29.04.2008

• ISRO achieves a record
• By launching 10 satellites in one go through the PSLV-C9 launch vehicle.
• This launch is notable for one more fact: for the first time ever an Indian mini satellite was launched through this vehicle.
• Some snippets worth our attention in this context:
• PSLV is good for smaller satellites; while GSLV can carry satellites of the 2 tonne category. What India’s capabilities enable it is to compete with the likes of Russia, China, Ukraine and the European Space Agency which dominate the carrying capacity of satellites of this class.
• Arianne 5 rocket of France can put a 5 tonne satellite in orbit. But it costs $120 mn to launch a satellite through this. At a time it can carry only two satellites.
• Atlas V of USA (United Launch Alliance – ULA) can launch 8 tonne satellites; but rarely available for non-US missions. Similarly Delta IV rocket by the same agency is meant for pure military use.
• Global satellite launch business is a $3 bn business.
• India’s launch services are about 60 to 70% cheaper than the rest of the world.
• Most commercial satellites weigh between 3 and 5 tonnes.
• Is it time for Naxalism to enter the federal domain?
• What are the issues affecting it now?
• Law and order being a state subject, the centre is having a limited role in tackling some of the grave crimes like terrorism, espionage and Naxalism. If crimes like these are classified as federal crimes and kept in the concurrent list, then that would make it possible for the centre to have a greater role. But for this, the Constitution has to be amended. This is what precisely the consultative committee on home affairs (of the Parliament) has recommended recently.
• The big question is whether states would be willing to bring about that change. Let’s wait and see how things will evolve.
• ICICI seeks NBFC license, drops FoF plan
• So reads a headline in today’s paper. I am sure you all know about an NBFC – Non Banking Finance Corporation. This is the route through which many MNC banks in India are overcoming their branch limitation problem.
• But what is an FoF? It stands for Fund of Funds. What is it? An FoF is essentially an investor group that invests in private equity funds in order to provide investors with a low-risk product through exposure to a large number of vehicles across sectors and even geographies.
• India and vaccine production
• India is the world’s largest vaccine exporter. UNICEF sources about 60% of its vaccine requirements from India.
• But in January 2008, the vaccine production in the country took a beating with the government ordering the suspension of manufacturing at four of its manufacturing units viz., Pasteur Institute, BCG Vaccines, Haffkine Bio-Pharmaceuticals and Central Research Institute because they failed to adhere to the good manufacturing practice standards.
• India opposes labour or environment standards being part of trade accords
• Why? Because it feels that bringing such issues into investment pacts would be very ambitious.
• The US is pressing India to bring in labour and environment standards in its currently being negotiated trade agreement. But India is opposed to this idea, as it had never allowed such things in its agreements with other countries or entities like the EU.
• Dollar slide to make oil touch $200 bn?
• If the OPEC President is to be believed, this could be so.
• Chakib Khelil, the Algerian minister for energy and mines and currently the President of OPEC suggests so.
• Each time the dollar falls 1% the price of oil barrel rises by $4 and vice versa.
• Some snippets on inflation
• The best measure of inflation in the country for non-urban India is the CPI-AL (Consumer Price Index for Agriculture Labour). Because this index gives a weight of 65% to food items unlike the more talked about WPI which has only 22% weightage for food products.
• A state like Bihar has 12% share of overall poverty in the country but lifts only 3% of the PDS food grains. Better off states like AP lift a higher quota than their share of people below the poverty line.
• On subsidies getting out of hand
• Today there is a very good debate from three experts on the issue. Though all of you are by now aware of the truthful reproduction of the market-oriented views I have been giving on the issue, today I felt that it is time we also look objectively at the argument being put forth by Nilotpal Basu, Member of the CPI(M) central committee.
• He says that the major reason for the recent spurt in global food prices is not shortfall in production. He backs up this argument by saying that a record 2.3 bn tonnes of food has been produced in 2007. This is 4% over last year. The cause for the global spurt according to him is the structural meltdown of the global food economy.
• What exactly is this structural meltdown? The structural adjustment programmes advocated by IMF/World Bank have induced trade liberalization and pulled down tariff barriers and quantitative restrictions and all other instruments available to national economies to insulate food security from global shocks. This has made food from being used for nourishment to being traded for speculation and bargaining.
• The shrill cacophony for slashing and targeting subsidies loses its relevance in the current context. What is needed is removing wasteful and costly subsidies elsewhere viz., industry. For eg., the revenue foregone on account of tax exemptions for the corporate India top Rs. 2,78,644 crores in 2007-08. Though the projected corporate tax is 33%, the effective rate is only 19%. The tax-GDP ratio is an abysmal 17.8%. It is this that needs to be corrected; not doing away with subsidies and/or targeting them. That has to be preceded by this.
• What are functional foods?
• These are also known as ‘neutraceutical products.’ These are fresh or processed food containing health-promoting ingredients, quite apart from the nutritional value.
• Typical functional foods include probiotic foods, omega fatty acids and even crops containing soya, gluten and whey proteins. Others in the category are energy drinks, juices and breakfast cereals.

28.04.2008

• The dispute about Maaza between Bisleri and Coke
• Maaza was launched in 1976 by Ramesh Chauhan of the Thums Up fame. He sold it to Coke in 1993, along with Thums Up, Citra, Goldspot, Rim-Zim and Limca.
• In June 2007, the Bisleri Group promoted Maaza Beverages sold the trademark rights of Maaza for international markets to its bottlers in Europe and US.
• Coke, which owns the trademark in India, is said to be keen on buying the rights for overseas markets.
• Chauhan claims Maaza trademark was sold to Coke only within India and Bisleri was the registered proprietor for it outside India.
• Coke, however claims that there was no non-compete agreement to restrain it in relation to any country where the Maaza trademark was not registered by a Chauhan entity.
• Forbes forecasts that India will top super-rich list by 2017
• Currently, India is the fourth largest in terms of the number of billionaires making to its annual list.
• Four Indians – Lakshmi Mittal, Mukesh Ambani, Anil Ambani and KP Singh – are among the world’s 10 richest. No other country is having as many on the top 10 list.
• Three countries are ahead of India in the list – the US, Russia and Germany. India has 53 billionaires in the list.
• IGBC to unveil green construction code for residential buildings too
• The proposed new code is the first to address residential construction in India. The country has had a green building standard since 2001, the year IGBC (Indian Green Building Council) set up the LEED (Leadership in Energy and Environment Design) committee that rates commercial buildings.
• Today India boasts of a staggering 70 mn sft with 183 registered commercial buildings. IGBC hopes to see a similar success story for residential buildings.
• Financial inclusion and FINO
• We have been noting about financial inclusion quite frequently in our blogs. The subject cannot be complete without FINO.
• FINO stands for Financial Information Network and Operations Limited. It is an ICICI promoted company where ICICI still holds a stake. It was established in 2004 with the objective of reaching the unbanked. It appears to have notched up quite a bit of success.
• It has about 700 agents working for various client banks. The agents,
  along with bank representatives, visit certain areas and spread awareness about the system and its processes. These agents are trained to work with micro-customers in urban as well as rural areas and help them use smart cards to conduct transactions. One agent typically services a thousand customers, or 2-3 villages, and makes regular visits to each area at predetermined times.
• With about 60 mn unbanked households still remaining in the country, FINO has its work cut out. Let’s hope it will see greater success.
• AP’s massive land record initiative – Bhoo Bharati
• It is planning to invest about Rs. 2000 crore to digitize the land records. The project is called ‘Bhoo Bharati.’
• A thorough survey of the entire land in the state is envisaged over a period of five years.
• The surveyed land records will be made available online.
• Land survey, it appears has been done about 100 years back in the country. There have been many changes since then in the borders due to sales, agreements and natural calamities such as earthquakes. Many of these changes have not been recorded by the governments.
• A different take on CRR hike
• This is the first time that I am reading an article from Ashok Khemka, an IAS officer. His idea appears to be innovative.
• We all know that the RBI keeps sterilizing the forex inflows by issuing the MSS bonds. At present the outstanding MSS bonds are about Rs. 1,60,000 crores. At about 7.5% interest rate on them, this entails an additional burden of Rs. 1000 crores per month on the nation on account of sterilization operations. We can say that this roughly translates to about 0.25 paise per unit of dollar per month in terms of interest outgo which will have to be borne by the country in terms of greater fiscal deficits of the central government incurring opportunity costs of foregoing more productive government expenditure on investments in physical and human infrastructure. Hence there is a need for revamping the CRR policy.
• A differential CRR policy can be put in place in times of such excess liquidity for forex inflows of hot nature such as NRI deposits, portfolio investments in stock markets, hot inflows of private equity, hedge and pension funds, etc., without corresponding increase in the productive capacity of the economy. The banking system may be mandated to a differential CRR regime in which such foreign inflows are levied CRR at higher rates and in the designated currency itself. By absorbing a part of such forex inflows in the designated foreign currency, there would be no need for sterilisation since no additional liquidity is being injected into the domestic economy since such CRR deposits would not form part of the domestic money supply system.
• A very good idea know? Sure, the people bringing in money will then start reclassifying their inflows under categories which attract a lower CRR. Looks like handling such finer detail will be far easier in times like these – especially when we are facing a huge current account deficit, but having large inflows of foreign money. Such a differential CRR can be in place till at least we turn current account surplus on trade front.
• Have any further ideas? Shoot them up in the shout-box.
• A re-look at the definition of derivatives
• Derivatives are financial contracts whose value “derives” from some underlying asset, such as stocks, bonds, currencies, or commodities. The instruments are now an integral part of modern financial systems, but have been only rather recently introduced in domestic markets.
• They provide three key market functions: risk allocation, price discovery and what’s termed “transactional efficiency”.
• Derivative securities allow for mechanisms through which investors, corporates, and even governments can efficiently hedge, (read purchase insurance), to manage financial risks. Also, the ability of derivatives markets to furnish information about “market-clearing” prices can boost market efficiency. Futures and option exchanges do reveal equilibrium prices that reflect demand and supply conditions in the offing, and so are essential for informed decision-making. Further, derivative contracts offer greater liquidity and lower transaction costs than underlying cash markets. Interest rate and currency swaps, for example, are widely used by corporates to lower costs of capital.
• Usually articles written by Jeffrey Sachs, appear to be anti-US.
• But not this time. While impressing on the need for global cooperation in energy technologies, he says that developing alternative energy technologies is not the responsibility of US alone.
• Can we afford to miss reinforcing our recently learnt concept of “The Tragedy of the Commons”?
• The total solar radiation hitting the planet is about 1000 times the world’s commercial energy use. This means that a small part of the world’s regions – say deserts – can be new sources of energy supply by tapping the solar radiation.
• Then why not keep on establishing more polysilicon factories all over the globe? It is a technology that is tried and tested. Why not have as many factories producing it so that we all can have plenty of solar energy!!
• Ever heard of urban mining?
• Scavenging through the scrap metal in old electronic products in search of costly metals such as iridium and gold.
• A tonne of ore from a gold mine produces just 5 grams (0.18 ounce) of gold on average, whereas a tonne of discarded mobile phones can yield 150 grams (5.3 ounce) or more, according to a study.
• The same volume of discarded mobile phones also contains around 100 kg (220 lb) of copper and 3 kg (6.6 lb) of silver, among other metals.
• Couldn't resist giving you this YouTube video. This is her latest hit called '4 Minutes.' Does she look like a woman approaching 50? Now you know why I am a humble fan for this great lady. Don't know her name? Then you are surely having your head in sand!
  

27.04.2008

• What are the reasons for the lack of interest in Islamic funds in India?
• Simply put: business compulsions and opposition from political quarters.
• India has just one Islamic fund in the offing viz., Taurus Parsoli Ethical Fund. Though it had its application with SEBI pending for the last six months, sources say it is likely to withdraw its application. The fund is a child of Taurus AMC and Mumbai-based Parsoli Corporation to raise money and ensure that the portfolio remains Sharia complaint. It aimed at raising about Rs. 500 crore.
• The idea did not find favour with the board members. Not many companies listed on the bourses are comfortable with the idea of being part of the Islamic fund. They fear that their image will take a beating among general investors. An Islamic fund is seen as mixing business with religion – an uncomfortable idea.
• About 58% of the 4,887 companies listed on BSE are Sharia compliant.
• You might remember that Sharia forbids Muslims from receiving interest payments and from investing in companies involved in the production or sale of pork, alcohol, tobacco, pornography, gambling and non-Islamic structured finance or life insurance.
• The list of Sharia compliant securities is updated twice a year and released on the last Friday of May and November.
• Is it time to say good-bye to BRTs?
• As part of the urban renewal efforts, there are about 13 Bus Rapid Transport corridors planned in the country in 8 cities -- Ahmedabad, Bhopal, Indore, Jaipur, Pune, Rajkot, Vizag & Vijayawada.
• These were planned perhaps by looking at the success of such corridors in Columbia and Chile and the fact that many countries in the world are planning such corridors.
• But the Indian experience, in Delhi and Pune proved to be very embarrassing and sticky for the government. Reasons?
• Lack of a sound operational plan.
• Under-estimation of future growth.
• Lack of a holistic urban transport policy.
• A typical BRT system is stated to cost between $1 mn and $35 mn for every 1.6 km while a light rail system costs about $13 to 336 mn for the same distance.
• Any new system is bound to cause upheavals. What is needed as better execution and management of public expectations.
• But with the kind of costs that we are talking of, would it not make sense to (perhaps simultaneously) encourage people to work from homes or provide alternative ways for working? I would say, why not allow sales people to avoid office altogether? They can be asked to file all their reports over the web or electronically. Why not encourage all services industry people to use the web to do their work? I agree that such tectonic shifts call for huge investments and a change of mindset; but we do have examples of such shift happening right in our own backyard. And the investment requirement for BRTs and MRTs is not low either! Back in the late 1990s when the then government of AP was planning to make Hyderabad an IT hub the nay-sayers outnumbered the believers. But look at what happened. A revolution has happened even before it could be termed as a revolution. Such a thing is possible even in our urban transport. Radically different work ethics and cultures can be imagined and established to overcome this problem. One such experiment is ‘walk to work’ wherein you can establish urban clusters for workers and their companies, totally eliminating the need for commuting.
• Why is India helping Sri Lanka with a $100 mn soft loan to buy arms?
• India is reportedly going out of the way to help Sri Lanka procure arms by providing a soft loan of $100 mn at 2% interest rate. Though India’s external assistance regime doesn’t classify Sri Lanka as a least developed country and hence ineligible for soft loans, it is reportedly doing so with a view to keep other countries from financing it and making an entry into the sub-continent.
• Remember our noting about vulture funds?
• Vulture funds or investors are those that do bottom-fishing in times of distress. They buy beaten-down corporate bonds in bankruptcy proceedings.
• Two of the globally well-known successful vulture fund managers or investors: Wilbur Ross and Phil Falcone.
• Tragedy of the Commons
• I introduced this phrase to you a few days ago in our notes. Today there appeared a very good article explaining the concept very well. Worth a read. Don’t miss it. It is here.
• How much do you know about martial arts of India? Can you name a couple of them?
• Cheibi Gad-Ga: This is from Manipur. In this form of duel, the fighting gear consists of a sword and a shield, now tailored to a stick encased in soft leather and a shield made of leather. Contestants use a stick (known as ‘Cheibi’) sheathed in leather and about two and a half feet long in combination with a leather shield (with three foot diameter) to represent an actual sword and shield.
• Kalari payattu: This is from Kerala. Kalari in Malayalam means a particular kind of gymnasium, where the martial art known as Kalari Payattu, is practiced. Basically, it helps in attaining immense flexibility. At the turn of the sixth century A.D., martial arts spread from Southern India to China by Daruma Bodhidarma-an Indian Buddhist monk and Kalaripayattu master. From China, martial arts have spread to countries such as, Korea and Japan. The art reached its peak in the 16th century, in the days of Thacholi Othenan-a celebrated chieftain of north Malabar.
• Silambam: Tamil Nadu is thought to be the origin of contemporary and scientific staff fencing, popularly known in Tamil as Silambam. The use of the long staff for self-defence or mock fighting was a highly organised sport in as early as the first and second century A.D.
• Thang Ta and Sarit Sarak: This is again from Manipur. Practised by its Kings to frustrate British rulers. Thang Ta is the technique of fighting with a sword or a spear and Sarit Sarak is the technique of fighting unarmed.
• Thoda: Originated in Himachal Pradesh and dating back to the Mahabharata days, this is an archery skill basically. Thoda, the name is derived, from the round piece of wood fixed to the head of the arrow, which is used to blunt its wounding potential.

26.04.2008

• World IP day
• Today is World IP day. WIPO has designated 2008 as the year for “celebrating innovation and promoting respect for IP.”
• IP: Intellectual Property.
• Sugar being decontrolled?
• The government may decontrol sugar in one stroke. Scrapping all curbs in one go rather than in phases (the earlier plan) will allow Indian sugar mills compete more efficiently from the very next season. The liberalisation would mean mills can sell sugar freely in the market, no cane area reservations and a direct linkage between the price of cane and sugar. The matter is now under consideration of the prime minister.
• An expert group that is looking into the issue is due to submit its report in the next few months. Therefore, a view on the entire gamut of reforms would be taken simultaneously.
• Have any ideas on this? Is it being thought about at the right time? I mean when we are faced with inflation both on the domestic and global fronts; could it be the right time to talk of decontrol? Let’s wait and watch the developments.
• Know anything about Microsoft’s profits?
• For Q1 of this year (i.e., Jan to March 2008), it has earned a net profit of $4.39 bn!
• Compare this with our Indian IT industry’s total revenue. One estimate puts the total revenue of our IT industry at $47.8 bn. Where do we stand? M$ earns a profit of a cool 10% of our annual revenues from the industry in just one quarter! Extrapolate it and you have a net profit figure which is nearly half our total IT industry’s revenues! Mind boggling, isn’t it?
• Can you reel out any of the available alternatives for bio-fuel?
• Cellulosic ethanol: This is produced from waste wood or weeds such as switch grass, by either enzymes or thermo-chemical reactions breaking down the cellulose and turning it into sugar to be converted into ethanol.
• BTL (Biomass to liquid): This technology produces biodiesel from wood biomass using the Fisher Tropsch process. The Fischer-Tropsch process is a catalyzed chemical reaction in which carbon monoxide and hydrogen are converted into liquid hydrocarbons of various forms. Typical catalysts used are based on iron and cobalt.
• Bio-butanol: This is an alternative to ethanol.
• GM corn: This is produced using an enzyme from the stomach of a cow. This should allow corn to be processed into ethanol without the use of synthetic chemicals.
• Ligno-cellulose: Direct conversion of this into a petrol-like fuel. The process involves rapid heating of cellulose in the presence of catalysts and then cooling it to create many of the components of petrol, including toluene and naphthalene.
• Algae: Conversion of this into ethanol and hydrogen gas has been researched upon. Algae with an enzyme called hydrogenase create small amounts of hydrogen.
• Emerging food crisis and its warnings
• Anger over high food and fuel costs in recent months has sparked protests in several countries. In Haiti, the poorest country in the Americas, protests have brought down the government and killed six, while in Cameroon at least 24 have died in protests linked partly to rising living costs.
• Humans escaped extinction?
• Humans might have had a brush with extinction some 70,000 years ago. So says a study.
• Spencer Wells is director of the Genographic Project, launched in 2005 to study anthropology using genetics.
• Previous studies using mitochondrial DNA — which is passed down through mothers — have traced modern humans to a single ‘mitochondrial Eve’, who lived in Africa about 200,000 years ago.
• The migration of humans out of Africa to populate the rest of the world appears to have begun about 60,000 years ago, but little has been known about humans between Eve and that dispersal.
• What could be reasons for RBI’s love for an SWF?
• SWF: Sovereign Wealth Fund.
• One is that forex reserves are now over $300 bn and with the return on US treasury bills falling steadily, the RBI is, perhaps more willing to look at alternative avenues of investment to improve earnings from forex reserves.
• Secondly, rising domestic interest rates widen the gap between interest paid on market stabilization scheme (MSS) bonds and earnings on forex assets.
• The IMF estimates that SWFs will rise from $2 to 3 trillion today to about $6 to 10 trillion within 5 years. China, Kuwait, Norway, Russia, Saudi Arabia, Singapore and the UAE are likely to be the big players with SWFs.
• Is there a need for a world agriculture bank?
• From a very interesting article on the subject, I give below some excerpts which will make us ponder over the subject for some time.
• What does a country which has a foreign currency problem emanating from a fundamental balance of payments disequilibrium do? It goes to the IMF for assistance. What are the options for a country when it needs money for a development project? It goes to the World Bank, IDA or ADB for aid. What can a country which has a physical food problem do? It cannot look beyond probably imports which have their own limitations of being uncertain, besides carrying the ubiquitous threat of higher inflation being transmitted.
• Presently there is no way out for a country which has a shortage of food and cannot supplement the same with imports. The problem is more acute when the product is rare, like pulses which are grown by a few countries. This situation should sow the seeds of the idea of establishing a world agricultural bank (WAB) which can respond appropriately in times of crisis.
• The WAB should be established by member countries which will have to contribute both equity capital as well as grains/oilseeds to the Bank. The Bank could choose the products that it would like to stock and can include those which normally are subject to production volatility. This would form a corpus which can be used to assist member countries in times of distress. The Bank on its part would be in the business of procuring products from the market at all times to build a buffer and would also be tapping all countries for surpluses. The Bank could also carry out its own farming activity by either procuring land or leasing the same in different countries and growing the deficit crops such as corn, wheat, oilseeds, etc, so as to augment its own supplies.
• Some solid ideas know? The article is from Madan Sabnavis who is the Chief Economist from NCDEX. Have ideas on the subject?
• Why should we be worried about silicon shortage?
• India must move quickly to create large-scale capacities for solar grade silicon, the main constituent of solar cells, to realise its renewable energy plans and combat power shortage, according to industry experts.
• The country is now short of power by 25,000 mw. Worried over the environmental impact of fossil fuel-fired power plans, many countries have started hiking their solar power generation capacity.
• India should take this opportunity to access technology and set up four to five poly silicon plants with an annual capacity of about 3,000 tonne, which could help generate 1000 to 1200 mw solar power every year, according to experts.
• International Energy Foundation experts have indicated that by 2050, a sizeable chunk of power generation would be accounted for by nuclear and renewable energy sources, specially solar energy.
• Demand for solar energy is increasing at the rate of 30% annually around the globe and about 50-60% for grid connected solar power. Japan, Germany and the US have started programmes to install solar rooftops in a big way.

24.04.2008

• Microsoft’s tax problem in India
• When a big company like Microsoft (aka M$ for nerds) is involved in some tax problem, it does make news. Let’s know the details as reported in ET.
• M$ has been issued notices for non-payment of service tax on ‘marketing and user support services’ carried out by M$ India for M$ Singapore. The Indian subsidiary held marketing events and other promotional activities for the Singapore subsidiary for a mark up of 7 to 10%. As the Indian subsidiary did not pay any service tax on these receipts, it was sent the notice.
• The government had prescribed separate set of rules for export of services in 2006, making it clear that any service consumed within India won’t come under exports. If they come under exports, then they would be exempt from tax. Export of services is defined as services being used outside India.
• Wasn’t it just yesterday that we noted about RIL’s spectacular performance?
• See today, it is reported that it has decided to close down its fuel retail business. Having incurred losses of Rs. 800 crores for 2007-08, it decided to call it quits from the fuel retail business. Good business sense is not sticking to a losing proposition.
• It had a license to set up over 5500 retail outlets. It has set up over 1250 over the first three years of its operations.
• Toyota overtakes GM as world’s top automaker
• In Q1 of this year, Toyota has emerged as the largest automaker with sales of 2.41 mn vehicles compared to GM’s 2.25 mn units.
• How do you deal with sticky issues in Indian polity?
• Answer: by avoiding them.
• This is precisely what the Abhijit Sen committee on commodity future trading is going to do; if reports are to be believed. It appears there are differences within the committee on the issue. The committee has Shetkari Sangathana leader Sharad Joshi, IIMA professor Siddharth Sinha, Forward Markets Commission member Kewal Ram and IIMB professor Prakash Apte as members.
• Its terms of reference were:
• To examine whether there was an unusual hike in essential commodity prices in 2006;
• To examine whether futures trading in the commodities contributed to the price rise; and
• To suggest measures by which the participation of farmers in futures trading could be made easier in order for him to discover optimum price for his produce.
• Remember about Alang?
• It is our well known ship-breaking yard in Gujarat.
• It was one of the biggest employers of migrant labour. It is fast losing out business to Bangladesh. It has generated business worth Rs. 80,000 crore till 2008. It has breached its first vessel in 1983.
• The problem with working in the yard is asbestos pollution. It adversely affects the health of the workers. They develop lung cancer because of it. The asbestos affected workers in Alang are reported to be around 16% of the workforce.
• But it is handsome wages ranging between Rs. 100 to 300 per shift that made working there lucrative.
• I am left to wonder, if a ship-breaking yard can give asbestos pollution, will not a building yard also give the same problem? Any ideas from people working in the ship building industry?
• Who is the new Governor of Bank of Japan?
• Masaaki Shirakawa
• You may know that BoJ is the equivalent of RBI.
• Want to make money even in turbulent times?
• For those of you who are dare devils and play the stock markets, this article is worth a read. You can’t afford to miss.
• Read it in full here.
• Be warned, I don’t subscribe to the theories or methods propounded by the author. You are on your own when you follow his advice. My advice is to stay away from stock markets till you are fully settled in life. When you can throw away a couple of lakhs, you are ready to play the markets.
• Playing stocks is not for the faint hearted.
• If you are asked to compare and contrast the working and/or functioning of IMF, World Bank and WTO, what could your answer be?
• If it is better than this article, be assured you can be on your way to working for them sometime in the future.
• Here it is.
• Who is Manoj Tewari and why is he in the news?
• He is a Bhojpuri singer-actor who has popularized Bhojpuri movie industry. He was the one whose debut film in Bhojpuri “Sasura Bada Paise Wala” was made for a paltry Rs. 30 lakhs but went on to earn Rs. 20 crores.
• Bhojpuri peasants were shipped out between 1873 and 1916 from Western Bihar and eastern UP to work as indentured labour on sugarcane plantations in distant colonies like Surinam. The trauma of being uprooted resulted in a folk culture called Bidesia. Bhojpuris who left their homeland remember it through Poorvi Lok Sangeet and Ganga Geet – an oral tradition that is kept alive to this day in the songs sung by Tiwari.
• It was in honour of this that the Dutch decided to have his face printed on a postage stamp in Holland. Why Holland? It has a sizeable population of Bhojpuri speaking Indians.

23.04.2008

• Government makes telecom mergers tougher
• It has revised the norms for merger between telecom companies within a circle. Merger conditions have been made stringent in four areas – pre-approval by DoT is required for merger; threshold market share of merged entity beyond which a merger will be prohibited has been lowered from 67% to 40%; a licensee must complete three years of operations before it can contemplate merger; and finally, the merged entity will have to pay extra for spectrum.
• Mr. Ahmadinejad’s visit to India
• He will visit India on April 29 on his way to Sri Lanka. He will hold talks with prime minister Manmohan Singh on an array of issues including the nuclear stand off. Though India doesn’t want another nuclear neighbour, it supports Iran’s right to peaceful uses of nuclear energy. India is also likely to reiterate its position that the continuing nuclear stand off should be resolved through diplomatic means.
• It would be interesting to know that India has announced its intention of joining the TAP (Turkmenistan-Afghanistan-Pakistan) gas pipeline project this week. The negotiations on the IPI (Iran-Pakistan-India) gas pipeline are dead-locked. US is opposed to this IPI pipeline and is reported as pressuring India to move away from it. While India itself is reportedly facing stand-off in its negotiations with Iran on pricing issue and Pakistan on transit fee issue.
• TAP pipeline is a 1680 km pipeline that will transport 100 mn cubic meters of gas from Duletabad gas field, of which India’s share is likely to be 60 mmscmd.
• G5 Meeting
• China, Mexico, South Africa, Brazil and India are meeting in Beijing ahead of the G-8 summit in Japan in July.
• IIM review committee
• It is headed by RC Bhargava. It was appointed to review the functioning of the IIMs.
• It has asked in its interim report to defer any increase in fee till the final report is submitted.
• You might have noticed that recently all the IIMs have announced a hefty increase in their tuition fees. It has suggested that the fee structure should be maintained at Rs. 3 lakh or below.
• About Tollywood
• The industry is 76 years old. It is second only to Bollywood. (BTW Tollywood doesn’t stand for Tamil movie industry; it stands for Telugu film industry).
• The industry shifted its base from Kolkata to Rajahmundry in 1936 and then to Chennai. It established its presence in Hyderabad in 1990s.
• It makes about 150+ movies a year.
• Some ‘greek’ (stock market lingo) from New York
• Dark pools: anonymous off-exchange stock trading venues where traders can match large orders while concealing price and volume. By allowing traders to hide their cards, the pools limit the impact on stock prices before an order is complete, reducing costs for the trader.
• Gaming: It is the industry term for the way traders manipulate prices in the dark pools by finding an information leak other cannot access.
• Pinging: it is perhaps the most common technique used for gaming. While pinging, a trader submits a small order to see if someone else in the pool is willing to take the other side of the trade.
• Rainmaker: An employee of a brokerage firm who brings a large amount of wealthy individuals or corporations to the brokerage firm's client base.
• India posts record grain output in 2007-08
• Total food grain production: 227.23 mn tonnes.
• Wheat: 76.78 mn tonnes (75.81 mn tonnes)
• Rice: 95.68 mn tonnes (93.68 mn tonnes)
• Coarse cereals (maize, bajra & jowar): 39.67 mn tonnes (33.92 mn tonnes)
• Pulses: 15.19 mn tonnes
• About RIL (Reliance Industries Limited)
• This is one company without watching which, our knowledge about Indian economy would never be complete.
• You know its turnover last year? Rs. 1.39 lakh crores. How many state governments in India this much of budget receipts in a year?
• Its GRM (Gross Refining Margin) is about $15/bbl. It is perhaps the highest in the world. This is achieved by it because its strategy is to source heavy and sour crude oil, which tend to be less pricey and require complex refining.
• China’s Reserve Bank Governor
• People’s Bank of China. Zhou Xiaochuan.
• Its forex reserves have risen to a record $1.68 trillion.

22.04.2008

· World Earth Day

• Today is world earth day. It was first celebrated in 1970 as a means of sensitizing people about the environment.

· Commodity transaction tax likely to be cut

• A partial rollback of the commodities transaction tax (CTT) could be on the cards. The prime minister’s Economic Advisory Council (EAC), headed by Dr C Rangarajan, is understood to have recommended this. The EAC had been asked by prime minister Manmohan Singh to review the proposal moved by the Finance Bill 2008-09, after receiving representations from not just the industry, but also the regulator of the commodities exchange, the Forwards Markets Commission.
• The EAC feels that the tax in its present form would harm the trade, which will shift out of bourses.
• Do you know the name of the world’s largest brewer?
• It is InBev. This ‘largest’ is by volume. It is likely to start operations in India soon. In Bangalore.
• Why do IFRS impact some of our firms negatively?
• Remember the info about adoption of IFRS (International Financial Reporting System – Some refer to it as Standards) that we noted in our blog a couple of days earlier?
• They usher in what is called ‘equity accounting’. What this means is that the firms which have joint ventures with other firms will be allowed to account for only the proportionate profits from the joint venture companies; but not the revenues. So this will adversely affect the revenue figures of the companies.
• Know the names of some of the biggest food grain dealers on a global scale?
• Cargill, Louis Dreyfus, Glencore and Toepher.
• Some of us would have known Cargill, for seeds.
• These companies have offered wheat call options to our government recently. Know what this means? It means that the government will have the option of buying wheat from them at a pre-determined price at a future date. If it doesn’t purchase wheat, then it will have to forgo the option premium paid to them. That option premium is about Rs. 1000 per tonne. This is considered a best bet in the present circumstances. Is the Left listening?
• Is a food crisis not immanent?
• If you read this article today by CSC Sekhar, you will be convinced with his argument that it is not. Read it here.
• But I would beg to differ with him. The impact of the food crisis will be felt for at least a year or two before it gets handled well by the international community. This is because, nobody thought that the bio-fuel revolution would make such a serious dent on food availability in so short a time. But now that it is a reality, the policy makers the world over will need some time to respond to this challenge. By that time some damage would have occurred. We are already seeing part of the damage in the form of rising global prices.
• Secondly, nobody knows for sure whether or not a particular policy is good while it is being implemented. Any policy gets implemented with the hope that it is a good one. But look at what happened with our buffer stock storage system! Every serious student of economics and our polity (me included) thought that holding on to such huge buffer stocks is a sheer waste of resources. How wrong we were, is known only now. Post facto.
• That’s why there will be some damage before the situation gets adequate and (hopefully) coordinated policy response from all over the globe.
• It is in this context that you can’t afford to miss today’s debate on this from three experts. Look at it here.
• What a muted response to the short-selling brouhaha?
• The securities lending and borrowing programme and short-selling mechanism for institutions, which were operationalised yesterday did not get any noticeable response.
• Brokers are attributing this lack of response to the lack of clarity about their functioning in addition to higher execution costs of such trades.
• So is short selling at institutional level a still born initiative? I don’t think so. It is too early to write it off. Let’s wait and watch.

21.04.2008

• UBS sweats over subprime crisis
• The world’s largest bank also seems to be the one suffering the largest subprime losses. Reportedly it has lost $37 bn in assets because of the subprime crisis.
• This has forced it to ask investors for emergency cash twice in two months.
• Government set to ease ECB norms for infrastructure firms
• There is an overall cap of $22 bn for all ECBs in the country. But in spite of this cap, the total amount raised as ECBs in the country during 2007-08 stood at over $26 bn.
• The ceiling for individual companies is $20 mn for permissible end-uses of ECBs. Under the current guidelines all companies registered under the Companies Act can tap overseas markets for funds up to $500 mn under the automatic route, subject to end-use restrictions.
• As infrastructure companies have been adversely impacted by these restrictions, the government seems to have made up its mind to relax some of the restrictions.
• Why should India be cautious about establishing an SWF? (Sovereign Wealth Fund)
• We should not be blindly aping some of the countries like Abu Dhabi or China in rushing ahead with the establishment of an SWF for the simple reason that those countries are running current account surpluses; while that is not the case with us. We have current account deficit. But we still keep accumulating dollars because the inflows are constituted by liabilities on capital account – net FII investment, external debt etc. These are returnable. That’s why we have to be more cautious.
• Having been wisened (or shall I say chastened) by RBI Guv’s seemingly conservative (but proved to be good in the medium term) disposition towards inflation, I think we better pay heed to his caution on this score too.
• Tragedy of commons and modern finance
• This article is not for the faint hearted; surely. Those of you with some finance background will relish this. Those who don’t have the stomach for it are advised to skip it.
• But one interesting aside from this is this – the phrase “The Tragedy of the Commons”. What this phrase speaks of is the conflict over finite resources in situations where individual interests clash with the common good. This was first used by Garrett Hardin in his 1968 essay “The Tragedy of the Commons”.
• Want to know how individual action by the USA has led to the depletion of a finite but intangible, common resource viz., financial stability? Then read the article. It is from one of my favourite authors: Mythili Bhusnurmath.
• Scientists create smallest transistor
• It measures a little bigger than a molecule. This is expected to spark the development of super-fast computer chips in the future.
• Using the world’s thinnest material called graphene, a team at the University of Manchester has produced the transistor which is one atom thick and ten atoms wide, marking the first true electronic nanocomponent.
• Four years ago, they discovered graphene, the first known one atom-thick material which can be viewed as a plane of atoms pulled out from graphite. Unlike other known materials, graphene remains highly stable and conductive even when it is cut into devices one nanometre wide.

20.04.2008

• On forward trading
• Just a week before the Abhijit Sen committee report on forward trading is scheduled to be submitted, deputy chairman of Planning Commission Montek Singh Ahluwalia said that India can’t ignore the active commodity market in China.
• But the Left says that forward trading doesn’t help farmers.
• Slowdown in M&A (Mergers & Acquisition) activity
• With a string of deals falling through in the past few months, dealmakers at India Inc seem to be cooling their heels — at least for the time being.
• Compared to the corresponding period last year, M&As have dried up and their announced valuation in the first three months of this year coming down by almost 71%. And though PE deals have hit the road again after an initial stutter, the buzz in investment banking circles is depicting a different story - that of deals not going through.
• On our PDS effort
• India runs the world’s biggest food aid program, an $8.4 billion effort that shoves 15 million tonnes of subsidised wheat and rice a year to hundreds of millions of people.
• How many essential commodities are there?
• The government classifies 30 items as essential commodities, of which 27 are included in the WPI (Wholesale Price Index) computation. They have a combined weight of 17.8% in the WPI.
• What is a nuclear bank that is being proposed by India?
• Even as the nuclear establishment expressed frustration at the nuclear deal getting stuck in politics, foreign secretary Shiv Shankar Menon hoped that the deal would be concluded soon and floated the idea of India being home to an international nuclear bank.
• The idea of an international nuclear bank was floated by International Atomic Energy Agency Director General Mohammad ElBaradei last year and has been widely debated among various countries. Due to the complexities involved, this is an idea that has not moved forward since last year.
• The idea of the fuel bank is to provide enriched nuclear fuel to countries that don’t have access to reprocessing technology. Countries with reprocessing technology will keep the bank stocked with enriched Uranium.
• The interest for India in the bank is that it would be one of the countries that could source fuel from the bank for its atomic reactors.
• Ground handling operations at our smaller airports
• As per the existing ground handling policy, which becomes effective from January 2009, only three agencies will be allowed to take up ground handling services in our domestic airports.
• Four international ground handlers – Menzies, Swissport, SATS and Dnata – have submitted tenders for handling ground work at the 26 non-metro airports in the country.
• Ever wondered what is Nehru’s take on the reservation system?
• From a piece written by Raghu Krishnan in today’s ET, I excerpt below for you:
• “if we go in for reservations on a communal or caste basis, we swamp the bright and able people and remain second-rate or third-rate. Let’s help the backward groups by all means but never at the cost of efficiency. How are we going to build our public sector or any sector with second-rate people? I want my country to be first-class in every thing. The moment we encourage second-rate we are lost. That way lies not only folly but disaster.”
• Can even a Nehru have the guts to say these words in the present day quota-centered politics? I am sure even Jawaharlal Nehru would have shied away from saying these words in public in today’s India.
• On taming the inflation conundrum
• If you have ever been looking for a single piece to inform you about inflation, today’s piece by Nidhi Nath Srinivas is a very good one on the subject.
• Take a look at it here.
• It is a very important subject in the present context. Do read it at least once.
• Oil hits a record $117 per barrel!!!
• The reasons for the spike include:
• An attack on a pipeline in Nigeria.
• A weak dollar and supply worries.
• Russian oil production dropped for the first time in a decade.
• Lower refinery utilization in America.
• India VIX
• We have been noting about VIX for quite some time in our blog. Today’s piece by Aman dhall and Dheeraj Tiwari is a good one which gives a lowdown on the concept in layman’s terms. Worth a read.
• Do so here.
• For the impatient – the index reflects investors’ best prediction of near-term market volatility.
• VIX value provides the expected fluctuation perceived by the market over the next 30 calendar days. It is calculated from the near and mid-month options bid and offer prices of Nifty 50 index options. The calculated figure denotes the expected volatility in the near term.
• The first such volatility index, VIX, was created by CBOE (Chicago Board Options Exchange) in 1993, tracking the S&P 500 (Standard & Poor) and was based on Black Scholes option pricing model.

19.04.2008

• On world trade growth
• The outlook for world trade in the on-going calendar year appears bleak with growth expected to dip to 4.5%, a one percent drop from 5.5% growth recorded in 2007. According to the World Trade Statistics 2008, compiled by the WTO, a sharp economic deceleration in key developed countries is being offset partly by continued growth in emerging economies like China and India.
• Government plans to monitor news channels and FM radio stations!!
• The government seems bent on monitoring about 100 channels by recording them simultaneously and storing the content for review later on.
• Read the full article here.
• Does this make sense?
• Issues relating to ‘coal to oil’ projects
• It is estimated that country has coal reserves of about 250 billion tonne and proven reserves of 93 bt. With country’s 80-90% of future power projects coming up on coal, the fuel could hardly be spared for a liquefaction projects that has yet to become popular even globally.
• The coal-to-oil projects are resurfacing again as high price of crude oil in the International market (over $100 a barrel) has made these capital and technological intensive operations feasible. The oil generated from the process could cost $50-55 a barrel, making it much cheaper than imported oil.
• RBI hikes the CRR rate
• To 8%. It sucks out Rs. 18,500 crores from the system.
• Let’s wait and watch whether this can make a difference to inflation.
• My guess is that more hikes may be on the way.
• Do you see any flaws that afflict the big globalizers as compared to the smaller countries that are also globalizing in a big way?
• One view that is being aired is that the big globalizers viz., the BRIC countries have some differences in approaches and situation than the smaller and successful globalizers of the past like the East Asian Tigers. Look at the differences.
• First, highly populous countries must integrate their poor and ill-educated underclass (in China and India mostly rural) as they engage with world markets.
• Second, China and Russia have financial systems that lack transparency, while Brazil and India are financially underdeveloped, putting further integration in the world economy at risk and increasing prospects for a financial crisis.
• Third, Russia is already facing massive demographic decline and an ageing and sickening population; China faces the near certainty of a Japanese-style demographic downturn from the 2040s onward, a belated legacy of its one-child policy.
• On IFRS a/c standards
• IFRS (International Financial Reporting System), which is principle-based rather than rule-based, could be implemented in India by April 2011, according to ICAI.
• This is based on the fact that heightened international consolidation and M&A activity across countries have brought about the need for a uniform, credible and transparent form of accounting standards. All entities with public interest in it will have to move to IFRS. This includes all listed companies, companies with turnovers above Rs 100 crore, companies with public borrowing of over Rs 25 crore, and all banks, MFs, and insurance companies.
• Nearly 108 countries, including the Euro zone, have already adopted IFRS. And countries like China, Canada and Australia will be adopting IFRS this year itself.

16.04.2008

• PMLA to cover insider trading
• Insider trading and market manipulation are being included in the Prevention of Money Laundering Act (PMLA) as ‘scheduled’ offences and this could result in stricter punishment for these crimes. Acting on suggestions from officials of the finance ministry, all offences covered under Section 12 A of the SEBI Act, read with Section 24 of the same act, are being included in the schedule to PMLA. Offences related to human trafficking, smuggling of migrants, piracy and environmental crime are also being included.
• Grains output to touch 208 mn tonnes
• India’s foodgrains output is expected to touch 208.08 million tonne this year, up from 174.63 million tonne in the drought-hit 2002-03. However, the overall production, including 73.39 million tonne wheat against 65.1 million tonne last year, has fallen way below the targeted 220 million tonne, according to government’s second advance estimates. Rabi foodgrains output, at 99.46 million tonne, has just failed to touch the 100 million mark and is lower than the targeted 108.32 million tonne. Kharif output is pegged to rise to 108.62 million tonne from 87.93 million tonne. Total rice production is also expected to be a disappointing at 86.11 million tonne though higher than last year’s 72.66 million tonne.
• Cause for more jitters on the inflation front for the government?
• Centre to plough Rs. 25000 crore into farms
• AMIDST growing concerns over depleting food stocks and slowed down agriculture, the Centre has undertaken a Rs 25,000-crore plan to pump in more funds into farms to improve agriculture production across the country.
• The step will encourage states to make more investments in the agriculture sector. Under the scheme, the Centre will sanction matching grants to states that make additional allocations for agri sector. The scheme is a part of the Food Security Mission for which around 16 states so far have approached the Centre and disbursement have already begun.
• The whole exercise is aimed at achieving 4% growth in the agriculture and allied sectors. The scheme envisages raising the production of rice by 10 million tonne, of wheat by eight million tonne and of pulses by two million tonne during the next four years.
• Indian gem business growth
• The Indian gem and jewellery industry has witnessed a growth of 22.27% amounting to a total export of $20.8 billion (Rs 84.058 crore) for the period between April 2007 and March 2008. This is well above the target of $18.5 billion set by the commerce ministry for the year. In the previous year, between April 2006 and March 2007, the exports were to the tune of $17.1 billion.
• The performance is good despite the fact that the rupee showed a steady gain over the US dollar for most part of the year. Also, India no longer enjoys the benefits of generalised system of preferences (GSP) with the US. India graduated out of the system in July 2007, under which US provided duty free access to products from countries whose exports are below a threshold limit. This considerably reduced the prospects of jewellery exports to US, which is the largest market for jewellery.
• The reduction of import duty on cut and polished diamonds to 0% has helped India to be at par with other international manufacturing centres. This will enable India to transform from the largest manufacturing centre to the global trading hub.
• The food vs. fuel debate
• A thing which I have been imagining for the last couple of months has come (true) to haunt us much sooner than expected. That’s why I think we should never be having pessimistic thoughts in the first place. Looks like the pessimistic thoughts (or fears) come true more quickly than the positive ones!!!
• Don’t miss today’s ET editorial on this debate. It is here.
• Food prices at global level have increased by as much as 57% in the past one year.
• The Wold Bank fears that there could be civil disturbances in at least 33 countries inhabited by the largest number of the poor.
• The volume of grains used for biofuel equivalent to a full tank of a SUV (Sports Utility Vehicle) could easily be the food supply for a person for a whole year!!
• India disproves Friedman on inflation
• Can’t miss such an article; can we?
• But what did Friedman say about it in the first place? His argument was that for a given money supply, a rise in the price of any one item will be offset by a fall in the price of another item. But as usual SSA Aiyar argues forcefully that it cannot be true in all cases as has been proved by India.
• What is the ‘bank in a box’ model being experimented in Andhra Pradesh?
• The RBI in collaboration with Union Bank of India and Corporation Bank has done this. This involves a local business correspondent who opens and maintains accounts for the rural population. The experience has been that the number of deposit accounts have outnumbered the loan accounts, thus making it easier for banks who may not have to worry much about replenishing funds with the correspondent.
• An early singal of the success of micro-deposit system?
• Can a strong rupee fight inflation?
• You might have noticed that we have been noting about the three options that a monetary authority has in fighting inflation for the last couple of weeks in our blog. One of them was allowing the country’s currency to appreciate to tame inflation. But can this really help?
• Assuming that rupee appreciation is allowed, this could result in a much wider current account deficit. A wider deficit is not desirable especially when there are signs that global risk appetite is on the retreat. Other side effects include the Dutch disease — where the non-tradable sector loses competitiveness. It is interesting to note that in many countries especially in Asia, currency appreciation has not lead to lower inflation. In India, the circumstances today are quite different from 2007 when the rupee appreciated by almost 10%. The increase in commodity prices since early this year could be described as a terms of trade (TOT) shock for India. A TOT shock implies a big increase in the price of imports relative to the price of exports. Ideally the policy response should be a weaker real rupee rate to offset the TOT shock which is getting aggravated by inflation. The way to square the requirement of a weaker real rupee rate through lower domestic inflation is via a tighter monetary policy. Hence linear responses of rupee appreciation to manage inflation are wholly inappropriate.

15.04.2008

• Essential drugs may come cheap
• At times we wonder who is taking the common man for a ride. Is it the Government or is the business community? Or is it both? If you read the following excerpt for what appeared in today’s ET, I am sure you would be as confused as I am about it.
• Drug makers, worried over the Centre regulating prices of more brands in the market, have told the government that they are willing to sell essential medicines at 50% of their maximum retail price. They have also offered to finance a delivery mechanism to deliver these drugs at the concessional price by contributing 0.25% of their total profits to the government which could be a little less than Rs 10 crore. If the government accepts this proposal, it could signal a major shift in the way rising healthcare costs are addressed in the country. However, these offers come with a condition. The government will have to agree to not increase the scope of cost plus price control.
• Remember anything about the ‘bear minimum margins’ that these companies were reported to be having a few months earlier in the news reports? If so, how is it that they are able to offer medicines for just 50% of not their cost price; but the MRP!!!
• I keep hearing from quite a few aspirants that they would like to join the system so that they can fight it from inside very effectively than staying out of it. Now tell me your confidence level about fighting the system by being inside. Would we not be very well off by being out of the system and making hay while at least being honest about our intentions? Just thinking aloud. Don’t take anything to heart.
• Maoists victory in Nepal gives India the jitters
• The Maoists have privately assured the UPA government that they will continue to do business with India, but there is a deep sense of unease within the government over the resounding victory of Mr Prachanda’s red brigade in the elections for a Constituent Assembly. The government is now unexpectedly faced with a political situation in Nepal where the ground realities have changed and the party in the dominant position has had an uncomfortable and even hostile relationship with India. The traditional allies, the Nepali Congress and Communist Party of Nepal, have all been reduced to a minority forcing India to immediately start rethinking its Nepal policy. This is not the scenario that the foreign policy mandarins had expected or wanted. Sources said that the Maoists have already reached out to New Delhi saying that they will deal with India. But mere semantics have not assuaged the deep sense of unease that has crept into a relationship. The only solace for the UPA government, which expected a politically-balanced government in Nepal, is that all the other players, both national and international, have also got it wrong.
• Net usage worldwide
• The US leads in having the maximum number of internet users with about 210 mn subscribers. It is followed by China with 162 mn users. India has about 42 mn users. Japan and Germany are the other two countries that are ahead of India with about 86 mn and 50 mn users respectively.
• Booming tax collections
• The 2007-08 direct tax collections are set to cross the revised target of Rs. 3,05,000 crores to touch about Rs. 3,10,000 crores. This represents a growth of over 40%.
• On the indirect taxes front, the Government may just meet the revised target. This is about Rs. 1,00,766 crores for customs and Rs. 1,27,947 crores for excise.
• Some interesting facts about health insurance market
• Health spends by some governments like the one in Karnataka is around 4.5% of the total budget compared to 3.6% by Gujarat or 3.4% by West Bengal.
• While 19% of the healthcare spends in the country happen through government network, private spend is pegged at 80% with the balance from sources like charitable trusts and institutions. Of the 80% private spend, while government employees spend around 4%, individuals is 12% and 64% happens from private sector (employers).
• National Statistics Commission
• Its chairman was Dr. C. Rangarajan.
• A committee headed by Planning Commission member Abhijit Sen has suggested that a Producers Price Index would be an accurate measure of inflation than the present WPI based index. The committee felt that such an index would reflect the true price in various sectors such as manufacturing, oil and food.
• Even though the work on the index is more or less complete, the government is no mood to implement it now. You can guess why.
• Derivatives trading on commodity exchanges
• Time and again we are faced with this debate. Today’s debate in ET is a very good read. Recommend it strongly, in spite of our having covered the subject earlier in our blogs. Do so here.
• Some excerpts worth our noting:
• It is incorrect to say that derivatives trading are fuelling price inflation. Futures trading provides vital clues to the state of demand-supply mismatches which was evident in case of wheat in 2006, tur in 2007 and even in this year in case of mustard, where lower output has been forecast by the government. Hence, futures trading mirrors economic fundamentals and if they are weak, the same will be reflected and one needs to address the fundamentals rather than the image.
• A ban on futures trading cannot hence change the fundamentals. We banned futures trading in wheat, urad, tur and rice last year. Prices of tur went up during the entire year due to a shortfall in production. Wheat prices reacted to global influences and continued to rise, and last week’s inflation data shows that rice prices have also gone up sharply. Hence, banning futures will simply remove a powerful signalling tool which can otherwise be used by the government to plan the supplies.
• Prices of fruits, vegetables, milk, coarse cereals, pulses like urad, tur and masoor, which are not traded on the exchanges have registered very high increases.
• Another example is edible oils. The hardening of edible oil prices is basically due to the rising crude price as well as due to the obsession of various countries with the production of biofuels. With crude holding above $110 more and more countries are willing to use their mustard, soya, maize, and palm oil for producing biofuels. This has led to extra demand for the food grains and edible oils, something that was not there before the advent commexes in India.
• So the government, instead of making a scapegoat of the commexes, should take concrete steps to help farmers grow more food. It should help them by developing infrastructure like irrigation canals and warehouses. India’s current warehousing capacity for farm produce stands at around one million tonnes — too little for accommodating the demands of farmers. Enhanced warehousing capacity will empower farmers and save them from distress sale, thus providing them with better incomes, which will only spur them to grow more food. We are currently witnessing the scenario in West Bengal where a bumper crop of potatoes has not resulted in bumper profits for the farmers, since the warehouses are already full and the farmers are forced to sell their produce at a ridiculously low price(Rs 150/quintal.) To sum up, the commexes don’t invent the price, they just help people discover it.
• An interesting piece from folklore about ‘scapegoat’ given one of the authors of the above excerpted debate.
• In ancient Jerusalem on the Day of Atonement, the villagers used to place their hands on a goat, and then let it depart into the wilderness. The idea was that the placing of the hands will transfer their sins to the goat, who by wandering off would take their sins away, thus purifying them. That was thousands of years ago, but surprisingly even today there are many who believe in the concept of scapegoat.