Indian Current Affairs: 26.08.2009

Finance & Economy

This is an excellent article from UR Bhat. Everyone of you must read it. He has neatly summed up the lessons that are learnt from this crisis for markets, investors, and institutions. Since it is a 'must read', we are not giving any synopsis or excerpt.

Two meaningful suggestions for global financial recovery as suggested in today's Hindu editorial

Global recovery can be sustained by two rebalancing acts. First, there has to be a shift from public to private spending. Secondly, aggregate demand across countries needs to be rebalanced, with a shift from domestic to foreign demand in the United States and a reverse shift from foreign to domestic demand in the rest of the world, especially Asia.

The government may finally manage to extract information on tax evaders who have stashed away money in Swiss bank accounts, with the European nation agreeing to renegotiate its tax treaty with India.
Threats to blacklist Switzerland as a tax haven by the 30-nation Organisation for Economic Cooperation and Development (OECD), which put the famed Swiss banking secrecy laws under pressure, may have helped India’s efforts to get the European nation renegotiate the treaty.
Switzerland responded by stating its readiness to comply with foreign governments in tracking down tax evaders by adopting the OECD Model Tax Convention concerning the exchange of information in tax matters.
By this move, Switzerland will give up the traditional distinction made between tax fraud (a criminal offence in Switzerland) and tax evasion (not a criminal offence in Switzerland) when considering foreign requests for administrative assistance in tax matters.
Even the OECD Model Tax Convention does not allow roving enquiry or fishing expeditions, as they are commonly called. Incidentally, this is not permitted in any country, including India.

In a scneario wherein parts of the country -- like the East -- are power surplus and parts of the country are power deficit -- like the West and South -- power trading makes lot of sense. But what ails power trading in India?
The volume of power traded added up to 20,965 million units (mu) in 2007-08, the figure crept up to 21,917 mu in 2008-09. Besides, just Maharashtra and Gujarat account for 80% of the trading.
The trading margin, that remains unrevised at no more than Rs 0.04 per kwh, disincentivising cross-country sales, needs to be reviewed to shore up exchange.
Latest data show that the weighted average purchase price of power was Rs 4.47/unit in 2006-07. It has since gone up to Rs 7.25/unit in 2008-09. Yet the trading margin remains pegged at four paise/unit.
Experts are putting the blame on trading margins for the lackadaisical performance of power trading exchanges.
Take a look at this ET editorial to get a broader picture.

After all, solar is the most abundant source of energy; reduces a nation’s dangerous reliance on energy imports; creates thousands of quality jobs in manufacturing, sales and installation; reduces harmful air pollution; and delivers energy that reduces electricity prices over its 50+ year life, protecting against volatile — and ever-rising — fossil fuel prices. More importantly, solar energy works in small increments for rural electrification and water pumping as well as 1,000 MW central station plants in the deserts of India.

Through this mission the country wants to send a clear signal to the markets that it is serious about ramping solar energy. The Mission would provide over 20,000 MW of solar power by 2020 while increasing electricity rates by less than 0.5% — a tiny price to pay for leadership on 21st century energy technology and water security.

International

The US Federal Reserve Chairman and initially a Republican appointee, Ben Bernanke is now going to get a second term as Fed Chairman.

Look at the speed and decisiveness with which Americans act? Though Ben Bernanke's four year term is set to expire on January 31 next year, they are so forthright in announcing his extension six months before! This sort of a thing will rarely happen in India.

With occupancy rates for luxury hotels worldwide falling to 57% in the year through July from 71% in the same period a year earlier, star hotels worldwide are giving up some of their hard-won stars to save money.
In the US, travel guides such as the one provided by the American Automobile Association and the Mobil Travel Guide give star or diamond awards. Internationally, there is no standard classification. Ratings are given in some countries by hotel industry associations.
To qualify for five stars, the highest rating, hotels must provide “an exceptionally distinctive environment offering consistently superlative, personalised service,” according to Mobil Travel Guide, which lays out specific requirements. There should be a welcome gift and “something noteworthy and thoughtful” should be left on the pillow during turndown service.

While it is known that fiscal deficit is one figure that no government is bothered about in the current crisis situation, the fact remains that this has to be contained sooner rather than later, if the economy is to survive.
An estimate by the independent Congressional Budget Office puts the cumulative fiscal funding gap of US at $7.1 trillion between 2010 and 2019.
A separate White House midsession budget forecast, projected a cumulative $9 trillion during the same period.
The national debt of the USA now stands at more than $11 trillion.

Language lessons

eg: With the internal situation getting dicey, BJP president Rajnath Singh and his men, who threatened action against Mr Arun Shourie, are now having a rethink.

A quasi nongovernmental organization; an organization that is financed by the government yet acts independently of the government
NGOs to be precise.

Indian Current Affairs