17.09.2010

Politics & the Nation

• Rahul stands up for Omar
• Scotching all speculation of a realignment of political forces in Jammu and Kashmir, AICC general secretary Rahul Gandhi on Thursday made it clear that he remained firmly behind chief minister Omar Abdullah, arguing that the job he was doing was a “tough” one and, hence, needed more time to reverse the situation.
• Mr Gandhi’s remarks should go a long way in raising the beleaguered chief minister’s comfort level. Powerful sections within the UPA government at the Centre have been gunning for Mr Omar Abdullah, holding him responsible for the deterioration of the situation in J&K. The CCS meeting held on Monday had expressed its unease by talking about a “trust-deficit” and “governance-deficit”, which was seen as a subtle dig at the chief minister. The BJP had a day later sought his resignation.
• Our sympathies are also equally with Omar Abdullah.  It is easy for anybody to say that he ‘frittered away’ his mandate or that he proved ‘inept’ at handling the situation in Kashmir.  Had anybody else been there in his place, it is quite possible that the situation could not have been much different.  Therefore, it is for the entire country to really stand up behind the CM of Kashmir in this hour of crisis.  He is trying his best and we all should enable him to do so.  
• Looks like Rahul Gandhi is maturing as a politician.  Take a look at his responses to some of the tricky questions posed to him in this news report.  It is really heartening to see him perform the way he does -- holding as he does a lot of hope for India in future.
• Centre appeals for calm ahead of Ayodhya verdict
• The Centre has appealed to the public to maintain peace, with the Allahabad high court set to give its verdict on the Ram Janmabhoomi-Babri Masjid title suit next Friday.
• Wary of law and order problems appearing in the wake of the judgement, the Centre, is hoping that the delivery of the title suit verdict is postponed as it does not want any untoward incident to take place just before the commencement of the Commonwealth Games on October 3, and Bihar assembly elections, which kicks off on October 21.
• 10% DA hike for Central Government employees
• Take a look at this graphic which reports about this.  

Finance & Economy

• Loans set to pinch more as RBI hikes repo rate 25 bps
• Loans for corporates and individuals are set to be costlier soon while deposits may yield higher returns as the Reserve Bank of India, or RBI, raised interest rates higher than expected to tame inflation.
• For the fifth time this year, the central bank raised the repo rate—the rate at which it lends to banks—by 25 basis points to 6%, and the reverse repo rate—at which it absorbs funds from banks—by 50 basis points to 5%, prompting lenders to review the rates they charge both retail and corporate customers. This narrowing of the differential between the two policy rates is now expected to ensure greater stability in the call money market, where banks either borrow or lend overnight.
• A statement from RBI said the latest rate action was aimed at controlling inflation without disrupting growth. It said inflation rates have reached a plateau, but are likely to remain at unacceptably high levels for some months.
• This graphic gives in a nutshell what the RBI said about its policy stance.
• FMC bill gets cabinet clearance
• After a chequered history, a bill which promises to electrify the seven-year old commodity futures market and put the commodity regulator on a par with its capital market counterpart, Sebi, will be tabled in Parliament during the winter session.
• The Cabinet on Thursday approved amendments to the Forward Contracts (Regulation) Act 1952, paving the way for the introduction of the Forward Contracts (Regulation) Amendment Bill, 2010 in Parliament. If passed by the both the Houses, it will pave the way for local and foreign institutional investors in commodity futures and bring in new products. Significantly, such a law can also transform the Forward Markets Commission (FMC) from a department, overseen by the Ministry of Consumer Affairs, into an independent body with regulatory and financial autonomy.
• Futures trading in commodities was restarted in 2002-03, after almost four decades, with the establishment of three national level exchanges, including MCX, NCDEX and NMCE.
• At present, the parent ministry frames policy for the commodity futures market, consisting of four national and 17 regional commexes, while FMC implements it. Under the amended Act, FMC will be able to raise fees from transactions undertaken on the commodity exchanges, recognise and derecognise exchanges, increases its manpower on lines similar to that of Sebi, facilitate the entry of foreign and domestic institutional investors such as banks, mutual funds and FIIs into the commodities market and introduce user-friendly products such as options and indices in a market which currently offers only plain vanilla futures contracts to participants. While FMC has suspension powers of up to three years under the present act, its penal powers are muted. This will also change under the amended act.
• The FCRA Amendment bill was first tabled in the Rajya Sabha in 2003-04 but could not be passed due to the dissolution of the Lok Sabha. Subsequently, an ordinance passed in January 2008 lapsed since it could not be taken up by Parliament. An ordinance lapses if it is not introduced within six weeks from the time Parliament convenes.
• In the financial year to August, cumulative commodity futures turnover grew by 57% to Rs 42.76 lakh crore. Over the same period, turnover on BSE and NSE, including cash & F&O segments, was Rs 116 lakh crore.
• RBI raises concerns over the high volatility in IIP numbers
• Industrial output grew 13.8 % in July, much above the consensus estimate of 7-8% and 5.67% growth seen in June, thanks to a 63% increase in capital goods output. The capital goods index jumped 42% month-on-month.The sharp increase in capital goods production comes as a surprise as industries were seen operating at their normal full capacity.
• It is in this backdrop that RBI voiced concerns over the high volatility in the IIP numbers.  But what leads to this high volatility?
• According to TCA Anant, the Chief Statistician of the country, construction of the IIP involves identifying important units, ones that account for around 70% of overall production, to get a fair representation of growth.  This selection is based on the situation at the time the index is constructed, or the base year of the index. As we move further away from the base year, the index becomes less and less representative of the actual production in the economy.
• EPFO's hidden treasure enables it to declare 9.5% return
• The government brought cheer to five crore employees in the organised sector ahead of the festive season by announcing a one-percentage point increase in the interest rate on provident fund savings for 2010-11, along with a host of reform measures to make the scheme more subscriber-friendly.
• The Centre will notify the 9.5% rate after consultations with the finance ministry. The EPF rate has been languishing at 8.5% for the last five years. The higher rate of 9.5% became possible after the Employees’ Provident Fund Organisation (EPFO) discovered a hidden surplus of 1,731.57 crore in its accounts.
• The Manmohan Singh government had last paid 9.5% interest on PF balances in 2004-05.
• The EPFO board also decided to stop paying interest to accounts that have not seen any fresh contribution for three years or more. This will help the organisation put a lid on nearly 3 crore inoperative accounts, helping it save administrative costs and improve efficiency.
• It also hiked the benefits on the employees’ insurance scheme, linking it to the wages at the time of death subject to a maximum of 130,000. Currently, the ceiling on insurance benefits under the Employees’ Deposit-Linked Insurance Scheme is 1 lakh. EPFO reworked math after realising error
• Central PF commissioner Samirendra Chatterjee said.  
• The finance ministry has been citing the higher returns earned by civil servants under the New Pension Scheme as an argument to nudge the EPFO to invest in equities. Though provident funds are allowed to invest up to 15% in equities, the EPFO board has stalled any change from a government debtfocused investment pattern it follows since 2003.
• The NPS for civil servants, which invests up to 15% in equities, has yielded 12% returns over the last two years. Citizens under the NPS, who are allowed to invest up to 50% in equities, have done even better—earned an average 19.5% in the first 13 months of the scheme’s existence.

• Banks woo the rich kids
• Almost all the MNC banks operating in India are reportedly wooing the rich kids with a variety of educational and real world experience programs.  They seem to have set sights on striking a longterm relationship with the GenNext of India Inc's rich and famous having an eye on future business.
• India has almost 1.27 lakh high net worth individuals, according to the 2009 World Wealth Report, released by Merrill Lynch and Capgemini. Each of them has a wealth of over a million dollars. India’s millionaire population is growing rapidly — 42,700 new dollar millionaires entered the tribe in 2009.
• India’s rich business families face two challenges — transferring business knowledge, discipline, acumen and capability to the next generation is one. Transferring wealth, and the wisdom to preserve and grow it, is another. Banks want to help millionaire families on both counts.

Miscellany

• An excellent definition of love:
• “It is the strange bewilderment which overtakes one person on account of another person” -- James Thurber
• Yet another equally amusing definition of love can be found in Ambrose Bierce’s The Devil’s Dictionary:
• “A temporary insanity curable by marriage or by removal of the patient from the influences under which he incurred the disorder.”

Language lessons

• scotch: Verb
• Hinder or prevent (the efforts, plans, or desires) of; Make a small cut or score into
• Synonyms: baffle, bilk, cross, foil, frustrate, queer, spoil, thwart
• tepid: Adjective
• Moderately warm; Feeling or showing little interest or enthusiasm
• Synonyms: half-hearted, lukewarm
• eg: Tepid world growth and the need to boost investment to create the additional supplies that would dampen inflation pull in the opposite direction.