• In the context of the Centre contemplating a package for farmers, what suggestions can you offer? Compare yours with what is offered by ET in today’s editorial. Here it goes:
    • Waivers and rescue packages are short-term measures to assist farmers. More lasting solutions are required to make farming profitable. These would include amending the Agricultural Produce Marketing Committee Act to create a common market for farm produce and greater choice for farmers to sell their produce to buyers who would give them the best price.
    • Reducing fertiliser, LPG and petrol subsidies and raising spending on rural infrastructure, particularly on roads and irrigation, can minimise crop failures caused by poor monsoon. Extension work on better farming practices and use of higher yielding seeds must also be ensured.
    • Further, there is the need to bring a larger number of farmers under the institutional lending framework. Most farmers today borrow from usurious moneylenders. The government and the RBI need to put in place a mechanism to regulate moneylenders and interest rates charged by them, because it is not possible to bring all farmers under the institutional lending framework.
  • Want an example of stern action? See the language of the EU’s Competition Commission and you will get a picture of what is stern action.
    • The Commission fined Microsoft a record $1.3 bn for the amount it charges rivals for software information. When Microsoft responded to this fine saying that the issues for which it was fined have been resolved and that the company is making its products more open, this is what the EU Competition Commissioner said:
      • Talk is cheap. Flouting rules is expensive. Microsoft’s actions have stifled innovation and affected millions of people around the world. The fine is a reasonable response to a series of quite unreasonable actions.
    • She looked quite cool while saying so in a press conference.
    • Can our regulators be so cool while imposing such huge fines on such big companies? Will not loss of jobs or shifting of base by the company concerned play a part? We should wait for history to unfold itself. To be fair, we do have a strong history of caring less for big MNCs. Coca Cola company’s case back in 1970’s is a case in point.
  • Sagarika is India’s submarine launched ballistic missile (SLBM)
    • It was test launched successfully a couple of days back.
    • For the SLBM capability the missile is only half the story. The other half is having a nuclear powered submarine. India embarked on building an ATV – Advanced Technology Vessel back in 1970’s. If reports are to be believed we are on our way to building a fleet of three nuclear submarines by 2015, each capable of carrying 12 nuclear tipped missiles.
  • First communist head of state in EU!!
    • Mr. Demetris Christofias was elected in Cyprus as President.
  • Turkey move to rewrite basis of sharia law
    • What an idea? Read the full story that appeared in The Hindu today. Do so here. Any attempt that can bring in reform among Islamists or Hindus or for that any religious faith; should necessarily originate within the faith. It cannot originate outside it. All the best to the Turkish Intelligentsia that has embarked on this task.
    • By the way, Hadith stands for narrations of the life of the prophet Muhammad. Hadith relate what the prophet said, did or liked. Most Muslims consider the Hadith to be an essential addition to and clarification of the Koran.
  • India and US to sign the LSA?
    • The US’s interest in roping in India into a Logistics Sharing Agreement (which the US calls the ACSA – Access and Cross Servicing Agreement) is bearing fruit; as yet.
    • The government is dithering on this because of the Left’s strong opposition to it.
  • Sulochana Pattabhiraman is no more
    • She is an eminent Carnatic musician.


· On short selling in stocks

o Short selling, as you all might by now know, is a transaction where an investor can sell stocks without owning them. Investor does this by borrowing stocks from another entity, sells it in the market and buys it back before market closes to return to the lender.

o Short selling was allowed (in a watered down version) in the 2007 budget. SEBI announced the details of the scheme in December 2007. What has been allowed is a full-fledged stock lending and borrowing mechanism for all market participants in the securities market under the overall framework of Securities Lending Scheme, 1997. Naked short selling (going on selling without backed by any physical security) is not allowed.

o But why it did not take off well is because of the confusion over tax implications. The CBDT (Central Board of Direct Taxes) now says that the lending and borrowing of securities will not be subject to taxes.

o This announcement is expected to cheer the market.

· Two notable points from the President’s speech on the eve of the Budget session:

o Resolve to step up priority sector lending to minority communities from the present 9% to 15%.

o Recommendations of the Radhakrishnan Committee on agricultural indebtedness are under consideration of the government.

· Why do states shun borrowings from small savings?

o Small savings collections carry an interest rate of 8% and are mobilized by states. But the proceeds go to the Centre’s kitty. In turn the Centre passes 80% of these to the states at a higher rate of 9.5% for 20 years. The higher rate is due the maturity mismatch involved.

o But with many of the states’ finances now healthy, they are shunning these high cost funds.

· India’s first green hotel in Hyderabad?

o The Park Hotel is proposed to come up with a hotel in Hyderabad. It will be a 280 room hotel, scheduled to start operations by mid-2009.

o A green hotel aims at saving energy. It is estimated to save approximately 34.7% of the energy costs.

o An eco-friendly hotel on the other hand is constructed using recycled materials.

o India has about 17 green buildings.

· India’s patent scene

o CSIR (Council of Industrial and Scientific Research) holds the largest market share in the total US patents granted to Indians. India had been granted 128 patents during the calendar 2007. CSIR has 37 laboratories and 19,000 people working with it.

o India became a member of the Patent Cooperation Treaty in 1998. Whenever a patent application is filed, the applicant could designate all the countries (of the 138) where it wants the patent to be effective.

· About Section 25 companies

o These are companies that are registered under the Companies Act. They are not-for-profit companies and do business like any other company. Their profits are meant for furthering the social cause that they have espoused in their charter. They are prevented from distributing profits to promoters.

o The government is thinking of a stricter control regime for such companies as it was found that many such companies are doing business for their promoters to profiteer.

· Do you have any take on the tightening of the DTAA provisions with Mauritius?

o ET puts forth two arguments in favour of the continuance of a softer DTAA (Double Taxation Avoidance Agreement) regime with Mauritius.

o For one, investors locate themselves in Mauritius only to access the Indian market. A lightly regulated offshore tax haven can be a major boon to a continent sized economy with higher taxation rates. The HongKong-China combine is a classic example in this regard. Mauritius is playing a similar role for India and hence should not be discouraged.

o Secondly, FII inflows (routed through Mauritius) have been good for the economy. They have increased corporate governance standards enormously. By helping create liquid capital markets they have helped FDI by making entry and exit easier.

· Want some lessons in our economic history?

o You will surely find them in the book by Arvind Panagariya – “India: The Emerging Giant.”

o If you can’t get to read the book, at least see a gist of its arguments given by SSA Aiyar in today’s ET. Worth a read.

· Writing the above piece SSA Aiyar has given at one place the positions held by India on various indices:

o Heritage Foundation’s Index of Economic Freedom: 104th rank

o World Bank’s latest Doing Business report: 120th out of 180 countries

o Human Development Index: 126th rank

o Corruption Perception Index of Transparency International: 72nd rank.

· Two points that make us feel that there is something wrong with our stock indices:

o The individual stocks in the index are being manipulated, either to mislead investors deliberately or to offset punts in the Sensex or Nifty futures.

o The futures and options market today is in multiples of cash market, resulting in the tail wagging the dog. It should be the reverse way round. The market is so shallow that only a few investors can manipulate a couple of stocks and impact the index outcome.

· Why should we meet the fiscal deficit targets?

o In a debate that appeared in today’s ET only one author has given a pointed answer. He is Amit Mitra, the Secretary General of the FICCI.

o Deficits make governments issue bonds to bridge the fiscal gap. The entry of the government (a giant sized borrower) has three negative fall-outs:

o One, the interest rates in the market begin to spike. This hurts investment and capital formation. This also deters those who borrow from banks for white goods, automobiles etc.

o Secondly, this leads to a crowding out of private investments. The very same rupee which could have earned a higher return in the hands of a private entrepreneur ends up offering low returns in the hands of the government.

o Lastly, evidence suggests that much of the extra spending of the government goes into salaries, interests and subsidies. These put further pressure on prices and breed inefficiencies. With rising global food prices, oil prices etc., it is critical to guard against fuelling price rise due to the impact of the fiscal deficit.

· Oscars at a glance

o Picture: No Country for the Old Men

o Actor: Daniel Day Lewis, “There will be blood”

o Actress: Marion Cotillard, “La Vie en Rose”

o Supporting Actor: Javier Bardem, “No country for old men”

o Supporting Actress: Tilda Swinton, “Machael Clayton”

o Director: Joel Coen and Ethan Coen, “No country for old men”

· The Karnataka election conundrum

o Sometime back while reading about the delimitation commission’s work and the prospect of postponement of Karnataka elections, I was wondering whether or not there could be a way out of the seemingly immanent deadlock. But today’s editorial in The Hindu does point out one.

o Rule 24 of the Registration of Electors Rules, 1960 provides solution for precisely the kind of situation that is arising now with respect to Karnataka. It is presently under President’s rule. The rule is set to expire on May 28. But in the meantime the President is likely to notify the delimitation of constituencies which makes it mandatory for all the future elections to be held on the basis of delimited constituencies. But because the process of bringing into force the electoral rolls according to the new delimited constituencies will take several months, it would have been inevitable to extend the President’s rule in the state.

o In view of Rule 24 cited above, that need not be the case. It provides that in the event of delimitation of constituencies, the Election Commission may direct that the rolls shall be prepared by putting together the rolls of such of the existing constituencies or parts thereof as are comprised within the new constituency.

o You can expect some quizzing on this issue for sure; either in mains or in interview.

· Two treaties that you should know about when it comes to development aid

o Monterrey consensus

§ It is an agreement reached by developed countries along with international agencies for extending finance for development.

§ Read more about it on Wikipedia here. It was agreed to in 2002.

§ New development aid commitments from the United States and the European Union and other countries were made at the conference. Countries also reached agreements on other issues, including debt relief, fighting corruption, and policy coherence.

o Gleneagles summit 2005

§ This G8 summit had its focus on the issues of global climate change and the lack of economic development in Africa. Other announced items on the agenda were counter-terrorism, non-proliferation and reform in the Middle East.

o The latest Development Cooperation Report 2007 acknowledges the apprehension that aid budgets are influenced more by considerations of national interest and support for friendly regimes than by lofty objectives of alleviating hunger and disease.

o You can access the full Development Cooperation Report (DCR) of 2007 here.

· Quota for SCs/STs in MBBS and BDS courses

o We all know that there is a quota; know?

o Nope; what the Union Minister Mr. Ramdoss has announced is the quota for them in the central pool i.e., seats in government medical and dental colleges across the country that are under the all-India quota. These are filled hitherto only on the basis of merit. Now he is proposing to extend quota for these seats also.

· Dhaka to honour Indian army martyrs

o This excerpt from The Hindu is worth our attention:

o Dhaka has for the first time agreed to honour the memory of Indian Army soldiers who were martyred in the war for liberation of Bangladesh. This was decided during a meeting here on Monday between the Chief of the Army Staff, General Deepak Kapoor, and his visiting Bangladeshi counterpart, General Moeen U. Ahmed, highly placed sources said.

o The martyred soldiers are likely to be remembered officially by Bangladesh on March 25, the day when the Pakistan Army began ‘Operation Searchlight,’ a brutal campaign of genocide and rape against the people of East Pakistan and the Awami League responded by declaring Independence.

o With India providing logistic support to the resistance army Mukti Bahini, Pakistan launched air strikes on the country, triggering off the Army action led at the theatre level by Lt. Gen. Jagjit Singh Aurora under the leadership of the Chief of the Army Staff, Field Marshal [then Gen.] Sam Manekshaw.

o The Indian Army overran Pakistan Army positions in 13 days, leading to one of the biggest surrenders on the Dhaka Racecourse on December 16, 1971.


  • Is our country’s also facing a slowdown?
    • Though it is too early to sing the sad song, what is signalling a slowdown in our country is the fact that for the first time in three years, the number of dividend paying companies has come down slightly.
    • Just 99 companies had announced their dividend payment intentions. Though this is not a huge difference from the figures for the last two years (108 and 104 respectively), this does perhaps sends a caution singal.
  • Want to know about budget process?
    • You can’t get a better picture than the one presented in today’s ET. Here is the link. I strongly advise all of you to read it once thoroughly.
    • Because I assume that you have been following my blog for the last couple of years, I will note only some salient points for our notes and avoid what I consider not important or an unnecessary repeat:
    • The President of India is constitutionally obliged to have the Annual Financial Statement (it is not called budget at all in our constitution!!) for the ensuing year laid on the table of the House under Article 112. But, according to Article 77(3) it is the Finance Minister who is made responsible for preparing this statement and pilot it through Parliament.
    • The budget exercise kicks off in September every year with the issue of a budget circular to all Union Ministries, all states and Union Territories, autonomous bodies and the defence forces for preparing revised estimates for the current year and the budget estimate for the next financial year.
    • About budget presentation day: The budget is presented to Parliament on a date fixed by the President. By convention, since 1999, it is being presented at 11.00 AM on the last working day of February.
    • About discussion on the budget: No discussion follows immediately after the presentation of the budget. A few days later the Lok Sabha discusses the budget as a whole and not the details. Then the Finance Minister replies to this discussion.
    • A ‘vote on account’ for the next two months of the ensuing financial year is obtained from Parliament. The House is adjourned for a fixed period. During this period, the Demands for Grants of various ministries/departments including Railways are considered by relevant standing committees.
    • Standing committee reports are presented to the House. The House is supposed to discuss each of the Demands for Grants and then pass them. But more often than not, these are all clubbed and put together at one time and passed – the guillotine.
    • In the Rajya Sabha there is only a general discussion on the budget. It does not vote on the Demands for Grants.
    • After the Demands for Grants are passed, the Appropriation bill is introduced and passed. It gives authority to the government to incur expenditure from and out of the CFI (Consolidated Fund of India).
    • What follows Appropriation Bill is the consideration of passing the Finance Bill containing tax proposals. Certain provisions of this bill relating to levy and collection of fresh duties come into effect immediately on the day the Bill is introduced by virtue of a declaration under the Provisional Collection of Taxes Act. Indirect tax proposals come into force as soon as they are announced; but direct tax proposals await the approval of Parliament. Parliament has to pass the finance bill in 75 days.
    • The origin of the word budget comes from the French word ‘Bougette’ meaning a leather bag or wallet. The first use of the term budget dates back to 1733 when the British PM and Chancellor of the Exchequer was Mr. Walpole.
    • Independent India’s first budget was introduced by RK Shanmukham Chetty on November 26, 1947. This was an interim budget because the earlier assembly which passed the budget ceased to exist after the country was divided.
    • The printing of the budget documents is very secretive. A printing press located in the North Block prints them. All the people associated with the preparation and printing are quarantined and are monitored by IB sleuths. Even the Cabinet gets to see budget summary only 10 minutes before Parliament assembles for the budget presentation.
  • Language lessons
    • Recuse: to disqualify oneself from sitting in judgement over a matter to avoid conflict of interest.
    • Doddering: to tremble or shake from weakness or age; to progress feebly and unsteadily
  • Virgin Atlantic is the first airline to try flying planes using biofuel
    • In a test flight from UK to Netherlands, it has run a plane fuelled with a biofuel mixture of coconut and babassu oil in one of its four main fuel tanks.
    • The European Commission said GHG (greenhouse gas) emissions from aviation account for about 3% of the total in European Union and have increased by 87% since 1990 as air travel cheapened.
    • Recent studies are confirming that biofuels cause more GHG emissions than conventional fuels, if the fuel emissions costs of producing these ‘green fuels’ are considered.
    • To support biofuel development, a large amount of natural land is being converted to cropland globally. The destruction of natural ecosystems releases GHG gases into the atmosphere when they are burned and ploughed, and deprives the planet of natural sponges that absorb carbon emissions.
    • Cropland absorbs far less carbon than the rain forests or even scrubland that it replaces.


  • FM radio policy changes
    • The FM radio revolution is all set to move to the next level, with TRAI (Telecom Regulatory Authority of India) making a set of far reaching regulations.
    • Want to know the present state of affairs and the proposed changes? Can’t get a better picture than the one presented in today’s ET. Look at the following details:


TRAI’s proposal

Geographical area for license



FDI cap (for players who also show news)



Without news




Cannot be linked

Linking permitted


No news / current affairs


  • Deactivation regular affair on NSE (National Stock Exchange) now
    • 372 futures and options terminals were deactivated for at least a day in January.
    • Trading terminals are deactivated usually by the exchange when the trading members are unable to meet their margin requirements.
    • The last time NSE resorted to such large-scale deactivation was in May 2006, when around 190 brokers were affected by the move.
    • One concept that you should be familiar with regarding this is MTM – ‘Mark to Market.’ Brokers have to keep topping up their margins deposited on any negative movement in securities. The clients taking positions have to keep depositing their margins with the broker, who in turn pays the exchange. For some reason, if the broker is unable to collect the margins from his clients on time, he has to pay them to the exchange from his own pocket. A failure means deactivation of his terminal.
  • India beats China in mobile additions
    • China, the world’s largest telecom market has added 8.42 mn subscribers in January. But India has added 8.77 mn connections during that month.
    • Tele-density has increased to 24.63% at the end of January in our country.
    • The country has added a record 83 million subscribers during the last 12 months. China’s 534-million subscriber market, in comparison, added 76 million subscribers during the same period. This was the first time that India surpassed all other nations in terms of mobile subscriber additions over a period of 12 months.
    • Total broadband subscribers base has reached 3.24 million by the end of January 2008 compared to 3.13 million by the end of December 2007.
  • Was Jodha really the first wife of Akbar?
    • In the context of the controversy surrounding this movie (Jodha Akbar, the Aishwarya Rai and Hrithik Roshan starrer), it is at times necessary for us to keep track of such inanities from the exam point of view or interview point of view. Such questions act as stress relievers during an interview. When the board senses that a candidate is unnecessarily tensed up they try their best to keep the candidate at ease (many boards do this). During such times it is questions like these that you can expect to be quizzed on.
    • Jodha has two more known aliases: Harka and Maryam.
    • Akbar’s first wife: Ruqaiya, the daughter of his uncle Hindal.
    • Akbar’s second wife: Salima Sultan, the beauteous widow of his disgraced mentor Bairam Khan.
    • Jodha was the third wife.
    • Now don’t start a debate on this in our shoutbox. It is a waste of time and effort. It is very unimportant and trivial from our point of view.
  • What is your comment on the banks reducing interest rates at the instance of our finance minister?
    • Many of you may say that it is unnecessary interference on the part of the FM to have intervened in a purely commercial decision that should have been left to the banks.
    • ET editorial notes: “In most of the developed countries, there is an unspoken understanding between the government and the central bank that each will not step on the other’s turf and the central government will not interfere in interest rate setting. But there is no such understanding in our country. The government has caused itself long-term damage by refusing to let oil companies raise prices on their own. It should not repeat the error with interest rates.”
    • What’s your take on this? I have a different take from ET. Should the developed world be treated as a trend-setter in the changed context? Have we not been proved on more occasions than one in recent times that we had done better than them in many respects? Especially in the wake of the subprime crisis and their (mis)handling it, should we keep looking at them with awe and reverence? I think our RBI governor has acquitted himself very well. The FM’s ‘moralsuasion’, if it can be called one, I think is a measure that suits our present state of the economy. And ofcourse the government’s own political compulsions too. I see nothing wrong with it.
    • But on oil prices; yes I do agree with ET.
  • Safety of women employees; especially in the BPO sector
    • You have a lot of grist to the mill.
    • Read today’s ET editorial on this matter here. I am sure you will have your own suggestions in this regard. I welcome any amount of debate on this issue in our shoutbox.
    • Will all the safety measure taken or contemplated by the industry be really of help in enhancing the safety of women employees? What do you think can be the lasting solution?
  • Delhi to have hydrogen dispensing station
    • The country’s first hydrogen dispensing station will be set up in New Delhi this year to address the growing need for developing alternative energy sources. The station would be used for dispensing hydrogen compressed natural gas blend as well as neat hydrogen in vehicles as part of a development and demonstration project.
  • Why did Steven Spielberg back out as artistic director for the opening and closing ceremonies of the Olympic Games in China?
    • He blamed China for failing to use its clout with Sudanese government to press for peace in the country’s Darfur region where more than 200,000 people have died in a conflict between rebels and militias backed by government forces.
    • Remember our noting on the subject. Just search for it and you will find excellent links to it.
  • Why is Subhas Ghising now a pariah in his own DGHC?
    • The administrator of Darjeeling Gorkha Hill Council and the uncrowned king of the Gorkhas in the country is facing some tough times. The Gorkha Janamukti Morcha has been demanding the immediate removal Mr. Ghising from the post and scrapping the move to grant VI schedule status to the region. It is demanding a separate state of Gorkhaland to be carved out of the Darjeeling hills and certain areas contiguous to it.


  • HDFC Bank to buy CBoP (Centurian Bank of Punjab)
    • In what is stated to be the biggest merger in the Indian banking scene, HDFC is set to take over CBoP in an all-stock deal.
  • ET-NCAER (Economic Times – National Council of Applied Economic Research) Business Confidence survey
    • Remember this survey that is done periodically? The results of this survey for the quarter ended December 2007 are out now.
    • The BCI (Business Confidence Index) has risen by 5.5% (8 points) to 154. This shows that India Inc is brimming with confidence, notwithstanding the apparent indications of a slowdown in industrial growth and corporate earnings. If the positive sentiment persists despite the turmoil in the capital market, corporate earnings may be back on track in the coming quarters.
    • The political confidence index too has risen for the third consecutive quarter to its highest level (127.7, which is higher by 5.2 points over the previous quarter’s figure) till date. But India Inc doesn’t seem too pleased with the pace of economic reforms.
  • Best of the Booker
    • This is a one-off award that is contemplated to honour the finest novel to have won the Man Booker Prize for fiction since it was first awarded in 1969.
    • India born authors Salman Rushdie and Arundhati Roy would be among those vying for the award.
  • How should India combat the imminent global stagflation?
    • The US economy is perceived as facing a recession for sure. The Singapore economy has shrunk by 4.8% in the last quarter.
    • Such slow down should logically lead to a fall in prices. But on the contrary prices are rising globally. Oil surged past $100 per barrel. US wheat prices are well over $400 per tonne, more than 100% higher than it was this time last year. Rice prices are up 20% to 40% over the past year, while edible oil prices have jumped 60% to 100%. New contracts for Brazilian iron ore signed a few days ago raised prices by 65%.
    • One of the reasons being cited for the rise in prices is that droughts and diversion of arable land to bio-fuels have fuelled record agricultural prices.
    • So, to combat the global stagflation, the country would be better off spending a lot on improving infrastructure rather than spending on oil subsidies and thinking of tax cuts, goes one suggestion.
  • Thinking of oil subsidies…
    • It is widely believed that the off-budget subsidies constitute about 2% of the GDP (Gross Domestic Product).
    • One argument that is usually made about oil prices is that taxes constitute a humungous proportion of the price of the oil products. But in a very interesting study, Saumitra Chaudhuri shows that it is not the case.
    • If we work back from the retail selling price in Delhi of gasoline and diesel of Rs 45.52 and Rs 31.76 per litre in effect since February 15, 2008, we find that including customs duty on imported crude and state VAT on products, the total tax burden comes to 51% for gasoline and 30% for diesel or on weighted average basis, 34% of the retail price.
    • Is this very high? In Europe the tax component in gasoline ranges from 51% (Spain) to 64% (UK), while that for diesel it goes from 33% in Spain to 55% in the UK. In Japan and Canada the respective figures are 27% and 30% for gasoline and 25% and 22% for diesel. In the OECD, only in the US, is the tax rate significantly lower than that in India — at about 14% for both fuels. In most of the Persian Gulf and other oil exporting countries there are subsidies, not taxes, on automotive fuels.
  • Supreme Court judges strength to be increased to 31
    • At present, by virtue of an amendment made in 1986, there are a total of 25 Supreme Court judges.
    • Now the Union Cabinet has decided to increase the strength to 31 including the Chief Justice. A bill to this effect is likely to be introduced in Parliament shortly.
    • The increase is in view of the huge pendency of cases – 46,926 till January this year.
    • In the High Courts, a little over 37 lakh cases are pending. The total strength of the High Court judges in the country is 877. But of these, only 593 are reportedly filled.
  • 2010 Youth Olympiad
    • Singapore is set to host this first ever Olympiad.
  • US efforts at destroying its failed satellite
    • In December 2006, it launched a 5000 pound spy satellite which is roughly the size of a school bus.
    • Soon after launch it went dead. It is orbiting at 208 km over the earth’s surface. As it is sure to make an entry into the earth’s atmosphere, the US decided to ‘kill’ it, by shooting it down with missiles launched from its naval vessels.
    • The worry is about the satellite’s fuel tank which is filled with 1000 pounds of toxic hydrazine.
    • The US says that its missiles had destroyed the satellite; but doubts persist about the fuel tank.


  • Mind blowing money for IPL players!!
    • Dhoni was bid for $1.5 mn in the IPL auctions. The 8 franchisees bid for a total of 77 players to build their teams. All the players have changed hands for a total of $37.63 mn!
    • What a record money? Feeling dizzy? Not knowing what is this all about?
    • Get a lowdown on that at page 4 in today’s ET. I couldn’t get a web link for it in spite of my best efforts. Didn’t post the image from ET for fear of copyright violations. You try this link here.
  • Telecom companies may share all infrastructure
    • Remember anything about the active and passive infrastructure sharing among telecos? Now the DoT has approved TRAI’s recommendation to allow service providers to share active infrastructure.
    • As of now, Indian telecom companies are permitted to share only passive infrastructure. This includes things like towers, repeaters, shelters and generators.
    • Active infrastructure includes key electronic components like antennas, feeder cables, nodes, radio access network and transmission systems – everything except spectrum.
  • Amaresh Bagchi is no more
    • One of the giants in the economic and finance scene in the country, Dr. Amaresh Bagchi breathed his last yesterday.
    • He was Professor Emeritus at the NIPFP (National Institute of Public Finance and Policy).
    • He was also a member of the MM Punchi committee on Centre-State relations.
  • What’s wrong with our coal strategy?
    • Why should we worry about it now?
    • International coal prices have touched a high of $140 per tonne. It is expected that long term coal contracts will be entered into by our country with international suppliers (Australia and South Africa) at about $110 per tonne. You know this is against just $55.6 per tonne that was contracted for last year.
    • Remember what happened to the international prices of wheat when we started importing a few million tonnes of wheat for our food security? I think a repeat is happening on the coal scene also in view of the huge requirement related to the UMPP (Ultra Mega Power Projects).
    • So what is the solution? Look at some suggestions given in today’s ET editorial here. Can you formulate your own take on the subject?
  • Fighting till the last man
    • Ever heard this phrase? There is an interesting story exemplifying this that appeared in today’s ET. I give below an excerpt:
    • The Alamo was the mission-fort in San Antonio, Texas, whose defenders fought till the last man before they were overrun by the Mexican army led by General Santa Anna. A garrison of around 180 American settlers and Tejanos — Mexicans living in Texas — refused to surrender to an attacking army of over 6,000 soldiers armed with 20 cannons. The garrison’s heroics inspired other settlers led by Sam Houston to take on and defeat Santa Anna’s army 46 days later under the clarion call of “Remember the Alamo”.
    • The Alamo has become a symbol of people who give their lives for a cause and inspire others to fight on and win. Texas declared its independence from Mexico in 1836 and joined the US in 1845.
  • Our budget glossary keeps on expanding.
    • I ain’t complaining. Do you? Download it from here.
  • Amirta karaisal
    • I am sure you all have heard about the need for appropriate technologies one time or the other. Ever heard of this Amirta karaisal? This is indigenously prepared organic manure that can control pests and also increase the yield. And it costs just Rs. 5 to 8 per acre!!
    • You must read this full article on this at least once. It is an eye opener. Do so here.
  • Why are countries like China, India, Sri Lanka and Pakistan watching with concern the developments related to the unilateral declaration of independence by Kosovo?
    • Recognition of Kosovo by the international community can be a precedent setting event. The separatist outfits operating out of all these countries can also possibly resort to unilateral declarations of independence. That is the worry.
    • But one key difference between Kosovo and others is that it is actually an international protectorate within a sovereign state viz., Serbia.
  • Sunil Gangopadhyay
    • He is elected as the Sahitya Akademi President for five years.
    • He succeeds Gopi Chand Narang.


  • A very good debate on reducing tobacco cultivation
    • I know all of you can come out with solid reasons for banning tobacco or cigarettes. But can you come up with a convincing reason for defending tobacco cultivation?
    • You will find some solid reasons here. I couldn’t condense it for our purpose. I found it very useful academically. It is just about 350 words.
    • Incidentally tobacco is the most important cash crop in my native district. I agree with the reasoning given in the above cited article.
  • Internet usage in India
    • We have been frequently noting about this subject in our blogs. Some update on this.
    • There are close to 4.6 mn internet users banking online today.
    • The number of users paying bills online is expected to be around 1.8 mn in 2007-08.
    • E-commerce transactions are estimated to have crossed the Rs. 2000 crore mark in 2006-07.
  • Look at how China lords over the US apparel market!!
    • US imports about $74 bn worth of apparels a year.
    • Of this China’s share is $22.74 bn, while India’s is $3.16 bn.
  • Can you specify an encouragement given by IRDA (Insurance Regulatory Development Authority) for the infrastructure sector?
    • Funding for the infrastructure sector is being talked about day in and day out in the papers; isn’t it? What can IRDA do to help ensure funding for the sector?
    • What it has done is redefine the word infrastructure to include all telecom services, construction of educational institutions, hospitals and projects relating to agro-processing and supply of inputs to agriculture. It is thus brought in sync with RBI’s definition and has widened the scope for infrastructure financing by insurance companies.
    • This measure is expected to help policy holders diversify their exposure and earn higher returns.
    • Currently, insurers can invest not less than 10% of their portfolio in infrastructure, subject to exposure norms. At present housing is not included in this definition; but there is a separate category for this. The norm stipulates that insurers can invest not less than 5% of their portfolio in housing sector.
    • IRDA has widened the definition of infrastructure based on the Deepak Parekh committee’s recommendations.
  • Some ideas on reforming the legal profession in India
    • NR Madhava Menon has written a beautiful piece in today’s Hindu on this subject. Take a look at it here. Worth a read and remembrance.
    • What is the context in which this reform agenda gains importance?
    • The Transparency International Report of 2007 has placed Indian judiciary as the most corrupt institution in the country and concluded that 77% of corruption in the judicial system has been lawyer-driven.
    • With unprecedented changes induced by technology and globalisation, all professions are forced to re-think their methods of management and delivery of services. Accountability systems are being made more transparent and participatory with the object of controlling commercialisation and improving the quality of services. Even the code of ethics and methods of disciplining erring members are being reworked across professions.
  • Chairman of NACIL?
    • Viswapati Trivedi.
    • NACIL: National Aviation Company of India Limited. The merged entity of Indian and Air India.


  • “Treaty shopping” and “round tripping” revisited
    • Remember these concepts that we noted about in our blogs? Worth a revisit in view of the recent developments happening with Mauritius.
    • We all know that we have a DTAA (Double Taxation Avoidance Agreement) with Mauritius. Because of this, at present Indian tax authorities can only call for reports from their Mauritius counterparts if they suspect treaty abuse by a company.
    • India has long been suspecting that treaty shopping and round tripping are being resorted to through this DTAA. In treaty shopping what happens is investors from third countries route their investments through Mauritius into our country to avail of capital gains exemption. In round tripping, domestic funds/companies go out and come back again through circuitous routes from Mauritius, to save taxes.
    • Now the visiting Mauritius PM has assured India of full support in checking treaty shopping and round tripping. Our tax sleuths can visit Mauritius and gain full cooperation from the tax authorities there.
    • BTW who is the Mauritius PM? Navinchandra Ramgoolam.
  • VI Pay Commission report to see light?
    • Looks like the ground is being prepared to make the pay commission submit its report soon.
    • The commission is understood to have submitted lot of relevant information in the run up to the budget making process.
    • In the current fiscal, the outgo on account of pay and allowances for the central government – with an employee strength of over 3 lakh – has been pegged at Rs. 46,379 crores.
    • The commission is headed by Justice B. Srikrishna.
  • Budget Glossary updated
    • See the updated budget glossary here.
  • Police-people ratio
    • In the context of the recent Maoist depredations in Orissa, this issue again comes to the fore.
    • The UN recommended peace time norm for this ratio is stated to be 222 per lakh of population.
    • But our country has this ratio at 122 per lakh of population.
    • In Orissa it is even worse with just 99 cops per one lakh citizens.
  • Coir Board Chairman
    • Mr. AC Jose
  • About tiger population
    • India has now a total of 1411 tiger in six pockets. This estimate is made by National Tiger Conservation Authority and Wildlife Institute of India.
    • This estimate is considered to be more accurate because instead of relying on the pugmark method, it adopted scientific sampling techniques such as mark-recapture and distance sampling of tigers.
  • European SEPA
    • SEPA stands for Single Euro Payments Area. This agreement aims to remove the economic disincentives to the execution of cross-border non-cash transactions. It has come into force throughout the EU’s 27 member states and 4 neighbouring countries.
    • A natural progression from the adoption of the euro common currency in 1999, this development represents an advance in the realisation of the single market for EU.
    • In its first phase, it stipulates a maximum of three business days for the settlement of cross-border credit transfers of unlimited value. It will extend to direct debits by late 2009 and eventually replace all national means of payment by 2012. Once it is fully operational, corporations and consumers will be able to conduct domestic as well as cross-border transactions in euros using a single bank account and retail businesses can process different card transactions through single machines.
  • India tops in area under Bt cotton
    • India had the largest area under Bt cotton in 2007 with the crop planted in 6.2 mn hectares of land.
    • India is the 5th largest grower of GM (Genetically Modified) crops by area.
    • This is according to a report “Global Status of Commercialized Biotech/GM Crops 2007” prepared by ISAAA – International Service for Acquisition of Agri-Biotech Applications.
    • Chairperson of ISAAA is Clive James.
  • World Carrom champion
    • India’s I. Ilavazhagi bagged her maiden women’s title in the 5th World Carrom Championship at Palais Des Festivals, Cannes, France.
    • She defeated P. Nirmala, also of India in the final.
    • India’s men’s team lost to Sri Lanka in the final.
  • Federer wins Laureus award again
    • Laureus World Sportsman of the Year award for 2008. This is the 4th straight time that he is winning the award.
    • The World Sportswoman of the Year award was won by Justin Henin of Belgium. This is the first time that she won this award. In 2007 she won the US and French Open tournaments.
    • The world team award went to South Africa’s rugby union team.
    • World Breakthrough of the Year was won by Lewis Hamilton of UK, the formula one racer.


  • India considering a sovereign wealth fund
    • The government is considering the establishment of a sovereign wealth fund (SWF) with a corpus of $5 bn to acquire companies abroad. The investment fund may also be used to bolster the country’s energy security by acquiring overseas coal mines and oil and gas blocks.
    • The PM himself seems to be pushing this idea and announcement to this effect is expected in the forthcoming budget.
    • In trying to establish an SWF, India is following the footsteps of China, Singapore et al. China floated a $200 bn SWF – China Investment Corporation last September. Kuwait has its Kuwait Investment Authority while Singapore has Temasek Holdings.
    • Singapore earns over 20% annually through its investments abroad. In contrast India earns less than 5% by investing its foreign exchange reserves in US treasury bills.
  • Something about government business for banks
    • Recently the RBI has threatened that it would auction government business if lead banks don’t take their responsibilities seriously and don’t play the development role in districts allotted to them across the country.
    • What exactly is this government business? What is its size? How much do banks earn out of this? What is the lead bank scheme? When was this introduced? Let’s see the answers for these questions.
    • Government business involves salary, pension payments and expenditure payments of various ministries. Banks earn fee income besides benefiting from the free float. (Float here means the government funds that get deposited in the bank before they are disbursed. On this banks don’t need to pay any interest and these amounts usually run into crores of rupees.)
    • The lead bank scheme was introduced by RBI in 1969 with a view to ensure cooperation and coordination among various financial institutions and government departments in development efforts. RBI has divided over 600 districts among the 28 PSU banks and they are required to play an active role in financing and developing these districts. The unhappiness of RBI emerges out of the fact that banks are only working for implementing government sponsored schemes rather than undertaking the developmental role.
    • Auctioning the government business would mean these PSU banks losing out on the lucrative government business and the free float. If the RBI does so, the biggest loser will be SBI which has a total government business of Rs. 5,91,350 crores upto the end of September 2007. It earned Rs. 490 crores commission from government transactions, which is about 15% of its other income.
  • Mayawati promises ST status for Gurjars of Rajasthan
    • As neither the BJP nor the Congress have been able to take a clear stand on the issue, Mayawati has stepped in with a clear demand.
    • You might remember that the BJP for its part has simply forwarded the Justice Jasraj Chopra committee’s report to the Centre without any recommendation. The committee noted that the Gurjars did not qualify for ST status. The report has further asked the Centre to ‘abrogate’ certain criteria for the purpose of qualification as they had become outdated.
    • The Congress remained non-committal on the issue.
  • Government finally gives the nod for issuing FCEBs – Foreign Currency Exchangeable Bonds
    • Remember our noting about EBs – Exchangeable Bonds?
    • THE government now allowed firms to issue foreign currency exchangeable bonds (FCEBs) to unlock the value of their holding in group companies. The norms governing tax treatment and eligibility for FCEBs are on the same lines as foreign currency convertible bonds (FCCBs).
    • In the case of FCCBs, bonds can be converted to equity of the issuing firm. In the case of FCEB, bonds can be converted into equity of a group company. As a result, payment of interest on FCEBs would be subject to payment of withholding tax. Funds raised through FCEBs cannot be invested in the capital market, but can be used for overseas expansion.
    • How do FCEBs help Indian companies? To know this, look at the borrowing costs through the ECB route. For borrowings with average maturity of 3-5 years, the overall cost ceiling is 150 basis points over 6 month LIBOR, RBI guidelines say. For borrowings over 5 years, the cost ceiling is 250 basis points over 6 month LIBOR.
  • Farm power GDP growth is best for poverty reduction
    • This is not from some politician based in West Bengal or Kerala. The World Development Report for 2008 by the World Bank has affirmed this. Such a view should give lot of support for our home based economists and other local and regional politicians who have been crying hoarse that it is development in agriculture that would lay the strong foundations of an egalitarian society.
    • By the way did you ever read a WDR? Take a look at it. I uploaded the overview on rapidshare for easy download by anyone of you interested in reading it.
  • Why is there a case for bringing the indirect taxes down?
    • Because lower tax rates boost consumption. According to a study by McKinsey, a price drop of 25 percentage points increases consumption three to five fold.
    • In our country the indirect taxes (read excise duties) are at about 25 to 30%. In China they are in the region of 15%.
  • Can you give a few examples of our political class’s scant respect for economic reform when things get politically inconvenient for them?
    • Tamilnadu CM has threatened to nationalize cement units in his state unless they cut prices.
    • In Goa, the CM has decided unilaterally to abolish all SEZs, including those officially notified.
    • The Union Minister Mr. Ram Vilas Paswan has displayed the command-and-control attitude in relation to price control in drugs. Now he is doing the same in pricing of steel.
  • The lackadaisical attitude of the Indian household sector towards the stock market
    • The household sector’s investment in shares and debentures is only 1.2% of the GDP. The share of their savings in financial assets is also very low at 6.3%.
    • The share of bank deposits in household financial savings has steadily increased over time. From 36.5% in 2004-05 it reached 55.6% in 2006-07.
  • What is Balck Swan? Who coined it?
    • It is a term used to describe the stock market collapse. It was coined by Nassim Nicholas Taleb in his book “The Black Swan” to describe a large-impact, hard-to-predict and rare event beyond the realm of normal expectations.
  • Now that the subprime crisis has mauled every big bank and there are calls for more nuanced regulation of banks and the credit rating agencies, the question that is gaining importance is this – can the gains of credit revolution be sustained through the envisaged strict regulatory oversight and reform? Will it not price credit derivatives out of the market?
    • Alok Sheel is a senior Civil Servant and is a very good commentator on economic and finance issues. Those of you who have a heart for knowing this high-funda subject, take a look at his article in today’s ET here for the answer.
    • It is a good read. Possibly for economics and finance guys, it can be a very good essay.
  • Buget Glossary
    • Time and again many of you have asked me about some basic concepts in economics and finance. More so those that are related to the Budget. Today’s ET has a very good glossary. A must read for everyone.
    • Do so here. (Sorry friends, I am not able to get the ET link for it.) Uploaded it on rapidshare. Download it from here.
  • Blue Ray vs. HD DVD battle
    • Looks like HD DVD championed by Toshiba has lost out. We get this impression because of the following developments:
      • Recently the US retailing giant Wal-Mart has announced that it would abandon the HD DVD format and only stock its shelves with Blu-ray movies.
      • Time Warner’s Warner Bros Studio said it would only release HD DVDs in Blu-ray format.
    • These developments have put paid to the Toshiba promoted HD DVD format. Looks like this round is won by Sony which championed the Blu-ray format.