31.05.2008

  • Updated figures on Indian economic performance
    • THE Indian economy grew at 9% in 2007-08, faster than the estimate of 8.7%, according to the Central Statistical Organisation. Agriculture was principally responsible for faster growth.
    • Economy-wide increase in prices last fiscal stood at 4.6%.
    • With the economy turning in a growth rate of 9% in 2007-08, the CAGR (Compounded Annual Growth Rate) for the last four years touched 8.9%. Growth averaged 9.3% over the last three years.
    • GDP at current market prices stood at Rs 47.13 lakh crore. The population in 2007-08 stood at 113.8 crore, which yields a per capita GDP of Rs 41,416, a little over $1,000 at 2007-08 exchange rates. Population growth rate has declined to 1.4%, as per the CSO’s estimates.
    • NNP, which is a national income measure more relevant for calculating per capita income, is Gross National Product less depreciation. NNP distributed over the entire population gives per capita income. This went up 12.3% to Rs 33,299 in 2007-08. At constant prices (1999-2000 prices), which is worked out after taking into account the erosion in purchasing power of rupee, the per capita income moved up to Rs 24,321 representing an increase of 7.8% during 2007-08.
    • GNP is GDP adjusted to exclude income accruing to foreigners and to include those bits of foreign country GDP that accrue to Indian nationals.
  • What better example of financial engineering can be there?
    • Look at how the Government of India and the RBI have come up with an unheard of scheme to bail out oil companies. While it will take some time for the effects of the scheme to seep in on the economy, it will surely keep all the economic / financial experts very busy offering their take on the subject in the coming weeks.
    • The scheme goes by the name special market operations. Look at the details here.
    • BTW remember the customs duties on crude and petro products? Duty on crude is 5% while on products i.e., petrol and diesel it is 7.5%.
  • RBI's guidelines on higher provisioning for banks
    • Remember the recent turmoil in the corporate world, wherein some of the corporates took big bets on currency movements by buying currency derivative products from some of the banks and when they found that they ended up with humungous losses, they refused to pay the banks, citing some clause which says that the banks ought not to have sold the derivatives in the first place?
    • With this episode, the RBI has now laid down stricter provisioning norms for banks. This is going to have a three-way impact on the banks. Look at them here.
    • Some of you may find it too much to digest. Go easy. It is very important for those with economics and finance background.
  • India's share in total world trade
    • It is presently at 1.2% and is worth $391 billion in 2007-08. India is targeting a 5% share in world trade by the year 2020.
  • A unique experiment with music
    • Authorities responsible for managing a bus station in the Vallejo district of San Francisco have found a unique way of tackling crime in around the bus station and also the problem of loiterers. You know what they did? They played music and organized concerts. Reportedly the crime rate has come down by 50% and also there was a substantial drop in the number of loiterers.
  • Yediurappa takes charge as CM in Karnataka
    • Amid a jam-packed crowd and a galaxy of dignitaries led by BJP national president Rajnath Singh and Lok Sabha opposition leader LK Advani, 66-year-old Bookanakere Siddalingappa Yeddyurappa was administered the oath of office and secrecy by governor Rameshwar Thakur on the portals of Vidhana Soudha, the seat of power, on Friday.
    • Five out of the six independents, who have lent support to BJP’s BS Yeddyurappa to become Karnataka’s 26th chief minister, were inducted as cabinet ministers in the first full-fledged 30-member saffron ministry that came into being on Friday.
  • International safety standards for mobile radiation
    • India, the world’s fastest growing telecom market, will now implement the international guidelines for minimising health hazards due to emissions from mobiles and base stations. After much deliberation, department of telecom’s policy-making arm, Telecom Commission (TC), has adopted the guidelines prescribed by the International Commission on Non-Ionising Radiation Protection (ICNIRP)
    • ICNIRP guidelines prescribe permissible radiation levels for telecom installations, base stations, mobiles and handhelds. ICNIRP has two sets of limits, one for general public exposure and another for occupational exposure.
    • ICNIRP guidelines are already being followed in Spain, Germany, Australia, France, Japan and many other countries.
    • In India, nearly 270 million customers use cell phones and there are over 1,15,000 towers, which emit electromagnetic radiations.
    • For handsets, SAR (specific absorption rate) is an indication of the amount of radiation that is absorbed by the body while using a cell phone. The unit of SAR is watts per kilogram (w/kg) and the higher the SAR rating the more radiation absorbed.
    • Globally, cell phones cannot be officially sold without specifying SAR level. In the US, a mobile exceeding SAR level of 1.6 w/kg cannot be sold while in Europe, manufacturers must ensure that the maximum SAR level of a cell phone does not exceed 2w/kg, this being the safety limit fixed by the EU council.
  • With IIT results being released, the point made by Andhra Pradesh students is well taken.
    • They seem to have taken 2000+ seats out of a total of 5000 that are there for the taking. Excellent performance.
    • Should the others feel like Serena Williams? (Seeded 5th, she lost in the third round of the French Open to Slovenian Katarina Srebotnik. Serena lost 4-6 4-6.) Nah. Success and failure are two sides of the same coin. Cheer up Serena. You have a lot of tennis left in you. So should all the others who may feel let down because of their poor performance in IIT entrance. The entrance exam is only one brief step (blip) in one’s career. There is a lot that remains to be achieved. Don’t let just one failure bother any one of you.

29.05.2008

  • Oil economics
    • Oil subsidy should be giving sleepless nights to the Finance Minister. Crude oil prices held firm at over $130 a barrel, and prices of petrol and diesel scaled new heights at $138 per barrel and $170 per barrel respectively.
    • Oil deficit at Rs 2,30,000 crore (projected for 2008-09) is threatening to upset the fiscal balance.
    • If at all the FM wants to do something, he may opt for a reduction in customs duty in the wake of rupee depreciation. The customs duty for crude is 5%.
    • Though there is a talk of imposing a cess, it will not be able to provide any cushion as the total collection from it could be just Rs 5000 crore.
    • In 2007-08, out of the total excise duty collection (revised estimate) of Rs 1,17,266 crore, close to 49% (Rs 57,460 crore) came from petroleum products. In the case of customs, oil contributed about 15% (Rs 12,270 crore) to the total collection of Rs 81,800 crore.
  • Natural gas allocation by EGoM
    • THE empowered group of ministers (EGoM) is understood to have finalised gas allocations for 2008-09 giving top priority to the fertiliser sector.
    • The allocation formula has finalised 5 MMSCMD (Million metric standard cubic meters per day) gas allocation for CGD (City Gas Distribution) projects that would help to keep cities pollution free as per the direction of the Supreme Court.
    • It is learnt that for 2008-09, those fertiliser units that are stranded would get priority with a total allocation close to 50 MMSCMD. This is higher than last year’s allocation when fertiliser units got just about 30 MMSCMD of gas. Similarly, only existing gas-based power plants (read no new power plant) would get priority in gas allocation with expected 30 MMSCMD allocation.
    • The power ministry had earlier sought allocation of 77 MMSCMD of gas for meeting the existing and upcoming requirements of the sector. The power sector requires 60 MMSCMD of gas to run 13,334 mw of existing gas-based projects at 90% plant load factor (PLF). It requires additional gas for running 1,285 mw of gas-based projects which are ready but are not being commissioned due to shortage of gas. Another 1,002 mw is running on highcost liquid fuel, naphtha and HSD, and this needs to shift to gas to become economical. The proposed allocation of 30 MMSCMD for 2008-09 is even lower than last year’s allocation of about 36 MMSCMD allocation. The PLF of gas-based power plants is already low at about 50%, this could further get affected this year.
  • Vitamin in urine boosts crop yield
    • Researchers at the University of Agricultural Sciences, Bangalore say that irrigating crops with a dose of human urine helps to boost yield. A two-year project by the university has shown increased yields of banana and maize after the crops were dosed with the excrement.
  • AMMOI
    • Ayurvedic Medicine Manufacturers Organisation of India
  • Gujjar agitation snippets
    • Two committees have been set up by the Rajasthan government to assuage the Gujjars so far.
    • One is the Justice Chopra committee. This had recommended that granting ST status on Gujjars is a thing which can be done only by the Centre.
    • The other is the Ramdas Agarwal committee. This had recommended a Rs 282 crore economic package for five Gujjar inhabited districts.
  • An interesting debate on engaging managers to teach at business institutes
    • You might have noticed an interesting piece that appeared on this subject sometime back in ET. It is here.
    • TT Ram Mohan, whose articles we follow with a bit of religiosity, has joined the debate with Gopalakrishnan, the author of the above referred piece. Very interesting.
    • Pieces like these provide fodder for some excellent interview or opinion sessions. Take a look at his piece here.
    • Recommend a strong read of both the pieces.
  • Arvind Panagaria's very valuable insight into the inflation issue
    • By drawing our attention to this table, he makes sit up and think whether the Government is over-reacting to the inflation issue by wielding every weapon that is there its armoury. The government has gone on to deploy every conceivable weapon in its arsenal — cutting import duties, banning exports, appreciating the rupee in the initial phase, raising the cash reserve ratio, suspending futures trade, cutting excise duties, imposing export taxes and threatening price controls — to tame the monster. His argument does make sense. Look at his argument:
    • First, do we really know for a fact that even a slight acceleration in inflation from 4-5% range hurts the poor? After all, we experienced much higher rates of inflation during the 1980s and 1990s and yet poverty fell during those decades: high inflation rates were more than matched by even higher rates of increase in the nominal incomes of the poor. While we cannot be sure that the past experience will repeat this time around, the case that recent acceleration in inflation is hurting the poor remains to be made.
    • Second, much has been written about asymmetrically larger increases in food prices to bolster the case that inflation poses a serious threat to the poor. For one thing, the focus on food prices confuses the change in a relative price with inflation, which is meant to measure the overall level of prices. But even ignoring this fact, the claim is unsupported by the available data. In April 2008, the WPI for food articles rose 5%, which was less than the 7.4% increase in the WPI for all items. Taking January to April 2008 together, increases in the WPI were 4% for food items and 5.9% for all items. While the prices of some specific food items in some specific locations may have risen asymmetrically, nationally, food “inflation” has been trailing rather than leading the WPI for all items.
    • Finally, and indeed most importantly, even accepting the assertion that any acceleration in inflation hurts the poor, are we right to invoke all possible instruments to squash it at first sight? Should we not institute a flexible system of transfers to the poor to protect them against food-price increases so that other policy instruments are left free for deployment at targets for which they are best suited?
    • In assessing inflation, we must also recognise that the price levels in the poor countries are known to be lower than that in the rich countries. As per-capita incomes in the poor countries rise towards those in the rich countries, their price levels also rises towards the latter. Therefore, increases in per-capita income growth are expected to bring either an increase in the inflation rate or appreciation of the rupee. Since India has generally resisted appreciation of the rupee, some acceleration in inflation is predicted.
  • Know anything about the CDR mechanism of the banking industry?
    • The CDR mechanism, an initiative by the Reserve Bank of India (RBI), came into effect in 2002 when the economy was facing a slowdown and the level of bad loans in the banking sector was quite high — in the range of 8-15%. Thus, RBI had asked banks to form a forum were all banks would jointly resolve bad loans on a conceptual basis. Through this mechanism, 165 cases amounting to Rs 83,000 crore were resolved by banks. Of this, 41 companies exited while only 31 cases failed.
    • Recently, the CDR cell had sought banks’ permission for its closure on account of slowdown in the cases addressed by the forum. BANK CEOs have shot down the proposal to wind up the Corporate Debt Restructuring (CDR) forum.
  • ICICI to make a late entry into pvt banking
    • So reads a caption today. ICICI Bank is a private after all; isn't it? What is it doing; if not privately banking? Just kidding.
    • Private banking refers to the personalised service provided to elite customers as against mass retail banking.
    • A host of foreign banks like BNP Paribas, ABN Amro, Deustche Bank, Citi, HSBC, Merrill Lynch, have been in the segment for the past few years. ICICI is making an entry only now.
  • A look at RBI's $ purchases
    • Once in a way we should look at graphics to get a clear picture. Look at this. It makes the $ purchases by RBI so clear. Can you relate this with something that we have been monitoring for the last couple of years? It makes the point that RBI's intervention in forex markets is never constant; it will vary depending on the need of the hour. Sounds like a child's discovery? Recall the questions you have been asking me in shoutbox et al., on this subject.
  • Indonesia quits OPEC?
    • Indonesia will quit the Organisation of the Petroleum Exporting Countries (Opec) because as a net oil importer it is not happy with high global crude prices, its energy minister said on Wednesday. Its status as a net importer means it would benefit from lower oil prices, putting it at odds with other Opec members, who favour higher prices.
    • The country, an Opec member since 1962, has seen its influence within the cartel wane as its production declined, even as the producer group gains more global clout with the admission of Angola and the rejoining of Ecuador last year.
  • US cracks down on LeT finances
    • IN AN action targeted at curbing terror finances, the US has frozen the assets of four leaders of the Pakistan-based terror group Lashkar-e-Toiba. The jihadi outfit has been behind all major terror attacks in India. The US treasury department announced that it had frozen the assets of Muhammad Saeed, the group’s leader; Zaki-ur-Rehman Lakhvi, LeT chief of operations; Haji Muhammad Ashraf, the chief of finance; and Mahmoud Mohammad Ahmed Bahaziq, a main LeT financier.
    • This basically means that assets of the four leaders which are under US jurisdiction will be frozen, and US nationals prohibited from engaging in any transaction with the four men who have now been identified by name by the US government. The department did not go into any details of where and how much these assets were worth.
  • Indian Railways on top in ferrying passengers
    • Riding piggyback on a booming economy, the Indian Railways (IR) has emerged as the topmost rail operator in the world by carrying maximum number of reserved passengers over long distances in 2007, beating even Chinese Railways by a few millions. Even in freight loading, Indian Railways has registered the highest growth in the world during 2007, albeit the United States (US) remains the biggest rail freight market.
  • IPL semi-finalists
    • Jaipur, Delhi, Mohali and Chennai.

28.05.2008

  • On retail yet again
    • It was just yesterday that we noted something about the ICRIER study on organized retail not posing a threat to unorganized retail. Time for some more snippets worth our attention.
    • The study says that in geographies where small stores were competing with organised retail their sales were down 8% and profits 9%. And that less than half the 4.2% small stores that close down every year do so because of the competition from organised retail.
    • These are not the fatalities for which we should sacrifice the large externalities of organised retail. Farmers, for instance, could see a 25% increase in their realisation when they supply directly to organized retail instead of going through the government mandis.
    • Clearly, it is time to stop seeing small retailers and large stores as antagonists. Both of them having their own niche. Unorganised retail has a different USP — proximity to the consumer, possibility of credit and bargaining — from large retail chains which score mostly on choice and prices. So, it is possible for smaller stores to tweak their business to survive and grow. A greater play to cash-and-carry outlets, which can supply goods to them at lower rates by sharply pruning the distribution chain, would help protect margins. Access to bank funds enabling them to extend credit to their customers can ensure there is no significant drop in sales. A general lowering of cost of doing business by reducing government interface of multiple licences would also help.
  • Alarm bells on education spending?
    • The cumulative expenditure of states on educational services as a percentage of total expenditure has dropped from 20% in 1995-96 to around 18% in 2007-08.
    • There is also a significant deepening of inter-state differences in per capita education spending across states. Per capita fund flow to education, in 2005-06, varied from Rs 483 in UP and Rs 487 in Bihar to Rs 1,034 in Maharashtra and Kerala and Rs 1,777 in Himachal Pradesh, a difference of four times between the lowest and highest expenditures.
    • Studies show that a decline in fund flow to this sector is leading to a deterioration of education infrastructure at the primary and secondary level in the states. There are reports of inadequacy of government schools, especially in the rural areas and acute shortage of trained and motivated teachers. As a result, Indian households are compelled to spend 1.4% of GDP on private education as compared to 0.7% in OECD countries, leading to education deprivation essentially among the poor.
  • Should FII investment limits in debt be hiked? The RBI has taken cautious steps to increase the limits of FII investment in Indian government debt from $2 billion to $2.6 billion and further to $3.2 billion and for the corporate debt, the limit has been increased to $1.5 billion from $0.5 billion. What benefits could accrue from this move?
    • It would provide a greater linkage to international interest rates;
    • Lead to a long-term equilibrium in the Indian financial markets; and
    • Would strengthen the growth impulses in the economy.
  • Look at the fertilizer subsidy bill
    • The government announced a fertiliser subsidy package of Rs 95,000 crore, more than double the amount that was announced in the Budget this year.
  • Japan and its yen carry trade
    • Remember the words 'unwinding of the yen carry trade' when we were noting about the evolving subprime crisis? Time to know that a reverse is happening. That is the carry trade is gaining momentum.
    • The carry trade — using low-yielding currencies to buy higher-yielding ones or assets — works best when markets are calm and predictable and many analysts had expected it to fall out of favour after the credit crisis flared up in August 2007. As market volatility surged to 10-year peak and sharp swings wiped out returns made on yield differentials, many trend-following funds and speculators unwound carry trades and are still nursing their wounds.
    • But why is it holding firm or perhaps making a stronger comeback?
    • A growing conviction that the worst of the credit crisis is over has helped global stock markets stabilize, which typically leads to a reduction in volatility and supports carry trades.
    • Experts say that worries about more US financial system troubles and rising inflation pressures will dog stocks and keep carry trades limited for some time. But eventually the carry trade trend will make more of a comeback.
    • In this context it would be interesting to know that Japanese households still hold about 780 trillion yen ($7.6 trillion) in virtually no-interest cash and deposits, 10 times more than in mutual funds. Compare this with the size of the US economy? Japanese household savings are a little over 50% of the US GDP!
  • Arun Sarin steps down as CEO of Vodafone!
    • This is the kind of corporate career that is everybody's envy.
    • Just at the age of 53, he decided to call it quits; that too when the company is in the pink of health. A look at his career graph:
    • 1984: Entered telecom industry, joined Pacific Telesis Group in San Francisco
    • 1995: Followed mentor Sam Ginn to newly-formed wireless communications company AirTouch
    • 1999: AirTouch & Vodafone joined hands to create Vodafone-AirTouch; Sarin was made CEO
    • July 2001: Joined Accel Partners and KKR to lead a new telecom venture called Accel-KKR Telecom
    • July 30, 2003: Appointed CEO of Vodafone
    • July 29, 2008: Stepping down as CEO of Vodafone
  • Obituary: Sydney Pollack
    • Hollywood filmmaker Sydney Pollack, who won a pair of Academy Awards for the epic romance Out of Africa and earned praise for acting stints in films including Tootsie and Michael Clayton, died on Monday after a battle with cancer, his spokeswoman Leslee Dart said. He was 73.
    • His biggest triumph was the 1985 drama, Out of Africa. Meryl Streep played the Danish owner of a coffee plantation in Kenya, and Redford the adventurer with whom she falls in love. Nominated for 11 Academy Awards, the film won seven statuettes.
  • Tax authorities are cooperating across the globe
    • Cross-border collaboration has become a buzzword in global law enforcement circles. Under an OECD-negotiated treaty, 19 countries can now prosecute tax evaders within their jurisdiction. The EU passed a similar law in 2000, while Brazil, India, and South Africa began cooperating with each other to identify suspect transactions in 2006. Their targets typically conceal assets in roughly 40 nations generally seen as tax havens, which are analysed routinely by international organisations such as the OECD and the IMF.
    • Almost $6 trillion is estimated to be hidden from tax authorities across the globe. To close this “tax gap”, US investigators and their comrades overseas are cooperating as never before.
  • Water proof rice
    • Helped by IRRI, the Manila based International Rice Research Institute, farmers in India and Bangladesh are expected to take to water proof rice cultivation in a big way.
    • With the Sub-1 flood-resistant gene, farmers could produce six tonnes of rice per hectare under normal conditions and around three tonnes if the paddy was submerged for two weeks. Normal varieties would only yield 1 tonne or less if subject to that sort of submergence.
    • The flood-tolerant gene is introduced to existing rice varieties through normal cross-breeding techniques and not via genetic modification.
    • IRRI, which started a Green Revolution in the 1960s and 1970s with the development of high-yielding rice seeds, is also working on drought-resistant varieties of the grain to deal with a world beset by global warming.
  • Latest in James Bond series
    • A NEW James Bond novel is published on Wednesday, the 100th anniversary of the birth of his creator, Ian Fleming.
    • ‘Devil May Care’ was penned by the award-winning British novelist Sebastian Faulks at the request of the late author’s family.
    • A bit about Ian Fleming
      • Fleming used to write novels in one stint at Goldeneye, his home in Jamaica, often between the months of January and March. The son of a Conservative Party politician and educated with some of Britain’s elite, Fleming was a journalist with the Reuters news agency, as well as a stockbroker, a banker and above all, playboy. He was considered too old for active service in World War II but worked for naval intelligence on a number of missions.
      • In 1952, at the age of 43, he wrote his first Bond adventure, ‘Casino Royale’, on a typewriter overlooking the Caribbean Sea.
      • Between 1952 and 1964, when he died, Fleming wrote 14 James Bond novels. The last — ‘Octopussy’ — was published posthumously in 1966.
  • India losing out on nuclear power front?
    • WITH China and Pakistan signing a nuclear cooperation agreement, Russia and US finalising their 123 Agreement and a host of other countries, including those with easy access to oil, expressing their intention of starting civilian nuclear programmes, India’s failure to move on the nuclear deal is being keenly felt within the government.
    • It also comes as no comfort to the government that over 49 developing countries, according to reports, have approached the United Nations to start civilian nuclear programmes. This includes countries like Saudi Arabia, Kuwait and the United Arab Emirates which are all countries that have huge oil reserves.

27.05.208

  • I chanced upon this lecture session from Joseph Stiglitz on The Hindu site. It is very rare for most of us to access lectures from Nobel Laureates. As usual Stiglitz is at his best talking about globalization; what else?
    • You can get the lecture here. It is in mp3 format. Listen and enjoy.
  • Phoenix lands successfully on Mars
    • Phoenix plunged into the Martian atmosphere at more than 19,300 kmph after a 10-month, 711 million-km voyage through space.
    • It is the first successful soft landing on Mars since the twin Viking landers touched down in 1976. NASA’s twin rovers, which successfully landed on Mars four years ago, used a combination of parachutes and cushioned air bags to bounce to the surface.
    • Phoenix’s target landing site was 48-km-wide shallow valley in the high northern latitudes similar in location to the earth’s Greenland or northern Alaska. The site was chosen because images from space spied evidence of a reservoir of frozen water close to the surface.
    • Pheonix will talk with ground controllers through two Mars orbiters, which will relay data and images.
    • It is equipped with a 2.4 meter-long arm capable of digging trenches in the soil to get to ice that is believed to be buried up to 30 cm deep.
    • Get a glimpse of one of the very first pictures sent by Phoenix here.
    • This graphic describes the Phoenix craft very well.
  • On Gujjar agitation (from Times of India editorial)
    • The Gujjars, estimated to number 1.6 crore nationwide, are already included in the other backward classes (OBC) category. They have, however, been gunning for ST status ever since the Jats were declared OBCs, thereby increasing the competition for government jobs and seats in colleges. The other source of contention for the Gujjars is the perception that the Meenas — a community that had comparable socio-economic status — have forged ahead by virtue of being declared STs.
    • The Gujjar agitation once again highlights the perils of caste-based reservations which is bound to lead to more groups clamouring for quota benefits. It is time that the Indian state takes a more nuanced approach to affirmative action. A points-based system — which has been proposed by some sociologists — where factors like income and gender are considered, in addition to caste, might deliver social justice better. If a rethink of the quota system is not done urgently, we could see a repeat of the situation in Rajasthan in other parts of the country.
  • Know anything about the famous Nanavati murder case?
    • The Nanavati murder case rocked Mumbai in the late 1950s. The dramatis personae were the debonair naval officer, Commander Nanavati, his English wife, Sylvia, and her wealthy playboy lover, Prem Ahuja. Nanavati was away at sea when Ahuja seduced Sylvia and the cuckolded husband found out on his return. He picked up a naval pistol from his ship and drove to Ahuja’s flat, where he shot Ahuja. Afterwards, he went straight to the police and gave himself up.
    • The trial was a landmark in Indian judicial history. It was the last one to employ the jury system, which was abolished shortly after, because this trial demonstrated just how vulnerable Indian juries were to media pressure and public passions. But the case lived on through two Hindi movies, a lengthy story in the New Yorker, a mention in Midnight’s Children, and Indra Sinha’s 2002 novel, The Death of Mr Love.
    • Nanavati was sentenced for life, released early and quietly migrated with his family to Canada, where he died.
    • BTW noticed the word “cuckolded?” A cuckold is a married man whose wife has sex with other men. In current usage it sometimes refers to non-married couples in committed relationships as well, although the traditional meaning is a man whose wife is adulterous.
  • Protein that defends HIV infection found?
    • Scientists have identified a protein that restricts the release of HIV-1 virus from human cells — a major breakthrough in AIDS research which they claim could lead to finding new treatments. A joint team from Vanderbilt University, Emory University and Mayo Medical School has identified calcium modulating cyclophilin ligand or CAML as the cellular protein that inhibits the release of HIV particles. They identified CAML as an innate defense mechanism against HIV. CAML works by inhibiting a very late step in the virus lifecycle, leading to the retention of HIV particles on the membrane of the cell.
  • Can you explain genome sequencing in layman's terms?
    • The full complement of an organism’s DNA is called its genome. In animals and people, it is made up of nearly 3 billion building blocks. The sequence of those blocks spells out the hereditary information, just as strings of letters spell out sentences. Decoding a genome, which is called sequencing, means identifying the order of the building blocks.
    • The first sequencing of a composite human genome was announced in 2001. Four individual male genomes have so far been sequenced. Male sequencing data has been unravelled from Jim Watson, co-discoverer of the double helix structure of DNA, from researcher Craig Venter and from two Africans.
    • Now researchers at Leiden University Medical Center say they have sequenced the entire genome of one of their female researchers.
  • India is among the 13 miracle economies
    • A UK based think-tank viz., the Commission on Growth and Development, which has Montek Singh Ahluwalia (Dy. Chairman of our Planning Commission) has said so. The think-tank is chaired by Nobel laureate Michael Spence.
    • In addition to India, Vietnam will also be joining the club of these fast-growing economies, which among others include Japan.
    • The other members of the Miracle Economies include Botswana, Brazil, China, Hong Kong (China), Indonesia, Malaysia, Malta, Oman, Taiwan (China) and Thailand
  • Now that many results are pouring in, it is pictures like these that should give you the inspiration to get on with your preparation, competition and life:
    • That is Serbia’s Jelena Jankovic who fell on the court after missing a return against Romania’s Monica Niculescu in the first round of the French Open at Roland Garros on Monday. Jankovic won 7-6 6-2.
  • In today's First Principle column we learn about "Buying the spread"
  • Big retail won't edge out kirana stores -- ICRIER
    • A government-commissioned report says there is no real threat to neighbourhood kirana stores from modern retail chains. Organised retail will only benefit farmers in terms of getting better prices for their produce and the negative impact on kiranas would be short-lived.
    • The ICRIER study has recommended a nationwide uniform licensing policy to facilitate modern retailing, which will help take India’s total retail sector to $590 billion in 2011-12.
    • At present, only 12% of unorganised retailers have access to institutional credit.
    • One of its other major recommendations is to facilitate cash & carry outlets, which can procure from farmers and sell to unorganised retail.
  • India among the top 3 investment destinations in the world
    • So says a Grant Thornton report. The other two countries are China and Russia. The report also pointed out that India would catch up with the US by 2050 and the BRIC (Brazil, Russia, India and China) markets as a group will surpass the G7 by 2032. As per the report, emerging economies are likely to witness an average growth of 6.3% in 2008 and 6.4% in 2009 in comparison to advanced economies which are likely to grow by 1.3% in the next two years. It added China’s economy will move ahead of the US by 2027.

26.05.2008

  • Farm loan waivers are only temporary fixes and do not address the underlying issues. But what is it that should be done to address those 'underlying' issues? Can you comment?
    • It is no secret that farmers get only a fraction of the end-consumer price, the bulk of the benefit being cornered by middlemen. There is a need to integrate farmers with the market to increase realisation. That requires better physical infrastructure such as good roads to enable farmers to bring produce to the market, entry of large retail chains to cut down intermediation costs, and a functioning futures market for more informed cropping.
    • The government also needs to channel resources away from input subsidies to investment in irrigation, power and communications infrastructure. This would help mitigate risks of monsoon failures or ill-informed decisions.
    • Essentially, the thrust should be on empowering farmers so that they have a greater control over their environment. In fact, with food prices skyrocketing and an era of shortages looming large, these are no longer just farmers’ issues but that of larger food security.
  • Subsidies on petroleum products in India are distorted and do not benefit the really needy. Comment
    • The subsidy on petrol, about 10% of the total, goes mostly to car and two-wheeler owners, who together constitute about 30% of all households. The relatively poor 70% households have no stake in petrol subsidy.
    • Nearly 40% of the subsidy on cooking gas, according to a TERI (The Energy Research Institute) paper, goes to the top 6.75% of the population. As for kerosene, 40% of it goes into adulteration, benefiting relatively better-off dealers.
    • Diesel, which accounts for the bulk of under-recoveries, could be benefiting the relatively deprived only inasmuch as it is used in public transport. But a large portion of it is likely going into captive power generation or private transport, again the undeserving.
  • Some commentary on Basel norms
    • The Basel I approach was just a one-size-fits-all approach for capital regulation in particular, with all corporate borrowers carrying the risk weight of 100%. Also, it gave rise to significant gaps between the measurement of regulatory capital and the actual economic risk experienced by banks. To overcome this approach, the Basel II norms were recommended to cover a comprehensive range of risk (credit, market and operational).
  • In the context of the dismal failure of the BRT (Bus Rapid Transport) system in the country's capital, Delhi what could you have done, had you been in-charge of the project from the word 'start'? (Sometimes, this is how you are asked questions in the interviews.)
    • Firstly, reliable data would have been collected on all aspects such as intensity/volume of traffic at different locations of the corridor and also at different points of time during the day over a reasonably long period. Further, this data would have been collected for all modes of transport — both slow and fast moving and also on the number of pedestrians passing by.
    • Secondly, I would have examined minutely how the proposed traffic in future plan will take care of the existing traffic requirement with an eye on increase in traffic. Also it would have been ensured that reduction in congestion and pollution will be there as a result of the project. To achieve it, simple computer-based mathematical models would have been used.
    • Lastly, while doing the above study, cost-effectiveness of the project would have been kept in mind. Two impact assessment studies with regard to quantum of (a) reduction in congestion on the roads and (b) reduction in air pollution would have been carried out using available mathematical/statistical techniques.
  • Can you identify the positive fallout of the act of declaring warehouse receipts as negotiable instruments?
    • With the promulgation of the Warehousing (Development and Regulation) Act, 2008, warehouse receipts will become a negotiable instrument. Assuming that at any time, about 15-20% of the annual agricultural produce is stored in warehouses; the Act has the potential to inject over $30 billion of agricultural credit.
  • If you are asked to comment on whether or not the Government of India is right in dictating lending policies of public sector banks, you can't get a better and well-reasoned argument than this one coming from Cherian Varghese, former CMD of Union Bank of India.
    • Look at it. It is here. I am in full agreement with him. I am sure, you too would be.
  • It is widely perceived that there is a disconnect between the past and present (contemporary) in the art scene in India. What could be done to eliminate this disconnect and radically alter the role of art and culture in India’s developmental framework?
    • The importance of economic triggers needs to be understood in redeveloping our artistic and cultural infrascape. Taking the platform of credible and regulated art funds to the masses over the coming years is one part of the process.
    • Utilising the transparency and power of public auctions so as to open out the domestic market for antiquities, leading to an archival, intellectual and financial resurgence is another constituent.
    • Creating world-class private-public sector archival and educational institutes which disseminate a new flow of information, knowledge and experiences is another pivotal requirement.
    • Publishng hundreds of well produced and designed (text) books of intellectual and artistic rigour is another piece of the jigsaw.
    • Creating new bridges between worlds that would normally never connect or relate is another need, such as transforming the sports stadium into a major sports-cultural complex.
    • Inter-linking the cultural and artistic disciplines, from the arts to cinema to literature, so as to clarify the underlying creative and ethical values, is another essential strand to be woven together.
    • Further, if we recognise that the creativity in us cuts through all social, caste, age and economic barriers, we have an immense opportunity before us, which could provide a unique egalitarian generation and redistribution of wealth when the appropriate material infrastructure is put into place.
  • In this context, the following fact is worth our noting:
    • Modern Indian art was barely a $1 million market in 1997, today it is $400 million without any real public sector support.
  • Composition of our GDP with reference to manufacturing and agriculture:
    • The share of manufactures in gross domestic product has been stagnant at about 17% since the early 1990s. While the share of agriculture in the GDP has significantly declined, to less than a fifth.
  • IIBI being wound up
    • Kolkata-based term lending institution, Industrial Investment Bank of India, has reached its last lap of being wound up following the board’s decision to auction most of its assets including performing loans, bad loans and properties owned by the company. The financial institution (FI) will initially sell the bad loans, which are worth around Rs 1,030 crore, through an auction which will be held in June.
    • Government owned IIBI started working towards winding its business way back in 2005 after IDBI rejected government’s proposal to merge the Kolkata based institution with itself.
    • High level of bad loans and poor capital was one of the key reasons the government decided to close it down. In fact, as per RBI data, IIBI’s capital adequacy ratio (CAR) was negative at 64% while its bad loans stood at 13% for March ’06. It had a loan book of Rs 1,006 crore with Rs 874 crore of standard asset while the balance Rs 132 crore were sub-standard and doubtful assets as on March ’06.
  • Copenhagen Concensus Center
    • It is a group of world’s smartest economists, also comprising five Nobel Laureates. It will compile an overview of how best to solve ten of the world’s biggest challenges.
    • The last time the expert panel had come together in 2004, CCC had drawn a lot of flak.
  • Oldest man to scale Mount Everest
    • A 76-yearold Nepalese man reached the summit of Mount Everest on Sunday and became the oldest person to climb the world’s highest mountain. Min Bahadur Sherchan reached the 29,035-foot summit early in the morning with his climbing guides. Sherchan was just 25 days away from his 77th birthday.
  • Petrol to be sold at market prices?
    • Looks like there is some consensus in the Cabinet about hiking petrol prices by about Rs. 10 to 16 per litre, so that it is sold at near market prices. Even if this is done, it is not expected to make an impact on the inflation figure because it has an insignificant weightage in the WPI figure.
    • The WPI consists of three major groups — primary articles (with 22.02% weightage), manufactured products (63.75% weightage) and fuel, power, light and lubricants (14.23% weightage). The third group is subdivided into three categories with following weightage assigned — coal mining (1.75%), electricity (5.49%) and mineral oil (6.99%). Among the mineral oil category, diesel has the highest weightage of 2.02%, followed by LPG (1.88%). Petrol has only 0.88% weightage.
  • BJP wins in Karnataka
    • While BJP has secured 110 seats out of the 224 that ther for grabs, it is still short of the simple absolute majority by 3 seats. That still leaves so much scope for keeping the BJP government on tenter-hooks.

25.05.2008

  • Bharti's MTN bid fails
    • After almost four months of discussions, Bharti Airtel called off merger talks with South Africa’s MTN on Friday night, accusing it of deviating from agreed terms and of trying to push a structure which would have resulted in the Indian company becoming a subsidiary of MTN. The South African company also wanted majority shares of Bharti Airtel held by the Bharti family and Singtel in exchange for a controlling stake in MTN. This too was unacceptable to the Indian company.
    • The collapse of the merger talks means that the largest takeover attempt by an Indian company has ended in failure.
    • Sources say India’s 74% FDI sectoral cap turned out to be significant obstacle in the negotiations. It is learnt that Bharti executives had sounded off government officials about the possibility of waiving off the 74% cap for this transaction but did not get a favourable response.
    • Bharti would have required anywhere between $40 billion to $50 billion for a 100% acquisition. While questions have been raised about Bharti’s ability to raise the funds required to fund the acquisition or the cash-cum-stock merger, the company has said it arranged letters of credit to the tune of $60 billion from banks in the US and Europe. At the same time, Bharti also clarified that it would not engage in a bidding war for MTN.
  • India's retail high streets make it to the top 10 locations in Asia
    • For the first time, three Indian cities have joined the elite list of top 10 retail locations in Asia. Leading the pack, Delhi’s Khan Market has emerged as the fourth most expensive retail high streets across the Asian market, while Mumbai’s Linking Road and Chandigarh’s Sector 17 market occupy the eighth and ninth position, respectively.
    • Overall, Hong Kong’s Causeway Bay is the most expensive retail street in Asia, with Rs 65,000 per sq ft. It is followed by Tokyo’s Ginza at Rs 38,000 per sq ft and Gangnam Station in Seoul at Rs 22,000. The ranking compares only the most expensive high streets in each of the Asian cities.
    • Prime high streets in India provide better revenue for retailers and will continue to be viewed favourably despite the rapid growth in mall development across cities.
    • The other markets in the top 10 expensive retail markets are Singapore’s Orchard Street, Beijing and Shangai in China and Jakarta in Indonesia.
  • Betting on cricket
    • THE CRICKET economy is booming. While there are billions of dollars involved in endorsements, telecast rights, and publishing, it’s the betting money which accounts for over 30-35% of total cricket economy.
  • Indian economy's performance
    • Reportedly there are more than 12 million SMB units in India, accounting for 40% of industrial output and over a third of exports and it is these companies that are taking the country’s economic prowess to new highs.
    • Research has shown that, faced with limited budgets, SMBs opt to invest in point solutions that solve immediate needs but are often not fully integrated or compatible with wider systems, resulting in lower long-term productivity.
  • Government mulls drastic changes to curb corporate fraud
    • As part of its Gen-next e-governance initiative, the government is developing a system which will provide early warning signals on corporate frauds. The system will look for possible trends of fraudulent practices using company data filed with the ministry of corporate affairs. According to estimates, India is losing a whopping $40 bn per year because of corporate frauds, which is more than 4% of the country’s gross domestic product. The early warning system, which is going to be mechanised in nature, will help the ministry to detect frauds at early stages
    • The frauds include those committed for the company, and those against the company such as embezzlement of funds and payroll frauds which, in turn, affect the bottomline of a company. The proposed early fraud detection system would check the books of accounts to find out whether any company is resorting to fraudulent practices which will adversely affect interest of shareholders, creditors, employees and others. At present, various government agencies including intelligence bureau under the ministry of home affairs, and Central economic intelligence bureau and financial intelligence unit, both under the finance ministry, detect frauds in financial sector.
    • What are the various types of frauds that are indulged in by companies?
      • The following is an illustrative list cited in this article:
      • Change in financial period
      • Side agreements to the sale transactions
      • Payroll fraud
      • Increase in the number of employees to whom the salary is paid but no comparable increase in the production
      • Difference in the size of the payroll before and after the outsourcing of the payroll starts
    • Want to know more about them? Read the full article here.
  • Should there be night time restrictions for flights?
    • IF THE government doesn’t wake up soon, more and more Indians will continue to suffer from sleepless nights. Even as most countries are taking stringent measures to impose restrictions on night time flights amongst other noise control methods, the ministry of civil aviation is yet to arise from the deep slumber.
    • In fact, it is totally taking an opposite route and has insisted on making major airports operational for 24 hours. The government has also asked the western countries not to restrict Indian carriers from operating flights during night citing that it is unfair to airlines and travellers from the developing world!
    • Sample this: At LaGuardia and Teterboro airports in US there is a voluntary ban on flights between midnight and 6 am, while there is a $250 fee for violating the noise limit at JFK. In Germany, at Schoenefeld airport, no take-offs or landings are permitted on the north runway between 10 pm and 6 am. While at Heathrow Airport, over the whole of the night period (11pm to 7 am) the nosiest types of aircraft cannot be scheduled to operate. But back in the Delhi and Mumbai airports, flights operate 24x7.
    • It appears that the ministry and aviation players are more gung-ho about how to make the country an aviation hub and not giving any thought to environmental issues and the countless sleepless nights it will impart to million of citizens.
  • India Mauritius double taxation avoidance treaty -- some snippets
    • Only two Mauritian citizens are directors in most of 26,000 companies registered in the island nation and made investments in India!
    • It’s estimated that India loses a revenue of at least Rs 1,000 crore per year because of the Indo-Mauritius treaty.
    • Though India also has a similar agreement with Sangapore, no business house can misuse the treaty as tax exemption is meant only for bona fide businesses.
  • Foreign teachers may soon leave Indian schools
    • The Government of India is planning to substantially cut down on the number of foreign nationals that can be employed in Indian schools which have affiliations with different foreign national boards.
    • From a 50% ceiling on foreign nationals, it is now proposed to allow such schools to hire maximum 20% of their total number of teachers from foreign countries. Any number beyond this will be allowed on proper justification on a case to case basis.
    • Over the past few years, there have been a considerable growth in the number of schools affiliated to the foreign boards in India, particularly those affiliated to International Baccalaureate Organisation (IBO) and Cambridge International Examination (CIE). The number of schools affiliated to IBO has grown from two in 1998 to 33 in 2006. The number of schools affiliated to CIE stood at 148 in 2006. This has forced the government to come up with a clear policy regarding these schools.

24.05.2008

  • We all know about the FDI limits/caps; don't we? But is there a cap on FII investments too?
    • FII investment in debt is capped at $4.7 billion, with a sub-ceiling of $3.2 billion in government securities and $1.5 billion in corporate debt.
    • How are FII (Foreign Institutional Investor) investments better than ECBs (External Commercial Borrowings)?
      • FII investment in local currency bonds is a better option than overseas borrowing by Indian companies. In the case of foreign investment in rupee debt, the currency risk is with the FII whereas in ECBs the local borrower has to bear such risks.
      • Besides, a functioning bond market can provide long-term money whereas ECBs can at best provide funds for 3-5 years.
  • Our forex reserves
    • Total foreign exchange reserves, including gold, SDR rose during the week ended May 16 to $314.08 billion.
  • See how far ridiculousness can be taken to?
    • This is an interesting story about launching of 'dharma funds' to enable devout Hindus to invest in the stock market. Couldn't resist the temptation of reproducing the full story for you:
    • After a handful of mutual fund houses expressed willingness to launch Islamic (Shariah) mutual funds, the big daddy among public sector mutual funds Cutie Eye AMC is planning to launch a ‘dharma fund’ to enable devout Hindus (Jain and Buddhists in particular) invest in the stock market. The fund, according to inside sources, will not invest in ‘non-dharmic’ sectors like defence (weapon manufacturing), pharmaceuticals, casinos and alcohol.
    • Way back in 2005, JM Morgan Stanley had plans to launch a fund for ‘strict vegetarian’ Jain investors. “The idea did not take off. The scholars (Hindu scholar board) we contacted objected to every stock we picked for the index. They didn’t want Titan, because Titan watches came with a leather strap; objected to L&T because the company constructed abattoirs for government, trashed HLL because they did animal testing and rejected Infosys because it wrote software programmes for meat-packing companies. And when we finally made a list, the board wanted to know if the fund manager wore leather shoes. We faced major reputation risk launching the fund and so we scrapped the idea,” said a fund manager who was involved in the fund structuring process. A case of dharma sankat?
  • Record wheat procurement
    • The government on Friday announced it has procured a record 207.10 lakh tonne of wheat in the current season on the back of higher support price to the farmers, a development that will help it combat high inflation. The earlier record of wheat procurement was 206.3 lakh tonne achieved in 2001-02.
  • What is fair value accounting and why is it in the news?
    • Fair value accounting is a way of accounting for assets and liabilities based on how much they are worth now as opposed to using historical values.
    • There is a leading international banking body that goes by the name Institute of International Finance, which called for certain changes to 'fair value accounting.' But leading financial firms of the world Goldman Sachs and Morgan Stanley have opposed some of the guidelines being suggested by this body.
    • The IIF is creating voluntary guidelines to influence regulators’ response to the banking industry’s woes and prevent a repeat of the credit crunch that has cost banks over $300 billion in losses. Among the proposals is that fair value accounting standards should be relaxed. Such a move would ease pressure on banks and brokerages to immediately recognise some losses on their books from securities that are hard to value.
  • Farm loan waiver extended
    • To be completed by June 30, the scheme now envisages covering more farmers. But the expenditure is expected to balloon to Rs. 71,600 crores.
    • It will now cover large farmers with land holdings in excess of two hectares and those in drought-prone areas covered under Prime Minister’s relief plan, accommodating demands raised by various political quarters, including Congress MP Rahul Gandhi.
    • It stands expanded to more than four crore farmers with allied activities including poultry, dairy and deepening of wells, being brought into the scheme.
    • Direct agricultural loan taken under a Kisan Credit Card would also be covered. The scheme has also been extended to loans taken by SHGs, and joint liability groups. The government has also decided to waive off restructured loans including those under Vidarbha package and calamity relief whether or not they were overdue.
    • While small and marginal farmers are eligible for debt waiver, other farmers are eligible for a one-time settlement (OTS) scheme. Under the OTS, the farmer will be given a rebate of 25% of the ‘eligible amount’ subject to the condition that the farmer pays the balance of 75% of the ‘eligible amount’. These farmers’ will be given OTS rebate of 25% of the ‘eligible amount’ or Rs 20,000, whichever is higher, subject to the condition that the farmer pays the balance of the ‘eligible amount’.
    • In this context it is interesting to note that there are two types of agriculture loans given out by banks. Investment loans and short-term loans. A ‘short-term production loan’ means a loan given in connection with the raising of crops which is to be repaid within 18 months. An investment loan is meant for direct agricultural activities including asset financing and allied activities such as dairy, poultry farming and biogas, among others.
    • A graphic given in today's ET gives this picture very well. Here it is.
  • Volkswagen to come out with small car
    • Europe’s largest car maker, Volkswagen, plans to roll out its low-priced car Up! at Rs 3 lakh in India by 2010-11. It will be the cheapest car from the Volkswagen stable, which is better known for luxury cars like Audi and Phaeton. The cheapest car from the German car maker so far has been from group company Skoda, which sells the Fabia at Rs 5 lakh and above in India.
  • The mobile ad market
    • The mobile advertising market is estimated at Rs 40 crore in India and industry players expect it to touch Rs 500 crore by 2010.
  • Capt. Gopinath's cargo foray
    • With domestic air cargo industry expected to grow at fast pace, entrepreneurs such as Mr Gopinath are bullish. Total cargo traffic at Indian airports has increased from 15.6% during 2005-06 to 21.5% in 2006-07 recording a compounded annual growth rate of 9.5% for the last six years.
    • To work with SEZ developers & retailers such as Reliance and Bharti to provide end-to-end and integrated logistics solutions
    • Airline will initially serve on metro and non-metro routes with 10 medium and small-size aircraft
  • ISRO's commercial ambitions
    • ISRO, which launched the PSLVc-9 last month with two satellites Cartosat-2a and IMS-1 with eight nano-satellites, has become the world’s second country after Russia to launch multi-satellites with polar satellite launch vehicles.
    • ISRO to give Google a run for its money?
    • The much popular Google maps may soon have a strong rival — ISRO. Indian Space Research Organisation has decided to launch its own version of the Google map for India — taken through Cartosat on the internet six months from now. The images will enable one to zoom to a meter of the earth surface. “Our images are good. They are in fact better than the ones available on the internet now. These images will be on our website in six months from now,” ISRO chairman G Madhavan Nair.
  • We do need to know a bit about 'elopements' too at times. Especially when they are headline stuff.
    • When Jawaharlal Nehru invited the celebrated Italian director Roberto Rossellini to India in the mid-50s to make some documentaries for the Films Division, it created many ripples. Not only did the Indian film world feel miffed that the Prime Minister had looked to a European for the project despite a wealth of local talent, but the Italian finally left without completing his task. And he took back with him the wife of an Indian documentary maker!
    • The ‘scandalous’ elopement of Sonali Dasgupta and Rossellini was the stuff of tabloids across the world, more so since his wife at the time was no less than the beauteous Ingrid Bergman.
  • Is US recession having a contagion effect on India’s sunrise industries?
    • While there appears to be no conclusive evidence to suggest so, changes in hiring practices at some of India’s fastest growing companies signal that something is amiss. Look at this graphic; and draw your own picture!
  • Appa Sherpa is the first to scale Mt. Everest 18 times!
    • Forty-eight-year-old Appa first climbed the Everest on May 10, 1990, and has been scaling the peak almost every year. A fellow Sherpa guide Chhewang Nima (42), who has reached the summit 15 times is his closest competitor.
    • Nepal is observing May 29, the day when Tenzing Norgay and Edmund Hillary first climbed the Everest, as the International Mt Everest Day by organising a variety of programmes to promote adventure tourism.
  • Australia willing to provide n-fuel to India via the 123 pact
    • AUSTRALIA is willing to consider joining the consensus with the Nuclear Suppliers’ Group (NSG) and the International Atomic Energy Association (IAEA) to provide India uranium for its power plants if the latter ratified the 123 agreement with the US. The move is clearly a softening of position from the earlier stand in which Australia was reluctant to open uranium trading with countries that have not signed the Nuclear Non-Proliferation Treaty.

23.05.2008

  • For many of us, today's ET piece "Levitating commodity prices" may go over our head. But some interesting language snippets that I couldn't resist excerpting for us:
    • George Santayana, the Spanish-born Harvard philosopher coined the oft-quoted phrase: “Those who cannot remember the past are condemned to repeat it.”
    • Writing of the December 1851 coup d’├ętat by Napoleon’s nephew, then the elected President of the Second Republic who a year later crowned himself Emperor, Marx penned: “Hegel remarks somewhere that all great, world-historical facts and personages occur, as it were, twice. He has forgotten to add: the first time as tragedy, the second as farce.”
  • In the context of the government's move to take back oil blocks awarded to Reliance Industries, because the latter failed to stick to the committed work programme, a concept that is worth noting is this:
    • Typically investors in such unexplored blocks have to make huge upfront investments. To tide over the problem of potential operators having to make large upfront investment commitments, there’s the concept of “promote licence” abroad. The arrangement is that promote licensees have a limited period, say, two years after award of the bid, to review data and coagulate the technical and financial capacity required to complete the agreed work programme.
    • Can it really work? My hunch is that bidders will still get a two year period to sit on blocks in a dog-in-the-manger fashion. When they have committed to make certain investments and/or development of the blocks at the time of bidding for the blocks, why is that any laxity should be allowed when they don't stick to their own promises? May be there are strong reasons, which we don't know of. Let us keep watching; may be more details will come out in due course.
  • I can't afford to miss a piece written by a famous author like Jeffrey D Sachs. This time he was writing about the food shortages that are plaguing the world. Some excerpts and my notes.
    • He argues that the poor yields from farms across the globe -- especially the under-developed countries, are due to lack of access to agricultural inputs -- fertilizers, good seeds and capital. Government-run agricultural banks in poor countries once not only financed inputs, but also provided agricultural advice and spread new seed technologies. In spite of the many ills that beset this practice, this practice played a huge and positive role in helping the poorest farmers to escape poverty and dependency on food aid.
    • During the debt crisis of the ’80s and ’90s, the IMF and World Bank forced dozens of poor food-importing countries to dismantle these state systems. Poor farmers were told to fend for themselves, to let “market forces” provide for inputs. This was a profound mistake: there were no such market forces. Poor farmers lost access to fertilisers and improved seed varieties. They could not obtain bank financing. To its credit, the World Bank recognised this mistake in a scathing internal evaluation of its long-standing farm policies last year.
    • The time has come to re-establish public financing systems that enable small farmers in the poorest countries, notably those farming on two hectares or less, to gain access to needed inputs of high-yield seeds, fertiliser, and small-scale irrigation. Malawi has done this for the past three seasons, and has doubled its food production as a result. Importantly, the World Bank, under its new president, Robert Zoellick, has now stepped forward to help finance this new approach. If the Bank provides grants to poor countries to help small peasant farmers gain access to improved inputs, then it will be possible for those countries to increase their food production in a short period of time.
  • Remember the definition of 'treaty shopping'?
    • It is the practice where the residents of a third country claim tax benefits of a treaty that exists between two countries. For example, the India-Mauritius double taxation avoidance agreement. While the agreement is expected to benefit the citizens of India and Mauritius, many third country citizens take advantage of it by routing their investments through Mauritius.
  • TCS bags contract to process passports in India
    • The Ministry of External Affairs processes close to 80 lakh passport applications a year and the number is growing every year at close to 20%.
    • The bid put in by TCS is learnt to be a little less than Rs 200 per passport, giving it around Rs 900 crore in revenues over the six-year duration of the contract, even if the volumes do not grow. The transaction fee of Rs 200 or so will be paid by applicants directly to TCS, which will run the passport centres out of 72 locations in the country.
  • India's spices exports cross the $1 bn mark
    • In 2007-08, spices export touched a new peak with 444,250 tonnes valued at Rs 4,435.50 crore ($1,101.8 million), surpassing the target of 380,000 tonnes fixed by the board. Spices Board chairman VJ Kurian said compared with the last year’s performance, the export showed an increase of 19% in volume, 24% in rupee value and 39% in dollar terms despite rupee appreciation and negative global economic factors. The spices export in 2006-07 was 373,750 tonnes valued at Rs 3,575.75 crore ($792.9 million).
    • What are all included in spices anyway? Pepper, chilli, cardamom, ginger, turmeric, celery, garlic, nutmeg and mace, coriander, cumin, fennel, fenugreek and value added products like curry powder, mint products and spice oils and oleoresins.
  • What is the logic behind our petro companies saying that they will sell branded fuels?
    • Branded fuel prices are not controlled by the government and are normally priced higher than the regular fuel. So, selling branded fuel would mean lower losses. Oil companies incur huge losses on fuel sales as they are forced to sell it at prices below cost.
    • Based on the estimated sales volume for 2008-09, it has been indicated that a Re 1/litre increase on petrol, diesel and kerosene would have an annual impact of around Rs 1,272 crore, Rs 5,352 crore, Rs 1,140 crore, respectively. An increase of domestic LPG by Rs 10/cylinder would help OMCs in saving around Rs 756 crore per annum.
  • Remember anything about Ahimsa silk and Kusuma Rajaiah from Andhra Pradesh? We noted this in our blog earlier also.
    • Now his Ahimsa silk is going places. Ahimsa silk, the ‘humane’ version of the silken fabric made without sacrificing silkworms, is being embraced by those who shun violence. Ahimsa silk is not just luxury. It is a statement which has attracted not just religious sects from the country but even international retail chains like Marks & Spencer, Organic Avenue and US-based environmentallyconscious fashion designers like Deborah Lindquist and Linda Loudermilk, to look towards India for this “peace fabric”.
    • Unlike conventional silk that entails killing of silkworms, ahimsa silk ensures that the moth completes its life-cycle and leaves the cocoon behind for the weavers to handspin the yarn. Despite lacking in texture and lustre of conventional silk and almost twice as expensive, environment-conscious customers across Europe and US have emerged as the patrons of ahimsa silk and take pride in rejecting the gloss fabric to endorse its humane version.
    • Unlike regular silk that costs Rs 200 to Rs 225 per metre, ahimsa silk costs about Rs 500 per metre in the domestic market and Rs 350 to Rs 400 per metre in export market.
  • The new side effect of global warming?
    • Scientists have sounded a grim warning over how global warming could destabilise vast carbon reserves beneath the ocean floor and unleash a catastrophic threat. These carbon reserves exist as clathrates, ice lattices and continental permafrost and are found even under freshwater lakes like Lake Baikal in Siberia. These ice structures may hold trillions of tonnes of methane.

22.05.2008

  • Which of the following grouping is India not a member of at the WTO forums?
    • Nama-11
    • G-33
    • G-20
    • G-18
    • I am dead sure that all of you will be able to answer the question. The answer for the uninitiated is G-18.
  • How many countries does the G-33 grouping have in it?
    • You think it is 33; isn't it? But actually 46 countries are reportedly members in it.
  • What is special safeguard mechanism (SSM) that India is worked up against at the WTO talks?
    • SSM is a mechanism to protect the livelihood of poor farmers in developing countries. SSMs give the developing countries the power to increase import duties on specific farm products if there is a sudden increase in volume of imports or a fall in domestic prices.
    • India is concerned over the unfavourable contents of the recently-circulated draft texts in agriculture and non-agriculture market access (Nama) at the World Trade Organisation (WTO). It is objecting to the price trigger of 30% proposed in the text, which India believes is too steep a dip.
  • What is y-o-y and w-o-w in the context of measuring inflation?
    • Inflation, as measured traditionally in India is on year-on-year (yoy) basis. What this means is that the current WPI index is compared with the WPI of last year and the growth percentage recorded is taken as the inflation rate.
    • But in many countries, it is measured on a wow (week on week) basis. The WPI figure of the current week is compared with the last week's figure and the inflation rate arrived at. This has the advantage of removing the base effect.
    • Now, don't ask me what is base effect; will you? Search our blog for this phrase. I have covered it already earlier.
  • What is meant by 'open interest' in futures and derivatives markets?
    • Open interest is the number of "open" contracts of derivatives like futures and options that have a time limit after which they expire. Open interest in a derivative is the sum of all contracts that have not expired, been exercised or physically delivered.
    • What is the implication of high levels of open interest or low levels of open interest?
    • Low levels of Open Interest reflect a market lacking in liquidity and, therefore, one which will be relatively more susceptible to being moved by a trade than a more liquid counterpart. When there are high levels of Open Interest, deals are likely to be rapidly swallowed up by the market - due to the fact that there will be a vast array of participants eager to open new positions or take profits - and consequently have far less impact on the current price.
    • Want to know more on this? A very good write up can be found here.
  • Global Peace Index
    • The Global Peace Index of the Economist Intelligence Unit (a unit of The Economist magazine), which measures 140 nations on how peaceful they are, has thumbed down the high and mighty. Here is a list that puts the US below Madagascar and Botswana! What else could one expect with the index calculating countries based on internal factors like crime rates, prison population, and external factors like relations with other countries, arms sales, foreign troop deployments, et al.
    • India is ranked 107 in this list.
  • Ever heard of the 'next billion'?
    • Across emerging markets over a billion consumers are waiting to be ushered into formal markets, eager to forsake the substandard products and usurious rates they are forced to contend with in informal channels. These consumers, are referred to as the next billion. They are currently excluded not because they lack purchasing power. In aggregate they are already spending almost a trillion dollars each year, and over a third of it is on non-essentials. Yet commercial enterprises and governments have so far not devised ways to reach and serve them profitably.
  • Interesting results from a research study into Kerala’s fishermen’s usage of cell phones.
    • A recent study by a Harvard economist found that variation in fish prices in Kerala fell from 70% to 15%, and the spoilage of daily catch fell from around 5% to almost zero after widespread adoption of mobile phones. Fishermen’s profit rose by 8% even as the consumer price fell by 4%.
  • Sometimes headlines are best remembered as they appear.
    • I found today's headline in ET very compelling. Read on...
    • StanChart eyes India listing via IDRs
    • A year after the Sepoy Mutiny, the British bank Standard Chartered set up its first Indian branch in Calcutta in 1858, to cash in on the flourishing trades in rice, jute and indigo. Today, 150 years later, the bank is all set to ride the booming Indian stock market.
    • Standard Chartered, the emerging market bank and the foreign bank with the biggest presence in the country, is looking at listing itself in Indian stock exchanges. It could well be the first MNC to issue Indian Depository Receipts (IDRs)—securities that will be traded in the local stock market. If the Indian listing goes through, this would be StanChart’s third global listing after UK and Hong Kong. India is the bank’s second biggest money spinner, contributing 17% of its profits. StanChart’s plans may draw some of the other global firms to float IDRs — a market that is yet to take off.
  • Ever heard of a universal remote?
    • It is very interesting. Read on... here.
  • IPL match
    • Yesterday’s match between Mumbai Indians and the Punjab Kings XI was a real thriller. Happened to watch it while shopping in a sports shop. T20 has the potential to have an unenthusiastic (or bored!) cricketing fan like me also glued to the TV set; at least in the last few minutes of the game.
    • Kudos to the format.