30 April 2024 : The Indian Express

Editorial 1 : Short on safety

Introduction: In the past few weeks, questions have been raised about India’s food safety regime in the wake of allegations against products as varied as infant food, “health drinks” and spices. Question marks have been raised on the effectiveness of India’s food regulator FSSAI.

FSSAI’s competency is in question

The country’s food business regulator, FSSAI, is probing charges of unhealthy sugar content in Nestle’s baby food products.
The agency has also begun collecting samples of powdered spices of several brands, including market leaders MDH and Everest, after regulatory authorities in Singapore and Hong Kong raised concerns over carcinogenic additives.
The authorities in the Southeast Asian countries are not the first to raise red flags.
A report in Indian Express has revealed that over the past six months, US customs declined entry to 31per cent spice-related shipments of MDH over salmonella contamination.
Data obtained by Indian Express newspaper from the US FDA shows that the refusal rate has doubled in the past one year.
The EU too has, reportedly, placed food items originating from India under the scanner.
The contaminants in question are different.
But the brands in question are amongst the most well-known.
The controversies have raised fears that a large section of the Indian market could be bypassing the regulatory radar.

About FSSAI

Food Safety and Standards Authority of India (FSSAI) is an autonomous statutory body established under the Food Safety and Standards Act, 2006 (FSS Act).
Ministry of Health & Family Welfare, Government of India is the administrative Ministry of FSSAI.
Headquarters: Delhi.

The Functions of FSSAI

Framing of regulations to lay down the standards and guidelines of food safety.
Granting FSSAI food safety license and certification for food businesses.
Laying down procedure and guidelines for laboratories in food businesses.
To provide suggestions to the government in framing the policies.
To collect data regarding contaminants in foods products, identification of emerging risks and introduction of rapid alert system.
Creating an information network across the country about food safety.
Promote general awareness about food safety and food standards.

Why FSSAI is not able to regulate the food market effectively?

The FSSAI came into being in 2008, two years after the enactment of the Food Safety and Standards Act.
The agency has had a chequered record.
It has consistently been hamstrung by staff and infrastructure shortage.
This has meant that a large section of the market views regulation as paperwork rather than regular inspections followed by expert guidance.
The FSSAI is mandated to educate businesses and consumers on food safety.
It is also tasked to “collect and collate data regarding food consumption, incidence and prevalence of biological risk, contaminants in food, residues of various contaminants in foods products, and identify risks”.
The frequent controversies around food items indicate that the agency has done scarce justice to its remit.
In instances such as the Vital Neutraceuticals case in 2015, the food authority’s actions have been struck down by courts for procedural shortcomings.
Regulations must contend with scientific uncertainty and the variance in rules amongst nations.
That’s why the food authority must regularly update standards, and handhold exporters.
The FSSAI has fallen short on both counts.

Conclusion: The failure of MDH’s plants to meet the USFDA sanitary standards shows the Indian regulator in poor light. A country with a growing food market and an aspiration to increase its footprint in the global market needs a more proactive regulator.

Editorail 2 : Why the bull runs

Introduction: It’s indicative of the changes in the Indian economy: The number of stock market investors is now inching closer to the number of land-owning farmers in the country. The global uncertainties are also not affecting the bullish nature of India's stock market.

Performance of the Indian Stock Exchange

In April, the BSE Sensex traded at a price-to-earnings (PE) ratio of 25.
In comparison, the PE ratio averaged 18.61 between 2003-04 and 2007-08 and 23.81 between 2014-15 and 2023-24.
In the case of the small- and mid-cap segments, the exuberance has been even more euphoric.
While both small- and mid-cap indices did witness a steep fall following concerns over “froth” in certain segments, and the possibility of price manipulation, they have recovered since.
This despite the fact that several small- and mid-cap funds had restricted fresh inflows, indicating their inability to allocate funds efficiently, which suggests that stock prices may not be anchored in fundamentals.

Indian economy’s compelling narrative

This exuberance, rational or irrational, is backed by an appealing narrative with several cross-cutting themes.
At its core is a belief in India’s growth trajectory — the view that the political, policy and economic environment are perfectly aligned to deliver relatively high growth over a sustained period is now widely held.
There are, after all, strong reasons to be optimistic about the economy’s prospects.
A growth rate of 7-8 per cent — notwithstanding uncomfortable questions over its estimation, the distribution of growth or job creation — is nothing to scoff at.
Strong corporate and bank balance sheets have only raised expectations that the economy is on the cusp of a private investment cycle.
And then there are favourable demographics.

Both foreign and domestic investors are enthusiastic to invest

It’s not just the foreign investors who have been pouring in money, enthused about the economy’s prospects.
Indian households, too, have been increasingly turning towards the stock markets in their search for yield.
As per reports, the total number of demat accounts in the country has recently crossed 150 million.
As per NSE, the number of unique investors (based on PAN) now exceeds 90 million, which translates to upwards of 50 million families, or more than 17 per cent of all households in the country.
And then there are those who invest indirectly via mutual funds.
As per the Association of Mutual Funds in India’s estimates, there are now more than 40 million unique mutual fund investors (there will obviously be some overlap).

The numbers, in perspective

To put these numbers in perspective, consider the following statistics.
In 2019, the total number of agricultural households in the country was pegged at 93.09 million by a survey carried out by the National Statistical Office.
In 2022-23, the number of farmer beneficiaries under PM-Kisan stood at 107.3 million, while in 2023-24, it was 92.1 million (as of January 2024).
In 2022-23, 74 million persons filed income tax returns (this includes individuals, firms, etc).
And, as per the National Family Health Survey, 7.5 per cent of households in the country have cars.

The investors are from diverse PIN codes in India

Investors now are not just limited to the larger cities.
In 2023, an SBI dividend yield fund drew applications from 70 per cent of the pin codes in the country.
As per other estimates, investors now come from every nine out of 10 pin codes in the country.
In 2016-17, contributions through systematic investment plans (SIPs) stood at Rs 43,921 crore.
By 2023-24, they had risen more than four-and-a half times to touch Rs 1.99 lakh crore.
In comparison, net investments by foreign portfolio investors last year stood at Rs 2.08 lakh crore.

Why do investors trust India?

Some are now expecting a period of digesting the extraordinary gains that the markets have witnessed.
But, a continuing surge in domestic flows could help maintain current valuations.
Investors, though, are not showing any signs of nervousness — the India VIX, a fear gauge, witnessed a steep fall last Tuesday, and remains well below recent highs.
Investors, though, especially the foreign ones, can be a fickle lot.
As per a recent report, some funds are undoing their “buy India, sell China” strategy as Beijing’s support for the economy and depressed valuations prompt a rethink.
On balance, however, India remains the preferred investment destination.
After all, it does seem to offer a more compelling story.

Conclusion: At a time when there is uncertainty over China’s growth prospects, the Indian economy stands out. It remains a preferred investment destination.

30 Apr 2024 : The Indian Express