS
from banks that had been originated by Fannie Mae, Freddie Mac, and the Federal Home
Loan Banks. Between January 2009-August 2010, it also bought $1.25 trillion in MBS
that had been guaranteed by Fannie, Freddie, and Ginnie Mae. Between March 2009-
October 2009, it purchased $300 billion of longer-term Treasuries from member banks.
 As the Fed’s short-term Treasury bills matured, it used the proceeds to buy long-term
Treasury notes to keep interest rates down. It continued to buy MBS with the proceeds
of MBS that matured.
Name the various companies which plan to shift their production to India.
What is the reason behind their plans to shift to India?

A trade war with the United States, the rise of manufacturing hubs in South-East Asia and now
a pandemic that originated on its mainland. China may not be able to retain its position as the
world's largest factory in the post-Covid global economic order, an analysis reveals.
India, on the other hand, stands a good chance to emerge as a reliable substitute, given its
congenial landscape for manufacturing as well as its vast consumer market.
It's not been a mean feat for China to remain as the world’s largest exporter of goods ahead of
the likes of the US, Germany, and Japan for years till an economic cold war erupted and
escalated between Beijing and Washington.
Since January, 2019, Chinese exports have reduced year-on-year substantially.
With both Presidents Donald Trump and Xi Jinping seen as headstrong, there are no active bets
on who will relent first.
But what looks almost certain is that companies around the world are looking to avoid taking
sides and reduce their dependence on China and Chinese-based manufacturing.

The coronavirus pandemic aggravated what began in early 2019.

Back then, Japanese companies like Ricoh, Sony and Asics Corporation angled towards
shifting their production units away from China in order to escape US trade tariffs.
Ricoh moved its production of printers from Shenzhen to Thailand last July.
Other supply-chain-dependent firms like Nike also explored shifting their bases to Vietnam,
Thailand, or other South-East Asian nations.
While announcing Panasonic’s quarterly earnings, CFO Hirokazu Umeda declared that the
company was actively looking at alternatives to produce electronic devices outside of
China.Most firms didn't aim to completely move out of China but rather looked for smaller
units across the SEA countries in order to reduce dependence.
The unique selling point of these Japanese firms has been their successful adoption of artificial
intelligence and IoT -- the Internet of Things, a giant network of devices and people connected
to the Internet.
The IoT concept enables companies to offset workforce shortages, making it easier for them to
do without China's relatively cheap labour factor.

Now, with the current Covid-19 pandemic in its full flow, the same thought of avoiding China
as manufacturing or a supply chain hub has resurfaced, ever so strongly.
Those who felt that the trade war would be a temporary blip are now more certain of not being
over-dependent on one nation, China.
On the auto-industry front, Japanese carmaker Mazda swiftly shifted a part of its production
from Jiangsu in China to Guanajuato in Mexico in the midst of the pandemic outbreak in order
to ensure least interruptions in its production line. The move involved high initiation costs but
may prove beneficial in the long run.
It makes good business sense to diversify production and supply lines in the face of situations
like these.
In the global manufacturing sector, China will see tough competition from smaller nations like
Thailand, Bangladesh, Vietnam and the Philippines because of their lower labour costs.
Even as firms are mulling their future plans, the Japanese government itself got into the act
recently by earmarking $2.2 billion of its stimulus package to aid Japanese manufacturers to
shift their production lines out of China and back to Japan.
Tokyo will also help companies move to other neighbouring countries on a smaller scale, in
what marks a significant shift in relations between the two major trading partners.
The Japanese government is discussing the need to shift manufacturing of high-value-add
products from China to Japan and also diversify other production units to locations across the
SEA region.

Aside from the smaller nations in the SEA zone, companies that prefer large-scale
manufacturing, supply chains, and concessions from the government can only look at India as a
stable alternative to China.
India has most things that China possesses, and is a nation with friendlier ties with the United
States.
At the same time, India will also be trying to attract companies looking to shift out of China
and use this as a viable opportunity to speed up growth in the post-Covid season.
Many companies, reports suggest, are already engaging with the India government at different
levels to explore opportunities.
This will also change the political dynamics prevalent in Asia and elsewhere.
As part of Prime Minister Narendra Modi's Make-in-India program, the government slashed
corporate tax rates of firms receiving incentives or exemptions down to 25.17 per cent from 35
per cent and the rates of firms which do not receive incentives or exemptions to 22 per cent
from 30 percent.
The move aimed at increasing domestic manufacturing hubs and exports.
One of the major benefits of having India as a manufacturing hub is that it is also a huge
market to sell finished products.
Manufacturing in smaller SEA nations would mean that they still have to be shipped out to
potential buyer markets.
But India can replicate the Make-in-India success of its mobile phone manufacturing in other
industries as well.
India now produces a considerable percentage of mobile phones sold in the country. The same
can be extended to other industries like computers and chipsets.
The US-India Strategic and Partnership Forum's (USISPF) President Mukesh Aghi said that the
companies are talking to them about how to set up an alternative to China by investing in India.

Aghi said that USISPF's recommendation to the new government would be to accelerate the
reforms and bring transparency in the decision-making process.
“I think that's critical. We would advise to bring more transparency in the process and to make
it more consultative because in the last 12 to18 months, we are seeing US companies look at
some of the decisions being made, either e-commerce or data localization, as more domestic-
oriented than global,” he told PTI in an interview.

In his reply to what the agenda of the new Indian government should be to attract investment,
Aghi suggested that New Delhi needs to accelerate reforms, be more transparent in the process
and engage more.

“We need to understand how we can attract those companies. And that
means all the way from land issues to customs issues to being part of the global supply chain.
Those are critical issues. There's a whole plethora of reforms that need to go further down, and
I think that is also going to create a lot of jobs,” he said.

We should note that this is not the first time companies have taken their business elsewhere,
displeased due to the situation in China. Previously, there was news about South Korean firms
being in talks with shifting their manufacturing units from China to India. Also, iPhone makers
have been planning to shift their plants to India from China, all due to the Coronavirus
outbreak.

In the last few years, the companies around the world which have made China their factory
have either shifted out of the country or mulling over the idea. Given the rising cost of labour
and the increasingly interventionist approach of the government after Xi Jinping came to
power, moving out is the best option for the companies. The outbreak of Coronavirus from
China will only accelerate the flight of the companies to India and Southeast Asian nations like
Vietnam.

The Indian government was hoping that these companies will ultimately shift to India, given
the young demographics and cheap labour. But, as per a study by Nomura Group on 56
companies shifting production out of China, only three of these relocated to India while 26
went to Vietnam, 11 to Taiwan, and eight to Thailand.

Southeast Asian countries and the tiny island of Taiwan are winning at welcoming the flight of
companies from China, while India, with a young population and cheap labour, is losing the
game. 
Most of these companies are shifting to Vietnam, a Communist country to the South of China
with a long sea coast facing the busy South China Sea. There are many factors which help the
country with a population of around 10 crores in attracting new companies. It has geographical
and cultural proximity with the Communist giant, and even the political system is similar- a
single-party Communist state. The companies prefer autocratic Communist countries as there
is no bureaucratic lethargy and democratic red tape in these countries.

Vietnam also started liberalizing its economy in the 1990s, just like India, and since then, the
country has grown at an average rate of above 6-7 per cent, very similar to India. In the last
three decades, it had not overtaken India in terms of average economic growth but in the last
few years, the tiny country is suddenly leapfrogging, thanks to its geographical proximity with
China.
But there are many other things which Vietnam did right, like minimizing red
tape, investment in infrastructure, education, and health. The country started economic
liberalization in 1986- exactly a decade after China- and since then invested heavily in primary
education. An average Vietnamese is more skilled than average Indian, thanks to the skill-
based education system. The country has less volatile currency and has been competing closely
with India in the World Bank’s Ease of Doing Business rankings. And therefore, given all
these advantages, the companies rather prefer to move Vietnam than India.

The primary advantage of the tiny country is its geographical, cultural, and political proximity
with China and its system. But, if India is willing to compete, the Modi government must focus
on land, labour, capital, and judicial reforms.

The companies moving to Vietnam know that they will find a conducive environment like
China in the country, given the authoritarian nature of the political system. In Vietnam, the
court and the executive are not equal but under the legislative, which is filled with only single
party members. Therefore, once the legislative clears a project, there are no additional hurdles.

On the other hand, in India, even after a project is cleared by the government, the companies
have to deal with the farmers for factory land, lethargic and corrupt bureaucracy, local mafia,
mafia-like NGOs, local trade unions, the government’s obsolete labour laws- which Modi
government is trying to reform, to successive court cases and petitions by activists like
Prashant Bhushan, and various regulatory bodies, and whatnot.