Indian Current Affairs: 04.02.2010

Politics & the Nation

Many administrative / executive actions are often coined "politically motivated" and they become the butt of criticism. Here is a defence of such actions:
All actions of politicians everywhere are politically motivated, meaning they are intended to gain popularity. But because something is popular does not make it wrong. It is more likely that something that is intended to please a narrower constituency, such as bankers or businessmen, is wrong. In a democracy, the job of politicians is to please the broader public, not narrow constituencies.
So, if it is your wont to keep criticizing political actions, better think twice before you do so.

Penned by Kiran Karnik this is one piece that all of you must read. It raises some very pertinent questions and makes a strong case for a more civilized democracy.

The Centre announced the Telangana panel, which would consider the demand for splitting Andhra Pradesh. The government, however, is yet to frame the terms of reference for the panel headed by B N Srikrishna, a retired judge of the Supreme Court.
The panel will meet with groups of people and political parties in Andhra Pradesh on the issue of the formation of a separate state out of the Telangana region.
The government decided on constituting an experts panel after a January meeting of different political parties to discuss the issue failed to arrive at a consensus on the formation of a separate state of Telangana.

Finance & Economy

Sugar companies are set to nearly double their payments to cane growers to as much as Rs 40,000 crore this year. This is likely to result in greater
Sugar companies in states like Uttar Pradesh, Maharashtra, Karnataka and Tamil Nadu, which compete for cane, are willing to pay record prices, as they boost inputs to benefit from more than a quarter-century high sugar prices due to short supply.
The impact of such a huge transfer of funds from one segment of the society to another is that it could trigger a wave of spending thus creating a multiplier effect, similar to the one that payment of salary arrears to government staff did last year, which boosted earnings for companies and changed the lifestyle of millions.
Though the central government fixed a ‘fair and remunerative price’ of around Rs 130/quintal for cane, farmers were paid more due to shortage. Sugar factories in UP paid Rs 245/qtl, in Maharashtra Rs 300/qtl, and Rs 200 in Tamil Nadu.
Farmers have reportedly sold about 160 mn tonnes of cane to factories this year.

It suggested a clean break from the past with market-linked prices for auto fuels and a sharp increase in the prices of kerosene and cooking gas.
If the recommendations of the expert group, chaired by the former Planning Commission member, are implemented, it will result in annual savings of over Rs 30,000 crore at current levels of under-recoveries for oil companies.
The argument for keeping diesel prices artificially low has been that any increase in the price of the fuel will be passed on, stoking inflation. But the panel was of the view that this should be compared with the inflationary impact of subsidies, which would be similar.
Take a look at a gist of the recommendations in this graphic.
The government’s track record, so far, suggests that it has been unwilling to swallow the bitter pill. A 2005 report by a panel headed by C Rangarajan recommended the elimination of subsidy on cooking gas and restricting it to only poor families for kerosene. The suggestion was not implemented.
A similar recommendation by a panel chaired by former bureaucrat BK Chaturvedi was also ignored.

Capital controls are not the best way of dealing with unwanted flows. Apart from being distortionary, they are not foolproof. They could also send wrong signals and hence should not be adopted as the first resort.
Alternatively, the RBI could buy up dollars and then try to sterilise the rupee funds created, putting upward pressure on interest rates.
The SEBI can even ban participatory notes that facilitate investment by entities not eligible to invest directly in India.

It stands for contingent convertible capital. It is nothing but debt that converts into equity when banks run into trouble.
This idea is aired as it should provide banks with an instrument that is cheaper and yet provide an equity cushion in times of crisis. In practice, however, it could end up being nearly as costly as equity and raising banks’ cost of capital sharply.
You will appreciate in this context, this piece written by TT Rammohan in defence of curbing banks' size. Recommend reading it. If you had to answer a question like "Is there need for curtailing the size of banks?" Or something similar, then it would be a very befitting answer.

It stands for Dynamic Stochastic General Equilibrium. It is a methodology reportedly used for the first time by IMF to model various ‘macrofinancial’ linkages, such as the exchange rate and inflation, in the conduct of monetary policy in India.
Broadly speaking, the idea is to analyse activities in the ‘micro’ domain to explain aggregate economic phenomena, such as growth, business cycles, and the effects of monetary and fiscal policy. Besides, DSGE models are dynamic, looking at how the economy evolves over time. Also, they are stochastic, taking into account how the economy is affected by random shocks such as sub-optimal policy design, oil price spikes and technological change etc. The plan is to use a few key variables for more accuracy in models.

International

Today's op-ed seems to be full of articles that are worthy of our attention and becoming must reads. Look at this piece by Larry Pressler. It strongly argues that India should be raising its voice against US for the latter's continued occupation of Afghanistan and military support to Pakistan.

Society

That is what research reports by Gartner are saying.
Gartner predicts that by 2014, social networking services will replace email as the primary vehicle for interpersonal communications. Social networking will prove to be more effective than e-mail for certain business activities such as status updates and location, it says.

Language Lessons

Inspiring awe; Worthy of adoration or reverence; Of high moral or intellectual value; elevated in nature or style;

Characterized by fantastic imagery and incongruous juxtapositions; Resembling a dream

Indian Current Affairs