30.11.2007

  • OLPC programme
    • One Laptop Per Child project is the brainchild of MIT professor Nicholas Negroponte.
    • The project envisages supply of laptops for less than $100 to each school going child in developing countries. Pricing is currently set to start at US$188 and the goal is to reach the $100 mark in 2008.
    • Called the XO it is about the size of a textbook and lighter than a lunchbox. It easily assumes several configurations: standard laptop use, e-book reading and gaming.
    • It can be solar or foot powered. It will come with at least two of three options: a crank, a pedal, or a pull-cord.
    • It has no internal hard disk, has only two internal cables. Creates its own mesh network out of the box, as it is a full-time wireless router. Its life expectancy is about 5 years.
    • But most of the sales so far have been in developed countries. Schools in developing countries still lack basic amenities like building, blackboards and benches. People connected with the education sector in developing countries (especially the poorer ones in Africa) are highly skeptical about its success.
    • You can know more about it on Wikipedia here.
  • Websites wary of search engines
    • Ever heard of a file called the robots.txt? It is used by web sites to control access by search engines to the hosted content. Though not an official standard, it has become an industry standard by practice since 1994, following concerns that some crawlers were taxing web sites by visiting them repeatedly.
    • Now the proposal is to provide extra commands to this text file which could limit how long a search engine can retain copies of content in their indexes, or tell the crawler not to follow any of the links that appear within a web page.
    • Geek? With technology enthusiasts like me lurching around the world, you have no choice but to suffer our rantings. Please bear with me. A geek yourself? Then read on more about it here.
  • What is the equivalent of ‘subprime’ category of borrowers in India?
    • It is called the STPL – Small Ticket Personal Loans.
    • Banks, especially the private sector ones have been aggressive in giving such loans. But because of the uproar made about the methods and processes of recovery being adopted by some of the over-enthusiastic recovery agents, banks have developed cold feet now and are going slow on these loans.
    • This is sure to drive the borrowers into the hands of the money lenders again.
  • SPV (Special Purpose Vehicle) for coal acquisition
    • Remember what we noted earlier about this?
    • Coal Ventures International, is being setup by PSUs – NTPC, SAIL, RINL, NMDC and CIL.
    • This would scout for coal deals globally by pursuing an aggressive merger and acquisition strategy.
    • The Cabinet has cleared the proposal for setting up this entity. It would have a war chest of Rs. 10,000 crores.
    • It will have greater powers for making investments. As against navaratna companies’ limit of Rs. 1000 crores, this entity is given the power to invest upto Rs. 1500 crores at the board level itself.
  • About MCPs!!
    • Male chauvinist pigs? No just kidding. I am talking about Mobile Command Posts. These are the high-tech heavy-duty trucks equipped with GPS-based satellite navigation system, satellite phones, TV cameras and monitors to aid safety measures at the airports.
    • These are being deployed at all the 66 airports to tackle aviation emergencies.
  • Indo-ASEAN FTA talks
    • We have been fed on reports about how India has been very reasonable in accommodating the concerns of ASEAN nations in the FTA talks. But take a look at today’s article by MK Venu. It argues for a more liberal approach. Read it here.
    • It argues that supply of food items in general will need to be enhanced substantially over the next decade as more and more Indians will rise above the poverty line. India will need to end up producing more and may be importing even more, to provide food security. Hence haggling over bound rates, in these talks may not be making sense; when we can actually appear more magnanimous and strike deals with the ASEAN nations.
    • Actual weighted average duties on imported food items is less than 35% but bindings are over 100%.
  • The Annapolis conference
    • We have covered in detail once about the Palestine issue. This is one more development that will eventually make it into our notings as one more sentence over a period of time.
    • The US has organized a Mid-East peace conference in Annapolis in USA. The joint understanding of all the participants was that Israeli and Palestinian governments must negotiate a peace treaty by the end of 2008.
  • Peter Mandelson praises India’s role in world economy!!
    • In an article arguing for a EU-India FTA, the EU Trade Commissioner has eulogized Indian economic achievement. Look at the substance of his averments:
    • It is a mark of India’s growing weight in the world, alongside China, that a healthy economy will be a key artery in a healthy global economy.
    • India gets a 10th of the FDI that flows to China. Further improving the investment climate can only open the tap wider.
    • Increasingly, India’s growing economy will be one of the world economy’s important sources of demand. An EU-India FTA can help strengthen that demand.
  • NREG beneficiaries to have smart cards by March
    • This flagship programme of the government will soon receive a technological facelift to plug some loopholes noticed in its implementation.
    • The programme aims to enhance livelihood security of people in rural areas by guaranteeing 100 days of wage employment in a financial year to a rural household, whose members volunteer to do unskilled manual labour.
    • Starting with 200 districts across the country in phase I in 2006-07, it was expanded to cover 130 districts in phase II in 2007-08 and from April, 2008 it is slated to cover the whole of rural India.
    • When extended to the whole of the country, it is expected to require about Rs. 1,50,000 crore per annum as funding.

29.11.2007

  • Something about ballooning
    • The DGCA is set to notify guidelines for ‘balloon aircraft’ and incorporate them in the CAR (Civil Aviation Requirements).
    • A company starting ballooning is required to have a start-up capital of Rs. 25 lakh.
    • A hot air balloon travels by moving with the wind. An airship on the other hand is a buoyant aircraft which is propelled through the air in a controlled manner.
    • A hot air balloon varies in cost from Rs. 30 lakh to Rs. 3 crores. The ideal weather for flying these machines is winter when outside temperature is low and air-pockets are rare. While a small balloon can take off with two passengers in its bucket, a bigger balloon may fly with 25 passengers.
  • World’s largest SWF
    • The Abu Dhabi Investment Authority is the world’s largest sovereign wealth fund with about $650 bn in its corpus.
  • BRPSE Chairman resigns
    • Mr. Prahlad K Basu has resigned.
    • Mr. Nitish Sengupta has taken over as the Chairman BRPSE.
    • BRPSE: Board for Reconstruction of Public Sector Enterprises.
  • Open Interest” in derivatives markets
    • Want to get a lowdown on this concept? Take a look at today’s “Simply Speaking” column in ET. But some basics:
    • Open interest is the total number of outstanding futures and options contracts at any point in time. In other words, these are open or yet to be settled contracts. The level of outstanding positions in the derivatives segment is one of the parameters widely tracked by the market.
    • In the futures segment, open interest data need to be read along with price changes in the futures contract. A rise in open interest in a futures contract along with its price indicates bullishness, which means investors are creating long positions. Investors may benchmark the price changes in the futures contract to the underlying (the cash market).
    • In the options segments, a change in open interest in put or call options enables traders calculate the put call ratio – a popular sentiment indicator of options traders world-wide, which is the number of puts divided by the number of calls.
  • New credit scoring model launched by CIBIL along with TransUnion
    • This model will predict the likelihood of a customer becoming a defaulter in more than 91 days on one or more lines of credit.
    • The scoring model factors in the payments history, outstanding debt, credit account history, recent credit inquiries and the different types of credit the borrower has availed of.
    • An individual should have availed at least one loan six months ago for CIBIL to rate the borrower under this new model. The scoring will range from 300 to 900 points, where 300 is for the worst-rated individual, while the best rate would be 900 points.
    • CIBIL: Credit Information Bureau of India Limited. Its Chairman is V. Santhanakrishnan. At present, CIBIL members include 77 banks, 32 NBFCs, 6 State Financial Corporations, 10 Financial Institutions and 2 Credit Card companies. There is a move to allow the RRBs also into the fold sometime soon.
  • India’s Uranium needs
    • The mines at Jaduguda have a uranium content of just 0.6% while the one that is coming up at AP is expected to yield 0.3%. But internationally commercial ores have up to 15% Uranium.
    • Till now, our nuclear power plants have looked economical because of huge, bomb-related implicit subsidies. But to produce large-scale nuclear power on commercial terms, India requires high-grade uranium ore, or enriched uranium. This is a key reason why India needs clearance from the Nuclear Suppliers Group for imports.
  • About wealth inequalities
    • Do you remember we noted something about the Gini coefficient sometime back in our blogs? Today a very good article titled “Rise of billionaires: Threat to growth?” appeared in ET. I recommend reading it at least once.
    • It argues that inequalities in wealth in not as bad as it may appear after all. Especially in the context of India. Let’s look at the arguments:
    • Though the real wealth at the top has risen sufficiently to cause a significant increase in wealth inequality in the country, the consumption based Gini coefficient was approximately the same in 2004-05 as in 1983 and 1993-94.
    • There is no case for leveling the billionaires of India for at least three reasons:
      • Replacing a billionaire by 1000 millionaires may reduce wealth inequality but it is almost sure to increase conspicuous consumption that is regarded as socially repulsive. The thousand millionaires are likely to have much greater propensity and time to spend their money on fancy cars, homes and gadgets than one billionaire.
      • For poverty alleviation, the ownership of wealth matters far less than how it is invested and spent. A billionaire is far more likely to invest his billion proactively and use it for philanthropy than a thousand millionaires.
      • The presence of a few billionaires is a powerful inspiration to other entrepreneurs.

28.11.2007

  • SBI follows US diktats and refuses to honour Iranian LCs
    • SBI has refused to honour LCs (Letters of Credit) issued by Iranian banks following US diktats that have to be followed by all banks operating in the US.
    • The US is able to thus hurt the trade between India and Iran, as the trade is carried out in dollars and all dollar trades are ultimately settled in US. This makes it mandatory for SBI to follow the US diktats.
  • UNDP targets 50% emission cut by 2050
    • The UNDP has asked nations in its latest report on climate change to reduce GHG emissions by 50% over the 1990 levels.
    • It has also recommended the creation of a Climate Change Mitigation Facility to mobilize between $25 to $50 bn per year to support low carbon transition in developing countries.
    • Our planning commission has rejected this report outright. Planning Commission Chairman MS Ahluwalia pointed out that the recommendations of the UNDP ought to be based on per capita emission figures and not on total emission by a single country.
  • Economicspeak!!
    • I am referring to the coverage on BANCON 2007 given in today’s ET.
    • Want a high funda, one sentence definition of carry trades? Look at this:
      • Carry trades are leveraged cross-currency positions designed to take advantage of interest rate differentials across currencies.
    • Domestic liability dollarization
      • It is defined as the domestic bank’s foreign exchange denominated loans as a share of GDP and is a considered risk factor because systemic sudden stops are associated with large real devaluations, increasing the chances that foreign exchange denominated loans will be defaulted.
  • India’s largest ever securitization deal
    • ICICI Bank is reported to have carried out a transaction of securitizing Rs. 1929 crores of its used and new car loans.
    • Coming as it does in the backdrop of the subprime crisis; it is certainly an eyebrow raising move on the part of the bank. You may remember that the securitization is one financial aspect that is being blamed for the emergence of the crisis.
    • The problem with this is – though the credit rating agencies may rate it very well – it is very difficult to know how much of the portfolio is subprime in nature.
  • US housing may be facing subprime woes; but in India it is a different story
    • There will be demand for over 24.3 mn new dwellings in urban India, and over half of this will come from outside top 100 cities, according to a study “Housing Skyline of India 2007-08”.
  • Curbs likely on CCDs with put option
    • CCDs: Compulsory Convertible Debentures. These are basically in the nature of equity.
    • Realty companies are found to be structuring the issuance of CCDs to foreigners in such a way that it resembles debt issuance rather than equity issuance. At the time of issuance itself, the issuer undertakes to buy (put option for the foreign buyer) the CCDs at a later date.
    • Real estate companies are barred from tapping debt through ECB route. But there is no restriction on pure equity investment. Hence the real estate companies are found to be circumventing this restriction by a clever structuring of the issuance.
    • Government may come out with some measures to plug this.
  • About SIMI
  • Unique water conservation method
    • The Orange County Water District in US has come out with the world’s largest plant devoted to purifying sewage to step up drinking water supplies.
    • The finished product though will not be directly fed into the kitchen and bathroom taps. Instead it will be injected underground to form a barrier against seawater intrusion and recharge underground aquifers.
    • Namibia’s capital Windhoek is reported to be the only place in the world where recycled water is put to ‘direct potable reuse’.
  • Administrative Reforms Commission’s VI report
    • The commission headed by Veerappa Moily submitted its 6th report to the Prime Minister.
  • India’s interceptor missile to be tested in December
    • This will intercept and destroy an incoming missile. It will reportedly help India into developing a full-fledged Ballistic Missile Defence shield.

25.11.2007

  • What is Seigniorage?
    • When one of you asked me this question, at first I mistook it for the royalty on sand. When I Googled for an answer, this is what I found on Wikipedia:
    • Seigniorage, also spelled seignorage or seigneurage, is the net revenue derived from the issuing of currency. Seigniorage derived from coins arises from the difference between the face value of a coin and the cost of producing, distributing and eventually retiring it from circulation. Seigniorage is an important source of revenue for some national banks. Seigniorage derived from notes is the difference between the interest earned on the government's securities portfolio, and the costs of producing and distributing bank notes.
    • Very interesting; know? This was simple in enough in language. Hence I didn’t bother to elaborate it further.
  • Kamlesh Sharma is Commonwealth Secretary General
    • India’s High Commissioner to UK, was selected to this post by the Commonwealth.
  • Tea production
    • Just yesterday we noted something about tea production. Today it is reported that we produced about 965 mn kgs of tea and exported 219 mn kgs last year.
  • Ever heard about Magitti?
    • This is a software being made for mobile phones. This will enable your phone to be aware of your position, preference, time of day and schedule to produce a location specific help, to find out just about whatever you are looking for.
    • Sounds like a dream or something out of a sci-fi movie? Well that is what would be staring at us possibly in the year 2009.
  • Indian highways and accidents
  • About medical tourism potential and investments
    • Our government is making a total investment of about $6.5 bn to encourage the medical tourism industry in the country. This will be used for setting up affordable hospitals and budget hotels for patients’ relatives in the country.
    • The size of this industry stands at Rs. 1200 to 1500 crores.
  • Some extreme sports
    • Are you a sports-loving person? If so one of the following is sure to thrill you; just to know. Imagine the kick when you actually indulge in them!!!
    • Pocket bikes
      • These are available with 2 stroke and 4 stroke engines with capacities ranging between 47 cc to 100 cc. The power varies between 5 hp to 14 hp.
      • These are pint sized variants of the normal bikes; but are used for sport.
      • Pocket bike racing is known as Mini-moto or Mini GP racing.
    • Cliff jumping
      • Jumping from a high cliff into a water body down below.
    • Zorbing
      • Originated in New Zealand in the early 90’s.
      • A zorb is a translucent PVC sphere about 7 feet in radius, inside which two persons are strapped and then rolled downhill.
    • Quad bike safari
      • Traversing through a desert or mountains on a four-wheeled all-terrain vehicle.
    • Abseiling
      • Descending a cliff with a rope.
    • Tobogganing or sledging
      • Sliding down snowy hillsides on a toboggan, a flat wooden sledge curried up at the front end.
    • Kite surfing
      • A large power kite propels a rider through the water on a small surfboard.
    • Sand boarding
      • Like snowboarding, but done on sand. The rider stands on a board and cascades down a sand dune.
    • Potholing
      • Also called caving, spelunking or speleology, this is essentially exploring caves.
    • Shark diving
      • Done under expert supervision, this is a real thriller. The diver goes into the sea inside a top open cage while the sharks take a close look.
  • What is Black Friday shopping?
    • Black Friday is the day after Thanksgiving in the United States, where it is the beginning of the traditional Christmas shopping season.
    • This is when consumers do lot of festive shopping and the stores announce big deals for consumers.
    • Thanksgiving, or Thanksgiving Day, is a traditional North American holiday to give thanks for the things that one has at the conclusion of the harvest season. Thanksgiving is celebrated on the fourth Thursday of November in the United States and on the second Monday of October in Canada.
  • A bit about Timbuktu
    • Few places in the world have an air of mystery as alluring as Timbuktu. The name of this city in the West African country of Mali is so wrapped in legend that many people think of Timbuktu as a mythical, timeless land rather than a city with a real history.
    • In many cultures, Timbuktu is used in phrases to express great distance and to suggest something beyond a person's experience. Popular sayings such as "I'll knock you clear to Timbuktu" suggest that, for many people, Timbuktu has existed more as an idea of the remote and mysterious than as an actual place.
    • Two British environmentalists have started an adventurous journey to this place in a lorry powered by biofuel made from renewable sources, including recycled chocolate.

24.11.2007

  • Reliance Petroleum Limited
    • Its market cap is bigger than the market cap of all the three public sector majors -- IOC, BPCL and HPCL – though it has no fully functioning operating asset.
    • Its 580,000 barrel per day refinery is the 6th largest in the world and is being built in a special economic zone in Jamnagar.
  • Pakistan suspended from Commonwealth
    • This is the second time that it is being suspended from the 53 nation grouping.
    • It was suspended in 1999 when General Musharraf seized power. It was readmitted in 2004.
    • Secretary General of Commonwealth: Don McKinnon.
  • Top 1 to hit India
    • This is a car race with a difference. Instead of specially built formula one cars, this one is competed with purpose-built normal cars.
    • Another such similar contest is NASCAR. Normally a NASCAR event is conducted over an oval-shaped circuit.
    • Top 1 structure is currently divided into two categories – Series 1 featuring 2000 cc cars and Series 2 with its 1600 cc line up.
  • Diabetes causing genes
    • HLA-A and HLA-B are the genes that help the body to fight infection. Their faulty versions lead the immune system to destroy insulin-producing islet cells in the pancreas.
    • Type 1 diabetes, also known as juvenile diabetes, is caused by the destruction of cells in the pancreas.
  • Something about REITs
    • REIT – Real Estate Investment Trusts.
    • Typically they pay out at least 90% of their net income as dividends to investors. Rentals from properties owned and managed by these vehicles form a significant portion of their revenue stream. Therefore, their business model is based on investment in income-yielding commercial property such as business parks, office buildings, shopping malls and hotels.
  • Indian power sector’s losses
    • The official T&D (Transmission & Distribution) losses are at 35%. Compare this with China and Japan! It is 3% in China and 4% in Japan.
    • As the demand supply gap is presently at 13%, unless the power supply growth exceeds 14% it would be impossible to support a growth rate of 10% in GDP.
    • Estimates of expanding and upgrading electricity transmission and distribution network during 2007-12 put the investment requirement in the range of Rs. 400,000 crores.
  • How many states in India have restructured their electricity boards?
    • Reportedly 13. The overall impact is reported to be positive.
    • Restructuring usually involves separating the functions of the board into transmission, distribution and generation activities by forming dedicated companies for carrying out those activities.
  • Impact of spectator sports on a country’s economy?
    • England’s failure to qualify for Euro 2008, the premier international football tournament in Europe, is estimated to have set back the UK economy by 1 bn pounds.
    • The impact will be especially felt by way of sales in pubs where those fans who could not get tickets would gather to cheer their side over drinks.
  • Divestment proceeds to the government
    • Since 1991, the government earned about Rs. 51,600 crores through divestment of its stakes in Central Public Sector Enterprises.
  • Tea estates and social security
    • Ever since the 1951 Plantations Labour Act was enacted, the plantations have to provide for the welfare of the workers working on the plantations. The welfare included housing, medical facilities and education. This is reportedly due to the State not having developed infrastructure and delivery systems at that time in those areas. These social security measures add about Rs. 4 to 5 per kilogram of tea’s cost.
    • But now the plantations are demanding and the government has also veered round to the view that the government should bear a portion of this cost.
    • India produces about Rs. 6,500 crore worth of tea at factory gate level.

23.11.2007

  • Why are banks not selling their NPAs (bad debt)?
    • Even when the defaulting companies are not coming out of the red, bankers are betting that the real estate locked up in sick companies would fetch far more than the sale of NPAs to ARCs (Asset Reconstruction Companies).
    • The other reasons supporting such decisions are:
      • NPA levels are at record levels of less than 1% of total advances.
      • New rules by RBI which have set a floor price for banks selling off a portion of the sick loan. Since this price is significantly higher than the heavy discounts offered to the ARCs in earlier deals, they are finding that the deals are no longer attractive.
      • Government’s decision to treat OCDs (Optionally Convertible Debentures) and preference shares as ECBs. This has put off many vulture funds which were using these instruments to buy bad loans from Indian banks. Since ECBs have a cap on interest, foreign funds no longer find such deals as attractive as before.
  • Pesticide free crops get a leg up in Andhra Pradesh
    • It is a very interesting article that appeared in today’s ET. It is about how AP is encouraging pesticide free farming and how it is benefiting farmers in reducing their input costs tremendously.
    • Found it hard to do a prĂ©cis on. Here goes the link for it.
  • SAT strikes down SEBI’s disgorgement order
    • Remember the first ever disgorgement order given in India by SEBI?
    • Now SAT (Securities Appellate Tribunal) has struck down this order. The order was passed by SEBI in the IPO multiple demat scam.
    • It said that the order passed without giving a reasonable opportunity of being heard to the affected parties. It also found some inconsistency in the order in so far as the sequence of findings was concerned.
  • Inflation in the future
    • An estimate by FAO (Food and Agriculture Order) has predicted that food prices would be rising at a higher rate in the next 5 to 10 years than in the past, adversely impacting those economies that have recorded higher weights to the food index in the inflation basket.
    • What is the composition of our inflation basket? Food items account for 57% of the CPI (Consumer Price Index) and 26.94% of the WPI (Wholesale Price Index).
  • More on the unfolding subprime crisis losses
    • From now on till the end of 2008, nearly 4.5 lakh suprime mortgages per quarter are scheduled to undergo their first reset (that is unable to pay the mortgage amount, the borrower seeks rescheduling of the loan amount). That adds up to $300 bn or more of mortgage loans poised to sour, and a fair part probably will.
    • When the crisis began, initial estimates of ultimate losses were in the region of $250 to $300 bn and these may still be right. Only it will come in installments, quarter after quarter.
  • How to cope with an appreciating rupee?
    • In a very good article Rajrishi Singhal gives out some excellent suggestions. Take a look at them here.
  • Cosmic question over the longevity of the universe
    • The universe is believed to have been created in the ‘Big Bang’ sometime back – about 13.7 bn years ago.
    • Two US Astronomers are now saying that astronomers may have unwittingly hastened the end of the universe by simply looking at it!!!
    • Couldn’t really make sense of what was reported about it in the Hindu today. If you care to look at it; do let me know when you understand it.
  • Taslima Nasrin hounded yet again
    • This time from Kolkata. To Jaipur.

22.11.2007

  • Commonwealth Summit
    • It is scheduled to commence from tomorrow in Kampala, Uganda.
    • It appears to be divided on the issue of suspending Pakistan from the Commonwealth. But some countries are insisting that Pakistan should be suspended because of the imposition of emergency in that country. These countries base their argument on the fact that Zambia and Fiji were suspended when there was a reversal of democracy in those countries.
    • India did not take any overt stance and is reported to have said that it is for CMAG (Commonwealth Ministerial Action Group) to take a call on the issue.
  • Composition of the Nobel committee
    • Though since 1977 members of Parliament have not been allowed to sit on the committee, it tends to be made up of former politicians or those with looser ties to their parties. It currently consists of one member each of the five biggest parties in the Norwegian Parliament.
  • India’s infrastructure funding issues
    • During the 11th and 12th plans, the envisaged investments are to the tune of Rs. 20.18 lakh crores and Rs. 40.55 lakh crores respectively.
    • The capacity of the economy to absorb investment of this scale is dependent on:
      • The regulatory environment for attracting private investment
      • The intellectual capacity of managers – both public and private – to structure projects in a transparent and achievable way; and
      • A ‘fire-in-the-belly’ attitude to deliver quality products before deadlines.
    • Some good initiatives taken for streamlining contract award procedures include:
      • Formulating model concession agreements
      • Building viability gap funding windows; and
      • Finalizing a panel of advisers to structure projects for the private sector.
  • Some good political comment from TK Arun on Nandigram. Look at the excerpt below; but see the full article here.
    • To equate Nandigram with Gujarat is absurd. Nandigram’s violent one-upmanship is localized, it does not lead to violence or insecurity and effectively disenfranchisement outside Nandigram. The politics of identity-based hatred that led to the savage, organized attack on Muslims in Gujarat in early 2002 perpetuates a social divide across the country, in whose cracks fester toxins that can yet consume the entire body politic. Nothing of the sort applies to Nandigram, however condemnable the killings there.
    • Nandigram throws the spotlight on the failure of Left politics in India, failure to construct an emancipatory project within the framework of liberal democracy and participatory growth. One segment of the Left still eulogizes the authoritarian state capitalism of China and the erstwhile Soviet Union, and are determined to swim against the current of history. At the other end of the Left spectrum the Naxalites violently shrink whatever democratic space exists in rural life, instead of building on and expanding the freedom promised by the Constitution.
  • Centre considering regulation of Sovereign Wealth Funds
    • Since these are controlled by governments, it is felt that they would follow the agenda set by the country concerned. Management control of an Indian company slipping into hands of a fund owned by a hostile country could pose an enormous problem. There is also the issue of some of the countries promoting SWFs not enjoying market-economy status.
    • Concerns about such investment entering into the country are expressed by the national security adviser.
  • Most Gulf bonds don’t comply with Islamic law
    • Known as sukuk (Islamic bonds), these are sold with a repurchase undertaking – a promise that the borrower will pay back their face value at maturity or in the even of default, mirroring the structure of a conventional bond.
    • A promise to pay back capital violates the principle of risk – and profit-sharing on which the Islamic bonds should be based.
    • Islam bans lending on interest as usury. What is allowed is risk-sharing and profit-sharing.

21.11.2007

  • Branch and ATM licensing to be liberalized
    • Banks planning new branches and ATMs may no longer require a mandatory approval from RBI. The government is considering a proposal to de-license bank branches and ATMs in the country.
    • The move is in tune with the likely findings of the committee on financial sector reforms headed by Raghuram Rajan.
    • The opening of bank branches is governed by Section 23 of the Banking Regulation Act, 1949. Banks cannot open a new place of business in India or abroad unless RBI approves it.
  • Romulus and Remus cave may have been discovered
    • These are the twin founder of the city of Rome.
    • Italian archaeologists believe that they found the cave where a she-wolf suckled Romulus and Remus.
  • Carrefour’s entry into India
    • The world’s second largest retailer and Europe’s largest has made an entry into India. It is expected to choose an Indian partner early next year and plans to launch a wholly owned Indian cash-and-carry business in 2009.
  • Sortino Ratio
    • Frank Sortino developed this ratio. Many global MF (Mutual Fund) rating agencies prefer this risk-adjusted return measure over the Sharpe ratio, because it is simple and easy. This classifies risk in terms of upside and downside risk. It arrives at a minimum acceptable return (MAR) for an investor. Whenever the fund return is less than MAR, it adds the underperformances, but does not add outperformances. This is a better measure of risk than volatility, used by Sharpe ratio. The latter tends to value consistency in the form of good or bad performances.
  • Mastercard and mobile banking
    • Mastercard plans to use the mobile phone customer base to reach the unbanked population. According to its estimates banking penetration is under 30%. There are more people in the country with mobile phones than with bank accounts.
    • According to a recent BCG report there are about 135 mn households in India which do not have access to basic banking services and this constitutes about 65% of the total population.
  • What are the factors that led to India getting exposed to the global shocks in food supplies?
    • India was largely immune from global price fluctuations earlier due to tight government control on supply and prices and rising production. But increased integration with global markets, through export of value-added products such as processed foods, and recourse to imports due to stagnant production (of wheat, pulses and oilseeds in particular) has exposed India to global shocks.
  • A bit about Vijay Kelkar’s background
    • He was recently appointed as the Chairman of the 13th Finance Commission. He is not an IAS officer, but an engineer by training and a Ph.D in economics.
    • He headed the task forces on direct and indirect taxes, and also the one on implementation of the Fiscal Responsibility and Budget Management Act. He is largely credited with the drafting of the Goods and Services Act that is expected to be implemented all over the country from 2010.

20.11.2007

  • I gave answers to a couple of your shout-box queries in today's Discover It. Look at them here.
  • FDI in cable TV set to touch 74%
    • The government is set to allow FDI up to 74% FDI in cable TV services and the HITS satellite-based platform to distribute television signals. This move is expected to intensify competition between telecom companies and cable operators.
  • NHRC equates Nandigram with Godhra
    • Look at a quote attributed to the NHRC Chairman, S. Rajendra Babu:
      • Both the incidents were a severe assault on the face of democracy and inflicted the worst scars on the face of the nation. The state human rights commission is actively involved in taking the case to its logical end.
  • What should be India’s stand be at Bali climate meet?
    • This is a very important debate that appeared in today’s ET. Take a look at it. You may be aware that he UN conference on global warming is to be held in Bali, Indonesia in December. Some important points out of this excerpted below:
    • The vital question that hangs like a Damocles’ sword over India’s head is whether India will be forced to accept legally binding emission targets by developed countries of the west. Such targets would be at the cost of growth of India’s GDP and at the cost of employment. There is no free lunch in reducing carbon emission and mitigating pollution.
    • No wonder the United States introduced air and water pollution control laws after a 100 years of rapid industrialisation. The effective amendments to the Federal Water Pollution Control Act came as late as 1972 and Clean Air Act was given teeth in 1970. The per capita income of the US had already reached $5,000 by then.
    • A glaring case of this trade-off between reducing pollution and extinguishing livelihoods of people comes from the action taken to preserve the Taj, resulting in the closure of metal foundries, glass factories and brick kilns in Agra. Each small unit was asked to shift from coal to natural gas, which meant an expenditure of Rs 30 lakh to 40 lakh per unit. Obviously, the small units closed and 100,000 workers lost their jobs.
    • Greenpeace recently released a survey based report named “Hiding behind the poor” which revealed that the highest income group in India, constitution merely 1% of the population, emits 4.5 times as much CO2 as the lowest income group consisting of 38% of the population.
  • India’s Uranium mining scene
    • India recently commenced work at Tummalapalle mine and processing mill in Cuddapah district of Andhra Pradesh. It is being set up by the state-owned Uranium Corporation of India Limited (UCIL) at a cost of Rs. 1106 crores.
    • With a capacity to process 3,000 tonne of ore daily, the plant will be the third in India and the first in Andhra Pradesh. Two other mills with a total capacity of 5,090 tonnes per day operate in Jharkhand. A crippling shortage of fuel has resulted in India’s nuclear power generating stations operating at about 50% of their capacity.
    • The country’s 17 nuclear power plants have a total generating capacity of 4,000 MW. India aims to increase this to 20,000 MW by 2020.
  • PFC mulls overseas arm to power infrastructure needs
    • The Power Finance Corporation is set to establish an overseas financial company for the development of infrastructure needs of the power sector in India.
    • This overseas firm will borrow foreign exchange to the tune of about $5 bn a year from RBI. The forex money would then go into the corpus of PFC arm for providing foreign currency loans to Indian power companies for meeting their requirement of raw material machinery imports.
    • Financing is expected to be a big problem for the growing power sector in coming years. The sector needs investment of about Rs. 10.30 lakh crores in the 11th Plan. A shortfall of over Rs. 4.5 lakh crores is expected. PFC’s efforts are expected to make good some of this shortfall.
  • Woman in news
    • Micheline Calmy-Rey
      • She is the President of Swiss Confederation, who was on a recent visit to our country.
  • India seems to have become the breeding ground for international chess Grandmasters!
    • With the Kochi boy G.N. Gopal having officially become the 16th Grandmaster of the country, this feeling is not incorrect.
    • India also added two more players to its list of International Masters. Tamilnadu’s P. Sethuraman and Aswin Jayaram received confirmation of their titles.
  • Did Jesus visit India?
    • It appears that according to the Bible, the life of Jesus between the ages of 13 and 30 remains untouched by gospels.
    • The Aquarian Gospel” is a movie being made that portrays Jesus as a holy man and teacher inspired by a myriad of eastern religions in India. The movie takes its name from a century old book that examined Christianity’s eastern roots.
  • Diplomatic gaffes too can be money spinners
    • The Spanish King Juan Carlos recently turned to Venezuelan leader Hugo Chavez at a public event and was reported to have said to him, a bit irritably, “Why don’t you shut up?”
    • This breach of diplomatic protocol became a smash hit across Spain today. A multi-million euro business selling ringtones, mugs, T-shirts and websites has resulted from this dialogue.

19.11.2007

  • More controls on FIIs
    • The government is thinking of restricting investments by FIIs from countries whose market regulatory structure is not compliant with principles laid down by IOSCO. This is in line with the recommendations made by Ashok Lahiri committee.
    • IOSCO is the Spain based international standard setter for securities markets regulating more than 90% of world’s securities markets. All IOSCO members have to sign an MOU, follow the principles endorsed by the body and facilitate exchange of information among the international community of securities regulators. The organization follows an objective assessment of the level of implementation of the IOSCO principles in the jurisdictions of its members.
  • WHO (World Health Organization) may remove India from vaccine source list
    • This follows the inspection by WHO of some GMP approved units in both private and public sector companies in India. The agency was not satisfied with what it saw and has said so in its report that has been submitted to the health ministry a couple of months ago.
    • GMP stands for good manufacturing practices. WHO has found problems with India’s drug regulator and some Indian pharma companies during the inspection over the implementation of the GMP.
    • In India the GMP standards approval is given by the state drug regulators and the DCGI – Drug Controller General of India.
    • Unlike other drugs, vaccines are mostly sourced by governments and institutions in bulk. Indian vaccine makers export around Rs. 1,500 crores every year, a large amount of which are sourced by global agencies such as WHO.
  • An interesting Mexican bull
    • This bull named El Zalamero, aged about 17 (considered equivalent to 70 years in humans) is known for its bravery and virility. In just 6 years, it has sired more than 25 calves of the fighting breed and even in this old age, it is the stud for about 15 cows that it lives with.
    • When it was just 4 years old, it debuted on the world’s largest bull ring viz., Monumental Plaza de Toros of Mexico.
  • An interesting issue about Indian pharma companies following best practices in India
    • Recently Ranbaxy has recalled over 73 mn tablets (gabapentin) from the US market as they reportedly contained higher levels of impurities than legally permitted.
    • This has raised a question as to why we don’t see such recalls in India? The sad fact is that quality standards are flouted day in and day out with impunity in our country. The speed with which trials are conducted in the US and damages/punishment are awarded is not seen in India.
  • Indo US differences over WTO talks
    • The points of contention between the two were high levels of trade distorting farm subsidies provided by the US and India’s relatively high tariffs on industrial products. India wants the US to commit to lower farm subsidies before it demands more market access for its farm products from developing countries. US has agreed to marginally reduce its subsidies, but could agree for more only when developing countries make more concessions.
    • In the area of NAMA (Non-agricultural market access) negotiations, the US wants India to make real cuts in tariffs, instead of just lowering the bound rates. India argues that since WTO negotiations take place on the basis of bound rates (the levels beyond which members cannot increase tariffs at any point), it is unfair to demand cuts on the applied rates.

18.11.2007

  • Language lessons:
  • Japanese set to hunt the humpback whale for the first time in decades
    • These whales were hunted to near extinction four decades ago. They have been off-limits since 1963 except for a small number caught under subsistence whaling programme by Greenland and the Caribbean nation of Saint Vincent and Grenadines.
    • Estimates put their global population at 30,000 to 40,000.
    • Japan is about to break the decades old moratorium on hunting these whales ostensibly for scientific research. Its whaling fleet is leaving for south pacific with orders to kill up to 50 of these whales.
    • Japan says that whaling is a Japanese tradition since the early 1600’s.
    • Since 1986 there is a moratorium on commercial whaling imposed by the IWC.
  • Online advertising markets
    • Globally the digital advertising market is worth $30 bn and in India it is about Rs. 500 crores and is growing at 50% annually.
    • Worldwide, interactive ads account for 8% of media spend.
  • US slowdown and impact on China
    • If the US economic growth slows by a percentage point, it will result in a decline of 6% for Chinese exports.
    • UN estimates put the world GDP growth to be at 3.4% for 2007. This is less than the 4% recorded in 2006.
  • Credit rating for Indian cities
    • Currently there is an ongoing exercise of credit rating 63 of the Indian cities. Four credit rating agencies viz., Crisil, Care, ICRA and Fitch are undertaking the exercise.
    • The higher a city’s rating the better its bonds subscriptions. Under the JNNURM, the Centre has promised to dole out Rs. 50,000 crore (approximately 50%) of the total requirement of funds. A city with better ratings will be able to issue bonds through the PFDF.
  • DGCA – Director General of Civil Aviation
    • Mr. Kanu Gohain.
    • He is likely to get a six month extension in service. He will be in service till June 30, 2008.
  • Planning Commission proposes National Electricity Fund
    • This is to generate resources for improving power distribution network in the country.
    • Some proposals under consideration include:
      • Granting priority sector lending status to power projects in the country.
      • Raising the income tax exemption limit for investment in infrastructure bonds from Rs. 1 lakh to Rs. 1.5 lakh.
  • India’s demographics
    • By 2050, about 32.8% of the country’s population will be over 50 years old.
    • The country needs 3 mn nurses by 2017. Annually about 80,000 students are enrolling for nursing courses.
    • Is it only IT that is an employment generator?
  • From the Open Space column of TOI
    • Titanium toothbrush
      • It was invented in Japan. They help do away with toothpaste.
      • One variety of this uses titanium dioxide, which causes an electrochemical reaction while brushing and this helps remove plaque.
      • The other variety uses titanium bristles that last for several years.
    • White holes
      • These are the opposite of black holes.
      • They eject matter and anti-matter instead of sucking them as done by black holes.
      • A Schwarzschild wormhole has two ends. One end is a black hole, sucking in matter and other end is a white hole, ejecting matter.

17.11.2007

  • Currency futures soon?
    • Indians may soon be allowed to participate in exchange traded currency futures.
    • These are instruments that allow them to take positions in future value of the rupee. A currency futures contract is one where two parties agree to buy and sell the currency at a future date at a pre-determined price.
    • This follows the recommendation made by an internal panel of the RBI on this.
    • But these recommendations also could possibly spark a turf war between the RBI and SEBI. The recommendation is that the RBI should retain the regulatory aspects of the trade even though securities exchanges are the domain of SEBI.
    • See what we noted about this topic earlier on 30th June and 7th June.
  • When is a book considered a best seller?
    • When it sells 3000 copies.
    • Heard about Chetan Bhagat’s “Five Point Someone”? It seems to be making waves.
    • It sold over 50,000 copies.
  • Finally the government gets the go ahead for talks with the IAEA
    • The Left parties gave a conditional go ahead to the government to approach the IAEA to discuss draft safeguards agreement.
  • India’s cryogenic engine test successful
    • These engines are used in launching the GSLVs. This technology was so far confined to Russia, Europe and the US.
    • Sometime earlier on 29th October,2006 to be precise, papers reported this fact a little differently. But do take a look at the details about what exactly a cryogenic engine is capable of here.
  • Forex reserves at $270 bn mark
    • At the current level the reserves are close to a third of the size of the country’s economy.
  • SBI’s Janata depositors issue
    • The scheme was launched way back in 1971 to inculcate the habit of savings, especially among middle and low income groups.
    • This began running losses due to the hefty commission paid to the deposit collectors (3.5%) and also due to the heavy expenses attributable to the scheme. Hence SBI decided to discontinue the scheme.
    • The deposit holders have approached the Supreme Court against the discontinuance.
  • How many varieties of CPI (Consumer Price Index) are there?
    • Four:
      • UNME: Urban Non Manual Employees
      • IW: Industrial Workers
      • AL: Agricultural Labour
      • RL: Rural Labour
  • Strike by WGA – Writers Guild of America
    • The 12000 members of the WGA are on a war path. They are demanding that the residual payments for re-use movies and shows on DVDs and newer channels like Internet and mobiles be hiked from 5 cents to 8 cents.
    • The Association of Motion Picture and Television Producers is not willing for it.
  • A look at the write-downs by global companies in the aftermath of the subprime crisis
    • A write down (reducing the recorded value of an asset in an account) represents the decline in the value of assets related to the house mortgages held as assets by these firms:
      • Citigroup: $8 to $11 bn
      • Merril Lynch: $7.9 bn
      • Morgan Stanley: $3.7 bn
      • UBS and HSBC: $3.4 bn each
      • Bank of America: #3 bn
    • I think we should wait for figures from the ensuing quarters also before we realize the full impact of the crisis.

16.11.2007

  • More on Volatility Index (VIX)
    • Want to know more about this concept? You should read today’s article in ET. Read it here.
    • Sometimes called as “the investor gauge of fear”, it has developed over time to become one of the highlights of the modern day financial markets.
    • Look at what we have already noted about this earlier. 03.08.2007 & 03.07.2007
  • Airport policy: Government may allow multiple airports in metros
    • A new policy on the Greenfield airports in the country is in the final stages of preparation and is likely to be put in place by the first half of 2008.
    • The existing guidelines require a minimum distance of 150 km between an existing airport and a new one. The distance is stipulated at 150 km in case of international projects.
  • India’s steel sector likely to go places
    • The domestic steel sector is on a roll. From being the 5th largest steel producer, the country is all set to become the second largest producer globally by 2015-16. This would be a major leap for the sector.
    • During the year 2006, it is the 5th largest producer of crude steel.
    • At present while India is producing about 56 mn tonnes, the global pecking order is like this:
      • China – 422 mn tonnes (mt)
      • Japan – 116 mt
      • US – 98.6 mt
      • Russia
  • OECD Secretary General
    • Angel Gurria
  • OPEC Secretary General
    • Abdalla Salem el-Badri
  • Pakistan names interim prime minister
    • Mohammedmian Soomro, the Chairman of the Pakistan Senate is named as the interim prime minister.
  • India’s first teraflop super computer
    • PARAM Padma. Made in 2003 by CDAC
  • US slowdown’s global impact
    • One consequence of a US slowdown would be a falling dollar. Because of the falling dollar, it is quite likely that the European exports will be priced out of important markets, including the US and China.
    • It is also likely that many countries will stop financing the US current account and budgetary deficits. This structural readjustment will be painful.
    • A weaker dollar makes US exports more competitive and makes the Chinese exports to US more expensive.

15.11.2007

  • India to retain BPO edge
    • Though there is fair bit of hype around China and other cheaper destinations taking over India in the BPO game, many industry leaders disagree. India is expected to retain its advantage in terms of cost, scalability, English speaking population and domain expertise. Though the rising rupee is expected to make a dent in their profitability, grapevine has it that even at Rs. 30 a dollar, our BPO segment will continue to make money.
  • Indians going places!!
    • Indian American, Shantanu Narayen is now the President and CEO of Adobe Systems. This company is known for its Acrobat Reader software.
  • On revenue neutral rate (RNR) for GST
    • It is a very good article that appeared in today’s ET. Recommend reading it once. Do so here. This would give you a peep into how experts work their way through to making recommendations. Some points worth our noting:
    • The Kelkar task force report suggested that the GST rate would need to be levied at 20% -- 12% to Centre and 8% to States.
    • While this suggested rate falls below the present statutory rate of 28.5% (Cenvat of 16%, and VAT of 12.5%), it is expected to raise the hackles of the consumers.
    • The total excise/service tax/ VAT/sales tax revenues of the Centre and the states in 2005-06 were Rs. 134000 crore and Rs. 139000 crore respectively.
    • Assuming that approximately 40% of the central excise revenues and 20% of the state VAT/sales tax revenues are from motor fuels, the balance of the revenues from other goods and services that need to be replaced by the GST are Rs. 89000 crore for the Centre and Rs. 111000 crore for the states, making up a total of Rs. 200000 crore.
    • In 2005-06, the total private consumer expenditure on all goods and services was Rs 2,072 thousand crore at current market prices. Making adjustments for sales and excise taxes included in these values and for the private consumption expenditure on motor fuels, the total tax base (at pre-tax prices) for all other goods and services is Rs. 1,763 thousand crore.
    • These values yield a revenue-neutral GST rate of approximately 11% (200 as per cent of 1,763 is 11.3%). The RNR for the Centre is 5% and for the states 6.3%. Allowing for some leakages, the combined RNR could be in the range of 12%.
  • The slowing IIP figures do not point to a trend
    • With the government’s indirect tax collections growing 18.6% in October, the belief that the slowdown noticed in September IIP figures is only blip and not a trend.
  • M. Rammohan Rao committee of SEBI
    • Constituted by SEBI, this committee on derivatives recommended introduction of mini contracts on equity indices, options with longer life/tenure, volatility index and futures and option contracts, options of futures, bond indices and F&O contracts, exchange traded currency (forex) F&O and exchange traded products to cater to different investment categories.
  • India’s seafood exports market
    • It is a Rs. 8,300 crore market.
    • India is a leading exporter of Black Tiger shrimp to the US. But this market is threatened by the cheap Vannamei shrimp from other Asian countries.
  • 15th International Children’s Film Festival
    • Started off in Hyderabad. About 115 films from 30 countries will be screened.
  • 13th Finance Commission
    • Constituted by the President under Article 280(1) of the Constitution, with Mr. Vijay Kelkar, former Finance Secretary as the Chairman. Other members are:
      • Indira Rajaraman, Professor, NIPFP
      • Abusaleh Shariff, Chief Economist, NCAER
      • Atul Sharma, former Vice Chancellor of Rajiv Gandhi University
      • BK Chaturvedi, Planning Commission Member as part time member
      • Sumit Bose as Secretary of the Commission.
    • It will make recommendations for the period 2010 to 2015. It is expected to submit its report by October 31, 2009.
    • It will look into:
      • Principles governing grants-in-aid of the revenues of States out of the Consolidate Fund of India
      • Measures needed to augment the Consolidated Fund of a State to supplement resources of panchayats and municipalities
      • Review of the finances of the Union and States and recommending steps for maintaining a stable and sustainable fiscal environment consistent with equitable growth
      • Review of the existing arrangements for financing disaster management
      • The need for improving the quality of public expenditure to obtain better outputs and outcomes
  • Bunchy top disease in banana plants
    • It is caused by a virus that spreads by the banana aphid.
    • Infected plants are dwarfed in nature and their emerging leaves are small and narrow with yellow edges. The leaves grow upright and have a stunted, bunched appearance.