08.11.2008

• RBI opens a forex swap line for dollar-hungry branches of Indian banks operating overseas
• So reads a headline today. What exactly is a 'swap line'?
• Look at this graphic and you will understand. I think the move by RBI is very sensible. At the same time it ought to mandate that the asset liability duration mismatch of these banks/branches should not be allowed to continue. That is, banks should not be building long term assets based on short term borrowings. Scenarios like these will result in frequent liquidity crises.
  
• The slow down is for real
• The slow down appears to have started hurting the employment scene even in our country. Quite a few top rung companies like L&T were seen shedding 5% of their workforce.
  
• Though the PM made a frantic appeal to India Inc not to affect layoffs, India Inc may not be in a position to do much. Many companies are reported to be sending their workforce on forced unpaid leave for short durations. Many are reportedly putting on hold their placement offers. The numbers by themselves may not add up to substantial figures; but what these reports do is bring in a kind of desparateness. That the slowdown is hurting badly is also known from reports that visits to psychiatrists for tension related problems are on the upswing.
  
• Let us hope that India Inc will come out successfully from all this in course of time. We may have to battle it out for a year or so. Till then we should somehow grin and bear the pain.
• Malegaon blasts probe and implications for the idea of 'India'
• Read this editorial that appeared in today's ET. I am sure it will make you wonder about the direction in which we, as a country -- a Hindu majoritarian one at that -- are going.
• In describing the BJP's support to the Malegaon blasts accused as 'political profligacy' the editorial appears to be right on dot about the very grave danger of some members of the majoritycommunity falling prey to the machinations of the terrorists' scheme of things. Whether it is the hallowed institutions like the Indian defence establishment or the police, it should be realized by one and all that they should not be allowed to be infiltrated by terrorism of any kind -- majority based or minority based. Terrorism is terrorism. It is neither Hindu nor Muslim. It knows no religion, no caste and has no creed. Its anti-human. That's it. It should not be allowed to take deep roots in any of our minds and institutions. The political profligacy of the kind advocated by some of the misguided elements in our polity should be put an end to by simply voting them out. At the same time it should be remembered that pandering to the parochial elements by not doing anything about the painfully long investigation and legal processesonly aggravates the problem rather than solving it.
• But then, going by the current state of affairs, I am often left to wonder 'who is seeking solutions here?' If that's the rhetoric; we have no clues.
  
• Kissan Credit Card scheme and what needs to be done to take better benefits out of it.
  
• KISAN Credit Card (KCC) scheme, announced by the government in 1998-99, is basically a revolving cash credit facility given to farming householders. The credit limit is determined upon the size of land holdings, cropping pattern and the scale of finance. KCC permits unlimited number of withdrawals and repayments within the credit limit, and each repayable within a cycle of 12 months. It also has an in-built component of micro-insurance at a subsidised premium of merely Rs 5. This gives coverage of Rs 50,000 for death and disability. Revolving cash credit facility at a very affordable rate of 7% can also help him in swapping of loans from non-formal lenders thereby redeeming the farmer from the vicious cycle of costly debt-trap.
• KCC addresses the problem of not merely agricultural credit; it rather enhances the creditability of the agriculturist and enables him to plan for investments with proper foresight and confidence. It is noteworthy that KCC extension falls within the category of ‘crop loan’ and he is still entitled for the ‘term loan’ if required in addition. This makes KCC all the more attractive. The possible contingency expenses are also factorised while determining the credit limit, thereby giving him sufficient liquidity to meet such expenses. Credit per seconverts a farmer into a debtor, while creditability transforms him into a confident investor.
• This is the most effective instrument for financial inclusion.
  
• All over the country, more than 72 million KCCs have been issued till date. More than 75% of them are in Andhra Pradesh, Orissa, Rajasthan, MP, Tamil Nadu and UP. If CMIE (March, 2006) reports are to be believed, we still have about 44 million farming households yet to be covered. Nabard has asked all banks to intensively issue KCCs to cover all farming households, including oral lessees, tenant farmers, and share-croppers. Through a campaign mode for financial inclusion, we can easily cover the remaining households by another three to four years, say latest by 2012. Nothing could be more beneficial for our agriculture.
• Government should develop an IT-enabled KCC which can be in the form of a smart card with a permanent identification number for each farming-household. This KCC smart card could contain the digitised history of agricultural credit linkages of the farm. Government should also think of expanding the financial services linked to KCC. This could also function as an entitlement card not only for crop loans, but also term-loans for capital investment costs towards land improvement, rain water harvesting, organic farming, drip irrigation, rural storage facilities and horticulture development. This will go a long way in simplification of procedures and transaction costs for bankers as well as help farmers in improving the productivity and income.
• India's poverty figures
• The latest numbers indicate that the level of poverty was 27.5% in 2004-05 and it has dropped to 25.9% in 2005-06. This means there were 260 million people in the country whose income was less than Rs 356.30 a month in the villages and Rs 538.60 a month in the cities.
• Recently, two reports by the World Bank and the ADB have been released on poverty estimates. The World Bank revised its benchmark of extreme poverty up by 25 cents from $1 per person a day to $1.25 per person per day. The ADB has estimated an even higher benchmark of $1.35 per person per day. The revised benchmark by the World Bank is the average of the national poverty lines of the worlds’ 15 poorest countries. The ADB’s benchmark is Asia-specific based on surveys from 16 Asian countries.
  
• When these benchmarks are used for estimating poverty levels in India, the situation becomes grave and uncomfortable. By using the first poverty line, the estimated number of poor in India during 2004-05 was 456 million or 41.6% of the total population. According to the second poverty line, the number of poor in India was 622 million, which is 54.8% of the population. Evidently, these estimates are significantly above the official estimates of 27.5% indicated by the Planning Commission. Among the states, Bihar, Chhattisgarh, Jharkhand, MP, Orissa indicate that around 40% of the population is below the poverty line.
• Bhutan coronates new King
• Jigme Khesar Namgyel Wangchuck was handed over power by his father Jigme Singhe Wangchuck two years ago. But the coronation waited this long for want of an auspicious day.
• The Oxford educated King is all of 28 years and has uttered some memorable words soon after taking over as King.
  
• It all sounds so fairy tale like. All the best to the King and his country. I really love Bhutan for its Kings. They have been, I think, very pragmatic in forging a strong relationship with India and have also been the front-runners in heralding a democracy of its own kind.
• Do you know the language used in Bhutan? Dzongkh.
• Seen the movie "King and I"? A very lovely and memorable movie about Thailand's King. Played by Yul Brynner, it is a classic. I think all that the movie stood for can be seen playing out in today's Bhutan.