Indian Current Affairs: 03.01.2009

Politics & the Nation

Pakistan imports products worth $1.9 billion from India, including fruits, vegetables, seeds, spices, maize, soybean, medicines, chemicals and cotton. Its exports to India are worth a modest $300 million, and amount to less than 2% of total exports.
In spite of India granting the MFN status to Pakistan, the latter has not reciprocated the gesture so far. Remember our notings on the subject? Read our post on 27.04.2007.
In the light of the souring relations consequent to the Mumbai carnage, will India now tighten the screws on Pakistan? Let's wait and see.
This graphic gives you details of Indo Pak trade over the past few years.

Leveraging on its advanced sewage treatment plants in Navi Mumbai, the NMMC (Navi Mumbai Municipal Corporation) has decided to appoint an agency which would recycle 250 millions of litres per day (mld) sewage water generated every day. This treated water, which is clean enough for general use except drinking, would be supplied to various commercial establishments in Navi Mumbai. The NMMC would charge the agency for the rights given to sell water.
The treated water would be provided mainly to the industries and other areas where nonpotable water is in short supply. In the process, the NMMC aims to cut down on supplying drinking water to these industries, thus saving a substantial amount. This additional quota of drinking water can then be sold to other corporations, which can fetch around Rs 50 crore per year. Of its total supply of 305 mld, the NMMC supplies 115 mld water to commercial centres and industries.

Finance & Economics

The government announced the second and final instalment of its fiscal stimulus package. The Centre enhanced the spending power of states with specific measures to boost credit availability. It offered additional sops to exporters and the small-scale sector, besides raising the level of protection for the cement and steel sectors.
Credit availability has been hiked in a variety of ways — the interest ceiling on external commercial borrowings has been removed; the cap on foreign institutional investments in the domestic corporate debt market has been jacked up by two-and-a-half times from $6 billion to $15 billion; a special purpose vehicle is being created to lend to non-banking finance companies to the tune of Rs 25,000 crore; the Indian Infrastructure Finance Company is being permitted to raise another Rs 30,000 crore by means of tax-free bonds, and states are allowed to borrow an additional Rs 30,000 crore from the market. Public sector banks will also be given additional capital to the extent of Rs 20,000 crore over the next two years, so they can lend roughly 10 times as much.

In a policy move co-ordinated with the Central government’s stimulus package, RBI on Friday reduced its repo rate — the rate at which banks borrow from RBI — from 6.5% to 5.5%. The reverse repo — the rate RBI pays to banks for parking funds with it — was slashed by 1% to 4%, the lowest ever. The cash reserve ratio — the slice of deposits that banks need to park with RBI — has also been reduced by 50 basis points to 5%.

This is the fourth time since early October 2008 that the central bank has eased its monetary policy stance, after having adopted a tight policy since October 2004. The liquidity infused into the financial system through these measures amounts to Rs 300,000 crore. With Friday’s move, another Rs 20,000 crore will be available for lending.
This is a graphic which gives concise details of the package.

According to the latest economic census, India has 26 million rural enterprises employing 51 million people while 16 million urban enterprises employ 49 million people and the SME sector as a whole accounts for 27.2% of the GDP.
In India, the percentage of workers having formal jobs is less than 7%.

India is the second largest producer of fruits and vegetables in the world with 10% of the world’s total fruit production but some 43% of the product is wasted because of lack of cold storage facilities and energy infrastructure.
India processes about 1.3% of its total fruits and vegetable as against 80% in the US, 70% in France, 80% in Malaysia and 30% in Thailand.

Usually, banks sell tier II bonds to institutional investors to raise capital to shore up their capital adequacy ratio.

Upper tier II bonds have a longer maturity and a higher coupon compared to the lower tier II bonds. In case of the former, however, banks have the option to call back the bonds after the end of the 10th year. After 10 years, if the ‘call’ isn’t exercised, the bank then raises the coupon by 0.5 percentage points to improve the yield.

International

Kilinochchi is considered the de-facto political capital of LTTE. The fall of Kilinochchi marks the rebels’ biggest loss after the fall of the Jaffna peninsula 13 years ago, while it means a massive politico-military victory for the government which had already flushed the rebels out of their former strongholds in the east in 2007.
Whether this fall means the beginning of the end of LTTE remains to be seen.
Look at these graphics which depict the shrinking base of LTTE and explain the current position.

Indian Current Affairs