20.02.2010

Politics & the Nation

• Shyam Saran puts in papers
• Prime Minister Manmohan Singh’s pointsman for climate change negotiations, Shyam Saran, has quit. The exit of the PM’s special envoy, who was not on the same page with the environment minister Jairam Ramesh on several issues related to climate change talks, indicates that powerful sections in the prime ministerial establishment were arrayed against him.
• That Mr Saran has fallen from grace was evident two weeks ago when Shiv Shankar Menon, his junior in the foreign service by three batches, was selected for the National Security Advisor’s job.
• Although there was talk that Mr Saran would be given a minister of state status to bring parity with Menon in the PMO, the file did not get moving.
• MiG 29Ks to add more punch to the Navy
• Defence capability is all set to get a shot in the arm as 29 more Russiamade MiG-29Ks, the state-of-the-art fighter jets, are coming India’s way.
• These jets can carry eight types of air-to-air missiles, including extended range BVR (beyond visual range) missiles as well as 25 air-to-surface weapons for land-attack missions. They are also equipped with air-to-air refuelling mechanism.

Finance & Economy

• Our telecom story
• The country’s telecom sector has witnessed a phenomenal growth during the last decade. India’s tele-density has increased to 43.5 per hundred in 2009 from a minuscule 2.2 in 1998. Technology, conducive government policies and political will have been the major drivers of this growth.
• The number of mobile subscribers grew from six million in 2001 to about 500 million in 2009 whereas landlines increased from 33 million to 38 million only during the period.
• Why is an indigenous telecom equipment manufacturing effort worthy of the trouble?
• Sustenance of growth in telecom services depends on our capabilities in maintaining telecom networks. At present, GSM and CDMA networks, whether in public or private domain, get third level of support from foreign technology providers that have free access to our networks. In the event of a hostility or an act of war, the consequences can be serious: silencing of all mobiles. Thus, for national security, it is imperative that we get products along with technology that go into making of the networks.
• The telecom equipment market in India in the next five years is slated to be of the order of Rs 3,00,000 crore.
• Why do banks charge prepayment penalties?
• This is apparently to mitigate the asset liability mismatch that happens whenever long term loans are foreclosed. The charges from prepayment will theoretically cover the costs for banks of fixing the asset liability mismatch.
• Reportedly banks will have to increase lending rates by at least 0.25 basis points to cover the cost of risk of prepayment.
• Banks and NBFCs charge prepayment penalties of up to 3% when a customer prepays retail loans to cover losses that may arise from asset-liability mismatches.
• The Competition Commission of India -- CCI, which had investigated the matter, had commented that the practice is anticompetitive and leads to the abuse of their dominant position by the financial institutions.
• CCI’s investigation into the matter has revealed that the practice of banks and finance companies to charge prepayment penalties suppress competition in the home loan market by limiting the ability of borrowers to switch their loans to another lender.
• A final decision on the issue is awaited, as CCI has preferred to enquire from the RBI whether the latter is planning to give any directions on the issue to the banks.

International

• Markets tank worldwide on Fed's action
• The Fed raised its discount rate — the rate at which it lends to banks — by a quarter percentage point to 0.75% late Thursday, hitting bond and stock prices and boosting the dollar, amid concerns the change represented the start of a retreat from the easy money policy the US has pursued to battle the economic recession.
  
• Brokers also felt the dollar-carry trade, wherein cheaper dollar borrowings at record low rates were deployed in high-yielding assets such as emergingmarket equities, could also take a hit in the near term from a strengthening dollar. The dollar-carry trade has been linked to a lot of the inflows into Indian markets, and the Fed’s decision has triggered concerns such flows could slow to a trickle.
  
• The following Q&A session gives you a more clear picture:
• Why is the market rattled?
• Traders feel that it's the start of a tightening cycle and soon there won't be enough cheap money to play around with. It will halt the carry trade - where investors borrowed cheap dollars to trade in emerging markets.
• Isn't Fed worried about growth?
• It is, and that's why it has picked the 'discount rate' and not the more powerful 'funds rate' - the rate at which banks in the US borrow from each other. It's a way of telling banks that things are beginning to look normal and they should rather borrow from each other at the 0.25% 'funds rate'.
• But why now?
• Fed wanted to catch markets by surprise. Indeed, it hiked rates a month before the open market committee meeting. Fed is worried about the spiralling commodity prices that can not only reverse growth, but also stoke inflation. And higher inflation will call for desperate rate hikes.
• Will it help the US?
• The dollar will rise, and it will lend some support to prices of US treasury bills. The real gain will be in the form of reining in 'inflationary expectations'. Also, it will give confidence to US banks that have been reluctant to lend.
• In this context, you shouldn't miss this excellent editorial piece that is written in today's ET. A must read.

Sport

• Woods apologises for ‘selfish’ behaviour, looks to make amends
• An emotional Tiger Woods apologised for his “irresponsible and selfish behaviour” on Friday as the golf superstar broke his silence on the sex scandal that engulfed him last year. In a brutally honest self-assessment which was broadcast live across every major network in the United States, the 34-year-old confirmed he had been in rehab for 45 days where he was reportedly seeking treatment for sex addiction.
• Woods squeaky clean image was left in tatters last year after a mysterious late-night car crash outside his home in Florida was followed by a string of lurid revelations about his personal life. More than a dozen women were linked to the billionaire sports star in the weeks following the car crash. Woods later admitted ‘transgressions’ in his private life and had not been in public until this week.

Language Lessons

• blase: Adjective
• Nonchalantly unconcerned; Very sophisticated especially because of surfeit; versed in the ways of the world; Uninterested because of frequent exposure or indulgence
• humdrum: Adjective
• Not challenging; dull and lacking excitement; Tediously repetitious or lacking in variety
• eg: Under normal circumstances, Budget 2010 would be as humdrum as those in the past few years.
• schizophrenia: Noun
• Any of several psychotic disorders characterized by distortions of reality and disturbances of thought and language and withdrawal from social contact
  
• chorister: Noun
• A singer in a choir