07.10.2010

Politics & the Nation

• Musharraf admits to having trained militants against India
• Pakistan's political class and those who controlled the levers of power seem to have abandoned the spurious “state” and “non-state” actor distinction while explaining terror activities against India. In a statement that confirms India’s view that the “state” is actively involved in fomenting and sponsoring terror, former president Pervez Musharraf has admitted that Pakistan had trained underground militant groups to fight in Kashmir.
• This is the first such admission by a top leader of the country. Mr Musharraf’s statement came days after he announced his return to active politics from London where he has been living in self-imposed exile.
• Mr Musharraf launched his political party — the All Pakistan Muslim League — in London and announced his intention to contest the 2013 election.
• Some interesting international experiences about EVMs
• Doubts have been raised about the security, accuracy and reliability of electronic elections in countries such as the Netherlands, Ireland, Germany and the US.
• The Netherlands banned the use of EVMs in 2006.
• In 2009, the Republic of Ireland declared a moratorium on their use.
• The Supreme Court of Germany ruled that voting through EVMs was unconstitutional as it was much more complex than what the average voter could be expected to comprehend.
• However, EVMs used in these countries were programmable, which is not the case with the Indian machines.
• RSS not to contest land for mosque
• RSS has reportedly decided not to back any attempt to challenge the Allahabad High Court order awarding one-third of the disputed land to Muslim bodies.
• RSS is reportedly unhappy with its offshoot VHP’s aggressive rhetoric on the subject and its demand for handing over the entire disputed area and 67 acres of land acquired by the Centre for construction of a Ram temple, implying that there should be no space for Muslims in the entire area.
• These developments in the wake of the reported statement by the RSS Chief soon after the verdict that the judgement is not a win or loss for anybody and that it invites everybody, including Muslims, to help build the temple there at the site, are welcome.  Moderation should prevail over both the sides and the two communities should put together a workable and amiable solution to the temple-masjid issue.
• Judicial Standards and Accountability Bill
• At present higher judiciary is virtually unaccountable.  When there are allegations against it, there is no modicum of investigation into them, leave alone any punishment if the allegations are true.  The Judges (Inquiry) Act, 1968 lays down impeachment as the only penalty that can be levied.  And this is a penalty that has so far not been levied on any errant judge.  Only Justice Ramaswami of the Supreme Court was investigated into for misconduct.  He too was not impeached, as the motion was not passed in Parliament.
• Now it is reported that the Judicial Standards and Accountability Bill 2010 finally got the Cabinet nod.
• The Bill seeks to address many of the ills of our present system by providing a simpler mechanism for investigating allegations against members of the higher judiciary as also forms of punishment less extreme than impeachment.
• It provides for a five-member oversight committee, headed by a former Chief Justice of India, to go into allegations of misconduct against judges of the high courts and the Supreme Court.

Finance & Economy

• Government proposes to ease foreign currency borrowing limits
• The government is reportedly working on a proposal to open a new overseas borrowing window for Indian corporates enabling them to raise up to $1 billion annually exclusively for infrastructure projects.
• Reportedly the government is considering waiver of withholding tax on such long-term foreign currency loans, which, if accepted by the revenue department, could make such borrowings more competitive.
• Currently, interest paid on all foreign currency loans attract withholding tax of up to 20% depending on the tax residency of the lender. Countries that have double taxation avoidance treaties, or DTAT, with India have lower rates. However, countries with which India does not have double taxation avoidance treaties or where the lender cannot be clearly identified as belonging to a specific jurisdiction, a rate of 20% is applied on the entire interest paid.
• Indian corporates have not been able to access long-term foreign loans of maturities beyond 10 years mainly on account of the impact of the high withholding tax on such borrowings.
• IMF raises India's growth forecast
• The International Monetary Fund raised its India growth forecast for 2010, citing robust industrial output and strong macro-economic indicators, but warned that global economic recovery remained fragile.
• Indian economy will expand 9.7% this year, up from the July forecast of 9.4%, IMF said on Wednesday in its World Economic Outlook report.
• India’s official growth estimate for 2010-11 is well below that of IMF at 8.5%, but a large part of the difference is due to the methodology. The IMF estimates are based on market prices whereas official agencies calculate GDP growth at factor cost. Some difference is also due to IMF estimates being for calendar year while India follows an April-March fiscal.
• The IMF also indicates considerable slowing down in 2011 possibly on account of weaker domestic demand and agricultural output coming back to normal levels.
• The world economy, led by emerging markets, is forecast to grow by 4.8% in 2010 before falling back to 4.2% next year, but a sharper global slowdown is unlikely, the IMF said.
• China is expected to grow at 10.5% in 2010 and 9.6% in 2011, it said, while lowering its US forecast for the year to 2.6% from 3.3% projected in July. The IMF has taken note of the increasing capital inflows and suggested a coordinated action as the best way of dealing with them, scoffing at the unilateral action by countries that has implications for others.
• On real and nominal exchange rates
• Here is a very good ET in the Classroom column that explains all abot them.
• Dept of Posts wants IRDA to regulate its insurance plans
• In a first significant step towards consolidating similar financial products under one regulator, the department of posts (DoP) is exploring the option of handing over the regulation of its insurance products to the sector regulator, Insurance Regulatory and Development Authority (IRDA).
• This follows the IRDA's refusal to regulate financial activities of the government (DoP), which controls the insurance busines of India Post.
• The department, which sells policies under the postal life insurance and rural postal life insurance schemes, acts within the framework of the Insurance Act. The IRDA has reportedly pointed out that with the premium calculations of the postal department not on an actuarial basis, the postal life insurance schemes could be notching up serious deficits.
• The postal department feels that an IRDA-regulated framework will allow it to make the scheme more flexible. The DoP, which acts as an agent of the finance ministry for its insurance schemes, lacks autonomy required to introduce new schemes or even providing attractive discounts to lure customers.

International

• Bank of Japan back in stimulus mode
• In the face of growing evidence that the yen’s strength was hurting the economy, the Bank of Japan cut its overnight rate target to a range between 0-0.1%, from 0.1%, reinstating the so-called zero-interest policy that the bank ended in July 2006, and pledged to buy ¥5 trillion ($60 billion) worth of assets. It also said it would keep its benchmark rate effectively at zero until price stability is in sight, adopting a US Federal Reserve-style commitment to ultra-loose policy.
• Core consumer prices have been falling from year-earlier levels since early 2009.
• BoJ governor: Masaaki Shirakawa
• Should India worry about the BoJ move?  Yes; certainly.  Cheap money in Japan means that money would be borrowed in Japan and invested in India to get better returns.  This in turn fuels asset bubbles (a la stock markets, real estate etc.,) here in India.  Moreover, the inflows of foreign currency have to be sterilized, which has its own costs.