27.12.2010

Politics & the Nation

• RBI joins bribes-for-loans scam probe
• The Reserve Bank of India has joined the Central Bureau of Investigation in probing the ‘bribes-for-loans’ scandal involving at least 15 companies, in an attempt to prevent loans given to them from burning a hole in lenders’ books.
• The central bank has written to all banks seeking details of their lending to firms named by the CBI in an investigation into violations in sanctioning of loans by executives in return for bribes. The CBI had named firms such as DB Realty, Adani Group, Emaar MGF, Lavasa, Oberoi Realty, Jaypee Group, JSW Power, Pantaloon and Religare.
• Rao reclaims proud place in Congress history
• Six years after his death, former prime minister PV Narasimha Rao’s photos are finally being dusted off and placed among the pantheon of great Congress leaders. Missing altogether from all party posters and brainstorming sessions for years, Rao has finally got a salute for ushering in economic reforms in the first formal compilation of Congress party’s history.
• The five-volume Congress and the Making of the Indian Nation is the first initiative of the Congress to trace its history since the party’s establishment in 1885. The book, which was released at the recently-concluded plenary session, captures the post-Independence years through the reigns of successive prime ministers from Congress, viz. Jawaharlal Nehru, Indira Gandhi, Lal Bahadur Shastri, Rajiv Gandhi and PV Narasimha Rao.
• The 13th chapter of the 172-page book is devoted to the Narasimha Rao government and the phase of economic reforms. Though Rao is the only Congress prime minister missing from the cover of the book, he has been praised for providing a stable government at the Centre and ushering in economic reforms with the aid of the then finance minister Manmohan Singh.

Finance & Economy

• Two very good editorials that argue in favour of reforms in two different domains
• The first one is shocked that the Delhi government is trying to undo what the DERC set out to do -- that of reducing the price of electricity for consumers.
• The second one bemoans the continuation of the exemption raj in Himachal Pradesh and Uttarakhand.  For very valid reasons.
• What explains the spurt in food inflation in recent times?
• Take a look at this op-ed by NP Singh.  A very good read.  Must not miss.
• Excerpts that explain the rise:
• In localised, fragmented and thin physical markets,information flow remains poor and limited only to influential market manipulators. Market participants cannot differentiate between information and noise, due to which market-related information is given too high a premium, leading to unwarranted price volatility. This translates into a risk premium added by traders in their intermediation costs, which is more pronounced for commodity markets lacking a mechanism for efficient information flow, like that provided by national commodity exchanges.
• A second related contributor to food inflation is the fragmented nature of Indian agricultural markets.  In the name of food security, the borders separating Indian states are as stringent in movement of agri-commodities at international borders. Within the political boundary of each state, trade in agri-commodities is subject to a plethora of regulations and taxation, not least of which are those under the APMC Acts. It also builds up costs of intermediation leading to cost-push food inflation, especially during food underproduction like that witnessed in 2008.
• PIPE
• It stands for private investments in public equity (PIPEs).  It involves buying stakes by private equity funds in listed companies.  PIPEs have generated extraordinary returns by applying private equity principles to public investing.
• Economix dashboard
• Look at this here.
• Mandatory PSU spend on social causes to fall
• In what may come as a relief to state-owned companies, the government is considering a proposal to reduce the share of net profit these firms have to spend on social causes from the current 5%.
• State-owned companies with a net profit of less than Rs 100 crore are required to set aside 5% of their profit for corporate social responsibility (CSR).
• The move follows a demand from several public sector units that their burden of corporate social responsibility should be in line with those of private companies.
• The ministry of corporate affairs has dropped a provision in the Companies Bill that would have made it mandatory for private sector firms to allocate 2% of their profits towards social causes. The new provision only requires these firms to have a policy that targets to spend 2% of their profit on CSR, although it seeks to make it compulsory for a company to give details of the money it has spent on CSR in its annual report.
• Curbs on expat PF end up hurting local cos
• A government diktat in late November, barring expats from withdrawing their provident fund balance till the age of 58, was seen as India’s tough response to developed countries like the UK and the US. ‘Tit for tat’ was the message for these nations that virtually forfeit Indian workers’ social security funds on completion of their foreign assignments.
• But as India Inc is discovering, the levers of economic diplomacy can often be double-edged. Thanks to the new norms, companies would have to shell out at least a quarter more for foreign workers’ skill sets.
• International workers were brought under the mandatory PF contribution net in 2008, as part of efforts to repatriate billions of dollars contributed by Indian workers to foreign countries’ social security funds. Expats’ PF contributions were pegged at 24% of their total pay, instead of basic pay as is applicable for Indian workers.
• International workers were, however, allowed to withdraw their PF account balance at the end of their Indian stint, irrespective of the tenure. But under the new rules, such employees would be unable to withdraw 24% of their Indian salary that is paid into the PF – until they are 58.
• To offset these changes, employers would have to contribute additional money to meet the regulatory requirements over and above expats’ negotiated salary.
• While complying with the PF law, firms gave workers an equivalent amount in the form of a bridge loan. At the end of their stint, workers would repay the bridge loan, recouping that amount from the PF account. This ingenuity would no longer work.  The reason - an employer can’t keep a loan on his books till the expat turns 58 as most foreign workers are in the age group of 30-45 years.  Even when the expat turns 58, he won’t be with the same company and the balance would only be paid to him, not to the employer. So it’s a write-off for companies.

Technology

• Titbits about BalckBerry

• The BlackBerry was created by 23-year-old Greek-Turkish college dropout named Mike Lazaridis, working out of a one-room tech startup in Waterloo, Canada.
• The BlackBerry officially came into India in October 2004. Though the country is said to account for barely 2% of RIM’s customers worldwide, it’s hard to miss a BlackBerry owner in the corridors of India Inc.

Language Lessons

• shimmer: Noun
• A weak and tremulous light
• Verb: Shine with a weak or fitful light; Give off a shimmering reflection, as of silk