Politics & the Nation
- The 'game changers' in the electoral verdict
- Uttar Pradesh, Maharashtra and Andhra Pradesh could well decide who gets to rule the country after the next general election. Taken together, they account for as many as 170 seats in the Lok Sabha. In view of the significance of these states, political pundits have accredited them with the tag of “game changers”.
- Though politics of the electoral sort wouldn't evince our interest too much a read now and then doesn't do us harm. Take a look.
- Satyam bidding over: it is now Tech Mahindra that has emerged the winner
Finance & Economy
- What was the proposal by China at the recently concluded G20 summit about SDRs?
- China suggested that the world should have a new international currency. It preferred the SDRs of IMF as that international currency, in place of the present de facto role played by the US dollar.
- Why is China proposing this now?
- Currently China holds about 70% of its $2 trillion of its forex reserves in the form of US dollars. It fears that in the next few years the US government will be running huge public debts to revive its economy. The OECD has projected the US public debt to increase by 40% in the next three years. China’s government fears that this will lead to a depreciation of the dollar, which in turn will lower the value of China’s $2 trillion foreign-exchange reserves.
- Zhou Xiaochun is the governor of the People’s Bank of China, our counterpart to the RBI.
- Gold standard and its demise
- As the world economy was emerging from the World War II, Keynes suggested the creation of a global reserve currency that he named bancor — whose value was to be determined by a basket of about 30 commodities, including gold. His aim was to create a currency that would not be vulnerable to the vicissitudes of any single economy. But this has not become a reality. Instead in the post World War II period, the dollar emerged as the primary global currency of reserve and exchange. Several countries pegged their currencies to the dollar, which in turn was pegged to gold. However, pegging the dollar to the gold meant that the US could not print an unlimited amount of dollars. The system came under tremendous pressure during Vietnam War that imposed a massive strain on the US treasury and ultimately led to the withdrawal of the US dollar from the gold standard in 1971.
- Titbits about world forex reserves
- Currently, two-thirds of the official foreign exchange reserves of national governments are in dollars, followed by the euro that holds about a quarter, the pound sterling and the Japanese yen that hold between 3-4% of the international reserves.
- What's the advantage enjoyed by US by virtue of the dollar being the international reserve currency?
- It can run huge trade deficits and pay them off by simply printing more greenbacks.
- Why is a national currency not ideal as a reserve currency?
- Any national currency is not suitable as a global reserve currency because it imposes the twin challenges on the currency issuing authority to achieve the domestic monetary policy goals and meet international demand for the reserve currency.
- We all know that the corporate sector in India is facing tight liquidity conditions in spite of the fact that government has taken quite a few initiatives to shore up the fortunes of the economy. If you are asked to suggest some measure to improve the liquidity situation in the country, will your suggestions include any of the following? The following is a list of suggestions from a finance expert. Take a look and be your own judge:
- The recent initiative of permitting companies to raise external commercial borrowings (ECB) up to $500 million for domestic spending under automatic route is a welcome move. The eligibility and end-use remains almost the same as before. ECBs should be permitted to replace the existing domestic debt (particularly in case of financing of NPA settlement as end use); either with an existing lender specific NOC or on a case-by-case basis approval by the RBI. This move would also help domestic banks manage their cash flow situation during turbulent times.
- Permit closely-held Indian business entities to directly raise capital from other international exchanges like Alternative Investment Markets (AIMs). This would certainly help many closely-held mid-size corporates invite equity participation which currently is difficult in India as there is no separate exchange to facilitate this.
- Asset Reconstruction Companies (ARCs) are an option for addressing distress debt situations, which was successfully introduced by regulators in 2002. Currently 49% FDI is permitted and many of the ARCs need further capitalisation for greater volumes. There is limited appetite for raising capital in India. It may therefore be prudent to consider relaxing the FDI limit up to 74% to infuse global liquidity in the system.
- India going places on telephone connection additions
- The cumulative GSM subscriber base (excluding GSM subscribers of Reliance) of the country grew nationwide to 288.3 million in March this year, up from 277.5 million in February.
- India has added a total of 10.8 mn GSM in the month of March, 17.4% more than the additions in February.
- Vodafone Essar added 2.85 million new users in the month of March; the largest for any telco in the country. But Airtel continues to be the largest telco, with its total customer base crossing the 94-million mark. Bharti also commands a market share of 33% in the GSM space as against Vodafone Essar’s 24%.
- We have covered quite frequently about IIFCL in our blog earlier.
- What role can IIFCL play in the current turbulent times to shore up the fortunes of our economy?
- For an answer to such a question this article that appeared in today's ET offers a good answer.
Language lessons
- burnished: Adjective
- Made smooth and bright by or as if by rubbing; reflecting a sheen or glow.
- eg: Their reputations, too, stood burnished.
- Sisyphean: Adjective
- eg: Sisyphean challenge.
- Both extremely effortful and futile. It came from Greek mythology. Greek legend had it that Sisyphus was a king in ancient Greece who offended Zeus and whose punishment was to roll a huge boulder to the top of a steep hill; each time the boulder neared the top it rolled back down and Sisyphus was forced to start again. Hence the name for any extremely effortful and futile work.
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