24.12.2010

Politics & the Nation

• On how the Rajya Sabha came into being
• The origin of ‘council of states’ or Rajya Sabha can be traced to the Montague-Chelmsford Report of 1918 and the Government of India Act, 1919, that provided for its creation as a second chamber of the then legislature. An independent second chamber was thought necessary by the Constituent Assembly to meet the challenges before free India at the time.
• Our Constitution-makers decided to establish a second chamber not merely because it existed under British colonialism since 1921. Rather, the need for a bicameral system was debated at length and reasons proffered. A large country with many regions, which had adopted a federal system of governance, a single House, even though directly elected, could not adequately represent all shades of opinion. The Rajya Sabha, with a smaller membership, higher age-level, indirect election, with some nominated eminent individuals, was to be a House of Elders providing a tempering effect on the lower House.
• Former Kerala CM Karunakaran dies
• Veteran Congress leader and former Kerala chief minister K Karunakaran breathed his last on Thursday after suffering a stroke and acute breathing problems. He was 93. Karunakaran was hospitalised on December 10 following a complaint of severe breathing problem. Karunakaran was the chief minister of Kerala four times.

Finance & Economy

• Food inflation back in red zone
• Prices of vegetables continued to rise, pushing food inflation back into double digits after three weeks and prompting economists to call for a mechanism to pre-empt regular spurts in prices. Food price index rose 12.1% for the week ended December 11 from a year ago, compared with 9.5% in the previous week as prices rallied for the fifth week in a row.
• Unseasonal rains have caused damage to some standing crops resulting in shortage of vegetables. Rise in vegetable prices was the highest at 11.32%, while prices of onions and potatoes rose by 4.6% and 9.5% from the previous week.
• Economists attribute the latest spurt in food prices to limited supplies.
• CCI to probe airlines’ ‘cartel’ moves
• Anti-trust watchdog Competition Commission of India (CCI) has sought data from the civil aviation ministry to probe whether airlines have formed a cartel to increase fares.
• After airfares on certain domestic routes shot up 200% in November, the civil aviation minister had said that the situation smelt of cartelisation and that the issue of sudden hike in fares could be referred to the CCI as well.
• BSE to unveil Shariah index, counts on Arab funds
• Bombay Stock Exchange (BSE), will launch its Shariah index next week. The index, structured in partnership with Taqwaa Advisory Shariah Investment Solutions, will have 50 stocks selected from the BSE-500 bracket.
• Infrastructure, capital goods, IT, telecom and pharmaceuticals shares will form a large chunk of the ‘BSE Tasis Shariah-50 Index’, as the new index will be known. But no stock will have more than an 8% weightage. The stock screening has been done by Taqwaa Advisory (Tasis) scholar board, and the index construction, by BSE.
• The new index will attract investments from Arab and European countries, where Shariah funds are already popular.
• Shariah, the religious law of the followers of Islam, has strictures regarding finance and commercial activities permitted for believers. Arab investors only invest in a portfolio of 'clean' stocks. They do not invest in stocks of companies dealing in alcohol, conventional financial services (banking and insurance), entertainment (cinemas and hotels), tobacco, pork meat, defence and weapons.
• The index will be rebalanced every quarter though stocks that do not comply (at some point of time) with Shariah statutes will be excluded immediately. National Stock Exchange S&P CNX Shariah Index and Dow Jones Islamic India Index are other Shariah benchmarks that are tracked by investors. Shariah-based equity investments do not allow investors to invest in heavily indebted companies — no investments in companies that have a debt-to-market cap exceeding 33% — companies with high outstanding receivables — net receivables in excess of 45% of M-cap — and companies that do not have at least 25% of its capital in fixed assets.

International

• OECD countries see sharp downturn in tax collection
• Tax collections in advanced economies are declining sharply because of rising unemployment and slowdown in economic activity even as corporates and individuals in certain economies like India pay more tax.
• While collection by way of direct taxes as well as indirect taxes tend to grow at 10 to 15 % in India, tax-GDP ratio is decreasing alarmingly in most developed countries as the fallout from the economic downturn of 2008 continues to linger even now.
• A higher tax-GDP ratio is a sign of economic development and a more equitable distribution of wealth. Besides economic growth, it also shows a higher level of compliance by citizens. Also, the tax-GDP ratio tends to be higher in countries that have a well established social security system.
• In 2007, the OECD countries’ tax to GDP ratio was 35.4%, but fell to 34.7% in 2008 and again to 33.7% in 2009.
• India’s tax to GDP ratio is 17 % of GDP, very low compared with that of countries like Denmark where the ratio is as high as 50%. The ratio is over 28% in the US and above 30% in Australia.
• More pain in Ireland, govt seizes Allied Irish
• Irish banks are grappling with loan losses after the collapse of a decade-long real-estate boom. The state has already taken control of Anglo Irish Bank, Irish Nationwide Building Society and EBS Building Society.
• Now it is reported that Allied Irish Banks, Ireland’s biggest company by market value in 2007, recorded its biggest share price drop in 22 months in Dublin trading, worth almost €21 billion at its peak, to €341 million.  It has become the fourth bank to fall under state control since 2008.
• Dubai may have to sell more assets
• Dubai and its government-owned entities have about $112 billion in debt — representing more than 140% of the country’s gross domestic product — that was amassed during years of growth in the property and tourism industries.
• The cost of protecting the emirate’s debt against default fell to 427 basis points on December 22, its lowest level since November 11. That is down from a peak of 651 basis points on February 15. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
• Dubai government debt, excluding that of state-controlled companies, stands at $30 billion.
• Dubai and its state-controlled companies have until now been able to renegotiate with creditors. Some $20 billion in debt and interest is due next year. Whether Dubai will be forced to sell overseas assets such as luxury retailer Barneys New York, US hotel and casino group MGM Mirage and Canadian entertainment company Cirque du Soleil, all amassed during the boom years, remains to be seen.

Language Lessons

• chimera: Noun
• A grotesque product of the imagination; (Greek mythology) fire-breathing female monster with a lion's head and a goat's body and a serpent's tail; daughter of Typhon
• eg:  It is increasingly clear that India’s promised demographic dividend would be a chimera if the workforce lacks the skills needed by a globalising economy.
• canescent: Adjective
• Of greyish white; (biology) covered with fine whitish hairs or down
• eg: the canescent moon
• pilous: Adjective
• (biology) covered with hairs especially fine soft ones