Indian Current Affairs: 16.10.2008

The RBI and Government give the much needed breather even as stock markets remained restless on global cues

RBI cut the CRR by 1% to 6.5% to release about Rs. 40,000 crores into the system.
Banks have also been given the leeway to borrow more by pledging 0.5 percentage point of their stipulated government bond holding for onlending to Mutual Funds which are facing heavy redemption pressures.
Also, the limit on FII investment in corporate bonds has been doubled to $6 billion.
The Centre has now advanced its spending by releasing Rs 25,000 crore to banks in the form of debt waivers to farmers. Coupled with the CRR cut this released about Rs. 65,000 crore into the system.
Look at this graphic to get a good picture of the issue.

Look at this graphic which gives a very good picture of how US Fed's bailouts which are supposed to be temporary created lasting legacies.

US crude fell $2.87 a barrel to $75.76 in afternoon trades, after hitting $74.62, the lowest since September 2007 and down nearly 50 percent since hitting a record over $147 in July. London Brent crude traded down $3.20 to $71.33 a barrel.
This is good news for India.
But why did the prices fall? The fear that the deepening economic slowdown will cut into already weakening demand. Slumping demand in the United States and other developed economies, as well as a flight of investors out of oil and into safer havens, has sent oil tumbling from July’s record.

SEBI has focused on the issue of FIIs helping hedge funds to go short on Indian stocks, as this has a double whammy effect. The way it happens is that a hedge fund, wanting to short an Indian stock, approaches an FII which had bought the stock and is currently holding it on behalf of a P-Note investor. Under the deal, the stock is sold and the money that is pulled out of India is given to the hedge fund. The P-Note holder may or may not be aware of this transaction, and continues to hold the P-Notes. When the P-Note holder wants to sell the stock, the FII asks the hedge fund to return the stock by buying back from the market.
Why does the hedge fund engage in such shorting? Because the interest it pays to the FII on providing funds is just 1% whereas it gets about 4 to 5% in international markets in the current scenario. According to market circles, shares to the tune of more than $3 billion have been lent through this route in recent months.
What does the FII gain here? Interest income without attracting regulatory glare.
What's the double whammy here? Indian stocks get hammered in our markets; thus bringing lot of volatility to the markets. Secondly, such transactions bring unnecessary volatility to the price of the rupee also.

Jet Airlines fires 1900 employees and invites the wrath of the MNS and the Left parties

With a view to curtail the runaway costs, Jet Airlines has given the pink slips to 1900 employees. This has given an opportunity for political parties who said that this termination is inhuman and that Jet's flights will not be allowed to land / take off from Mumbai unless these employees are reinstated.
But with the Indian airline industry facing a combined loss of about Rs. 8,000 crores for FY 2008-09, it has to be seen how this issue will be resolved.

For a small state that Goa is, look at how it is getting into limelight for the wrong reasons!

For its idyllic beaches and small footprint, it ought to have been touted as one of India's leisurely destinations. But alas, it is attracting lot of negative press of late.
Look at this piece which reels off the crime among / supported by elected representatives.

You might remember about Press Note 1. It was formulated in 2005 to dilute an earlier government provision called Press Note 18, which stipulated that the foreign company had to furnish a NOC (No Objection Certificate) from an Indian partner if it planned to set up a wholly-owned subsidiary even in an allied field. Press Note 1 has restricted the need for an NOC to the same activity only.
The NOC condition is applicable for JVs set up before Jan 2005 for which FIPB clearance is needed
FIPB (Foreign Investment Promotion Board) feels foreign companies have started bypassing India due to PN-1 related delays
The govt’s intention to scrap Press Note 1 was opposed by domestic players. The finance ministry has set up a committee comprising officials from department of industrial policy and promotion (DIPP), foreign investment promotion board (FIPB) and the commerce department to look into the cases and check whether the dispensation of PN-1 invoked by the Indian JV partners stands ground.

For his book "The White Tiger." It is about a Bangalore businessman writing letters to China’s PM, narrating the story of his life about how a migrant rickshaw-puller’s son smashed his way through the barriers of class and caste to make it big.
The Chennai-born Adiga is the fifth Indian to win the Booker. Remember the others?

After studying literature at Oxford, Adiga started his career by writing articles for the Wall Street Journal and Money. He then joined TIME magazine and wrote about the transformation of the Indian economy in the era of globalised outsourcing, and its impact on lifestyles not just in the metros but tier-2 cities like Mangalore where he went to school. Then he became a freelancer and wrote this book, which fetched him the Booker.

Indian Current Affairs