Indian Current Affairs: 24.01.2009

Politics & the Nation

It is now CPM's turn to be embarrassed
The CBI has claimed that it has got clinching evidence against CPM's Kerala unit Secretary Pinarayi Vijayan, who it alleges had indulged in a criminal conspiracy and abuse of his position as electricity minister to cut a sweetheart deal with Canadian power company SNC-Lavalin.
Recommend a read of what we have noted about the controversy surrounding this deal earlier in Discover It. The Kerala High Court had asked for a CBI probe into the issue in January 2007. If you follow that up with this report that appeared in today's ET it will give you a good comprehension about the controversy.

Sample this excerpt from an article commenting about PwC's role: "Also, given that the audit firm in question was also involved in the affairs of Global Trust Bank and DSQ not long ago, it may be relevant to ask what corrective actions were taken by the firm to mitigate or prevent opportunities for fraud, reckless mismanagement, and conflicts of interest raising the potential for such behaviour within its own organisational set-up." Then another one: "First, the inability of auditors to detect fraud and the diversion of funds separately or conjointly constitute a key element of the ‘expectations gap’ between public and professional perceptions of auditor’s responsibilities and usually gives leads to a possible collusion between the auditor and the management. "
In the wake of calls like these, I think the question about the role of auditor -- whether he is a watchdog or a bloodhound -- should be decided first. This assumes lot of significance in view of the fact that Arthur Anderson, which saw its demise in the wake of Enron scandal, was ultimately absolved of any wrongdoing by the US Supreme Court; ironically much after the demise of the firm.
Couldn't get a better and forceful argument than this one that pleads for a balanced view of the role and responsibilities of independent directors and auditors.
A must read.

International

It is now widely quoted that the US President Barack Obama called Pakistan along with Afghanistan as the epicentre of terrorism threatening world security and that his administration would tackle both countries as a single problem.

His comments are sure to be received with glee in India, which has maintained that terror coming out of Pakistan is a threat to not just India but the international community. The linking of Afghanistan and Pakistan as one problem is also being seen here as a positive development for the region.

Finance & Economics

The Economic Advisory Council to the PM has said that it expects the economy to grow by 7.1% instead of the 7.7% that it estimated earlier. Further it also says that the fiscal deficit will be about 8%, if the subsidy payouts are included. This is one figure that has been consistently touted by "The Economist" magazine since long.
If the deficits of states are also included, the country would be seeing a fiscal deficit which is well beyond 10% of the GDP.

Supreme Court rejects Vodafone contention about jurisdiction of IT authorities. The chronology of events relating to this case which will have far reaching implications for cross border transactions goes like this:

I-T Dept asks why Vodafone should not be treated as assessee in default for failure to deduct tax on payment in respect of transfer of securities relating to Vodafone Essar Ltd
Vodafone files a writ petition in the Bombay HC on January 28, 2008 challenging the notice
HC orders that purchase of shares by Vodafone in Cayman Islands was liable to capital gains tax here
Vodafone moves Supreme Court questioning the jurisdiction of Indian IT authorities to tax the deal
Co may face $1.7b as tax & fine (same amount). Total outgo may rise to over $4 billion

Its GRMs (gross refining margins) have taken a hit in Q3 because of the volatility seen in crude prices globally.
In the past, RIL has managed to sustain attractive GRMs above regional and global benchmarks, by efficiently sourcing crude — relying more on relatively lowpriced ‘sour’ crudes and exporting oil-products of the required specifications, as per prevailing demand conditions. The attendant flexibility in refining operations has paid rich dividends.

Concepts

This is a management concept that is attributed to Donald Sull. It is used to describe management's tendency to respond to the most disruptive changes by accelerating activities that succeeded in the past.
Sull's wisdom says that times characterized by disruptive changes are best negotiated by companies that practice 'active waiting.' It refers to anticipating and preparing for opportunities and threats that executives can neither fully predict nor control.
The best way to avoid active inertia, according to Sull is to have fuzzy vision and stop being glued to a well-defined future. Fuzzy vision provides a general direction and sets aspirations without prematurely locking the company into a specific course of action.

Indian Current Affairs