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.