07.01.2010

Politics & the Nation

• Amar Singh on the way out of SP?
• The crisis in the Samajwadi Party has entered the red zone with Amar Singh on Wednesday quitting all his posts — general secretary, parliamentary board member and spokesperson. Mr Singh’s decision, which has brought to the fore deep fissures in the SP, appears to be a sort of ultimatum to Mr Mulayam Singh — “either reset the terms of our relations or we part ways”.

Finance & Economy

• When should the stimulus measures be lifted?
  
• The finance ministry is reportedly keen to do away with the stimulus measures on the grounds that these have helped shepherd India’s economy safely out of the worst global economic crisis since the Great Depression.
• But different voices are heard on the subject. Some are saying that this is not the right time to lift the measures and that they can be lifted not before another six months.
• The stimulus measures — a mixture of tax cuts, increased expenditure, easy credit and interest rate cuts all totalling more than 12% of GDP — were announced in three phases between September 2008 and April 2009. Around this period, economic growth slowed to nearly 6% levels after averaging more than 9% in the preceding three years. The economy has since recovered, notching 7.9% in the quarter to end-September.
• Look at this graphic which presents the healthy state to which our economy appears to be headed.
• Air India's payments come in for close public scrutiny
• The huge payments that Air India has proposed to make for various consultants and consortia are coming in for close public scrutiny, because of the prevarious financial position in which it is finding itself currently.
• Air India is reportedly toying with the idea of hiring McKinsey & Co for a consideration of Rs. 14 crore even as it is already being advised by Booz Allen and Accenture.
• Air India has already paid € 5 million for becoming a member of Star Alliance. It will have to pay another € 5 million once it joins the alliance, which has strict functional guidelines, most of which AI has failed to adhere to so far. The AI official quoted earlier said Star Alliance has asked for the next tranche of € 5 million immediately regardless of when AI plans to join the grouping. Air India has already missed the deadline of joining Star Alliance and now has sought time till December this year for becoming a formal member of the global airline grouping.
• Air India is estimated to have lost Rs 5,200 crore in 2008-09, nearly half of the national airline industry’s loss. It has a debt of about Rs 16,000 crore on its books.
• It had pressed for a Rs 5,000-crore bailout package, of which the government has approved Rs 800 crore. The rest will be given in installments linked to performance.
• What explains the stellar performance of Indian Banks? (Excerpted from TT Ram Mohan's article in today's ET)
• No matter what the ups and downs of the economy, the Indian banking sector can deliver a return of 1% on assets, a benchmark of good performance in banking. India today seems to have a crisis-proof banking sector. -- Substantiate and explain.
• Bad times for the economy spell lower credit growth. In 2007-08, commercial credit growth slowed to 22%. It slowed further to 18% in 2008-09. But banks maintained their return on assets in 2008-09 at the same level as in the preceding boom years of 2004-08. This is truly astonishing. It buttresses the argument stated above. What explains this phenomenal performance of the Indian banking sector are the following:
• One, banks’ ability to sustain spreads — return on advances minus cost of funds — at all times. Volume growth slowed down in the last two years. But the spread on loans actually increased in 2008-09. A key factor driving large spreads in Indian banking is the high proportion of current and savings account (Casa) deposits. These account for a more a third of all deposits in Indian banking. Banks pay zero interest on current accounts and 3.5% on savings accounts.
• Secondly, banks have woken up to the potential for fee income. Apart from conventional products that generate fees such as letters of credit, guarantees and mortgage products, banks now generate fee income from sale of mutual fund and insurance products.
• Thirdly, falling interest rates in a slowdown lead to a surge in treasury profits on banks’ investment in government securities. By the same token, rising interest rates in boom periods should cause these profits to decline. They do, but there have been other offsetting factors: gains on equities and foreign exchange products.
• Fourthly, the slowdown that we have seen in the past two years has not caused any increase in provisions on account of rising NPAs.

Technology

• Google's answer to the iPhone: Nexus One
• It is a feature rich phone that was launched on Tuesday in some countries. Not in India; as yet.
• It comes with a 5 megapixel auto focus with flash camera and 4GB SD card, which can be further expanded to 32 GB. Nexus One also introduces a voice-enabled keyboard for all text fields. One can speak a text message, tweet, or update Facebook, or an email, via voice. It can also search Google, call contacts, or get driving directions by just speaking into the phone. Google terms its phone as a superphone.
• At $529 (Rs 24,330), the smartphone is much cheaper than Apple’s iPhone available at Rs 30,000.
• Do you know where do politicians get their bullet-proof cars made?
• It is usually the Medak Ordnance Factory. But they now have competition from private sector firm Chanakya Automobiles (India) Pvt. Ltd. The company claims to be India’s only private manufacturer in this category after it was certified by the Bureau of Police Research and Development in 2008 to produce armoured vehicles to VVIP-specified levels.

Language Lessons

• frisson: Noun
• An almost pleasurable sensation of fright
• eg: The frisson that the Nano created at the last edition of the Delhi Auto Expo is absent this year, but there is a closer focus on business, with auto part makers from China, besides the global auto majors, eager to strike new deals, new alliances.
• spectre: Noun
• A mental representation of some haunting experience; A ghostly appearing figure
• eg: The current avatar of the climate change spectre may turn out to be more effective than any previous ones.
• atavism: Noun
• A reappearance of an earlier characteristic
• eg: Yet, in both the recent policy initiatives of the Centre, the Model State Mineral Policy, 2010, and the Modified Draft Mines and Minerals Act, 2009, there seems enough scope for continuing opacity and atavism in mining investments.
• biddable: Adjective
• Willing to carry out the orders or wishes of another without protest
• eg: ...The biddable Chinese have diligently followed this advice.
• kahuna: Noun
• Kahuna is a Hawaiian word for defining a priest, sorcerer, magician, wizard, minister, expert in any profession.
• eg: ...But China’s pragmatic approach to gold makes it the really big kahuna.