Thinkpad: Keeping The Lights On

Hope you have been safe this week.

Daily Covid cases crossed the 4 lakh mark on Friday with fatalities remaining high. It is clear that this is no longer a concentrated outbreak across a few states or even urban areas. The outbreak seems to be moving in a Mexican wave — some of the earliest cities to see a surge in infections, like Mumbai and Pune, are stabilising, but others like Delhi and Bengaluru are now seeing high and rising cases.

The decision to stay away from a nationwide lockdown may have appeared to be the correct one from the viewpoint of protecting the economy, but it may have also allowed the virus to keep spreading. In an interview to The Indian Express, Anthony Fauci, who has become one of the saner global voices amid the Covid crisis, explained that you have to break-up the problem into “the immediate, the intermediate, and the long range”. And in the immediate, when faced with a large outbreak, you may need to shutdown the country for a few weeks to put an end to the cycle of transmission. “This virus has shown us that if left to its own devices, it will explode in society.”

It may be too late now.

Meanwhile, all focus is on vaccinations as it should be. But, for now, the vaccination programme remains constrained by supplies. Everyone rushed to register on CoWIN when it opened up for those above 18 but where are the vaccines? It’s sort of the road to nowhere till supplies improve.

The pace of vaccinations remains the most crucial economic indicator too. In a conversation this week, Sonal Varma of Nomura and Sajjid Chinoy of JPMorgan weighed in on the economic impact of the second wave. What were the key takeaways? Get jabs in arms as quickly as possible. Don’t get lost in this vaccine pricing debate. Keep it simple. Single rate pricing is best. Centralise procurement. Decentralise distribution. Use tools like vaccine vouchers to ensure that those who need to get the vaccine free of cost get it. And, once again, the cost at 0.5% of GDP is completely affordable. Don’t fret over it.

For a more detailed view on the economic implications of the second wave, you can watch here.

Meanwhile, businesses are keeping the lights on and life does go on. And so does regulation, questionable as it may be in its intent and execution. A few important changes came in this week.

The securities market regulator SEBI directed that top management of AMCs will now be paid 20% of their compensation in units of schemes that they have a role in or oversight of. A very vocal mutual fund community is enraged at the idea. There is merit in the principle of linking performance to compensation, of course. But the industry had raised some legitimate concerns as well. For instance, ‘why does the chief information security officer need to have her or his salary linked to the fund’s performance’ is a legitimate question to ask. You can catch up on that debate here.

The tendency to micromanage isn’t restricted to any one regulator.

The Reserve Bank of India this week said it would cap the tenure of private bank chief executives at a maximum of 15 years. For promoter CEOs, the cap is at 12 years. Again, many different views on this, in support and in protest. Stripped of all detail, this is a CYA move from the regulator in the absence of an adequately strengthened supervisory system. The financial sector has seen a spate of recent accidents and the RBI wants to do SOMETHING. It also wants to be SEEN to be doing something.

Separately, the RBI also introduced new restrictions on bank auditors. Banks can’t continue with the same auditor beyond three years, the regulator has said. Again, protests have emerged with some genuine practical issues being raised.

The pendulum swings between weak management and micromanagement.

Till next week.

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