15.01.2007

• State equity in companies with large land needs
• The government is likely to come out with a policy according to which, a private investor needing more than 100 acres of land will have to give a stake to the state.
• The value of the land will be the equity contribution by the state.
• The step is likely to be implemented where states are planning to change the usage of rural land for industrial purposes.
• How do venture funds get misused?
• According to the present norms VCFs (Venture Capital Funds) are prohibited from investing in ‘associate companies’. An ‘associate company’ is one in which the sponsors or directors or trustees or investors (of the VCF) hold, individually or collectively, 15% or more equity.
• This provision was there to ensure that business people don’t come up with VCFs just to take advantage of the special tax treatment given to the funds.
• But businessmen always find a way out. Corporates are floating venture capital funds with high networth individuals and institutions, to use the money to further their own business objectives.
• The modus operandi runs like this: A corporate entity wants to invest in a particular venture and wants to avail the special tax treatment. What it resorts to is – it sponsors a VCF and invests directly no more than 15% in the new venture. Then it ensures that the VCF funds the rest of the money in the new venture.
• SEBI apparently is scrutinizing such practices now.
• KG Balakrishnan sworn in as the Chief Justice of India
• Konakuppakatil Gopinathan Balakrishnan is full name.
• He is the first dalit CJI.
• He is the 37^th CJI.
• Online bill payments scene
• The number of Indians paying their bills online was about 3 lakhs in 2005-06. This is expected to touch 1.8 million in 2007-08.
• Considering the total number of 35 mn people using the Internet in India, the number of online bill payers is considerably less.
• On average an Indian urban household (in the top 10 cities of the country) pays about 42 bills annually.
• Indian telecom strength
• Amidst the din surrounding the stake sale in Hutch Essar by Hutchison Whampoa, one thing that is surely missing public attention is the total valuation of the Indian telecom sector.
• It has grown to a whopping $100 bn (Rs. 4.5 lakh crores) in valuation.
• Coal India Limited Chairman
• Partha S Bhattacharya
• Indo ASEAN FTA talks
• ASEAN has finally accepted India’s negative list of 490 items. This has apparently become acceptable after both sides agreed that the total trade from the commodities included in the negative lists on either side should not exceed 5% of the total bilateral trade.
• WTO talks resumption efforts
• The main reason for the talks breakdown was US’s intransigence in reducing its agricultural subsidies. Instead of responding to the calls from EU and G20 for a reduction of its subsidies from the current $18 bn, it went ahead and said they would be increased to $22 bn. This led to the breakdown of talks at WTO.
• It appears that the US and the EU have made some attempts to bridge their differences over this issue. Hence there is a likelihood of resumption of WTO talks.
• Commodities markets: Jeera (cumin seeds)
• Unjha (near Rajkot in Gujarat) is the one of the biggest markets for this commodity in the country.
• The arrivals fell sharply by 25% and demand for export also has taken a beating with the imposition of emergency in Bangladesh
• What are CTC teas?
• Crush, Tear, and Curl is a method of processing tea. The process follows that of orthodox tea manufacture, but instead of the leaves being rolled, they are passed through a series of cylindrical rollers with hundreds of small sharp "teeth" that Crush, Tear, and Curl.
• Infrastructure investments proposed in the ensuing 11^th Plan period amount to $350 bn
• Power ($120 bn)
• Railways ($67 bn)
• Roads ($49 bn)
• Irrigation ($18 bn)
• Ports ($11 bn)
• Airports ($9 bn)
• Others ($76 bn)
• What could be the dampeners to India’s growth story and what should be the policy responses at this present juncture?
• Dampeners:
• Worrisome inflation. With inflation having crossed the much feared 5.5% target kept by RBI, it is a cause for worry. Though pressures have eased on crude oil front, prices of manufactures are seen soaring.
• Slowing US economy. This is going to adversely effect our IT and IT enabled services sectors. It was the growth of these sectors that contributed to the demand for cement, steel and consumer durables sectors.
• Policy responses should be: remove supply-side bottlenecks
• Lift restrictions on foreign and Indian investment in sectors such as retail, insurance and mining and simplify procedures for awarding contracts in crucial infrastructure sectors like airports, expressways and flyovers.
• Finalize the rehabilitation policy so that large-scale industry can take off faster.
• How to succeed in Indian business environment?
• In a very good article, Saurabh Tripathi and Arindam Bhattacharya have the following to say:
• While cost leadership based on scale is an established strategy, it is typically adopted by players in mature markets, starved for growth. That cannot be adopted in high-growth, emerging markets like India where differentiation has to be deployed to gain market share. There are three characteristics that are required of players to win in such a scenario:
• One, boldness of vision and courage to bet on the latent potential of consumer demand. Remember Dhirubhai Ambani’s quip? – how many people will make a phone call if making a phone call was cheap as a post card?
• Two, aggressive pricing backed by scale.
• Three, an economically viable business model. That is don’t undersell yourself.
• C. Rangarajan on globalization and India
• Globalization means free cross-border movement of information, goods, services, capital and people. It is more than ratio of exports to GDP. It is about culture, society, politics and people.
• Received wisdom is that free trade is beneficial as it leads to efficient allocation of resources consistent with comparative advantage, and that restrictive trade practices impede growth.
• Emerging economies have an obvious preference for FDI over FII flows as the latter do not always lead to expansion of productive capacity and can be volatile, particularly in times of loss of confidence.
• The gross daily turnover of the foreign exchange markets, estimated at $1.5 trillion, is several hundred times the volume of global trade in goods and services.
• On the impact of globalization there are two major concerns:
• It is argued that globalization sharpens inequities across countries as its rewards are skewed in favour of rich countries because of their skill and technology endowment. It has also been argued that globalization leads to more iniquitous distribution of income within countries also.
  But these arguments don’t hold water. In this era of knowledge-intensive production, international comparative advantage is no longer derived by national resource endowment. And empirical evidence points out that developing economies have gained in globalizing scenario.
• Globalization compromises national sovereignty by disempowering governments from following independent policies.
  It is nothing but exaggeration of fears. Globalization does not mean abdication of domestic objectives; it only means designing domestic policies recognizing the constraints imposed by globalization.
• He cites a critic’s remark that the world cannot marginalize India. But India, if its chooses, can marginalize itself.
• SEZs worldwide
• About 3000 SEZs are stated to be operating in 120 countries accounting for over $600 bn in exports and 50 mn direct jobs.