11.02.2009

Politics & the Nation

• It's now Al Qaeda which threatens India
• In a strongly worded video message it has threatened India that it will see more Mumbai type attacks if it ever dares an attack against Pakistan.
• With Richard Holbrooke, the special envoy for Pakistan and Afghanistan currently on a visit to Pakistan, perhaps with a message from Obama that Pakistan needs to stop being a safe haven for terrorist groups, this threat from Al Qaeda assumes significance.
• Financial inclusion figures - a comparison
  
• 80% of the Indian population is living without a bank account.  In contrast that figure in other countries is: Sweden (2%), Germany (3%), Canada (4%) and Belgium (5%).
  

Finance & Economics

• A third stimulus package on cards?
• The interim budget that is to be placed before the Parliament on Monday is likely to have a stimulus package though it may not be called as such by the government.  Quite a few measures on both the direct and indirect taxes front are reportedly under consideration.
• However, it appears that the package may not have much relief for individuals.  With populism having taken firm roots in our polity, I think even individuals may be thrown a few sops.
• Let's wait and see.
• The problem with mark-to-market rules in accounting
• While the global banking giants are all crumbling like a house of cards and India Inc is reeling under the impact of recession, Indian banks are reporting healthy bottomlines.  What's the reason?  The answer lies in mark-to-market accounting.
• Mark-to-market rules mandate that notional losses or profits arising out of the appreciation or depreciation in the current value of assets have to be reflected in the statement of accounts.  This gives rise to a situation wherein losses/gains that are on paper give a healthy/poor picture of the corporate or the bank.  But prudential accounting norms require that mark-to-market losses/profits have to be booked as on the date of financial reporting.  So, what's the way out?
• An ET editorial comes out with the idea that there should be two sets of reports -- one without mark-to-market figures and another with them.  I have an eery feeling that this is somehow not a good solution. Have any take on this?
• How can introduction of GST (Goods and Services Tax) improve the country's GDP?
  
• According to Vijay Kelkar, the Chairman of the Finance Commission there are four channels through which this happens:
  
• First, the current system fails to tax all goods and services. This failure leads to distortions and a misallocation of resources from maximum-efficiency areas to undertaxed areas. GST will maximise coverage of goods and services, and thus reduce distortions and improve output. 
  
• Second, the current unrefunded taxation of capital goods is a real curse on capital accumulation, hitting savings and investment. Kelkar believes that by ending such overtaxation, GST will make a huge long-term difference to outcomes. 
  
• Third, indirect taxes need to be levied at the destination point to be comprehensive and non-distorting. At any given price level and exchange rate, says Kelkar, violation of the destination principle puts local producers at an unwarranted disadvantage with outside producers. A destination-based GST will end the anomalies of the current system. 
  
• Fourth, differences in the tax bases of different states and the central government greatly increase the cost of doing business, and impose dead-weight losses on the economy. GST will go a long way towards reducing the current system’s red tape, delay, hassles, corruption, leakages and waste. 
  

Sport

• Cricket
• Even a non-cricketing type like me stayed glued to the TV during the T20 match between India and Sri Lanka.  What a brilliant performance from the Pathan brothers!  Simply superb.  Hope India keeps playing like that for some more time to come.

Language lessons

• If you read today's ET editorial on Bollywood's decadence, you will get a chance to either learn or recap many words that you don't normally use in day to day life.  A very good piece from learner's perspective.
• dystopian, soppy, flyblown, inane, cornucopia, vaudeville and pastiche are some of the words I found interesting.