The Indian aviation industry is in turbulence — yet again. For over a week now, the government-owned carrier Air India has been under siege with a section of its pilots on strike. The pilots are agitating over a dispute regarding training, which they say impacts their career advancement prospects adversely. With around 350 pilots reporting sick, Air India has cancelled most of its international flights. It is estimated to be incurring losses to the tune of Rs. 12 crore (US$2.2 million) a day.

Taking swift action, the management derecognized the pilot’s union and has also fired a few of the agitators. The strike has been declared illegal by the Delhi High Court. But the striking pilots have refused to buckle. Meanwhile, Air India’s Executive Pilots Association (EPA) is supporting the agitators, and private airline Jet Airways’ Society for Welfare of Indian Pilots (SWIP) has also asked for the reinstatement of the fired Air India pilots.

This ongoing agitation has only added to the woes of the cash-strapped airline. Just last month, the government cleared a US$5.75 billion bailout for the ailing carrier and is now unwilling to pander to the striking pilots. Talking to a television news channel recently, Ajit Singh, union minister of aviation, noted firmly that the pilots need to consider that Air india “is already on the sick bed and should not go to the ICU [intensive care unit].”

Singh went on to say that all employees and all unions have to co-operate in an effort to make Air India stand on its feet. He warned: “Otherwise it will not stay afloat. They have to realize that if they do not rise above their personal interests, then Air India will sink, and with that all of them will sink.”

Talking to daily newspaper Mint, Craig Jenks, head of Airline/Aircraft Projects Inc., a New York-based air transport consulting and advisory services firm, noted that “the Air India strike reflects a franchisee mentality among pilots, a confidence that they can control outcomes to their advantage without fear of competition. The government has encouraged this through the bailout.”

G.R. Gopinath, founder of Air Deccan, India’s first low-cost airline which was later acquired by Kingfisher Airlines, says that the government “must find the political will to look beyond Air India.” In a column in the daily newspaper Times of India, Gopinath notes: “[The government] must create a vibrant aviation sector and spell out a long term strategic vision for all stakeholders. A robust ecosystem is needed, not individual policies to suit Air India or Jet Airways or Kingfisher Airlines, as has been the case with successive governments.”

Indeed, even as Air India’s problems are compounding by the day, the entire Indian aviation sector is under stress. The rising cost of aviation turbine fuel, service taxes and high airport charges have been affecting almost all airlines adversely. In fact, even as irate passengers were trying to cope with the Air India cancellations, pilots of another beleaguered airline, Kingfisher Airlines, owned by liquor baron Vijay Mallya, decided to go on strike. They were protesting against delayed salaries.

While Mallya has been talking of bringing in foreign investment, industry observers don’t expect it to happen any time soon. They point out that the proposal to allow 49% foreign direct investment (FDI) by foreign airlines is unlikely to be cleared in the current parliamentary session, which will end next week.

Rajesh Chakrabarti, assistant professor of finance at the Indian School of Business, points out that “the current crisis has probably brought to a head what was inevitable at Air India. Its timing with the Kingfisher woes has made things worse for passengers.” According to Chakrabarti, the striking pilots have a valid cause. He notes that while court strictures will force them to resume duties in a few days, it will not be a long-term solution. Says he: “Air India must have a round of serious reorganization in order to be viable. On the other hand, the industry will probably see some inevitable rise in passenger fares to ensure survival, as well as some consolidation.”

According to Jan Zalewski, South Asia analyst, IHS Global Insight, India’s aviation sector is in a paradoxical situation. In a recent report, he notes: “Despite double-digit growth rates of passenger air traffic, five out of six private domestic airlines in India posted huge losses over 2011; this paradoxical situation is partly due to high oil prices and a depreciating rupee, but more importantly the losses are due to the highly restrictive and unfavorable operational environment for domestic airlines in India.” He adds: “Unless the government adopts more favorable aviation policies that would allow airlines to fly domestic routes profitably, there is likely to be a shortfall in capacity by 2020 which would thwart growth in the sector.” Zalewski says that foreign airlines bringing in FDI could help provide domestic airlines with cash flows, but this is unlikely to be a game-changer. “Even if working capital is raised, this would mean that, at best, real financial recovery would occur slowly.”

The price war in the Indian pharma market has taken a new turn. Just a few weeks ago, mid-sized Indian firm Natco Pharma took on German multinational Bayer when it was awarded India’s first compulsory license. With this, Natco got the go-ahead to manufacture and sell sorafenib, the generic version of Bayer’s patent-protected renal and liver cancer drug Nexavar. While Bayer’s drug costs a patient around Rs. 280,000 (US$5,200) for a month’s treatment, Natco priced its version at Rs. 8,800 (US$163) per month.

On May 3, another Indian firm, Cipla, slashed prices of its sorafenib drug from Rs. 28,000 (US$519) to Rs. 6,840 (US$126) for a month’s treatment — a 75% reduction in a single move. Cipla has also sharply reduced the price of its lung cancer and brain tumor drugs by around 60% to 75%.

According to Yusuf Hamied, chairman and managing director of Cipla, this price reduction is a humanitarian approach by Cipla to support cancer patients. Talking to business daily The Economic Times, Hamied said: “Yes we are cutting prices; we are being humanitarian. But, at the same time, we are not doing any charity. Doctors in India link the quality of drugs to the price of drugs; we want to remove that misconception.” Cipla, incidentally, is currently contesting a patent infringement suit filed by Bayer over its generic version of Nexavar.

Observers say that Cipla’s expertise in reverse innovation and its economies of scale play a key role in its ability to reduce prices. They see this recent move as being part of Cipla’s strategy to garner a larger share in the growing oncology market in India. “It’s a smart move by Cipla. It will reach many more patients and will also be able to garner a greater market share,” said Anjan Sen, director – health care at Deloitte Touche Tohmatsu India, talking to The Economic Times.

This is not the first time that Cipla has been a price warrior. Some years ago when global pharma companies were selling anti-retroviral drugs for US$10,000 to US$15,000 per patient, per annum, Cipla priced its drugs at around US$350. At that time, Hamied had said: “AIDS is going to be a bigger holocaust in India than an earthquake. We’re not making money, but we are not going to lose money, either.” Cipla’s move compelled other players to lower their prices as well.

Ravinder S. Singha, managing director of FirmLink Pharma, a New Delhi-based pharmaceutical consultancy firm, notes that “this is history repeating…. Cipla’s current step to reduce the prices of its cancer drugs is a replay of what it did with its HIV drugs. Others will have to follow suit.” Singha believes that neither Natco nor Cipla will be incurring any loses at their price points. “This only goes to show how much global multinationals play around with prices,” he adds.

But this time around, it’s not just the global pharma firms that are concerned. Indian firms like Natco, too, have been caught unaware. Natco is expected to launch its version of sorafenib shortly. “As of now, we are sticking to our price of Rs. 8,800, as mentioned in the compulsory license. Over the next couple of days, we will weigh our options and take whatever steps we think are necessary,” says M. Adinarayana, Natco’s company secretary and general manager, legal and corporate affairs.

Adinarayana sees Cipla’s move as a knee-jerk reaction to counter Natco’s low-priced version of Bayer’s Nexavar. He adds, however, that “it is not healthy competition. This price war is going to be embarrassing.”

Singha of FirmLink Pharma points out that the pharmaceutical industry, like any other, is driven purely by business compulsions. “We will see a lot more price wars going ahead,” he says.

Meanwhile, the markets have given a thumbs-up to Cipla’s move. While the broader market plunged 1.87% (or 320 points) on May 4, Cipla was one of the few gainers — up 2.46%. Natco was down by close to 6%.

On April 25, ratings agency Standard & Poor’s (S&P) downgraded India’s sovereign rating outlook from “stable” to “negative.” It warned that further action was possible if the country did not find a solution for its twin problems of a high fiscal deficit and a widening current account deficit. In lay language, this means that the government is spending too much.

S&P also lowered the rating of 21 banks and companies, including majors such as the State Bank of India, ICICI Bank, Infosys and Wipro. This will make it more expensive for them to raise money.

Indian finance minister Pranab Mukherjee, however, said that the downgrade did not indicate a crisis — and the stock markets shared his opinion. The Bombay Stock Exchange sensitive index (Sensex) had gone down 190 points on the S&P news, but it recovered to end the day only 56 points down.

Meanwhile, other government officials underscored the point that the only solution was to speed up reforms. The opposition parties have successfully stonewalled all attempts to pass relevant reform bills through Parliament. The day after the downgrade, the Asian Development Bank (ADB) made the same point. The S&P rating cut “is a timely warning,” Rajat M. Nag, managing director general of the ADB, told Kolkata-based daily The Telegraph. “Reforms are running into some headwinds.”

On the reform issue, the government has created its own problem. A few days earlier, chief economic advisor Kaushik Basu reportedly told a Washington meeting of the Carnegie Endowment for International Peace that there were unlikely to be major economic reforms in India before the next Parliamentary elections in 2014. Basu later issued a statement claiming that journalists had juxtaposed his comments on Europe in 2014 with the Indian election of 2014. Read Basu’s statement: “This is unfortunate, because the central message of my talk was the possible European crisis of 2014 and India’s major rise thereafter, likely overtaking China.”

The damage, however, was done. Indian industry has been saying for some time that the anti-corruption movement in the country has resulted in a policy paralysis in Delhi; bureaucrats and politicians are afraid of making decisions in case they are accused later of having ulterior motives. Basu’s statement has been highlighted by the opposition as an official admission that this is indeed the case.

There are other problems which are Mukherjee’s own creation, critics note. In the Union budget, he had introduced a capital gains tax on offshore transactions involving Indian assets — but he did it with retroactive effect from 1962. Vodafone and other affected firms are now fighting back. British chancellor of the exchequer George Osborne has met with Mukherjee to lobby for Vodafone. Companies which had their licenses cancelled by the Supreme Court in the telecom scam have also tried to persuade government officials to plead their case with Mukherjee. This includes Norwegian minister of trade and industry Trond Giske: Norway’s public sector Telenor was partner in a joint venture — Uninor — that had its license cancelled. Sistema of Russia has meanwhile sought a solution in the India-Russia bilateral investment treaty.

The Supreme Court had asked the Telecom Regulatory Authority of India (TRAI) to come up with an auction scheme for the cancelled licenses. The TRAI has confounded everybody by setting the floor price at a very high level. Telecom industry players say they will go into the red if they have to pay such prices.

Meanwhile, another budget provision, the General Anti Avoidance Rules (GAAR), is causing other ripple effects. Says economic daily Mint: “GAAR gives sweeping powers to the tax authorities to question any transaction with retrospective effect. Overseas investors say they will have to exit India if the law is implemented.” According to credit rating agency ICRA: “GAAR is adding to the anxiety of foreign investors.” In April, the fund flow from foreign investors turned negative for the first time this year, reflecting the growing negative sentiment.

At the current pace of applications, U.S. visa grants for skilled workers will soon exhaust the existing caps, Wharton experts and others tracking migrant job trends say.

The latest data released today by U.S. Citizenship and Immigration Services (USCIS) show that since the beginning of April — the start of the annual H-1B visa application window, which extends through September — the department has received 30,300 applications for the 2013 fiscal year. That total includes 20,600 H-1B applications counting toward the general 65,000 cap, and 9,700 petitions toward the 20,000 cap for individuals with advanced degrees.

“The prime driver is economic activity picking up in the U.S.,” says Ravi Aron, senior fellow at Wharton’s Mack Center for Technological Innovation and a professor at the Johns Hopkins University Carey Business School. Indian IT services companies are boosting their U.S.-based workforce as American companies increase investments in capital-intensive IT systems, he notes. Indian and Chinese workers have traditionally accounted for the bulk of the demand for H-1B visas, followed by Mexicans and Filipinos.

If the current pace continues, the annual cap on visas could be reached in the next few months, predicts immigration attorney Cyrus Mehta of Cyrus Mehta Associates in New York City. In part, Mehta attributes the growing demand for H-1B visas to increased startup activity in the New York City area, especially in mobile applications and IT security.

U.S. employers “are more confident about hiring again,” according to Laura Danielson, chair of the immigration practice at the Minneapolis, Minn.-based law firm Fredrikson & Byron, which specializes in representing Chinese entrepreneurs and employees. H-1B demand is surging among her clientele in the medical devices, automotive, biotechnology and IT industries, she says, adding that employers looking for skills in the STEM professions (science, technology, engineering and mathematics) often find them among Chinese professionals.

The IT industry is still “the greatest mover,” notes USCIS press secretary Christopher Bentley. U.S. employers are “requiring workers from India and China in greater proportions.” However, the current spike in H-1B visa applications is not as high as it has been in earlier years, according to USCIS spokesman William Wright. In 2008 and 2009, the H-1B visa cap was reached in the first week of the application season. Visas for those with “advanced degrees” were exhausted in the first week in 2008, and within a month in 2009.

Mehta points out that some of the current demand could be spillover from a recent rash of controversial denials of L1B visas (for specialized knowledge workers) by the consulate in Chennai, India. According to both Mehta and Danielson, the U.S. government must raise the H-1B visa caps in order to compete effectively with other countries. “Studies have repeatedly confirmed that many of these immigrant professionals will go on — in greater numbers than our American work force — to develop patents, create businesses and provide a net job growth to our economy,” Danielson notes.