22.09.2010

Politics & the Nation

• The Ayodhya-Babri Masjid dispute
• Take a look at this excerpt from today's ET that sums up the dispute for us in a very succinct way.
• The longest-running legal battle in India is a dispute over the 60 sq feet by 40 sq feet land in Ayodhya where Babri Masjid stood till Dec 6, 1992. Since 1950, five title suits were filed in the Allahabad HC, staking claim to the title of the plot of land of the Babri Masjid. Of these, four are to be decided by the Lucknow bench of HC.
• The bench comprising Justices S U Khan, Sudhir Agarwal and D V Sharma will give its verdict on the following questions:
• Did a temple exist at the disputed site before 1528 when Mir Baqi constructed the Babri Masjid?
• Was the suit filed by Sunni Waqf Board in 1961 barred by time limitation?
• Was Ayodhya Lord Ram’s birth place & is there evidence to show that Hindus have been worshipping at this place for a long time?
• Two separate civil suits were filed in 1950 by Hindu Mahasabha member late Gopal Singh Visharad and the Paramhansa Ramchandra Das, keeper of the Digambar Akhada in Ayodhya, seeking permission for pooja at the disputed site
• The second suit was filed by Paramhans Ramchandra Das, also in 1950, seeking the same injunction but this suit was later withdrawn
• The third suit was filed in 1959 by the Nirmohi Akhara, seeking direction to hand over charge of the disputed site from the receiver
• The fourth suit was filed in 1961 by the UP Sunni Central Board of Waqfs for declaration and possession of the site
• The fifth suit was moved in 1989 in the name of Bhagwan Shree Ram Lalla Virajman for declaration and possession
• However, one suit was withdrawn and the others were pending with the Faizabad civil court till 1989, when they were transferred to the Allahabad high court
• The first suit dates back to 1885, when Mahant Raghubar Das filed a title suit in a Faizabad court to build a chabutra on the outer courtyard of the mosque structure. It was dismissed on the ground that the alleged demolition of an original Ram temple in 1528 had occurred over 350 years ago, and so it was “too late now” to remedy the grievance
• However, in December 1949 some people broke open the structure’s locks and installed a Ram statue and articles of worship, and the administration ordered status quo
• Will the C'wealth games happen?
• The very fact that this question has popped up in our minds is a testimony to all that is wrong with our games preparation.  Take a look at these news excerpts...
• Even as an official report from the US ranked India as the third most powerful nation on earth, a foot overbridge near the showpiece stadium of the Commonwealth Games came crashing down, injuring 27 workers and casting a long shadow over the world’s third largest multi-sports event, due in 11 days.
• The run-up to the games appeared battered, with terror threats, a worsening flood situation in north India, rising number of dengue cases, withdrawing athletes, and foreign delegations slamming the games village as “unfit for human inhabitation”. All of this is amidst pervasive anxiety over an impending Lucknow High Court verdict over the politically charged Ayodhya issue, expected on Friday.
• On Tuesday, Delhi reported 79 more cases of dengue, taking the total number of people infected with the mosquito-borne disease to 2,450.
• The organisers are yet to obtain a terror insurance cover for the 9,000 athletes, games staff and officials for the sporting event. Insurance broker Trinity Group, which has to arrange for insurance cover of the CWG, said reinsurer Lloyd’s Syndicate on Monday withdrew from covering any losses arising out of a terror attack during the games. The reinsurer withdrew after Sunday’s firing incident.

Finance & Economy

• What explains the volatility in IIP numbers?  What’s wrong with the calculation regarding GDP?
• Such questions are sure to have crossed your minds, had you been following the news in recent weeks.  To get an explanation for such questions, reading this interview is a must.  Take a look.  

• India, US may sign $3.5-b defence deal
• The largest-ever defence deal between India and the US — acquisition of 10 C-17 Globemaster transport aircraft by the Indian Air Force for $3.5 billion, nearly Rs. 16,100 crore at current exchange rates, — is likely to be inked during US President Barack Obama’s planned visit to India this November. Negotiations have reached the final stage and each of the giant transport aircraft, which can carry helicopters too, would be priced at around $300 million. After spares and maintenance are included, the final deal size would be around $3.5 billion, making it the biggest defence deal between the two countries.
• The C-17 is utilised for air dropping paratroopers and supplies, emergency evacuation and carrying heavy equipment like tanks.
• The C-17 acquisition will be bigger than the $2-billion deal for eight P-81 maritime reconnaissance planes signed in 2009.
• The C-17 can carry a payload of around 77,500 kg and has a range of more than 5,200 km. It can land even on runways that are just 3,500 ft long and 90 ft wide. The cruise speed of this heavy-lift transport aircraft is around 853 km/hour.
• Ever since the two countries entered into a strategic alliance, India has been buying American defence equipment. In 2009, for example, a $1-billion deal for six C-130 J ‘Super Herculus’ aircraft was inked and earlier this year 24 Harpoon Block III anti-ship missiles were bought for $170 million. The government also bought special VVIP aircraft from the US — also Boeing made —for use by the Prime Minister and the President.
• Indian companies will also benefit since the government’s offset policy mandates that 30% of the deal value flows back as offset business. The offset business for this deal is estimated to be around $1 billion.
• Why would the RBI be weary of managing the Rupee’s value when faced with huge portfolio inflows?
• There are limits to how much the RBI can intervene to hold down a rupee bubbling up on a wave of portfolio inflows. Such intervention has huge costs: increase in liquidity when the RBI buys up dollars and releases rupees, at a time when the need is to rein in inflation, upward pressure on interest rates when the RBI sells bonds to suck in excess liquidity, and a substantial loss arising from the interest payable in India on the bonds sold to suck in the rupees released by buying up dollars, which are then deployed in dollar and euro bonds earning next to nothing. In such a scenario, the government and the RBI may have no option but to restrict excessive capital inflows.

• Should there be a cap on the interest being charged by MFIs?
• These days MFIs are attracting lot of negative attention.  Especially on the interest rates being charged by them; forgetting that they too incur a cost to secure funds and that they too are in need of some return on their investments.  Take a look at this excellent piece written by SSA Aiyar advising why a cap on the interest rate being charged by MFIs is going to be bad.
• Which is better?  Having a single CPI or continuing with multiple CPIs as at present?
• This is the question that is debated in today's Face Off column in ET.  A very good and pertinent question and a very meaningful debate.  Take a look.
• Some gyan about payment processing using credit and debit cards
• Every time you make a purchase of 1,000 in your card, the merchant gives up close to 19 on the invoice value. Of the 20, 13.5 goes to the bank that has issued the credit card. Around 90 paise to 1.5 paise goes to either Visa or MasterCard for facilitating the payment from the card issuing bank to the card accepting bank. The remaining money goes to the bank that has enrolled the retailer. It is from this remaining 5 that the cost of telecom, the capital cost of the POS terminal and the cost of bringing in new merchants into the network is covered. It is because of these charges merchants are not very keen on accepting cards.
• In the case of cards, there are four parties involved — the merchant, the customer, the card issuing bank and the acquiring bank.
• Banks have issued close to 190 million debit cards, but cards still account for only 3% of payments. According to RBI’s latest annual report, it has spent 2,754 crore in printing currency notes in 2009-10 and the number is only growing. The cost of printing currency has gone up by 33%, which is more than the rate at which the alternatives to currency are growing.
• Remember the 'impossible trinity'?
• It refers to the belief that it is not possible for the central bank to achieve the following three objectives simultaneously: manage exchange rate, have free capital flows and also manage interest rates. Once the doors of capital flows are opened, market forces will determine the exchange rate and the interest rate. If the central bank attempts to fix the exchange rate, the flow of capital will slow down. It is possible to continue to attract more capital even after fixing the exchange rate if the central bank give up its flexibility to manage interest rates. But if RBI wants to have a say in both — the exchange rate as well as the interest rate — it will have no choice but to place restrictions on the flow of capital across the country’s borders.