The Flip side of globalisation, as many Indian companies and even sectoral regulators would testify, is the increased levels of scrutiny by foreign regulators, especially US watchdogs.
On Wednesday, the government was forced to approve the creation of 75 crucial posts in the domestic aviation sector regulator DGCA to carry out safety inspection of airlines and private charter companies, largely under pressure to avoid a downgrade by the US regulator — the Federal Aviation Authority (FAA).
The non-implementation of these could have resulted in the downgrade of the DGCA on aviation safety count from the top Category I to a lower ranking, which would have implied that Air India and Jet Airways, which fly to the US, would not be allowed to hike the existing number of flights they operate and subject themselves to greater safety supervision in the US.
Indian firms, which make nearly 40 per cent of generic and over-the-counter drugs for the US market, are facing the heat from the US Food and Drug Administration, which earlier this month barred products from Ranbaxy Laboratories’ Toansa plant, coming in the wake of a $500-million settlement by the Gurgaon-based firm in May last year after allegations it had faked test results and sold adulterated products. Three of Ranbaxy’s facilities, at Paonta Sahib and Dewas in 2008 and Mohali last year, have already been blacklisted by the FDA, which also imposed an “import alert” (effectively a ban) on Wockhardt’s Chikalthana plant while another drugmaker Strides Arcolab Ltd’s facility got a warning letter after an FDA inspection in June.
Meanwhile, early last year, the California-based subsidiary of the State Bank of India was forced to agree to take a series of steps to improve its banking practices related to bad loans following a critical review by US regulators. The country’s largest bank consented to the orders of the Federal Deposit Insurance Corporation and the California Department of Financial Institutions that, among other things, required it to have and retain “qualified management” and obtain within 90 days an independent study to ensure it “is staffed by qualified individuals commensurate with its size and risk profile to ensure the safe and sound operation of the bank”. The US stock market regulator — the Securities and Exchange Commission (SEC) — reportedly got 18 whistle-blower tip-offs from India during the year ended September 30, 2013 for its probes into various market related irregularities. This formed part