28.02.2007

Hi friends,

Because of my busy schedule today also, I couldn't cover anything about the Economic Survey at all. Here go the rest of the notings for today:

  • Election results in Northern states
    • Punjab went the SAD (Shiromani Akali Dal) way, Uttarkhand is clinched by BJP and Manipur is bagged by Congress.
  • Unemployment
    • It has risen from 2.8% in 1999-2000 to 3.1% in 2004-05.
  • Demographic dividend
    • The phenomenon of a rise in the share of working age population and resultant rise in savings and growth.
  • What happened to Union Carbide?
    • We all heard of the Bhopal tragedy know? What happened to the company Union Carbide that was responsible for the gas leak?
    • The Dow Chemical Company purchased Union Carbide in 2001 for $10.3 billion in stock and debt. Dow has publicly stated several times that the Union Carbide settlement payments have already fulfilled Dow's financial responsibility for the disaster.
    • The union government demanded Dow for a payment of Rs. 100 crores. It refused to pay the amount.
    • The Bhopal Disaster took place in the early hours of the morning of December 3, 1984, in the heart of the city of Bhopal. It was caused by the accidental release of 40 tonnes of methyl isocyanate (MIC) gas from a Union Carbide India Limited pesticide plant owned by Union Carbide.
    • The BBC gives the death toll as nearly 3,000 people dead initially, and at least 15,000 from related illnesses since. Greenpeace cites 20,000 total deaths as its conservative estimate. Bhopal is frequently cited as the world's worst industrial disaster. It is the subject of controversy to this day.
  • Do we or do we not have an extradition treaty with Argentina?
    • An internal document of the CBI (of 1981 vintage) lists Argentina as a country with which we have extradition treaty.
    • But the communication received by India through diplomatic channels on February 16, says that we do not have such a treaty with them and that India should therefore ask for Quattrocchi’s detention under Argentinean law and tat India would have to give an offer of reciprocity for seeking extradition.
    • The CBI finally sent the extradition request to the Ministry of External Affairs on February 24.
  • Government clears air on DD signal encryption
    • The government is set to mandate the encryption of DD terrestrial signals during international cricket matches. This will address concerns of private broadcasters that sharing of live feed of sporting events with DD would lead to privacy of the latter’s signals in the overseas markets, thus leading to revenue losses.
    • There are two modes of encryption: basic mode and professional CA system. It is yet to decide on the mode of encryption.
  • The result of the NREGP (National Rural Employment Guarantee Programme)
    • NREGP is a variant of the Employment Assurance Scheme introduced by Narasimha Rao government in 1994. That scheme guaranteed 100 days of employment for agricultural workers in backward districts.
    • It helped increase the rural employment from 87.5 crore (875 mn) man-days in 1990-91 to 123 crore (1,232 mn) man-days in 1995-96.
  • Quote from Aristotle
    • “Democracy is a government in the hands of men of low birth, no property and vulgar employments.”

27.02.2007

  • NBW against Navy war room leak accused
    • A non-bailable warrant was issued against Ravi Shankaran, a kin of former Navy Chief Admiral Arun Prakash.
    • The CBI claimed that he along with Kulbhushan Parashar got vital information, including complete plans for the navy’s network-centric warfare system, defence procurement and compromise with the country’s national security.
  • Anti-India insurgent groups operating in Bangladeshi soil
    • ULFA
    • National Liberation Front of Tripura
    • All Tripura Tiger Force
    • National Democratic Front of Bodoland
    • Kamtapuri Liberation Organisation
  • Iraqi President
    • Jalal Talabani
  • Rail freight corridor
    • Work on the dedicated freight corridor is expected to start this year and is expected to be finished in about 7 to 8 years.
  • Surprise news from Coke
    • It is talking of milk-based drinks, coffee-based flavours, ice-cream colas, aam panna, raw apple drink and flavoured water.
    • It feels there is life beyond the carbonated drinks.
  • NRI savings and spending
    • There are about 22.50 lakh (2.25 mn) NRIs abroad whose remittances in 2005-06 alone came to about $2500 crores ($25 bn). Of this 70% were spend towards family support and 9% in gifting.
  • Smart City project in Kerala – not scrapped
    • The Kerala government appears to have successfully renegotiated the deal with Dubai Technology and Media Free Zone Authority (Tecom).
    • The state government wanted to have 26% stake in the project whilst the earlier agreement was for 9% stake.
    • An investment of Rs. 1500 crores is envisaged in the first phase. Creates about 30,000 direct jobs.
  • Chennai to have its water problems solved once and for all?
    • If we go by the reports, it appears that the desalination plant that is being constructed there (at a place called Minjur near Chennai) is going to supply water at a cost of Rs. 48.66 per kilolitre.
    • This plant is expected to be commissioned by July 2008.
  • Levy policy on sugar reviewed
    • In a major policy reversal, the government is toying with the idea of doing away with levy sugar altogether. At present, 10% of the sugar produced by sugar mills is procured by the government as levy sugar. It is proposed to do away with this procurement. In the next phase, the government would also do away with the practice of fixing the amount of sugar each mill can sell every month in the open market.
  • Power capacity may miss target
    • The target for capacity addition is kept at 32,804 MW. It is feared that this target is unlikely to be achieved and that a shortfall of 9,554 MW to 12,417 MW is going to be there. Even if the target is met, it is still likely to leave a peak shortage of 18,913 MW.
  • Wheat farmers in India
    • We have about 13 mn (130 lakh) small farmers of wheat. With an average yield of 2.6t/ha, they are each producing less than 4 tonnes of wheat every year.
  • First banks in India to launch biometric based ATMs
    • ICICI Bank
    • Followed by Dena Bank and then Andhra Bank
  • Three advantages of road transport over rail transport – of freight
    • Railways offer no time guarantee to the consignor wishing to move cargo.
    • Trucks offer door-to-door service, unlike the Railways.
    • A number of consumer durables and perishables, are better carried safely by roadways than railways, which are more suitable for moving bulk cargo.
  • Railway Board Chairman
    • JP Batra
  • Railway figures
    • Projected freight carriage in 2011-12 is 1100 mt.
    • Projected passenger carriage is 840 crore (8,400 mn) as against the present 640 crores.
    • The national economy growing at 8 to 9% will required Railways to grow at 10 to 12%.
    • Railways are India’s lifeline, accounting for 1% of GDP and 6% of its total workforce in the organized sector.

26.02.2007

  • This year’s Oscar Nomination having connection with India
    • Deepa Mehta’s “Water” has been nominated in the foreign language film category. The country from which it is nominated is Canada. But it lost the title to “The Lives of Others” from Germany.
    • What is its India connection? It is Directed by Deepa Mehta of Indian origin; a story centered around India; and the cast is Indian. Seema Biswas (Shakuntala), Lisa Ray (Kalyani), John Abraham (Narayan) and Sarala (Chuyia).
    • In India in 1938, eight-year-old Chuyia--a child bride--learns she is now a widow. Taken from her parents, Chuyia is sent to live for the remainder of her life in a widow's ashram run by the greedy, tyrannical Madhumati. There, she is befriended by the beautiful Kalyani, a young widow who is shunned by the other women and forced by Madhumati to work as a prostitute.
  • A little about Internet addresses
    • In the current IPv4 (IP version 4) technology of TCP/IP based routing, there could be 450 crore (4.5 bn) unique Internet addresses. It is estimated that these addresses would be all used up by 2010.
    • It is expected that IPv6 will roll out by then.
  • Wikia
    • Most of us have heard about wikipedia on the internet. It is a free online encyclopedia available on the web. Its uniqueness is that the content is contributed by anybody. And it is available for free. This is a not-for-profit venture and runs only on donations.
    • Its founder Jimmy Wales has come out with another venture – a for-profit venture called “Wikia” and expects to launch a search engine before the end of 2007.
  • Investment advisers to be regulated
    • In a move to protect the investors from the investment advisors flooding the market, SEBI is coming out with a program of certifying the investment advisors.
    • It is likely to mandate that the investment advice offered should be client specific and cannot be a free advice. Such advice cannot be given to public at large. Besides, the advisor is expected to have a certain minimum qualification to render such an advice.
  • Let’s learn a bit about carbon emissions
    • The magazine Time estimates that a flight from Tokyo to New York emits about 2,400 kg of carbon per passenger.
  • Indian economy’s size
    • Is 4th largest in terms of PPP (Purchasing Power Parity)
    • About 25,000 farmers committed suicide since 1997 all across the country.
    • Rural India contributes to about 25% of the country’s GDP but gets only about 5% of the investments. Balance 95% of the investments go to urban India.
  • Indian infrastructure
    • India’s roads carry about 61% of the freight and 85% of the passenger traffic.
    • National highways constitute only 2% of the total road network and account for 40% of the road traffic.
    • Average truck and bus speed today is about 50 km/hour
    • Indian Railways ply about 11,000 trains, carrying about 170 lakh passengers and 15 lakh tonnes of freight every day. It accounts for only about 25% of freight traffic.

25.02.2007

  • Telecom industry creates its own ombudsman
    • Fed up of the DoT’s refusal to consent for the creation of an institution of Ombudsman for the telecom sector and TRAI’s limitations in its role as a recommendatory body for the creation of such an institution, the telecom companies themselves decided to go ahead and establish on themselves.
    • An Ombudsman is an independent body to which consumers can take their complaints. It will have the power to mediate settlements between consumers and their service providers and can act as a one-stop solution to their owes by ensuring that they do not have to approach other consumer forums and courts for redressal mechanisms.
  • Online consumer grievance redressal -- Core
    • Consumer Online Resource & Empowerment Centre, is an organization supported by the Union ministry of consumer affairs. The online platform, which is at present running as a pilot project of Core, will be launched before World Consumer Rights Day on March 15.
  • A little info about charity across the world
    • US seems to be the leader across the globe even in making donations for charity.
    • In the year 2000, it was the $500 crores ($5 bn) donation by Bill and Melinda Gates; and then in 2006 it was the $4350 crores ($43.5 bn) donation by Warren Buffet, that were the highest single contributions in a single year which skewed the charity figures of a country.
    • Even though India now has the third highest number of millionaires in the world after US and Germany, our charity figures are no where near these figures.
    • The US leads the pack with its individual gifts as a percentage of GDP with a figure of 1.7%.
  • About Samjhauta Express
    • This New Delhi-Lahore train link was suspended in 2001, following the attack on Indian parliament. It was restored again in 2004.
  • SSA funding pattern
    • The Central Government has changed the funding pattern of Sarva Siksha Abhiyan from 75:25 to 50:50.
    • This means that the Central and State governments have to contribute equally to the scheme.
  • Government clears the dedicated east-west rail freight corridor
    • It costs about Rs. 28,181 crores.
  • More about Indian Railway’s freight business
    • Revenues from freight: 2004-05 (Rs. 30,778 crores) and 2005-06 (Rs. 36,287 crores)
    • In 1950-51, the share of railways in total freight carried across the country was 89%. Today it is about 40%.
    • Carrying freight by rail is stated to be 6 times more fuel efficient than carrying it by road.
    • The Integrated Energy Policy of the Planning Commission has recommended that the Railways has to increase its freight market share to at least 50% by 2029-30. To achieve this, it has to grow 7.5 times against the road traffic’s growth at 5 times.
  • Semiconductor policy cleared
    • For availing incentives the semiconductor companies have to invest a minimum of Rs. 2,500 crores during the first 10 years. The incentive is subsidy of 20% of the capital expenditure.
  • Finer details about extradition of Quattrocchi
    • As India and Argentina do not have an extradition treaty between them, India has to make a request for extradition within 1 month from the date of the arrest of the individual.
  • Total size of the mutual fund industry in India
    • It is pegged at Rs. 3.39 lakh crores and is managed by about 30 odd AMCs (Asset Management Companies)

24.02.2007

  • About Reliance Industries Limited
    • The company has a total market cap of $4375 crores ($43.75 bn) on Indian bourses. It is about 5.5% of India’s total market cap.
    • In a move, which can see the Mukesh Ambani & his associates stake raise to 55%, the company is issuing a preferential offer of Rs. 15,000 crores. This is being done through a warrant issue, as a warrant issue has the advantage of making staggered payments over a long period.
  • Private goods train on Indian Rails
    • Train No. 5645 UP/NTT Guwahati: It belongs to Hindustan Unilever Limited and is run by Indian Railways. It runs from Nagpur to Tinsukhia.
    • It is freight that brings in 60% of revenues to Indian Railways and passenger trains lose Rs. 7,000 cr every year.
    • Road transport is 33% more expensive thatn Railways.
    • Experts opine that road transport is inefficient beyond 300 km and that transport of goods by train is more economical.
  • Quattrocchi detained
    • Ottavio Quattrocchi, the Italian businessman who is wanted by India in connection with the Bofors scandal investigations is arrested in Argentina at its Iguazu International Airport.
    • He was arrested consequent to the Interpol’s red corner notice.
    • As India is not having an extradition treaty with Argentina, it will quite some time before the legal formalities are completed and India can get him for trial.
  • High Court scraps Singur land acquisition
    • The court was critical of the government’s decision to provide only the stipulated compensation to farmers who had not consented to the acquisition of their land, and to offer a 10% bonus to those who had. The bench observed that every paisa of the exchequer was public money and should not be given away.
  • RIL mulls cars with hydrogen fuel
    • Reliance Industries is toying with the idea of developing hydrogen fuel cars as part of its CDM (Clean Development Mechanism) project.
    • It intends to use natural gas for air-conditioning and hydrogen will be sequestered (extracted) from the condensed vapours. Hydrogen is meant to fuel cars. A prototype car is being developed by RIL.
    • CDM projects are implemented under the Kyoto Protocol of the UNFCCC (UN Framework Convention on Climate Change) that curtails the amount of greenhouse gas emissions generated by developed countries. To meet the cap, developed countries buy carbon credits from developing countries like India. One carbon credit is equivalent to reduction of one tonne of carbon dioxide.
  • Indian and Air India merger
    • Experts opine that the merger of the two entities will be a success, if it is able to extract synergies in network and fleet management. They cite the example of the merger of Air France-KLM. Air France had a strong network in south-Europe and serviced 200 destinations, while KLM had 119. The merged entity had the advantage of reduced station handling costs and sharing of airport lounges.
    • It is finding such synergies between the two entities in India that will be key to the success of the proposed merger. In this context it will be interesting to know the details of their fleet strength.

Air India

Indian

Existing fleet

48

74

Aircraft ordered

68

43

Employees

15,300

19,300

Revenues (Rs. Crores)

9,677

6,000

Profit (Rs. Crores)

615

700

Passengers (Lakhs)

44

80

Market share

20

20

Domestic destinations

Nil

54

Global destinations

48

18

    • Experts are identifying the following advantages with the merger:
      • Administration, marketing and selling operations can be brought under one roof, yielding significant savings.
      • The merged entity will have the advantage of complementary network, overseas for AI and predominantly local for Indian.
      • The route management is expected to improve, as there is some overlap with Indian flying to many overseas destinations apart from serving domestic market.
  • Mars rendezvous
    • A billion Euro, European comet chasing spacecraft ‘Rosetta’ will come within 250 kms of the red planet’s surface. It was launched in March 2004.
    • It is destined for its rendezvous with comet Churyumov-Gerasimenko in 2014, after traveling 710 crore (7.1 bn) kms.
  • PhDs in India
    • Number of people pursuing doctorates and the number of people passing out with a doctoral degree every year, is an indication of a country’s growing intellectual and innovative strength. Look at how India compares with China and the US in this regard.
    • Number of PhDs enrolled: China (1,20,000), India (5,000)
    • Number of PhDs turned out: US (50,000), India (375)
  • History about bank nationalization from RBI archives
    • In a couple of years, state-owned banks will be entering their 40th year of nationalization. Prior to actually taking over banks, the Congress government with Morarji Desai as finance minister sought to put in place policies to ensure social justice through a national credit council. However, barely four months after the third meeting of the NCC on July 9, 1969 Indira Gandhi sent a note to the Congress Working Committee through the minister of industries suggesting nationalization of major banks. This came as a surprise, for the prevalent belief in Congress circles was that the issue had been settled in favour of social control. But, Indira Gandhi had by then decided to confront the Syndicate in what was a bid to wrest control of the party. She needed a dramatic issue and bank nationalization fit the bill.
  • Microsoft fined for patent infringement
    • A US federal jury fined Microsoft with $1.52 bn for infringing MP patent.

23.02.2007

  • India’s place in global electronics market
    • India is expected to account for 11% of the global electronics market by 2015. It was about 1.8% in 2005.
  • Sell-off norm in insurance likely to go
    • At present, Indian promoters of a private insurance company have to bring down their equity stake to 26% within 10 years of starting business. If the Finance Ministry’s proposal goes through, it will benefit players like HDFC, ICICI, Birlas, Reliance ADAG and Tata AIG to retain their stake.
  • Mashelkar Panel on intellectual property rights
    • When the Patents (Amendment) Bill was being passed in 2005, the Left has agreed to support the legislation after the government gave an assurance that the concerns raised by the Left are included in an amendment to the Act.
    • Then the Mashelkar Panel was appointed and it submitted its report recently. It held that limiting the granting of patents for pharmaceutical entities would not be TRIPS compliant and that excluding micro-organisms per se from patent protection would be violative of the TRIPS agreement.
    • Mr. Mashelkar himself has admitted that some portions of the report were plagiarized. The Left has seized upon this admission and said it is rejecting the report. Government is yet to make its mind clear on this report.
  • ITC’s e-choupal
    • This project brings down the transportation cost and commission agent fee as farmers bring directly produce from farm to warehouse without any intermediaries.
    • Farmers benefit through enhanced farm productivity and higher farm-gate prices, and ITC benefits from lower net cost of procurement having eliminated costs in the supply chain that do not add value.
    • This project has covered 31,000 villages so far, and has reached out to 30 lakh (3 mln) farmers through 5,200 kiosks across 6 states.
  • About nano-technology
    • It is the creation of functional materials, devices and systems through control of matter on the nanometer length scale ( 1 – 100 nanometers). For comparison, 10 nanometers is 1,000 times smaller than the diameter of a human hair.
    • Benefits: Molecular manufacturing technology can be self-contained and clean; a single packing crate or suitcase could contain all equipment required for a village-scale industrial revolution. It will provide cheap and advanced equipment for medical research and health care, making improved medicine widely available.
    • Disadvantages:
      • Economic disruption from an abundance of cheap products
      • Economic oppression from artificially inflated prices
      • Personal risk from criminal or terrorist use
      • Social disruption from new products or lifestyles
      • Unstable arms race
      • Environmental damage from unregulated products
  • India’s intended aeroplane purchases
    • It is expected to buy about 480 planes at a cost of Rs. 1,35,000 crores in the next five years
  • Government kicks of CST phase out with 1% cut
    • The Cabinet cleared the proposal to cut CST by 1% to 3% effective April 1, this year.
    • The states earn about Rs. 25,000 crores from CST. As this reduction would make a dent of about Rs. 6,250 crores in states’ revenues, a compensation package is worked out.
    • This package includes transfer of revenues from 44 old and 33 new services, the right to impose VAT on imports and certain tobacco and tobacco products and budgetary support.
  • Declining share of agriculture in our GDP
    • It has declined from 34% in 1991-92 to just less than 23% in 2004-05.

22.02.2007

  • Iran to create a female-only tourist island
    • The island of Arezou (wish), one of the 102 islands in the gigantic Oroumiyeh Lake, close to the Turkish border is being converted by the Iranian authorities as a female-only island.
    • All public transport, facilities and restaurants on the island will be staffed only by women.
  • Lean manufacturing
    • It allows manufacturers to quickly react to changes in customer demand do it with little inventory.
  • South Korea lets kids use mother’s name
    • South Korea is revising its laws to allow children to use their mother’s last name in a bid to achieve greater gender equality.
  • Budget related terms
    • Fiscal deficit: The difference between revenue receipts plus non-debt capital receipts on one side and total expenditure including loans, net of repayments, on the other side. In other words, this is the budget deficit plus borrowings and other liabilities.
    • Fiscal policy: An instrument of demand management which seeks to influence the level of economic activity in an economy through the control of taxation and government expenditure.
  • About service tax
    • It was introduced through the 1994 budget, with a levy on three services viz., telecom, stockbroking and insurance.
    • Today it covers 99 services. The rate of tax was raised from 10% to 12% in the 2006-07 budget.
  • GM crops in India and the world
    • The global acreage under the GM (Genetically Modified) crops has risen from a paltry 17 lakh (1.7 mn) hectares in 1996 to about 10.20 crore (102 mn) hectares now.
    • This acreage accounts for 40.9% of the total land under cultivation in the developing world while it stood at 61.1% in case of the developed world.
    • In India, the acreage has risen from 29,000 hectares in 2002 to touch 38 lakh (3.8 mn) hectares in 2006. The number of farmers using GM seeds has risen from 75,000 to touch 23 lakh (2.3 mn) farmers.
  • Risks of climate change
    • A recent study by British economist Nicholas Stern estimates that the overall costs and risks of climate change would be about 5% of global GDP every year.
  • Semiconductors
    • Silicon is the most commonly used semiconductor today, along with gallium arsenide, germanium, hafnium, and some other materials.
    • Semiconductor device fabrication is the process used to create chips.
    • A fabless semiconductor company specializes in the design and sale of hardware devices implemented on semiconductor chips.

21.02.2007

  • Telecom levies may be cut, tariffs set to drop
    • Indian telecom operators now pay about 30% of their total revenues as levies, which are among the highest in the world.
    • DoT has been seeking a reduction of the licence fee to a flat 6% to bring mobile telephony in line with the licence fee paid by national and international long distance operators.
  • Indian retail
    • Organized accounts for just over 4% of the total retail industry and is expected to grow from $1200 crores ($12 bn) to about $17,500 to $20,000 crores by 2016.
    • The sector is expected to see an investment of about $3000 crores ($30 bn) over the next 4-5 years.
  • About treaty shopping
    • This refers to registering companies in tax havens to avoid paying taxes. It is a matter of concern for finance ministry for sometime due to the large loss in revenue – about Rs. 2,300 crores or more annually through companies routing their investments through tax havens like Mauritius, Cyprus, the UAE etc.
  • Founder of Internet
    • Mr. Vint Cerf is one of the founders of Internet. He currently works for Google as its Chief Internet Evangelist and Vice President.
    • He says that there are about 2.5 bn devices which are accessing the internet.
    • Internet has touched a population of 100 crores. It does not reach the remaining 550 crore population as yet.
  • MD of PriceWaterhouseCoopers, India
    • Deepak Kapoor has taken over as MD from Mr. Roopen Roy.
  • Forex reserve management
    • Is done by RBI. It usually invests these reserves in low yield overseas treasury instruments. That is treasury bonds of other countries – usually the US and other developed countries. This has given us a return of just 3.9% during the period 2001-2005.
    • Taking a cue from countries like China and Singapore which have floated SPVs for overseas investments, India is also toying with the idea of establishing an SPV with about $1000 crores ($10 bn) to start with.
    • One more option that can be availed is meeting the forex ECB requirements and other overseas financing requirements of domestic corporate entities.
    • The Planning Commission proposed idea of using these fund infrastructure development through investment in corporate and infrastructure bonds, has now been given up considering its inflationary impact on the economy through increased money supply.
  • Air traffic figures for the country
    • Total passenger traffic during 2005-06 was 7.34 crores (73.35 mn).
    • Cargo traffic was about 1404 tonnes during the same period.
  • Indo-Pak trade during the first 7 months of this financial year 2006-07
    • India exported $78.9 crores ($789 mn) worth of goods to Pakistan.
    • India’s imports were at $18.7 crores ($187 mn).
  • Solving the SEZ land problems
    • Reliance has come up with a novel idea to solve the land requirements problem. After developing the SEZ, it will return 12.5% of the land acquired to the land owners. This will be really valuable land: developed land in a top industrial zone can fetch Rs. 5 crore an acre. Reliance will also leave untouched the homestead land of villagers within the SEZ. So, each family will end u pwith hoestead and additional land worth crores. This is a good way of making farmers partners in an industrial project.
  • Britain’s is known as…
    • We all know that famous quote about Britishers as a nation of shopkeepers.
    • But do you know that it is also recently plagued with a peculiar problem of cycle thieves!!! Reportedly about 1200 bicycles are being stolen in Britain every day. Police are attributing this to the ease with which the stolen cycles can be sold over the Internet through online auctions.
    • Incidentally there was a movie titled “The Bicycle Thief” made by one Vittorio De Sica, almost 6 decades ago.
  • Direct selling business
    • You would have heard of Amway; right? India’s direct selling business provided employment to about 4,000 people in addition to creating a community of 12.5 lakhs (1.25 mn) distributors.
    • Globally direct selling business is worth a whopping $8500 crores ($85 bn), churned out by 3 crores (30 mn) direct sellers across 165 countries.
    • The Indian direct selling industry has touched an annual revenue of about Rs. 3,500 crores.
  • Bombay Stock Exchange CEO
    • Rajnikant Patel
    • The BSE is mandated by SEBI to demutualize (reduce the brokers’ stake in the Exchange) to about 49% by May 17, 2007.
  • About SLR and CRR
    • Banks have to maintain an SLR (Statutory Liquidity Ratio) of 25% with the RBI. That is, they have to invest this much of money in government securities. On this, they get a return of about 7.5%.
    • A 1% reduction in SLR would release about Rs. 25,000 crores into the system.
    • On CRR balances, banks will not get any interest. This is currently kept at 6% (actually it will be 6% by March 3rd).
    • A 0.5% hike in CRR will drain out about Rs. 14,000 crores from the system.

20.02.2007

  • FIIs may be out of FDI aviation cap
    • We all know that there is a cap of 49% for FDI in aviation.
    • The RBI has clarified that the sectoral cap is not a composite limit. This means that FIIs can invest beyond the stipulated 49% limit through secondary market (meaning stock markets) purchases.
  • What are zero tax companies? How do you bring them to tax?
    • Normally, a company is liable to pay tax on the income computed in accordance with the provisions of the IT Act, but the profit and loss account of the company is prepared as per the provisions of the Companies Act. There were a large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the IT Act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies were popularly known as zero-tax companies.
    • In order to bring them to tax, MAT (Minimum Alternate Tax) was introduced through Section 115J w.e.f 1988-89. According to this, if taxable income of a company in respect of previous year and onwards is less than 30% of its book profit, the total income of such company chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30% of such book profits.
  • The Rio Carnival
    • It starts on Saturday, and ends on Fat Tuesday, or Mardi-Gras. The first records of Carnival festivities in Rio de Janeiro date back to 1723. Immigrants from the Portuguese islands of A├žores, Madeira and Cabo Verde introduced here the Entrudo. The idea was basically getting everybody soaked wet. People would go out in the streets with buckets of water and limes, and everybody could be a potential victim. Even Emperors took part in the fun.
    • Carnival 2007 happens from February 17 (Saturday) through 20 (Tuesday).
    • The Carnival is known more for its samba dancers.
    • King Momo – is the lord of misrule. King Momos, King Momus, (Rei Momo in Portuguese or Rey Momo in Spanish) is considered the king of Carnivals in numerous Latin American festivities, mainly in Brazil and Colombia. His appearance signifies the beginning of the Carnival festivities. Each carnival has its own King Momo, who is often given the key to the city. Traditionally, a tall, fat man is chosen to fulfill the role.
  • Superb revenue collection for the country
    • As against the budgeted estimates of Rs. 4,42,153 crores for 2006-07, the expected collections are at Rs. 4,95,000 crores.
    • This figure is about gross revenue collections. It includes all direct and indirect taxes.
  • 7 more companies given the Navaratna status
    • Bharat Electronics, National Mineral Development Corporation, Rural Electrification Corporation, Power Grid Corporation of India Limtied, Power Finance Corporation, Hindustan Aeronautics and National Aluminium Company.
    • This takes the total tally of navaratna companies to 16.
  • Facultative Reinsurance
    • Also known as fac cover, it is a contract to purchase reinsurance for a specific project. Since most of the risk is borne by the reinsurer, the terms of cover are also decided by the reinsurer. An insurer buys fac cover if it has to provide cover to a project too big for its balance sheet. In India, most of the oil refineries require a facultative reinsurance cover as any large claim could result in wiping out the balance sheet of an insurance company, if the risk were to be retained by the insurer.
  • Some sensible comments made in the context of the Samjhauta express bombings in the ET editorial
    • New Delhi should realize that Pervez Musharraf does not have complete control over Pakistan-based terrorist groups. Large sections of Pakistani society, which view secular modernity with suspicion, are in the thrall of political Islam. Communal carnages in India, like the 2002 post-Godhra pogrom, together with the Indian state’s failure to deliver substantive justice to victims of communal riots, have only legitimized the specious two-nation theory that has been its ideological ballast. New Delhi, even as it continues to engage Islamabad vigorously, must deliver on its constitutionally ordained promise of secularism. That is important if it is to be seen as a trustworthy partner in peace by all of Pakistan.
  • Fertilizer subsidy in India
    • As against the budgeted Rs. 18,752 crores, we are spending about Rs. 33,000 crores on this subsidy.
    • The subsidy administration mechanism leaves much to be desired. How much of this subsidy actually reaches the deserving – small and marginal farmer is anybody’s guess. The payout to the fertilizer companies are based on a cost-plus formula. This is a perverse incentive for ‘gold-plating’.
  • Need for labour reform
    • With the economy booming for the last few years, absolute poverty has been cut in half and the country seems to be on the threshold of achieving middle-income status soon.
    • But, India’s manufacturing sector still accounts for less than 15% of the GDP and employs less than 15% of the work force.
    • Most manufacturing jobs in India are in the informal sector, characterized by low productivity and wages and to which labour laws do not apply. In India, small and informal firms employ about 40% of our workers. India’s organized manufacturing sector employs about 13% of the total labour force of about 45 crores (450 mn).
    • There are currently about 47 central and 157 state laws affecting labour markets.
    • What is needed is a simplification of all these.
  • The fiscal turnaround in states
    • The combined revenue deficit of the state governments is budgeted to decline to 0.1% of GDP in 2006-07, down from a massive 2.7%.
    • States’ combined fiscal deficit, too, is projected to drop to less than 3% for the first time in the last decade to 2.8% in 2006-07.

19.02.2007

  • Insurance business
    • Lloyds of London is the world’s largest insurance company.
    • India is considered as the 23rd largest insurance market in the world with tremendous growth potential.
    • Insurance penetration in India is 3.14% (premium as percentage of GDP) compared to over 10% in South Korea and Japan.
    • There are 14 life and 8 non-life insurance companies in private sector in the country since the opening of the sector in 2000.
  • Retail sector and industry status
    • The retail sector has been demanding recognition as an industry for over two years now. An industry status would not only make it eligible for fiscal benefits and concessions but also get it easier organized financing.
  • India’s airline pilot shortage
    • Currently over 550 expat pilots work in various domestic airlines in the country.
    • Industry estimates put the requirement of pilots at more than 3000 over the next three to five years.
    • Airlines pay anywhere beween $8000 to $10000 per month to e pilots, which is around 10 to 15% more than what Indian pilots earn.
    • The country produces only around 200 pilots annually against a demand for around 500.
  • IPBCC – India Pakistan Bangladesh Ceylon Conference
    • It is an 18 member grouping of shipping lines from these countries. They collectively move around 12 lakh (1.2 mn) containers annually between India and Europe. Its notified rates are the norm of the tarde in the route.
    • It has announced winding up of its operations as on October 1, 2008.
    • This means that member lines will fix their own rates from then onwards.
  • Hottest chilly of the world
    • India’s (naturally occurring hybrid native to the Assam region) Bhut Jolokia chilli has been confirmed as the world’s hottest pepper by Guinness Book of Records.
    • It has a 1,001,304 scoville heat units. Scoville heat unit is a measure of hotness for a chilli.
  • Berlin Film Festival awards
    • Golden Bear award for best film: Won by Chinese director Wang Quan’s Tuya’s Marriage (Tu ya de hun shi)
    • Best first feature film: Vanaja by Rajnesh Domalpalli from India.
  • India’s overseas oil assets
    • India’s oil consumption is pegged at 25 lakh (2.5 mn) barrels of crude oil per day. Of this 73% is imported.
    • Last year’s oil import bill swelled to $4300 crore ($43 bn).
    • OVL (ONGC Videsh Limited) has a target of acquiring 60 MMPTA (Million Metric Tonnes Per Annum) of equity oil and gas overseas by 2025. OVL is currently working towards a goal of 20 MMTPA of oil and oil equivalent gas from its overseas assets.
  • Fund for backward regions
    • Rashtriya Sam Vikas Yojana (RSVY) programme, for improving the infrastructure in backward areas, is being revamped by the government with a new name – Mahatma Gandhi Backward Regions Development Fund.
  • Cess on private cars
    • A 5% cess proposed is to be levied on cars and 2% on two-wheelers to fund bus-based rapid transit system in many cities.
    • The surplus fund would be channeled into an SPV dedicated to development and maintenance of sustainable urban transport.
  • Production of pulses in India
    • Production has remained stagnant for the past 40 years i.e., since 1965-66. It has remained range bound between 1.20 crore to 1.40 crore tonnes (12 mn to 14 mn tonnes).
    • Imports have ensured that the prices did not rise steeply and remained stable.
    • Per capita availability of pulses has decreased from 13.9 kg in 1985 to less than 9 kg in recent years.
  • Should India lower its customs duties to ASEAN levels at one go?
    • There should be a three tier structure:
      • Lowest duties on raw materials at 5%
      • Higher on intermediates at 7.5%
      • Highest duty of 10% on finished goods.
    • Capital goods should always have 5% duty to incentivise capital investment in key infrastructure sectors.
    • We must also start the process of rationalizing the 14 customs duty rates, currently above the peak rate.
  • In a detailed article recommending staying the course and delivering on FRBM targets, Sri. C. Rangarajan, Chairman of the PM’s Economic Advisory Council explains why fiscal deficits are a concern. Read the full article here.
    • 1. They dis-empower the government’s fiscal stance by preempting a larger share of public resources for debt servicing thereby leaving that much less for desirable expenditures such as physical infrastructure and social infrastructure. This leads to a declining ratio of capital expenditure to total expenditure as seen over the period 1990-91 to 2002-03.
    • 2. Together with revenue deficits, they push up borrowed resources for current consumption which may raise growth in the short term, but of the spurious variety. Ideally borrowed funds should be used only for investment.
    • 3. It results in government crowding out the private sector. A balance needs to be struck in apportioning the investible resources between the government and the private sector.
    • 4. Continued fiscal deficits impact on interest and inflation rates depending on how the deficits are financed. Raising finance from domestic debt leads to higher interest rates. Raising finance by printing money leads to inflation.
    • 5. Fiscal deficits, especially in the face of revenue deficits, exacerbate inter-temporal equity concerns as they give the pleasure of spending to the current generation while passing on the pain of servicing to the later generations.

18.02.2007

  • Tanjore Temples
    • There are over 90 temples across this Tamilnadu district.
    • The town is famous for its Brihadeeswara Temple built by Raja Raja Chola about 1100 years ago. This is a temple for Lord Shiva.
    • Tanjore was the capital of the Chola kings.
  • Indian engineering graduates
    • India produces about 400,000 engineering graduates every year!! This is next only to China. China produces about 600,000 engineering graduates every year.
  • Higher education
    • Every year around 1,20,000 students leave India for higher education. Estimates put it that the country’s loss on account of this can easily build about 40 IIMs or 20 IITs.
    • India spend on higher education is about 8% of the GDP with 3.3% coming from the government and the rest from the private participation.
  • JETRO
    • Japan External Trade Organization
    • Its CEO is Osamu Watanabe
    • It is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO's core focus has shifted toward promoting foreign direct investment into Japan and helping small to medium size Japanese firms maximize their global export potential.
  • What is an overheating economy?
    • An overheating economy is one that has too much domestic demand for its own good. To grow, an economy needs investment. Growth achieved is a function of savings and the capital output ratio. Savings are invested and output produced for each unit of investment is the growth in the economy's output. This investment creates jobs and puts more money into the hands of more people.

      An economy rapidly growing over a period of time tends to run short of workers. In such a situation, employers tend to bid up wages, which leads to even more money in the hands of the people, which happened at the peak of the US information-technology boom in the late 1990s.

      People have a tendency to spend money they earned. So the extra money they earn creates greater demand for goods and services. Investments typically take time to bear fruit and increase supply at home, so this demand for goods is serviced by importing them. This distorts the current account (we are importing way more than we are exporting).

      And since services (restaurants, takeouts, bowling alleys, etc) can't be imported, they tend to become costlier, and there is inflation. Thus two big ways of telling whether an economy is overheating is to look at its current account, where it should be running a deficit, and look at the inflation it is facing.

      In addition to these two, the third big symptom of a heating economy is the expansion in credit extended by domestic financial institutions. As investment increases, it needs to come from people's savings or through other people's savings (aka foreign investment).

      These savings are typically locked up in financial institutions and banks, which lend this money to entrepreneurs, companies or government agencies that invest and create the boom. Thus for an economy to overheat, there has to be lending of money by the banks that creates a drastic growth in credit.
  • Macular degeneration
    • It is a leading cause of blindness in older adults in the developed world affecting nearly 25 to 30 mn people.
    • Scientists have developed an implant that attaches to the retina, which can restore partial sight to those suffering from macular degeneration. This devise is in early stages of clinical testing.
  • What is Mardi Gras?
    • It is a carnival that is celebrated in New Orleans,, USA. New Orleans Mardi Gras began in 1837, the year of the first street parade. The first day of the Carnival season is always January 6th (which is twelve days after Christmas). This is called the Twelfth Night and marks the beginning of the private masked balls that are held until Mardi Gras Day. The Mardi Gras parades consist of floats holding the krewe members, who throw doubloons, beads and other items to the people lining the streets. Many "parade-goers" either wear a costume or purple, green and gold when attending the parades, and scream "Throw me somethin' Mister!" to the krewe members on the floats. Marching bands and celebrities on floats are also included in the parades. Mardi Gras Day (which is always Fat Tuesday), is the last day of the carnival season. Many of the largest parades are held on this day.
    • What is a krewe?
      • Every parade in New Orleans' Mardi Gras celebration, and there are about sixty of them each year, is sponsored by a Krewe. While there are literally dozens of Krewes, each with their own rules and traditions, there is a general framework that binds them together: each Krewe must hold a parade which includes floats or bands; they have to hold a ball; and most importantly they have to have the Mardi Gras celebration be its main purpose.
    • What is a doubloon?
      • The doubloon is one of the most enduring symbols of Mardi Gras. These highly detailed, brightly-colored coins are thrown from the floats and many have become collector items. Doubloons are stamped with the different carnival club logo on one side and the parade's theme on the other, so that no two clubs have doubloons that are exactly alike, and each year they are different, too. They are minted in various colors, and from different materials, like aluminum, silver, bronze and now plastic.
    • What is Fat Tuesday?
      • Mardi Gras (French for "Fat Tuesday") is the day before Ash Wednesday, and is also called "Shrove Tuesday", the final day of Carnival. It is a celebration that is held just before the beginning of the Christian liturgical season of Lent.
    • What is Lent?
      • The 40 day period immediately preceding Easter Sunday. For the Christian Church, a time of preparation and repentance prior to the celebration of Easter.

17.02.2007

  • Insurance industry
    • The IRDA has been requesting the government to infuse more capital in national insurance companies to bring their solvency margin to the required level of 1.5 from the current level of around 1.08.
    • Nationalization of insurance business done in 1972. The four general insurers (i.e., New India, United India, Oriental Insurance and National Insurance) were functioning as subsidiaries of General Insurance Corporation of India, a 100% government-promoted company. After the notification of the General Insurance Business (Nationalisation) Amendment Act, 2002 these subsidiaries were de-linked from GIC.
  • Taj Group of Hotels
    • Established nearly 100 years ago, it runs 59 hotels in 40 locations across India with an additional 16 international hotels.
  • India is on a shopping spree
    • The retail spend in the organized retail stores has touched Rs. 55,000 crores ($12.4 bn) in 2006.
  • RFID technology in oil exploration
    • Normally we would have experience RFID (Radio Frequency Identification) technology in organized retail showrooms. But in oil exploration?
    • Yes. It is reputed to help convert marginal oilfields into smart, digital platforms. The accuracy of exploration is reportedly helped by this technology. When drilling for new wells, companies use perforating guns. These shots have to be very accurate – targeting areas where there is oil. RFID tags can be embedded into the pipes fitted into prospective wells, eliminating wastage, cutting costs and saving time.
  • India’s chartered accountants
    • There are about 135,000 registered CAs in the country. 55,000 of them are practicing in India, 12,000 outside and the rest are employed elsewhere within the country.
    • Every year about 9000 to 10,000 CAs graduate.
  • Government de-licenses the 5.8 GHz spectrum for WiMAX usage.
    • Globally, the WiMAX forum has identified 5.8 GHz, 2.5 GHz and 3.5 GHz bands to deploy systems for WiMAX.
    • With this de-licensing, India conforms to the global standards, having earlier taken steps to vacate the 2.5 and 3.5 GHz spectrum from INSAT and Satellite TV communications.
  • World’s ice
    • About 90% of the world’s ice is located in Antarctica – most of it formed in an ice sheet over the land.
  • Food subsidy bill
    • Budget estimates for the year pegged the food subsidy bill at Rs. 24,200 crores.
    • Storage and transport costs are currently pegged at Rs. 358/quintal per month.
  • Oil bonds
    • These are issued to the oil marketing companies in the country by the government, to compensate losses incurred on sales of petrol, diesel, LPG and kerosene.
    • For the year 2006-07, the cabinet has approved issuance of Rs. 28,300 crores bonds.
    • They carry an interest of 7 to 8.2% depending on the prevailing interest rates. The bonds are shown as investments in the oil companies’ balance sheets and they usually sell them when they need the money.
    • The government has to take the approval of the parliament for the issue of the bonds.
  • Duties on luxury cars
    • At present the CBU (Completely Built Units) imports attract the following duties:
      • 60% basic duty
      • 32% additional customs duty
      • 4% countervailing duty
      • + national calamity and contingency duty
    • All put together, these duties add up to about 120%.
    • The government is thinking of slashing the basic duty by about 10%.
  • India’s wheat market
    • Corporates buy about 20 to 30 lakh tonnes (2-3 mn tonnes) of wheat per year compared to about 1.8 crore tonnes (18 mn tonnes) by FCI.
    • Bulk of the investment in agriculture comes from the private sector. About 71%.
    • The involvement of the corporate sector, the likes of Reliance, Bharti, ITC etc., is expected to provide powerful stimulus to increase production and productivity.
  • India’s ports sector
    • It accounts for carrying roughly 95% of India’s international trade by volume and over 70% by value.
    • World’s largest container port is in Singapore.
  • Central Bank governors
    • Japan: Toshihiko Fukui
    • China: Zhou Xiaochuan
  • Those among you who want a great detail about transport sector details, look for today’s centre page article: Fast-changing profile of ports” by Raghu Dayal. It is a good piece giving lot of information and stats on India’s and World’s ports sector.
  • False promise of liberalization

16.02.2007

  • Of the total petro-prodcuts sold in the country, how much does diesel account for?
    • 45%
    • Major areas where it is used include goods transport by road, agriculture pumpsets and railways.
  • Customs and excise duty cuts on auto-fuels likely
    • Customs duty on auto fuel is currently at 7.5%. And excide duty is about 8%.
    • At present the oil companies are losing about Rs. 2.35 per litre of diesel and 10 paise per litre of petrol sold.
    • Rangarajan committee has recommended for uniform customs duty rates on crude and petroleum products. If implemented, this would result in reduced protection for the domestic refining industry and improve the margins of the marketing companies.
  • CPM’s mouthpiece
    • “People’s Democracy”.
  • CBI to seek Governor’s sanction to prosecute Mayavati in Taj Corridor case
    • It is the Rs. 175 crore Taj Heritage Corridor case.
    • Sanction is being sought under Section 197 of the CrPC. Section 197 of the CrPC requires sanction for any court to take cognizance of an offence allegedly committed by a public servant, not removable from office except with the sanction of the government, in the discharge of his or her official duty.
    • CBI investigations have revealed that the former CM had accorded her approval to the Taj project and had also ordered release of funds without required approvals.
  • The 2004 Madrid terror attacks
    • In 2004, Madrid, Spain had witnessed a spate of terror attacks that killed 191 people and wounded more than 1800.
    • 29 suspects are being brought to trial there in Spain.
    • Of the 12 suspected ring leaders, only three were brought before the court; seven others blew themselves up to avoid arrest and the rest are fugitives.
    • These suspects were all inspired by Al-Qaeda; though it appears they are not directly related to that banned group.
  • Cow dung to power cell phone towers
    • About $5,600 is the cost of operational expenditure per cell tower per annum.
    • Of the world’s total cow population of 150 crore (1.5 bn), India is home to about 20 crores (200 mn) cows.
    • About 63% of rural families do not have access to electricity. With a shortfall of 15,000 to 20,000 mw of electricity in the country, most rural areas experience 10-15 hours of load shedding each day.
  • Harappan site discovered
    • A new site near Rohtak near Haryana was discovered. The exact location is on a link road from Julana to Kirsola village, about 35 km from Rohtak.
  • AIDS virus weakness found
    • The structure of a protein on the surface of HIV as it looks while the protein is bound to an infection-fighting antibody is revealed by atomic-level images of the virus made by scientists of the National Institute of Allergy and Infectious Diseases, US. A protein called gp120, seems susceptible to attack by this antibody, which is called b12 and is capable of broadly neutralizing the virus.
  • A new development fund
    • Mahatma Gandhi Backward Region Development Fund will be launched by the PM shortly, to redress the regional imbalances in development. With a corpus of Rs. 3,750 crore it will provide financial resources to supplement and converge existing developmental inflows into 250 identified districts across the country.
  • UNIDO
    • Director General: Kandeh Yumkella
  • About money laundering
    • It is defined as disguising the source or ownership of illegally gained money to make it appear legitimate or hiding money to avoid paying taxes or using legally gained money in pursuit of unlawful activities.
    • It usually takes place in three phases.
      • Placement: Depositing bulk cash into the banking system using currency or funds from illegal activities
      • Layering: Multiple transactions are used to separate the proceeds from their illegal source.
      • Integration: The illegal funds are mixed with apparently legitimate business earnings.
  • IICF India International Coffee Festival 2007
    • Is being held at Bangalore from February 23.
  • Gem and Jewellery India International Exhibition is being held in Chennai from March 2
  • Administered Pricing Mechanism in petro products has led to some bad consequences. They are:
    • Price signals are suppressed, leading to suboptimal resource allocation.
    • Oil marketing companies are forced to sell below cost, denting their bottom line for which they are then compensated by issue of oil bonds. Since these oil bonds are in reality off-budget way of financing the losses of oil companies, the net effect if to pass on a burden that should, rightly be borne by the oil consumers, to the economy as a whole.
  • India’s third coach building factory
    • Is to come up at Rae Bareilly
  • “What they don’t teach you at Harvard Business School” is a book by Mark McCormack
  • The current monetary tightening (which can be said to have begun in September 2004) appears for some to be not yielding the desired results. Here is how:
    • For a long time, banks were basically funding their asset expansion by running down their excess holdings of government securities. These holdings peaked at 42% of net demand and time liabilities, far above the statutory liquidity ratio of 25%, owning mainly to limited demand for credit at that time. Thus, banks had substantial leeway to cut their government bond holdings, and this reliance on internal non-deposit funding limited the effective transmission of monetary tightening, as banks did not have to compete intensely for deposits.
    • Also, money markets remained flush despite the gradual monetary tightening, limiting the impact of gradual hikes in policy rates on bank lending rates.
    • Additionally, the government continued to ease restrictions on foreign borrowing by Indian companies. Some of this borrowing was used for foreign acquisitions, but a substantial portion was used domestically. This, along with the pressure on state-owned banks not to raise lending rates, only compromised the effectiveness of the transmission of tighter monetary policy.
  • Inflation
    • While we are getting really worried about inflation hovering at above 6.5%, do you know the rate of inflation in US?
    • It is about 2% to 2.25%. They expect inflation to be about 1.75% to 2% in 2008.
  • We go gaga over our FDI and FII figures day in and day out. But do you know that in 2006 (full year), the US attracted a net of $89,610 crores ($896.1 bn) of foreign investments. Their net foreign investments are much larger than our total GDP!!!