15.09.2010

Politics & the Nation

• Know anything about Prasad?
• We are sure, you are wondering who Prasad!  The subject of our discussion is Hari Prasad, the person that is arrested by the Mumbai police for stealing an EVM and proving that it can be tampered with.
• It is an interesting story about him and the issue relating to tampering of the machines.  Worth a look.  Look at it here.  A long story; but will present us the many sides that are there to the issue.

Finance & Economy

• Obama’s rhetoric starts hurting Bangalore
• Look at this graphic which captures the emerging scenario wherein because of domestic compulsions US politicians, Obama not excluded, are vying with each other in clamouring for cuts on offshoring work..
• On our coffee consumption
• India consumes about one-lakh tonnes of coffee annually.  India is world's sixth largest producer of coffee.
• Coffee lovers are going to feel the pinch soon, as world prices of coffee have gone up.
• Arabica, the world’s most-grown coffee, has become almost 50% more expensive in the past three months and touched a 13-year high last week.
• What should we do to handle another financial crisis?
• This is a very good article by Arun Duggal that discusses how we cannot perhaps prevent another economic crisis coming down on us.  The best that we can do is manage living through the crisis.  He comes out with a few dos and don'ts to get that ability.  Look at the following excerpt:
• First, further strengthen the banking and financial system by capitalising it even higher than the new Basel III requirements. A hybrid equity layer, which can be converted into equity at the RBI’s direction, should be introduced.
• Second, annual stress testing of all banks on the lines of the tests recently conducted by the Fed and European Central Bank. The rating agencies are well-equipped to conduct these tests, but the basic parameters/scenarios should be uniform and specified by the RBI every year.
• Third, a more dynamic credit policy framework by the RBI and more importantly, by individual banks, such that credit is tightened quickly (and other measures introduced swiftly) when there are signs of excesses in any section of the economy. Most importantly, if property or stock prices are rising too fast.
• Four, counter-cyclical provisioning policy by banks. The RBI is already encouraging this but should consider taking loan loss provisions to 100% (from 70%) level in the next three years. This provision could be relaxed during the downturn to revive the economy quickly.
• Five, encouraging long-term capital flows such as FDI in plant & machinery, venture capital, growth capital and discouraging short-term or hot money capital inflows. A further restriction on short-term capital flows should be considered. This will help reduce the contagion impact.
• Six, a well-capitalised subsidiary structure for foreign banks and financial institutions operating in India in such a way that if the parent institution runs into trouble, the Indian entity is not directly impacted.
• Seven, we should enforce the Volker Rule i.e., strict limits on bank’s proprietary trading and alternate asset activities, even though the rule got compromised in the Dodd-Frank Act in the US.
• Eight, a single consumer protection agency should be created to cover all financial products from banks loans/deposits, stocks and bonds, mutual funds, insurance, etc. This agency should focus on: financial literacy promotion, ensure that financial products are appropriately designed and marketed transparently to consumers with different levels of risk capacity, and grievance redressal. At present, these functions are fragmented among different regulators in India. The Dodd-Frank Act includes a very good model for this.
• Nine, executive compensation in the financial sector should be moderated. The RBI has already made a good start, but more emphasis on compensation linked to long-term performance is needed in all areas of financial services.
• Finally, private sector should facilitate creation of an independent and unofficial economic stability think-tank composed of experienced economists, bankers and academics that should monitor the Indian and global economy to identify excesses, overheating, emerging risks, etc, and share its independent views with the country’s economic decision-makers.
• Inflation dips to 8.51% on new series debut
• The new series of the wholesale price index made a promising debut for the government by showing sharply lower inflation in August, but it may not convince the central bank to pause monetary tightening when it meets on Thursday.
• The rate of inflation for August under the new series eased to 8.51% from 9.78% in July. The decline is less pronounced if calculated on the earlier series, where it slipped marginally to 9.5% from 9.97% in July, data released on Tuesday showed.
• The new series of WPI data with 2004-05 base year, many new products and different weightings to reflect changes in the economy was released by the industry Minster Anand Sharma on Tuesday.
• The switch to the new series had become urgent as the earlier series with 1993-94 base had become outdated with obsolete products and unrepresentative weightings.  It also suffered from poor data gathering with results of a very thin sample being passed off as a headline number for the nation.     
• An excellent graphic that gives the composition of the new WPI series
• What is meant by Adverse selection?
• Look at this first principle column that explains the concept.

Language lessons

• kosher: Adjective
• (Judaism) conforming to dietary laws; Proper or legitimate
• Noun: Food that fulfils the requirements of Jewish dietary law
• eg: ...It might help, of course, that even the IMF now considers such controls kosher.