11.12.2009

Politics & the Nation

• What does division of Andhra Pradesh mean?
• Take a look at this interesting news story on how a division of the State is going to impact the economy.
• Though some experts are predicting that things will be as usual in the new T-state, jury is still out on the issue.
• Besides, the issue has spawned demands for separate statehood in a number of other regions in the country, notably Vidarbha (Maharashtra) & Gorkhaland (West Bengal).
• It would be interesting to watch how events unfold in the next few months to years. A clear picture can only emerge when once the mind of the Central Government is made clear on these various competing claims and counter-claims.
• One thing is for sure -- it is confusion and chaos for the present.
• An excellent editorial observation on the position of political parties on linguistic states
• The only major political party that does not support linguistic states is the BJP, for which all non-religious identities subvert its preferred basis of nationalism, Hindutva. It would like to view states purely as administrative divisions and so has been a champion of small states. Most other parties see linguistic states as consolidating essential cultural identities that constitute rather than erode the Indian national identity.
• On factors other than language as determinants of statehood
• Clearly, there are factors other than a common language that go into deciding the size of a state: we do not have a 45-crore-strong single Hindi-speaking state. A lineage of regional cohesion arising from geographical peculiarity, cultural or ethnic commonality and administrative convenience, all these are legitimate determinants of size.

Finance & Economy

• Curtains down on Bajaj scooters
• Bajaj Auto announced on Wednesday that it is exiting the scooter segment altogether, bringing the curtains down on its iconic product line.
• The company had stopped making the Chetak — once the world’s largest selling scooter — almost three years ago, and according to its MD Rajeev Bajaj, it will stop production of its non-starter Kristal series by end of the current fiscal.
• Bajaj Auto says it will now focus on making motorcycles.
• Read this interesting obituary on the scooter.
• Concerns on banks' exposure to stock markets
• The RBI is reportedly concerned about banks' exposure to stock markets. Banks’ exposure to mutual funds (MFs) has more than trebled, from Rs 45,000 crore to Rs 1,64,000 crore, during March-November 2009. The RBI is worried that stock market volatility could impact banks and, hence, endanger financial stability.
• Currently, the aggregate exposure of a bank to the capital markets in all forms (both fund-based and non-fund-based) is capped at 40% of its net worth at the end of the previous year, with direct exposure capped at 20%.
• The RBI is reportedly contemplating to come up with more regulations becuase banks' investments in equity-oriented MFs is included within the direct exposure limit, whereas investment in exclusively debt-oriented MFs is not. Hence it is reportedly contemplating bringing investment debt MFs within a separate overall cap for MFs.
• Soaring food inflation
• Food price inflation, which is generally attributed to supply side pressures and not amenable to management through policy action, may be returning to haunt India. By spilling over to the rest of the economy, it could force demands for higher wages from drivers to electricians and has the potential to push up overall inflation, including for industrial products.
• On Friday, official data showed that inflation in food articles climbed to 19.05% for the week ended November 26, its highest level in a decade, from 10.48% a year ago. It crossed 20% last in 1998.
• Consumers are feeling the pinch at the retail end as prices of products such as urad dal, sugar and peas are being sold at almost double the rates last year.
• There were riots in October 2007 in parts of West Bengal over unaffordable food prices even as the nation’s stock market benchmark Sensex was crossing 17,000 for the first time. Subsequently, policy makers reacted by raising rates.
• While the main cause may be the lack of supply after a poor monsoon, some blame it on the “cheap money” policy being followed by the central banks across the globe to revive the economic growth. Record low interest rates in India and the last salary increases for government staff have boosted spending on eating out, durables such as televisions, motorcycles and cars.
• Look at this graphic which gives a lowdown on the weight of food articles in the WPI basket.

International

• An excellent example of innovation in financing the climate mitigation efforts
• We all know that Copenhagen is happening and that lot of protests, ideas and suggestions keep being aired. Here is one idea that is thrown by George Soros, the hedge fund wizard.
• The proposal is to tap into the vast hidden reserves of cash that lie ready to keep rich nations’ economies afloat in time of crisis. The cash is in the notional form of special drawing rights (SDRs), also known as “paper gold”, issued by the IMF. SDRs do not incur interest unless the money is released into circulation. Mr Soros pointed out that the rich countries did not use it even during the recent financial crisis. He has asked that the developed countries hand their $150 billion of SDRs to developing countries for immediate use to combat climate change. As soon as the cash is released, it will incur interest from the IMF—currently at around 0.5%. But this should be paid by the IMF gold reserve, which is currently worth more than $100 billion. That would ensure that developing countries are not saddled by debt payments. Mr Soros said the developing countries could make money from their low-carbon investments from the SDR fund by selling carbon credits on the carbon markets.

Language Lessons

• scoot: Verb
• Run or move very quickly or hastily
• eg: It’s time for the iconic vehicle to scoot, as aspirations, values and tastes change.
• obfuscation: Noun
• Confusion resulting from failure to understand; The activity of obscuring people's understanding, leaving them baffled or bewildered; Darkening or obscuring the sight of something
• rake: Noun
• A dissolute man in fashionable society; Degree of deviation from a horizontal plane; A long-handled tool with a row of teeth at its head, used to move leaves or loosen soil
• eg: The bike pillion rider fuses into the driverdropping a girl home on a bike is a rake’s pleasure, on a scooter a ‘cousin brother’s’ duty.
• paroxysm: Noun
• A sudden uncontrollable attack
• eg: "a paroxysm of giggling"