Indian Current Affairs: 19.06.2009

Politics & the Nation

The Government is reportedly toying with the idea of classifying forest mining areas as 'go' and 'no go' areas. The 'go' areas comprise the degraded forest area, while the “no go” would include forest areas of medium and high density.
Environmentally sound as the proposal might be, the ministry will need to amend the Forest Conservation Act and the Environment Protection Act if it is to enforce this plan. The existing legislations do not classify forest areas as “go” and “no go”. In the absence of legislative backing, the plans to restrict mining to areas of degraded forests could well be challenged.
At an all India level, 55 to 60 per cent of forest area is classified as degraded.

Finance & Economy

Entry load for Mutual Fund investors to go; Anchor Investors
Investors will now have the freedom to directly negotiate on the fee that they pay for the services of distributors, or brokers, during the purchase of mutual fund schemes. Till now, if an investor had put in Rs 100 in a mutual fund, only Rs 97.75 was invested by the fund while the balance Rs 2.25 was paid by the fund house to distributors. From now on, investors will directly pay the distributors a fraction of the 2.25%.

But there are concerns that doing away with an upfront commission to distributors could impact the penetration of MFs in smaller towns.

Sebi has introduced the concept of an anchor investor, whereby a company planning a public issue can allocate on a discretionary basis up to 30% of the QIB portion of the issue to any one of the institutional investors.

Curiously, however, the lockin period for such an investor is just 30 days. While the presence of a large investor could help an IPO sail through, it could be misleading for smaller investors, feel some market watchers.

The wholesale price index (WPI)- based inflation went sub-zero for the first time in 35 years for the first week of June, but top policy makers and economists dismissed it as a short-term statistical phenomenon, with no real implications for either the country’s growth or its monetary policy.
The inflation index fell by 1.61% for the week ended June 6 over the year-ago period, after gaining 0.13% in the previous week, according to data released on Thursday.
What could this mean for you and me?

Deflation, an indicator of falling prices, would normally signal economic contraction. Hence, instead of rejoicing that each rupee of their income will now be worth more than a year ago, consumers may start worrying about the loss of jobs and incomes. This, plus their expectation that prices could fall further, would make them postpone purchases, depressing demand further and deepening the economic stagnation.

Falling prices also mean bad news for borrowers. The real rate of interest is the nominal rate less than the rate of inflation, and deflation means a real rate of interest that is higher than the nominal rate. Hence, each rupee that you use to repay a loan would be worth more than the rupee you borrowed.

India's Chief Statistician Mr. Pronab Sen feels that manufacturers will benefit with input prices coming down at a faster pace than a fall in the prices of finished goods.

Retail inflation in India, as measured by various consumer price indices, still hovers around 8% while in economies such as the US, it has dipped into negative territory, currently at-1.3%.

The PPF, which was launched in 1969 to solve India’s informal sector pension problem, has managed to attract barely 40 lakh subscribers over 40 years.
In 2003, the prospect of a largely destitute elderly population of 200 million looming around the corner and the growing social cost of an unwieldy tax financed civil service pension, forced the government to adopt the Old Age Social and Income Security (OASIS) Committee recommendations. Thus was born the New Pension System (NPS).
The 2007 pan-India incomes and savings survey by IIMS Dataworks estimates NPS latent demand at 80 million subscribers who can produce aggregate pension savings of $300 billion by 2019.

Continuing its growth trajectory, the Indian telecom sector is expected to generate revenues of over $30 billion by 2013, according to global analyst firm Gartner. The country’s telecom subscriber base is expected to cross the 770-million mark by 2013. India has over 450 million telecom users at present.
But it will still remain number two by 2013. China will remain number one.
The mobile penetration is expected to reach 63.5% by 2013 from 38.7% at present.

Environment

India’s per capita carbon dioxide emission is very low — only 1.21 tonnes per annum, roughly one-fourth of the world average per capita emission of 4.50 tonnes per annum.
However, in aggregate terms, India is the fifth-largest emitter of fossil fuel-derived carbon dioxide, and its total emissions are growing rapidly.
If India were to participate in a global regime of tradable emission permits, how would the consequences be affected by the different modes of emission entitlements? The two main types of emissions allocation schemes are:
Grandfathered Emissions Allocation (GEA) scheme in which permits are allocated on the basis of the aggregate emissions level of a predetermined year, say, 2010.
Equal Per Capita Emissions Allocation (EPCEA) scheme in which the aggregate emissions entitlements for India in different years are arrived at by multiplying the average global per capita emission (4.58 tonne per capita as estimated to be in 2010) with India’s population for the corresponding years.
The developed countries favour the grandfathered emissions allocation scheme, while the developing countries — particularly, China and India — advocate the EPCEA scheme.

Defence

THE US spent more than $607 billion on defence in 2008 according to SIPRI statistics and this constitutes 41% of global expenditure on defence. This far exceeds what the next nine countries spent during the same year.
The Chinese spent $85 billion, the Russians $59 billion and the Indians $30 billion.
America maintains about 750 military and intelligence bases world-wide and its intelligence budget exceeds India’s defence expenditure.

International

It's a debate that will keep demanding the world's attention at least for some time to come. Look at the take by two policy analysts.
A couple of observations worthy of our noting:
BRIC has long-term potential at a time of tectonic power shifts in the world. The qualitative reordering of power underway, symbolises the birth-pangs of a new world order. The world clearly is at a defining moment in its history. In that light, new forums like BRIC could evolve as important instruments to bring about change in the global architecture.
BRIC, by acting as a pressure group, can be a catalyst to international reform, including an overhaul of the Bretton Woods system and a supranational currency as the world’s reserve currency.

Language lessons

Ride on someone's shoulders or back
eg: BRIC's fleeting first summit was piggybacked on the Shanghai Cooperation Organisation (SCO) meeting.

Indian Current Affairs