31.01.2008

• I noted for you from a very good article on regional trade agreements. Take a look at it here in today’s Discover It.
• FDI liberalization in various sectors
• The government liberalized the FDI limits in various sectors. Take a look at the liberalized sectors:
• 100% allowed in: Titanium mining, MRO (Maintenance, Repair and Overhaul) operations, Flying training institutes, Technical training institutes, Helicopter/sea plane services.
• 74% allowed in: Non-scheduled airlines.
• 49% allowed in: Commodity exchanges (FDI up to 26% FII up to 23% with a 5% cap on a single entity), credit information companies (24% cap on FIIs), Petroleum refining by PSUs (with prior FIPB approval)
• Navin Chawla issue
• He is one of the most controversial Election Commissioners that we have seen in recent times. The post itself is a hot one. He found himself in the midst of a controversy. Let us see how.
• The Shah Commission (which looked into the excesses committed during the Emergency) is reported to have recorded a detailed account of his negative conduct during emergency. But one major issue that appears to have put him in defensive is that a Jaipur based trust run by his wife is reported to have received donations siphoned from the MPLAD funds by a section of Congress MPs.
• About 200 MPs led by BJP have petitioned the then President Dr. Abdul Kalam seeking his dismissal. The President forwarded the petition to the PM, Dr. Manmohan Singh. The PM refused to pass it on to the CEC. The BJP then approached the Supreme Court. The Centre took the stand that it is not bound to forward the petition to the CEC. The CEC took the stand that if a petition came before him, he had the powers to consider it. Thereupon the Supreme Court left it to the BJP to approach the CEC.
• So now the BJP has approached the CEC with a petition signed by about 180 MPs seeking his removal.
• According to Article 324(5) of the Constitution, the CEC has the powers to secure an Election Commissioner’s removal. If the CEC makes a recommendation to the President, the EC can be removed. What this means is that the CEC should first give a finding that the EC deserves to be removed. Then he should make a recommendation to the President through the Central Government. Once the government forwards it to the President and the President accepts CEC’s recommendation, the EC stands removed.
• What is the news item about Mahatma Gandhi’s ashes being immersed in the Arabian sea with State honours?
• Why so late? He died 60 years ago know?
• It appears that after he was killed, his ashes were sent to villages and towns across India for memorial services by his followers. It is not known how many or if any urns containing his ashes still exist. The last time an urn of Mahatma’s ashes was found was in 1997 in a bank vault in Bhubaneshwar. The ashes were later immersed at the confluence of the Ganges and the Yamuna rivers in Allahabad.
• This time an urn preserved by one Bharat Narayan, a businessman was sent by him to Mani Bhavan in Mumbai last year. Mani Bhavan is a house that Gandhi lived in when he visited Mumbai. It is now a museum.
• These ashes were immersed by the Mahatma’s great grand daughter, the 75 year old Nilamben Parekh. The immersion was carried out in the Arabian sea in the presence of 15 of the Mahatma’s descendants.
• Is India slowly finding its place in the football map of the world?
• If news reports are to be believed, this seems to be the case.
• The world’s richest football clubs are: Arsenal, Real Madrid and FC Barcelona, in that order.
• Arsenal and Liverpool FC (FC stands for football club) came to the country on a reconnaissance mission recently. Now FC Barcelona, the club for which Ronaldinho plays, has announced plans to explore opportunities in India. Two other premier clubs that have announced business tie ups with Indian businesses include Manchester United (ManU) and Chelsea.
• Is Sunil Mittal happy? I am sure he will be. Is it not after all he who came out with a grand vision of bringing football to glory in India?
• Wipro’s TINA
• TINA here doesn’t stand for “There Is No Alternative” that we are so accustomed to listening to from psephologists during election time.
• It stands for “The Intelligent NextGen Associate”, a name given to the service oriented architecture by Wipro.
• Gibberish? I know for some of you, it will be. Imagine this scene. You enter a huge retail store. Then instead of a human sales associate, if you are accosted / accompanied by a robot to help you out, what you are experiencing is TINA from wipro.
• Remember the tiff with Singapore on bank licensing issue? It refuses to die down.
• India and Singapore have signed a CECA – Comprehensive Economic Cooperation Agreement. Under this, both countries have agreed to grant QFB (Qualified Full Banking) status to three of each other’s banks. This enables the banks to open up to 15 branches and ATM centres in the country.
• It appears Singapore is not willing to give QFB status to ICICI Bank. So, India is retaliating by not giving it to UOB (United Overseas Bank) of Singapore.
• There are about 8 Indian banks operating in Singapore. Four of them -- Indian Bank, UCO Bank, Bank of India and Indian Overseas Bank – have full bank licenses and can access retail market in Singapore. The other four – SBI, ICICI Bank, Bank of Baroda and UTI Bank – operate in the wholesale segment as merchant banks and offshore banks. In contrast Singapore has only one bank viz., DBS with two branches in India.
• Why does budgetary support need a rethink?
• Like father like son. Rahul Gandhi is credited with having said that only 5 paise out of every rupee reaches the intended beneficiaries as against 15 piase during his father’s time. So can you conjure up some solution for this problem? Take a look what ET says:
• One, the Planning Commission must go through the demands with a fine-toothed comb, throw out/prune all demands where there is the slightest doubt regarding efficacy in delivery and then go to the finance ministry with a reasonable wish list. For this to succeed, the plan panel must revert to the practice (followed till the Eighth Five Year Plan) of taking stock of all on-going projects and re-categorising expenditures of a continuous nature as ‘non-plan’. This will automatically give a correct indication of the Plan size (unlike at present where close to 30-35% of expenditure actually goes for wages and salaries/operation and maintenance). It will lead to more informed discussion/negotiation between the finance ministry and other ministries and not degenerate into a test of the clout of various ministries (read ministers).
• Two, money saved in the process must not be used for some ingenious scheme thought up by some bureaucrat seeking to extend his tenure at the Centre. Instead, it must be transferred by way of direct cash grants to well-targeted beneficiaries. Yes, of course, there will still be some leakage but we will do away with the costly and wasteful super-structure.

30.01.2008

• Take a look at what we noted on RBI’s quarterly monetary policy review. In today’s Discover It blog.
• TCS cuts staff salaries!!!
• In a surprising move, the IT major has imposed a cut of about 1.5% in the salaries of its employees. This warns of tough times ahead for the company and IT sector specifically.
• Though its quarterly results met with expectations, it is portending tough times ahead for the IT sector.
• The reasons for the tough times are reportedly the strengthening rupee and the shrinking US market because of the subprime crisis.
• The US slowdown is making Indian IT majors look at Japan seriously. The Japanese market is estimated to be about $150 bn in size and is reportedly second only to the US market.
• Let’s wait and watch.
• Hussain Sagar lake being cleaned up
• Though this may not be newsworthy at national level, my roots in Hyderabad make me take pride in the effort and report it in these columns.
• The state government is spending a whopping Rs. 320 crores to clean it up. For this purpose it took a loan from JICA (Japan International Cooperation Agency). The project envisages construction of a new sewerage treatment plant with a capacity of 30 mn litres per day.
• The lake was once a fresh water lake and was built in 1562 to supply water to agricultural land. But over the last 30 years, sewage and industrial waste have been dumped into the lake. Over 25,000 Ganesh idols are being immersed every year in the lake.
• How does SARS virus enter host cells?
• Recent research by Chinese scientists suggests that it enters host cells via ‘fatty rafts’ in the cell membrane.
• You might recall that SARS (Severe Acute Respiratory Syndrome) spread to many countries around the world in 2003 and killed about 800 people.
• India’s housing shortage
• Reportedly there is a shortage of about 25 mn dwelling units for the weaker and low income categories. Two reasons that are attributed for this are:
• The abysmal failure of the public transport system in most Indian cities meant that people are forced to live close to their work place, which has created unwarranted demand pressure and high prices for housing.
• The archaic land laws made land conversion difficult and discouraged land pooling. This has further accentuated the housing problem.
• Language lessons:
• Funambulist: an acrobat who performs on a tightrope or slack rope. Used in the context of RBI’s monetary policy review.
• Imprimatur: sanction: formal and explicit approval. Eg. There is a strange imprimatur to commercial banks – to lend more to employment intensive industries.
• Emerging markets: future safe havens?
• If you have been following my writings in our blogs, you would have noticed that the US is the big daddy when it comes to absorbing the trade surpluses that various countries across the world have. These surpluses are usually invested by the governments of the world in US treasury bonds (in other words, the rest of the world finances the US fiscal deficits). But slowly a feeling is gaining ground that the emerging markets of the world may offer safe havens for such investments in future. Take a look at the strong arguments in favour of this line of thinking in today’s ET. The article is by SSSA Aiyar.
• India Inc’s green initiatives to earn carbon and tax credits
• At present there is no clear-cut definition in the Indian tax laws about treatment of carbon credits, which are accounted for by some as capital assets and others as goods. Industry has pitched for treating them as capital assets and exempting them from capital gains tax.
• A World Bank study has pegged the global market size for carbon trading at $10 bn.
• An expert committee headed by Dr. RK Pachauri is looking into recommending the measures that the government may have to take in future to face the impact of climate change.
• SocGen fraud
• Societe Generale is France’s oldest bank. One of its employees – a junior futures trader Mr. Jerome Kerviel – has twisted and tweaked the systems in the bank to indulge in unauthorized trades on behalf of the bank, without its knowledge. This has resulted in the bank taking a losing bet of $73 bn on European share prices. Ultimately, the bank got away with a $7 bn loss. But it badly hit the confidence of the financial world and has shaken the belief in the regulatory and control systems in place in the banks of the developed world.
• Kerviel was an employee trained by the bank to detect fraud. But he used the skills to work round controls as a trader. He took a one way bet and waited for the market to turn in his favour. He took the arbitrage route on stock index futures and covered his tracks by juggling deals against fake ones with fictitious people. He was able to get away with all this because the bank’s risk systems do not check up on unregulated over-the-counter contracts straight away if no deposit is required. (Looks like gibberish? Don’t worry; they won’t ask you such detail in Civils. Enjoy if you can understand.)
• But do remember one thing. This is not the first time that a rogue trader had done in a bank. In 1995 Nick Leeson had done a similar fraud while working with Britain’s Bearings Bank. You know how much loss the Barings Bank suffered? A mere £827 million (US$1.4 billion). Looks like small change compared with SocGen’s loss; eh? Following Barings' collapse, Nick Leeson was sentenced to six and half years in Singapore. His wife left him and he was diagnosed with colon cancer. Against all odds, Nick Leeson survived and now fully recovered from cancer, lives happily in Ireland with second wife Leona and three children. In 2005 Nick was appointed General Manager of Galway United Football Club. By July 2007 he became its CEO.

29.01.2008

• Indo US nuclear deal: update on negotiations with IAEA
• Contrary to the government’s claim that the talks are proceeding smoothly, the Indian negotiators have so far failed to include certain provisions that are considered alien to an IAEA safeguards agreement. These provisions include an assurance of uninterrupted fuel supply and corrective measures in case there is a disruption.
• The US is reportedly waiting for the final safeguards agreement before approaching the NSG (Nuclear Suppliers Group). Most NSG countries have decided to come out with their positions only after India specific safeguards agreement is finalised.
• Two of the telecom’s important decision makers in India
• TRAI Chairman: Nripendra Misra
• Telecom Commission Chairman: Siddhartha Behura
• Government suspends manufacturing licences of four drug companies
• Remember the WHO (World Health Organization) report on our companies not following the good manufacturing practices?
• Now the Government suspended the licenses of Pasteur Institute of India, Haffkine Bio-Pharma Corp., BCG Vaccines and Central Research Institute.
• The suspension will continue till the companies make changes in line with the prescribed standards.
• The move is aimed at salvaging the repute of our vaccine exports.
• WHO hinted that India could be dropped from the list of vaccine sourcing nations.
• World’s biggest polluters are meeting in Hawaii
• The world’s biggest GHG (Greenhouse gas) emitters are sending delegates to a US sponsored meeting aimed at curbing climate change without stalling economic growth.
• Washington favours voluntary measures and ‘aspirational goals’ to limit climate change, aided by easier transfer of environmental technology.
• This is the second time that the group is being convened – the first time was in Washington in September last – and there has been some scepticism among environmentalists about the effectiveness of this process.
• Business expectation index
• The RBI prepares what is known as the Business Expectation Index. The index for January-March 2008 declined 2.5 percentage points over the previous quarter from 50.2% to 47.7%.
• The index is reportedly prepared after surveying over 1000 corporates.
• FIMMDA
• Fixed Income, Money Market and Derivatives Association.
• It is hosting its annual conference in Cairo this year.
• IMF Managing Director
• Dominique Strauss Kahn
• Can you give an example of IMF’s bias against developing countries?
• What could IMF have prescribed had the subprime crisis had its origins in some developing country? Or from a country that is not part of the North American and European economies? I am sure you would remember the prescriptions and lectures given for the East Asian countries during the 1998 East Asian currency crisis. But now that the subprime crisis originated because of a breakdown of credit and risk management practices and shortcoming in US financial regulation and supervision, look at what it is prescribing!!
• First priority is the restoration of normal function in financial markets, which means that the central banks should provide funding to interbank markets.
• It warned against excessive supervision that can exacerbate the crisis by calling for financial institutions to make balance sheet corrections on the asset side rather than securing capital.
• It felt that a slowdown could result in a decrease of the price of commodities, including oil, which would provide room for a more active monetary policy.
• These suggestions are what made the ET editorial comment that these policy prescriptions are like a nun endorsing a red light district.
• Why should not TRAI regulate mobile to landline tariffs?
• The differential pricing strategy adopted by our telecom companies is making the calls from cell phones to landlines costly. Hence these are subtly forcing users to call from cell phones to cell phones. This would ultimately bring down the market share of landline phones in the market. Hence TRAI is trying to mandate that there should be no such differential pricing.
• But the case against this is that, TRAI should be worried about competition in the market and not whether a particular technology survives or not. It should remain technology neutral.
• About India and China’s return to the world centre-stage
• It is a very good article that appeared in today’s ET. Take a look at it here.
• Though it makes a good reading, what struck me is the imbalance in the length of the period of the various ‘waves of evolution’. Perhaps people looking at the very same period sometime down the line – say in 3000 AD or 10000 AD will certainly notice a different set of ‘waves’.
• I think we should be cautious in identifying the ‘waves’ with such imbalances.
• But nevertheless it is a good read.
• The seven waves of evolution identified are:
• 40,000 BC: Language breakthrough. Language made its appearance.
• 5000 BC to 1500 AD: Agricultural revolution.
• 1500 AD to 1850 AD: Industrial revolution.
• 1850 to 1940 AD: Transport and telecom revolution.
• 1940 to 1975 AD: Computational and electro-chemical revolution.
• 1975 to 2002 AD: Network era.
• 2002 AD to present times: Knowledge and collaboration.
• Farm credit figures
• Farm credit target for 2006-07 (Rs. 1.75 lakh crores) was lower than the 2005-06 achievement of Rs. 1.80 lakh crores.
• 2006-07 achievement was Rs. 2.02 lakh crores.
• Tamiflu
• It is the preventive vaccine for bird flu. The US is willing to help India in offering technical support to contain bird flu by supplying this vaccine.
• The help offered by it includes: checking the availability of Tamiflu syrup for children from worldwide stocks; providing technical support for animal surveillance, and personnel protection equipment for rapid response teams in West Bengal.

24.01.2008

• How are our IT companies facing the rupee appreciation?
• In the last 15 months, the rupee has appreciated 14% to 15% and every 1% rise has a margin impact of 40 to 50 basis points (0.40 to 0.50 %) for them.
• Wipro will cover the currency at a particular level for the entire tenure of a project so that the margins are protected.
• Satyam BPO has gone back to the table a couple of times for rupee-triggered price renegotiation and is also attempting outcome-linked contract structures.
• Both Wipro and Infosys have managed price increases in the range of 3% to 5% from both existing and new customers.
• Can you notice the different strategies adopted by different companies?
• On stock market turbulence
• When there is turbulence in the stock markets, it is but natural that all sorts of suggestions will be thrown up for proper monitoring and reform. Are investors not aware of the inherent risks when they are betting their money? I am surprised that governments appear to be deriving lot of satisfaction when there is buoyancy in the markets and lose their nerve when there is a fall. Whatever may be our opinions on the matter, what matters to you and me is that it is quite possible that you will be asked questions in interview about such times.
• One such possible query could be: “Do you feel that there is any structural weakness / deficiency in the Indian markets? If so, how would you address them?” For such a question, today’s ET editorial offers the best answer. Look at it:
• First is the lack of depth. The fear of FIIs pulling out was enough to send the market into a vertiginous fall. More institutional players – such as pension funds — are required to balance out investment horizons and to provide markets with adequate depth.
• Second, enough discussion has already taken place about the need for a robust securities lending and short selling infrastructure. It’s time to implement it immediately if heterogeneity is what is needed.
• Finally, if there is one lesson to be learnt from the recent trading it is this: there might be enough liquidity in the system, but the temporary mismatches in transferring liquidity from one part of the system to another is causing bouts of desperation. The solution is to ease such flows within the system.
• The crisis in rural health care
• This is one excellent piece that appeared in today’s ET. You can’t afford to miss it. It is by Arvind Panagariya.
• The article gives the details of organisation of the rural health care in India very well. Couldn’t get a better account elsewhere so far.
• I don’t want to do a précis about it. You must read it; read it and read it. Don’t know that the link leads to it? Then click here to read it.
• About our exports
• The government is thinking of weeding out some time worn export incentive schemes. These will be schemes of marginal use and low utility like the EPCGS (Export Promotion Capital Goods Scheme) etc.
• Our exports target for the current year is $160 bn. We are likely to see our exports touching $150 bn.
• The next year’s target is pegged at $200 bn.
• A new investment instrument for our markets
• It is a DCB – Domestic Convertible Bond.
• It would allow investors to trade their debt component and equity options separately.
• It will be like a convertible debenture making regular coupon and principal payments, and also giving the bondholder the option to convert the bond into a stock.
• The instrument will be largely aimed at institutional players. Active presence of institutional investors was important to bring liquidity in the debt market.
• Revival plan for irrigation
• Government is thinking of coming out with a National Project concept for this. It will cover 14 ventures and the identified projects will get 90% funds directly from the Centre, and states will have to fork out only 10%.
• Since 1996-97, the Centre has spent Rs. 20,598 crores under AIBP (Accelerated Irrigation Benefit Programme). States have added another Rs. 15,000 crores for this. Despite this, the net farm area that is officially irrigated has remained static at 53 to 55 mn hectares.
• Studies point out that between 1995-96 (before AIBP was launched) and 2003-04 (the last year for which official data is available), the gross irrigated area has risen from 46.5 mh (million hectares) to 49.3 mh for all cereals, from 3 mh to 3.3 mh for pulses and from 3.9 mh to 4 mh for sugarcane. Moreover, even this marginal increase has been offset by declines in oilseeds (from 7.3 mh to 6.5 mh) and cotton (from 3.2 mh to 2.6 mh). In effect, the over Rs 35,000-crore public money infusion into AIBP have not benefited the farmer.
• Want to know how we have been faring under various Plans? Look at this figure.
• The actual irrigation potential created so far is about 101 mn hectares. The average cost of irrigation works out to Rs. 1 lakh per hectare.

23.01.2008

• Turmoil in stock markets
• Looks like the fall in stock markets around the world is spreading like a contagion. Though the cut in key rates by the US Federal Reserve (a cut of 75 basis points) appears to have had a sobering effect today, it is quite likely that we will see lot of turbulence ahead in the days to come. This rate cut is the steepest by the US central bank in 23 years. Also this is the first emergency rate cut since the 9/11 terror attacks.
• Dr. Rangarajan’s forecast on our economy
• The Chairman of the Prime Minister’s Economic Advisory Council says that we can grow at 8.5% for the next five years.
• He expects that the US recession would be a milder one, something like a slowdown instead of a full-blown recession.
• In India the growth has not been consumption led, but was driven by investments. Such growth can sustain further consumption.
• It is largely the consumer durable sector in the manufacturing segment which has shown negative growth. As this segment is highly cyclical in nature, it may bottom out soon. Moreover, as and when the Sixth Pay Commission report is accepted it will also boost demand.
• In defence of the Tata Nano
• There was some criticism from NGOs and environmentalists that the car would cause lot of pollution and would clutter our roads further.
• In a very good article Kala Sridhar argues in favour of the car. Take a look at the full article here.
• Consumer disposable incomes are constantly rising, with India’s per capita gross national income rising from $460 in 2001 to nearly $820 in 2006.
• Currently India sells only 1.4 mn four-wheelers, whereas China sells 5 mn and the US sells over 10 mn four-wheelers.
• As the number of vehicles on the road increases, it is for the government to step up relevant infrastructure accordingly.
• While the country’s public revenues have grown faster than the country’s GDP, public services have not significantly improved.
• Investment on road laying and maintenance has to be increased.
• Mass transport systems have to be kept in place and well maintained.
• There is no point in blaming the Nano when our cities are quite automobile oriented as of now.
• Gordon Brown moots honour for Sachin Tendulkar
• The visiting British PM has suggested that Sachin Tendulkar’s contribution to cricket should be recognised by honouring him with Britain’s knighthood. This may however, remain unlikely.
• The reason is that India became a Republic on January 26, 1950. This meant that the British Queen is no longer the Head of State for India. From this followed the stoppage of the practice of knighting Indians.
• Some notable Indians who were knighted by the British Queen before India became a republic: Rabindranath Tagore, Sarvepalli Radhakrishnan and C.V. Raman.
• A package for farmers in the offing?
• Looks like Agriculture Minister Sharad Pawar was able to wrest a commitment from the Finance Minister about a package costing Rs. 30,000 crores covering 31 debt-prone districts of the country.
• This includes writing off bad debts arising from loans provided to farmers in those districts. Establishment of a long-term agricultural price stabilisation fund at the national level for crops prone to heavy price fluctuation. The fund is aimed at compensating farm commodity producers at times of heavy fall in prices.
• Virtualization in computing
• It allows a physical computer to house multiple ‘virtual machines’, each one acting like a separate computer with an operating system and all the software that runs on top of it.
• So far the big player in this area is VMware. But now Microsoft seems to be investing heavily in this space.
• We can expect some fireworks on this front soon.

22.01.2008

• India surely appears to be the flavour of the season even among OECD countries
• With France and UK showing enthusiasm about improving their relations with India, it sure appears to be the flavour of the season. Recently even China rolled out the red carpet for our Prime Minister.
• UK has even publicly said that it favours a permanent seat for India at the Security Council.
• During the currently ongoing visit of its Prime Minister Mr. Gordon Brown, both the countries pledged to pursue the UN agreement on the Comprehensive Convention against International Terrorism.
• ISRO successfully launches an Israeli satellite
• ISRO launched Israel’s Tecsar satellite using its PSLV –C10 rocket.
• This is a purely commercial launch. The satellite reportedly would track Tehran’s nuclear arms programme. It has got the capacity to take pictures with a 1 meter resolution.
• Some terminology that we should be familiar with in the context of the current retail boom
• There are three types of frauds happening in retail. The retailers are at the receiving end.
• Return fraud: In this, a consumer comes to exchange a product which actually hasn’t been purchased from the store in the first place. This is especially visible for high value merchandise such as apparel.
• Slip & Fall: In this, a consumer deliberately falls down in the shop and sues the retailer for negligence. In the Indian version, a consumer claims some valuable thing missing from the bag he kept with the security and sues the retailer.
• Sweet heartening: An employee colludes with a friend or other colleague who poses as a customer. The ‘sweet heart’ friend then purchases some high value item but is billed for a much cheaper product.
• Expert’s views on Indian economic reforms
• We have been noting extensively on the state of Indian Economy and economic reforms in our blogs from time to time. But it would do us a lot good when we read some expert’s views on various aspects of our economy or reforms. What better can it get, than knowing the views of an internationally renowned person like Dr. Raghuram Rajan? Take a look at his interview today in ET. It is here. But some excerpts for our notes:
• On government’s performance on fiscal front: While the FRBM targets are fairly under control, off balance-sheet items such as oil bonds are exploding. Sooner than later, the government must take cognisance of it. For instance, administered petrol prices are allowing PSUs to incur losses. Often other losses are buried under losses due to administered prices. As a majority shareholder in oil marketing companies, the government shouldn’t decide to repress prices to protect consumers. The government is doing so without consulting minority shareholders overruling corporate governance norms and property rights.
• On exchange rate: Exchange rate appreciation is a residual price that has to be paid. The RBI cannot hold the exchange rate for too long. Allowing one-way currency bets is not good. Eventually one is building up speculation which will contribute to inflation and liquidity in the system. Sooner than later they will run out of instruments to do so. What the RBI is essentially doing is fighting appreciation of the nominal exchange rate. Till exchange rate reaches equilibrium, there will be no clarity.
• Status quo on ADR/GDR front
• Remember this ADR/GDR route of raising capital for Indian companies?
• Government is in no hurry to lift the restrictions on companies raising funds abroad. Those that do not have domestic listing will be asked to wait for a while for going ahead with their ADR/GDR issues. This is with a view to promote home capital market.
• This follows the submission of a report by the committee headed by Saumitra Chaudhury which has gone into the issue. It appears to have recommended a status quo on the subject.
• At present companies have to go in for simultaneous listing, both on the foreign markets as well as domestic markets.
• Exim curbs on dual use chemicals may be eased
• The government appears to have agreed to subject international trade in 24 products known as the Australian Group of Chemicals and many other items in the same class to greater scrutiny. This move is aimed at preventing the proliferation of dual use materials from India.
• Though India is not a member of the Australia Group and there is no obligation on its part to impose such restrictions, it still felt it desirable to do so.
• Want to know something about the Australia Group. Follow this link.
• MCX is Asia’s first commodity exchange to allow carbon credits trading
• Two other prominent exchanges that trade carbon credits are: Chicago Climate Exchange and European Climate Exchange.
• The market for trading in carbon credits is estimated to be in the range of $60 bn to $70 bn annually. India has reportedly generated close to 30 mn carbon credits and has roughly another 140 mn in the pipeline for sale.
• The trading unit of carbon credits is going to be 200 tonne. Each tonne of carbon credit is an entitlement to emit one tonne of carbon dioxide equivalent gases.
• India-ASEAN FTA talks seem to be nearing conclusion
• With both the sides making some compromises, the stage appears set to clinch the deal.
• Let us await more info on this.

18.01.2008

• Medicine pricing; some reform in the offing
• The NPPA (National Pharmaceutical Pricing Authority) is planning to introduce what it calls pro rata pricing. It means that once the price of a strip of ten 100 mg tablets is fixed, a corresponding price will be applicable to all other strengths and packs even if no price is fixed for them.
• So far manufacturers are having a heyday by tinkering with pack size to defeat the price caps fixed for medicines.
• At present, price is fixed for a certain pack or strength. For a different strength or pack, the price fixed is not applicable and it takes months before NPPA can fix the price for a new pack. This is what is sought to be plugged with the proposed move.
• India destroys 93% of its chemical weapons stock
• India is on the path to destroy all of its chemical weapons by April next year.
• Mobile TV to make an entry soon
• Mobile TV refers to serving TV content on mobile phones.
• TRAI has made its recommendations concerning usage and allocation of spectrum bands, method of beaming content, details of licences like fees and validity command area of these licences and eligibility criteria.
• US team clones human embryo
• A small California based company – Stemagen has reportedly succeeded in cloning human embryo.
• Their success included making five early stage embryos (called blastocysts) from donated human eggs and skin cells from two men.
• Stem cells, you might recall, are found throughout the body, renewing tissue and blood cells. Cells taken from very early human embryos can give rise to all the cells and tissues found in the human body. Scientists hope to harness their power to transform medicine, to repair devastating injuries, replace the brain cells lost in Parkinson’s disease, or to cure juvenile diabetes.
• Take a look at what we noted about stem cells earlier in our blog.
• Why is our textile sector more rupee-hit?
• It is a very good article that appeared in today’s ET. Take a look at it here. Some quick bullet points for us to remember from this:
• Structural weakness – i.e., poor and inadequate weaving and processing capacities. This restricts its strengths to only a few areas – yarn and casual/fashion wear garments.
• Its competence in mass consumption (regular wear) garments also is very restricted. So its ability to compete in times like these is limited to 40% of the markets.
• The TUFS scheme was used to add new spindle capacities rather than fabric making capacity.
• The discriminatory tax regime that was in place has discouraged setting up of new weaving units in the organized sector. Small weavers were exempted from excise duty while the organized big players had to pay the same. This stunted the growth of the organized sector.
• A bit about our wooden shipping industry
• India has a 200 year history of making wooden ships. Now there is a surge in demand for wooden ships; thanks to the demand from Gulf countries. They are using these ships to carry livestock, mainly meant for meat.
• This industry is centered around two small ports in Gujarat – Mandvi and Salaya. Locally it is called Vahanvatti.
• The cost of such ships varies from Rs. 1 crore to 5 crores based on tonnage and size. These have a life of about 30 years.
• These ships get their required clearances from the ministry of commerce; and not from the DGS (Director General of Shipping) as they are considered as country class cargo vessels.
• What suggestions can you give for tackling the high volatility seen on the very first day of listing of IPOs?
• Here are some good suggestions from today’s ET editorial.
• Institutional investors should also be mandated to put the full application money, like retail investors, and not just the 10% margin. This small margin requirement, coupled with a proportionate allotment system leads to over-bidding, creating an impression of large demand.
• Whether or not price bands are required is worth a debate. Instead of price bands, if a system of open bidding in the institutional segment is put in place, it may help better price discovery. The price so discovered can be used to allot the retail portion.
• When economists (or the more widely read people) speak of demand side measures in an economy, what exactly are they referring to?
• In today’s article by Jaideep Mishra, he outlines some of them.
• A reduction in indirect taxes (that is, lower excise duty) will boost off take of consumer durables.
• Lowering of interest rates by the central bank. This will push up consumer demand.
• A competitive exchange rate that will not disincentivise manufacturing and production.
• A good critique about the SEZ policy
• It is a very good article written by two IIM students. Take a look at it. It is worth a read.

17.01.2008

• British PM Gordon Brown to visit India
• He will be arriving on Sunday to upgrade relations with India. His visit is expected to pave way for better ties in trade, investment, education and in dealing with terrorism.
• Our next polls to be held in redrawn constituencies
• Remember anything about the delimitation commission? We noted something on this in our blogs earlier. Take a look at what we noted on 7^th March, 2007.
• Now our PM is confirming that the next phase of parliamentary elections will be held in the delimited constituencies.
• This will happen in 24 states. The remaining states where this exercise could not be completed were: Assam, Manipur, Arunachal Pradesh, Nagaland and Jharkhand.
• In Jharkhand the exercise would result in a reduction of the number of tribal seats. As this is going to be unacceptable to several political parties, this is reportedly being put on hold.
• In the north eastern states the exercise could not be completed because there were court injunctions and some other problems which brought about a feeling that delimitation need not be pursued for the time being.
• RBI takes a different route to control the rising rupee
• I have answered one of your shout-box queries on exchange rates in today’s Discover It. Take a look at it here.
• In a change of tack, the RBI has chosen to intervene through the forward market instead of the spot market this time to contain the rupee. There were large inflows of dollars into the country due to the ongoing Reliance IPO. The RBI bought dollars in the spot market and sold them in the forward market. This ensures that there is no liquidity generated in the immediate future.
• SBI ties up with SocGen for custodial services business
• SocGen is a French bank. Its full name is Societe Generale. This tie up by SBI makes it the first Indian bank to enter the custodial services business.
• Custodial services business includes a range of services including safekeeping and settlement, reporting, corporate actions, dividends collection and distribution, proxy voting, tax reclaim services, fund administration and providing market news and information.
• Reads like gibberish? Just try Googling and you will understand most of them. For the ones that you don’t understand or need help with, shout in the shout-box.
• FII figures
• A total of 1253 FIIs registered in our country. The number of FII sub-accounts is reportedly at 3,720.
• About oil prices
• Time and again ET has been taking a negative view of the government’s failure to pass on the realistic prices of oil to the people. Take a look at today’s editorial comment excerpted for you below:
• “It was always likely that kerosene, being predominantly consumed by the poor, would receive some measure of subsidy in the post-APM era, but the UPA government’s failure to increase prices of petrol and LPG, used predominantly by the rich and the middle class, reflects political timidity of a high order. The Left’s cussedness along with opposition from the UPA chairperson Sonia Gandhi has certainly played a part. Oil prices are politically sensitive everywhere but countries such as China have allowed prices at the pump to rise more than India. Prices in this country are stuck at levels appropriate for $58 per barrel compared to current prices which are around the $100 mark. The total quantum of oil bonds to be issued in fiscal 2007-08 may be in the region of Rs 28,000 crore.”
• Rising food prices hurt consumers but benefit farmers. Is there a conflict that needs to be managed here?
• In a good article about the coming food crisis, which he sees as an opportunity, TK Arun answers this question very well. If you have time take a look at the full article here. But coming back to the answer to the question:
• If you thought the challenge before the government is as simple as this, you don’t get it. In India, the farmer sells his produce for about one-third the price the consumer pays. In other words, only one-third of the rise in prices goes back to the farmer. To increase the benefit of rising food prices to the farmer and to minimise the cost to the consumer, this huge margin between farm and consumer prices must shrink.
• How can this done? Through any of these measures:
• Abolish mandi taxes.
• Allow direct sourcing of farm produce by agribusinesses and organised retail — obviating several rounds of transportation and loading and unloading costs, apart from intermediary margins.
• Organise farmers into bodies — companies or cooperatives — capable of leveraging the opportunities afforded by the market.
• Encourage initiatives such as ITC’s e-Choupal and DCM Shriram Consolidated’s Haryali stores that offer farmers a host of inputs ranging from seed, fertiliser, tractor parts and diesel for pump sets to agronomic advice and soil testing.
• Bird flu problem again
• Remember the first time we covered this in our blogs? Yes, it is back again. This time in to West Bengal through Bangladesh. Bangladesh reportedly has been having bird flu in 23 of its 64 districts.
• Last time it was Maharashtra (Navapur in Nandurbar district) during February 2006.
• This will pose a challenge to the $7.8 bn poultry industry of the country, as imports from our country will be banned by many countries.
• Remember H5N1 virus? This is what causes bird flu.
• What’s more important right now is this: while containment is the immediate priority, the task of identifying the strain and comparing it with samples collected from earlier outbreaks to check for any mutation is equally important.
• World Spice Congress
• The 9^th version will be held in Goa from January 28 to 30.
• The theme is “Harmonisation – The emerging global need”
• India has fixed an export target (for spices) of $10 bn by 2017. This year the spices exports are expected to touch $1 bn.
• India accounts for 44% of the total quantity of spices traded in the world. This is in spite of the fact that only 9% of our production is exported.
• On tax rate cut
• Various opinions on the desirability or otherwise of a tax rate cut are appearing in papers of late. Let’s take a look at the Prime Minister’s EAC (Economic Advisory Council) Chairman Dr. Rangarajan’s view on this.
• His advice is to moderate the indirect taxes on consumer goods to boost the economy. The moderation in tax rates would also augur well for the manufacturing sector which has shown early signs of a slowdown. This feeling arises out of the fact that the latest IIP figures fell to 5.4% from 17.2% a year ago.
• Does his reasoning debunk the theory that the slowdown in IIP figures is due to the ‘Diwali effect’ that we noted in our blog earlier? Let’s keep watching. He may have more info with him than what meets our eye!!!
• Why is it important to allow pension funds to invest in stock markets?
• Because they will be long term investments that will add to the maturity of the stock markets of our country. They will bring in stability and credibility and will in turn inspire further confidence for other long term investments. Thus spake SEBI Chairman M. Damodaran.
• He is looking at the experience of Chile in this regard. Its capital markets were far less mature than the Indian stock market. Yet it is often cited as the market for most professionally managed pension funds investing in their stock markets.
• About 152 global pension funds from 18 countries are now invested in our country’s capital markets. Pension funds almost make up for about 13% of the 1250 odd FIIs in the country.
• Giant rodent fossil found in Latin America
• The fossil of a rodent the size of a bull is reportedly discovered in the forests of South America – Rio de la Plata in Uruguay. The fossil dates to about 4 mn years.
• Hungary’s Prime Minister
• Ferenc Gyurcsany
• He is on a visit to India currently.

15.01.2008

• I noted for you the gist of an article written by James Wolfensohn about the emerging global world order in the context of globalization. Take a look at it in our Discover It blog.
• Reliance Power IPO
• Planned to raise Rs. 11,700 crores through the IPO, it is reportedly oversubscribed by 10.52 times on the very first day of its opening!!! Mindboggling isn’t it?
• BSNL to come out with the largest ever IPO in India?
• Move aside Reliance Power. It appears that BSNL is going to come out with the largest ever IPO in the history of India. It plans to offload about 10% stake to raise about Rs. 40,000 crores (over $10 bn)!!!
• China set to replace US as India’s largest trading partner?
• If the figures being talked about are anything to go by, this is going to be a reality sooner than expected.
• The 2007 trade volume between the two countries is pegged at $38.5 bn. Though this is currently lower than the Indo-US trade, the trade with China is growing by over 50% per annum while that with the US is growing by about 20%.
• India-China relations
• During the ongoing official visit of our Prime Minister, both countries are reported to have signed 12 agreements on various aspects of cooperation between the two countries.
• Three north eastern states go to the hustings in the ensuing two months
• Tripura, Meghalaya and Nagaland are set to see elections to their state assemblies during February and March.
• This will be followed by elections to 7 other states this year. They include: Karnataka, Delhi, Chattisgarh, MP, Rajasthan, J&K and Mizoram.
• So we can expect lots of promises and gifts from the Central Government this year, as by May next the current term of the Lok Sabha is set to expire.
• RIL strikes gas in KG basin yet again
• It has struck gas at a depth of 151 meters in a well that it planned to drill up to 2820 meters. It has notified the DGH about is awaiting official estimates of the quantum.
• RIL is the sole operator of the block.
• Language lessons
• A sentence in today’s ET editorial reads thus: “…one of the accompanying Indian journalists used to get so maudlin when he was drunk that…”.
• Madulin here means excessively sad or mournful.
• Effusively or tearfully sentimental: “displayed an almost maudlin concern for the welfare of animals”
• New tax code in the offing?
• Currently individuals and non-corporate assesses do not have to include income from some sources while calculating their tax outgo. These include agricultural income, insurance receipts, long-term capital gains and dividends. They are spared of paying tax on such income.
• But the government is thinking of coming out with a proposal whereby they have to disclose income from all such sources and deduct them from their computations of tax payments. This is expected to enable the establishment of an audit trail for effective tax mop up.
• But the move could have political ramifications if the norm is applied to farm income.
• Solar city scheme
• The government has reportedly finalized the draft policy in this regard. Under the scheme, municipal bodies should extend financial incentives to customers opting for solar energy, while Ministry of New and Renewable Energy will facilitate local bodies in procuring equipment at the most affordable cost.
• Municipalities will also get Centre’s help in setting up solar street lamps in towns, besides using the solar energy in other public places.
• Currently the cost of producing 1 MW of solar energy is about Rs. 20 crores. In sharp contrast, thermal energy production costs about Rs. 5 crores per MW.
• Ethanol blending facing hurdles on tax front
• Indian oil retailers are currently mandated to mix ethanol with petrol up to 5% by volume. But they are not able to meet this mandate because of tax problems at the state level. Only 11 of the 21 states where such a mandate exists, have so far implemented the policy.
• State regulations restrict transfer of ethanol from one state to another due to different taxes imposed by different states.
• Therefore there are calls for making ethanol a ‘declared commodity’. This makes it mandatory for the states to levy tax at a rate which is not more than 4% on ethanol.

14.01.2008

HAPPY PONGAL TO ALL OF YOU

• I noted something about the global economic ramifications of the bailing out of the banks that had to undertake massive write-downs in the wake of the recent subprime crisis. This is from a piece written in today’s ET. Do look at in our Discover It blog.
• There is one more piece on according the MES (Market Economy Status) to China in today’s Discover It blog. Look at it here.
• Death of a bank
• Ever heard of IIBI. It is Industrial Investment Bank of India. It was set up under the Companies Act, 1956, in March 1997 (by converting the erstwhile Industrial Reconstruction Bank of India), and is fully owned by Govt. of India.
• Now it appears to be on the death bed. Its board has decided to sell the entire loan book at one go. That is, it will auction both the good and the bad assets for cash.
• Criticism on NREGS (National Rural Employment Guarantee Scheme)
• We have been noting about this flagship scheme of the UPA government for quite long. We have been fed on positive information about this so far. But take a look at the criticism levelled against it by the CAG (Comptroller and Auditor General).
• The CAG has conducted a six-month performance audit and found that:
• Only 3.2% of registered households availed the mandatory 100 days employment.
• The average employment provided under the scheme has been 18 days.
• Is there a case for winding this up in view of this? I don’t think so. It is not just this scheme; take any scheme formulated by a government and I am sure you would see a slow adoption and slow implementation. The government would do well to press on with it while rectifying the mistakes pointed out in its implementation.
• One aspect that is worth paying attention to in regard to such schemes is that the civil society (that is NGOs – Non Governmental Organizations) should be alive to instances of cornering of government outlays by patronage networks aligned to oppressive hierarchies at the grassroots and agitate against them. Governments per se cannot help there.
• On subsidies
• We have been noting for quite sometime on the ill effects of subsidies and the way their administration needs a thorough revamp. If you read today’s article by Asutosh Misra, you would surely sit up and doubt whether or not you were arguing about subsidies per se. Once in a while, we do need articles like these to enable us to take stock of our stand on a particular issue. Some noteworthy points from this piece:
• Subsidies should never be seen as free lunch for the beneficiaries at the expense of the exchequer. The government is not giving anything from its own pocket. Subsidies are funded by the taxpayers, who in turn benefit from them. Why not treat subsidies as dividend payments for the taxpayer and as a partial social security net for the less privileged?
• Subsidies provide a cushion to all and sundry. If you remove subsidies, price of not only beneficiary goods but other items are sure to go up. It will have a domino effect. It will be proved in the end, that subsidies are smaller price to pay.
• Subsidies and free-market principles do not constitute a contradiction in terms. The subsidies system does, however, need tweaking to end pilferage and wastage. The trickle-down benefits of reforms may reach the grassroots one day but right now subsidies are the life buoy on which the common man survives. A thing that keeps afloat his hopes for a brighter and better tomorrow.
• What a forceful argument; eh?
• International Potato meet ends
• India’s first International Potato Convention held at Kolkata has come to an end.
• The journey of potato is interesting. It is believed to have originated in the Andes, Peru and Bolivia in South America. The world got to know about it when the Spaniards introduced it in their own country in the 16^th century.
• Development should not be seen only from the perspective of costs; at all times.
• Andhra Pradesh perhaps is the first state to empower tribal women in a very unique way. In the tribal villages of Vetamamidi, Pinjarlakonda and Metlapalem in East Godavari district, work is in full swing on a mini-hydel project to harness the Yeleru river for power generation.
• The project envisages ensuring that the benefits out of water bodies in the forest areas reach the local tribals. An all-women 20 member project committee elected by the grama sabha will own and manage the power station. The cost of each mini-unit is Rs. 5.8 crores. The Ministry of New & Renewable Energy has granted Rs. 3.1 crores as subsidy and the balance is given as loan by NABARD.
• While economic purists may argue that it is money being thrown down the drain, can we afford to ignore the social angle that is there to it? I believe this is one excellent example of empowering the tribals. If the country takes up more such projects that harness the local resources for their social and economic benefit, issues like naxalism will peter out on their own.

13.01.2008

• Noted something about a new concept TIPS, in our Discover It blog. Look at it here.
• Hire and fire may get official nod
• This is one measure that is seen by the MNCs and private sector largely as one of the key components of labour reform in India.
• The government has been working on a formula whereby employers would be able to hand over pink slips to the workers after suitably compensating them. The compensation would be fixed somewhere between 45 and 90 days of salary.
• The industry bodies such as CII, FICCI and ASSOCHAM have been asked to submit the maximum compensation package that the employers would be willing to extend.
• The unions have reportedly communicated their support for 90 day salary compensation.
• As the Left is likely to oppose this policy, the government is expected to extend this to the unorganized sector, which comprises 92% of the total work force in the country.
• Tata’s Nano is likely to keep making news and waves in the days if not years to come
• Ratan Tata is billed as the only person (in private sector, that is) after Henry Ford to think of affordable no-frills mobility solution for the man on the street and actually be able to pull it off.
• US dumping measure hits WTO roadblock
• Remember the ‘zeroing’ controversy? Look what we noted on this earlier.
• Now it is the turn of Japan to question this by asking the WTO to permit it to slap up to $250 mn in extra duties and tariffs on US goods to retaliate for the way US has been setting its anti-dumping duties on imports.
• Zeroing refers to the practice of looking only at imports priced at a lower level than in their home markets and ignoring (or zeroing) similar products that actually cost more at home, when making comparison to establish the level of dumping.
• Indian duty free shops left high and dry by the government
• Remember the controversy about this? Look at what we noted on this earlier.
• Now the government of India has refused to approach the EC (European Commission) for verification of Indian airports, citing security concerns. Had the government allowed an inspection by the EU of the security processes in place in our airports, it would have lifted the ban on passengers flying out of these airports carrying LAGs (Liquids, Aerosols and Gels) over 100 ml. That lifting of the ban would have helped our Rs. 300 crore duty free shopping market.
• Tourist arrivals in India
• India is witnessing robust tourist arrivals over the last couple of years.
• 2007: 5 mn ; 2006: 4.45 mn.
• The foreign exchange earnings from them also have been jumping by leaps and bounds. 2007: $12 bn; 2006: $9 bn; 2005: $5.73 bn.
• Domestic tourists number about 460 mn last year.
• Government may scale down tax sops for the renewable energy sector
• The Planning Commission and the Finance Ministry have been opposing the scheme under which 80% depreciation of the renewable energy devices is exempted from income tax. It is seen that this facility is being used largely as a tax incentive than producing additional energy. Under this scheme, the loss in renewable energy business can be set off against the profit of another business owned by the same entrepreneur.
• Despite the incentive, the generation of wind and biomass power stands at a mere 7660 MW and 560 MW respectively.
• More are Edmund Hillary and Tenzing Norgay
• The Himalayan Mountaineering Institute was set up in 1954. Tenzing Norgay was associated with it since then till he died in 1986.
• Edmund Hillary accompanied Neil Armstrong in 1985 in a small twin-engined ski plane over the Arctic Ocean and landed at the North Pole.
• The sons of Tenzing Norgay and Edmund Hillary – Jamling Norgay and Peter Hillary, have together climbed Mount Everest in 2003 as part of the 50^th anniversary celebrations of the conquest by their fathers.
• Marion Jones gets 6 months jail
• The fallen sport star got the jail term for lying about steroid use and involvement in drugs fraud case.
• ISRO plans to launch satellite to study the sun
• It is called “Aditya” and weighs about 100 kg.
• It should be up in space by 2012 to study the dynamic solar corona, the outermost region of the sun. This region has temperatures of over one mn degrees, with solar winds that reach a velocity of up to 1000 km a second. The corona releases energy during solar flares in the form of bursts – manifesting in geomagnetic storms on earth.
• The satellite will carry as its payload an advanced solar coronagraph.
• It will be placed in the near earth orbit of 600 km.
• The launch of the satellite will coincide with the ‘solar maximum’, a phase of high solar dynamism, which will occur once in 11 years. The ‘solar minimum’ occurred in 2006.
• Know anything about Smiths Cloud?
• Read about it in full here.
• It is a gaseous cloud (mostly Hydrogen) which is 11,000 light years long and 2500 light years wide that is travelling towards our Milky Way galaxy. It is expected to collide with our galaxy in about 40 mn years.
• What a short time? What amazes about astronomy is that it makes all our present day problems / issues look so silly and a waste of time. Why bother about rising temperatures in 50 years? Does it make any sense? 50 years is just a blip. By the way look at a good piece shared by my friend Vinod in today’s Time Pass. It is also about ‘time’ and makes a billion look so small.

12.01.2008

• Ceasefire between LTTE and Sri Lankan government
• The ceasefire was announced in 2002. The Sri Lankan government has announced its intentions of pulling out of the ceasefire agreement on January 3^rd this year on the grounds that growing violence over the last two years had rendered it irrelevant. The truce formally becomes invalid from January 16.
• FBI has classified LTTE as the most dangerous of the terrorist organizations in the world.
• About residential hotels
• Residential hotels are set to make their debut in India. Wait a minute. Are hotels not the places where we reside while on travel? Residential hotels are a class apart because they combine the flexibility of a vacation home with the service of a hotel.
• DLF will soon come up with India’s first residential hotel with the Hilton Group in Goa.
• Something about oil exploration
• In the year 2000 there were only 12 companies in the exploration business in India working in 7 producing basins countrywide. By the end of 2007, the number has gone up to 49, operating in 10 basins. Yet, even now only about 20% of the country’s acreage is explored.
• Some global biggies in exploration business;
• BG (British Gas) and BP from UK
• ENI of Italy
• Total of France
• Santos of Australia
• Exxon Mobil, Chevron Corp of US
• Royal Dutch/Shell of Netherlands
• India is seen as a low risk area in terms of oil exploration. It usually takes between four to eight years for a company to complete the exploration and development phase and produce the first molecule of oil or gas.
• Our policy allows for 100% foreign investment in the exploration business. The companies can claim income tax holiday for 7 years from the start of production. Zero customs duty on imported equipment needed for petroleum operation.
• See the rapid strides being made by newer modes of banking!
• ICICI Bank has around 55% of the transactions happening through its ATMs, 22% through the internet, 12% through call centre and the remaining through its branches.
• Currently ICICI Bank has 13 mn customers. Of which, there are 2.5 mn active customers.
• How will the subprime crisis impact our IT companies?
• The full impact of the crisis on orders from a segment of the financial services companies may be seen only in the months ahead. That apart, a cut in IT budgets would hurt income growth of the software firms.
• The rational expectation in such circumstances would, however, be that companies would outsource more work to low-cost centres to cut their operating expenses.
• Want a strident criticism of the way we do things in governing our country? Can’t have a better one than this one from Mr. V. Raghunathan.
• Writing about how lax our implementation of laws is, he explains how we seem to be concluding that if we cannot control what is illegal, then we can redefine what is illegal as legal and thus effect a cure to the malady. He gives three examples.
• One, we got used to regularising tax evasion by allowing “voluntary disclosure” every few years. The message was, if you forgot to pay your tax on the cheque from ET for a piece like this, you could be severely hauled up; but if you were smart enough not to pay your taxes ever, the government of India would come to your rescue by showing you an honourable way to turn a new leaf.
• Then we went a little further. We had our banks come down hard and levy a penal interest on any working man who defaulted on a single EMI, or worse, tried to pay his loan sooner than the contracted period. We even had them increase the interest simply in the name of a floating rate even for a regular customer. In comparison, we thought that the large habitual and wilful defaulters would be horsewhipped by our banks. But they simply held camps for such defaulters, giving them interest reductions or even waivers and in most cases even a significant concession on the principal, to ‘help’ them repay their loans. The signal was clear again. There is no point being a small borrower and repaying the loan. The trick, if you had arrived, was to borrow big and default.
• We extended our model to murderers and dacoits too. Whenever our police, paramilitary and military failed to catch them, we learnt to engage them to voluntarily ‘surrender’, with accompanying fanfare, complete with media, cameras and garlands, so that an average citizen could hardly be faulted if he thought murder and mayhem a quicker route to celebrity.
• Those of you, who are not satisfied with the excerpt above, can read it in full here.
• What are the areas where our ethanol blending programme is not applicable?
• Remember the ethanol blending programme of the government?
• It is not applicable in J&K, north-eastern states and our island territories.
• Industrial park scheme extended till March 2009
• The scheme offers a 10 year income tax holiday under section 80-IA (4)(iii).
• The earlier scheme was valid only till March 2006. The new scheme will be made applicable for the period April 2006 to March 2009.
• Sir Edmund Hillary is no more
• The first man, with Sherpa Tenzing Norgay who conquered Mount Everest is no more. He died at the age of 88 yesterday.
• He also rode a tractor to the South Pole, drove jet boats up the Ganges and served his country (New Zealand) as its top diplomat in India.
• He was originally a beekeeper whose acquired mountaineering skills saw him qualified to join a British expedition trying to conquer Mount Everest. He achieved the feat on May 29, 1953.
• He was made a Knight Commander of the Order of the British Empire by Queen Elizabeth in July 1953.
• Coming back to answering Soyuz’s query on our income tax rate of 30% not being low on purchasing power parity basis:
• What it means is that a 30% tax say in US, is not the same as 30% tax in India. Though both are identical figures percentage wise, the tax in India is more than the 30% tax of the US.
• To understand purchasing power parity a simple example often touted is this: If a burger costs say $1 in the US, it should also cost Rs. 1 in India. But it is not so in reality. The purchasing power of the rupee is lower by about 40. Because that is the exchange rate between the US dollar and the Indian rupee. So to purchase the same burger, we end up paying 40 rupees. Get the picture?
• So 30% tax in US will not necessarily be equal to 30% tax in India. Our 30% is far more than the US’s 30% on PPP terms. This is what was being referred to by Shome in his interview.