Indian Current Affairs: 03.03.2010

Politics & the Nation

This is cleared by the EGoM (Empowered Group of Ministers) set up for the purpose. Some highlights of the bill as cleared by it:
No tribunals at various levels of administration. As a measure to fix accountability for failure to ensure food security to the identified beneficiaries, the EGoM was confronted with the proposal to consider setting up of food security tribunals at all levels, including districts and blocks. But it has not favoured setting up of the tribunals.
To provide 25 kg of grain to the poor every month at Rs 3 per kg. The poverty estimates to be used for the distribution of grain under the scheme was the one provided by the Planning Commission, which had arrived at the conclusion that 28% of the rural population was living below poverty line. The population figures will be those provided by the Registrar-General of India and the methodology is that is used by the rural and urban development ministries.
There will be no APL/BPL differentiation, nor does it cover the `nutritional security for all aspect. It also does away with the proposal to transfer cash directly to beneficiaries.
When the draft bill gets the final nod, the country could see a massive operation of some 400 lakh tonnes of wheat or rice being moved to five lakh ration shops across the country every month. Some 40 crore people, covering 30-35% of the total population, including the urban poor, will be benefited from the scheme.

Do you have a take on the currently raging controversy over Bt Brinjal? If you have not yet formulated one or are out of ammo to do so, this ET editorial offers a perfect chance to formulate one.

Finance & Economy

The planned move of the ADAG, Aditya Birla and Tatas into banking is bound to face some stiff norms.
They may have to first prove their credentials in lending to agriculturists and small traders in villages and towns before tapping the thousands of crores of rupees of the urban rich and corporates.
The government’s planned new licence for banks will stipulate that new banks focus on the yet-to-be defined rural and semi-urban areas before they move to cities, such as Mumbai and New Delhi.
New entrants may only be allowed to open branches in the rural areas for the first two years and the subsequent spread will depend on the basis of direct lending to agriculture sector, opening of no-frill accounts and other financial inclusion criteria.
The private sector has so far failed in taking the banking services to rural areas despite their soaring profitability. While the 27 public sector banks have opened 13,381 branches so far in the rural areas, 22 private sector banks, both old and new, lag behind with 1,113 branches, according to RBI data.
Private banks are also far behind in lending to the priority sector. The government has already created a Rural Infrastructure Development Fund (RIDF), where shortfall from priority sector lending is diverted to take up rural infrastructure projects.

Firstly, the outlay for the MSME sector has been enhanced by around Rs 600 crore to Rs 2,400 crore, presumably to implement recommendations of the prime minister’s taskforce.
Secondly, the policy of 2% interest subventions for exports announced last year for MSMEs and certain employment-intensive sectors such as handicrafts, carpets, etc, have been extended for one more year.
Thirdly, it is announced that the Reserve Bank of India is considering more licences to banks including non-banking finance companies. Such a move would eventually benefit MSMEs the most.
Fourthly, an amendment is proposed whereby an eligible small scale industry (SSI) unit can avail cenvat credit against purchase of capital goods in full (100%) in the same financial year of receipt of such capital goods (earlier, it was 50% in the year of receipt and rest was allowed in subsequent year only).
Fifthly, SSIs are allowed to pay the duty on the goods cleared by them once in a quarter instead of the monthly basis.
Finally, the proposed independent evaluation office under the deputy chairman of the Planning Commission might as well bring in the much-needed transparency and result-orientation in promotional policies. Currently, implementation of most of the schemes is in a mess, including those meant for MSMEs.

The first, widely noted and much applauded by corporate India, concerned finding means to cross the ‘double-digit growth barrier’. The second, less glamorous and hence less discussed, is in harnessing economic growth to make development more inclusive. The third, which attracted little notice and comment, relates to ‘weaknesses in government systems, structures and institutions’ that he recognised as a ‘bottleneck of our public delivery mechanisms’.

The government is reportedly considering setting up a high level Financial Stability and Development Council to improve the current regulatory framework and to ensure coordination between some regulators. How far can this super body work? What are the pros and cons of setting up this one? Two experts take a view in today's Face-Off column. Take a look.

Look at this definition of core capital in today's First Principle column. Understanding this phrase assumes significance in the context of the global financial crisis shifting the focus from capital requirement to tangible common equity.

The Reserve Bank of India (RBI) is having second thoughts over relaxing norms for derivatives in the wake of the global crisis. The central bank has indicated that it may err on the side of caution when it comes to filling gaps in Indian markets and financial sector innovations.
Why? Look at this reasoning as outlined by Ms. Shyamala Gopinath:
The RBI would look at introduction of a requirement of ‘insurable interest’. If lenders have protection via CDSs, they may have more to gain from the company, failing which they would gain if the company survives. If this is the case, creditors with CDS protection could have incentives to push troubled companies into bankruptcy instead of working out the troubled debt. Recently, in the context of CDS on Greece debt, it is reported that US regulators will look into the matter of CDS trader destabilising not only companies but also countries.
Doesn't make sense? May be, as laymen, we may not understand the jargon of bankers all the time. Read the story in full here.

Today's ET in the Classroom column gives you enough info on this concept. A must read. Take a look.

Language Lessons

Make you annoyed or angry
eg: Environment minister Jairam Ramesh’s decision to put a moratorium on Bt brinjal has got the goat of not just some GM businesses, but of some of his ministerial colleagues as well.

To deal with effectively; to finish something off
eg: On the flip side, the proactive policy is open to abuse — passing off questionable expenses as R&D — but better corporate governance standards should put paid to the practice.

The topic that a person, committee, or piece of research is expected to deal with or has authority to deal with
eg: The proposed remit of the council would, however, appear to be too wide, ranging from macro prudential supervision of the economy to inter-regulatory coordination (read dispute resolution), financial literacy and financial inclusion.

Indian Current Affairs