04.03.2010

Politics & the Nation

• Want to see an example of economic decisions getting political support?
  
• Read this news story. You will get a clear example of one. It is not just about taking tough decisions, but it is equally about going to town defending them that sets a leader apart from the rest. This is what exactly the Finance Minister appears to have succeeded in doing.
• His rationale for the fuel price hike was founded on:
• One, the window of opportunity available for the Centre —there are no major state elections this year. Besides, there will not be any elbow room for the government in the event of oil prices shooting up once again on the back of a global recovery.
• Two, the hike being necessary to maintain growth, give the common man the spending power and create stimulus for growth.
• Three, the fact that the inflationary impact will be a mere 0.41% on the common man, which could be easily absorbed by an improved crop situation.
• Four that the aam admi is taken care by the government as in spite of an increase in the support prices for wheat and paddy to farmers, it had not hiked prices of items in the public distribution system. The finance minister argued that the move protected the poor from inflationary food prices.
• Lastly, that the outlays for the social sector have to be met by raising resourcces. For meeting the increased outlay for the social sector -- a total of Rs 1,37,674 crore for 2010-11 -- options for raising resources are limited. Hence fuel price hike is a must.

Finance & Economy

• How are foreign funds sneeking into the country's real estate business?
  
• ECBs are not permitted in real estate (construction) in the country. But people have found a way to invest in them without breaking, apparently, any rule. Here is how a transaction goes:
• It will be involving a three-way transaction and comes across as normal private placements in the corporate bond market.
• It begins with a real estate company placing non-convertible debentures (NCDs) with a local entity like a non-banking finance company (NBFC) to borrow. The next step involves listing the debt security, soon after which an FII steps in. Once the NCD is listed in the stock exchange, the NBFC offloads the paper to a foreign fund. Since FIIs cannot invest in unlisted debt, the NBFC warehouses the NCD till the paper is listed, and then recovers the money by selling the debentures to a foreign fund.
• The two transactions are part of a back-to-back deal struck among the NCD-issuing firm, the local NBFC and the FII.
• The advantages in this scheme of things:
• first, there is no lock-in because an FII can sell NCD as and when it wants;
• secondly, the debt is secured against mortgage of assets, pledge of shares etc; and
• thirdly, unlike FDI, here the foreign investor can fund even those projects which are not FDI compliant.
• Did we withdraw fiscal stimulus last year?
  
• At a time when everybody from the FM to the not-so-well-known economists emphasizing on the need for fiscal consolidation, we need people like an SSA Aiyar or a TT Ram Mohan to shake us up and tell us that we have missed the woods for the trees.
• Read this interesting essay. TT Ram Mohan explains us how there was a withdrawal of fiscal stimulus by stealth last year itself.
• PSUs to buy 20% from small units
  
• The government is reportedly considering a proposal whereby all public sector companies, including railways and entities under the defence ministry, will have to procure 20% of their total requirements from MSEs. The size of public procurement in India is huge and it could provide a fillip to the sector.
• The policy will cover a wide range of supplies, services and works required by governments, local authorities and public organizations. According to estimates, MSEs are set to benefit from a Rs 34,000 crore windfall annually once the policy comes into effect.
• Currently, there are about 26 million micro, small and medium enterprises in the country, which contribute about 45% of the country’s total manufactured output and about 40% of the export income. The sector employs over 42 million people.
• Some statistics that deserve to be gleaned while considering the reported move to expand banking
  
• After the last round of branch licensing, there has been only an incremental rise in rural coverage. Of the 9,000 branches of private banks in the country, just 1,138 are located in rural areas. And, of a loan portfolio of Rs 5,13,593 crore, lending to rural folk constituted just Rs 7,353 crore at the end of September 2009. Public sector banks fared better, not because of an innate belief but out of compulsion. About 13,000 of the 40,000 branches of public sector banks, other than State Bank of India, are in rural areas.
• The country’s credit-to-GDP ratio is about 50%, which alone is reason enough to expand banking network.

Environment

• Some interesting statistics about gaseous emissions
  
• It appears that cattle expel more polluting gases that trigger climate change than carbon-dioxide-spewing cars, as methane traps heat 20 times more than CO2. It has been pointed out that a cow produces more noxious gases than an SUV.
• We have only 75 million-odd motor vehicles but we have the world’s largest population of livestock — around 485 million, including some 283 million cattle, and the rest, goats and sheep — which collectively emit 11.75 million tonnes of methane.

Science & Technology

• Ice deposits on moon
  
• Scientists have detected more than 40 ice-filled craters in the moon's North Pole using data from a NASA radar that flew aboard India's Chandrayaan-I.
• NASA's Mini-SAR instrument, lightweight, synthetic aperture radar, found more than 40 small craters with water ice. The craters range in size from 2 to 15 km in diameter.
• It is estimated that there could be at least 600 million metric tons of water ice in the craters.
• The new discoveries show that the moon is an even more interesting and attractive scientific, exploration and operational destination than previously thought.

Obituary

• Pravin Mahajan
  
• Almost four years after he killed senior BJP leader and his brother, Pramod Mahajan, in one of the most sensational murders of Indian politics, Pravin Mahajan died on Wednesday at a private hospital in Thane.
• Pravin was an unknown figure until the morning of April 22, 2006, when he shot his brother Pramod. On that day, Pravin drove to the Worli residence of his elder brother Pramod Mahajan. After a brief, tense conversation, Pravin shot Pramod and then went to a police station and surrendered. Very little was known about his motive for killing Pramod, who was then one of the important and high-profile politicians at the national level.
• Pramod passed away 13 days later, on May 3. Pravin was convicted for murder by a Mumbai sessions court, and sentenced to life imprisonment on December 18, 2007.

Language Lessons

• waffle: Verb
• Pause or hold back in uncertainty or unwillingness; Talk or write at length in a vague and uninteresting way
• eg: The way out is to lay down objective corporate governance norms for the applicant promoter group of companies. Those who fail the test should politely but firmly be told to cool their heels, while those who qualify should be given regular banking licences on par with the existing ones. There is no case for waffling on the subject.
• apposite: Adjective
• Being of striking appropriateness and pertinence
  
• eg: The FAO’s suggestion therefore, that livestock farmers should “internalise the costs of environmental damages”, has caused consternation, not the least because of the sheer impossibility of that task, however apposite.
• Synonyms: apt, pertinent.
• emanation: Noun
• Something that is emitted or radiated (as a gas or an odour or a light, etc.); The act of emitting; causing to flow forth
• winkle: Verb
• Emit or reflect light in a flickering manner; Gleam or glow intermittently; Remove or displace from a position
• eg: It takes months of scrutiny by a dedicated few to develop confidence that you’ve winkled them (software bugs) all out…
• panopticon: Noun
• An area where everything is visible; A circular prison with cells distributed around a central surveillance station; proposed by Jeremy Bentham in 1791