Politics & the Nation
  • Should we have smaller states?
    • In the context of the Justice Srikrishna committee submitting its report on Telangana, the debate acquires significance.  Take a look at today's face-off column that puts forth two differing view points.  Excerpts:
    • Against smaller states:
    • The debate now is that smaller states ‘facilitate better governance’ and ‘help concentration on developmental issues’. But the experience of the three states that were carved out of Bihar, MP and UP does not justify it. Governance and concentration on developmental issues relate to the prevailing socio-economic system. In the present system, economic disparity is bound to increase, not only among the people, but also among the regions. Industrialisation is determined on the basis of location of raw material and development of infrastructure. Regional disparity is byproduct of the capitalist order.
    • For smaller states:
    • The tragedy is that vested interests want concentration of power. For them the best way to handle it is through big underdeveloped states. Look at the contrast. The US with a population of 310 million has 50 states. India with 1.2 billion has 28 states and seven union territories.
    • Good governance is possible only when the government is nearer to the people. Small states and decentralisation of power through Panchayati raj and municipalities are the best instrumentalities to achieve it. It is widely acknowledged and scientifically proved that smaller states have progressed enormously.
  • Tribunal gives biggest share of Krishna water to Andhra
    • The Krishna Water Dispute Tribunal on Thursday announced a water-sharing formula to end the 43 years of conflict among three states — Andhra Pradesh, Maharashtra and Karnataka.
    • According to tribunal’s formula for sharing the waters of river Krishna till 2050, Andhra Pradesh will get the largest share. It also increased the allocation for Karnataka and Maharashtra. Every year, Andhra will be entitled to 1,001 tmc (thousand million cubic feet), Karnataka will get 911 tmc and Maharashtra 666 tmc. The tribunal’s decision has come as a big victory for Karnataka as it allows the height of the Almatti dam to be raised. Karnataka has been raising the issue for long, but was facing stiff opposition from Andhra Pradesh.
    • The tribunal, headed by Justice Brijesh Kumar, also allowed more water to be stored in the Almatti dam in Karnataka. With this order, 524 metre of the dam height could be used to store the Krishna water from its earlier 519 metre.
  • Justice Srikrishna committee submits report on Telangana formation
    • Not wanting to fuel speculation over the Telangana report — submitted to the government on Thursday by the Justice BN Srikrishna Commission — the government has decided to share the document with political parties of Andhra Pradesh and also make its contents public in a week’s time.
    • The decision to bring the Telangana report expeditiously in the public domain is in line with a key recommendation by the Srikrishna Commission that a final solution to the Telangana issue must be taken over a limited timeframe of three to six months, preferably through political consensus. This is in the best interest of every stakeholder in the state, the panel is said to have told the government.
Finance & Economy
  • Food inflation at 10-wk high of 14.4%
    • A spike  in vegetable prices pushed India’s food inflation to a 10-week high in the week to December 18. The fuel price index also rose on a rally in global crude prices, increasing the likelihood of another rate hike by the Reserve Bank of India (RBI).
    • The high food inflation was attributed largely to a surge in the prices of onions, which have risen nearly 50% in the six weeks to December 18.
    • Prices of some other vegetables like tomatoes and potatoes have also firmed up in the period. The overall index of vegetables has risen by 28% in this period.
    • A surge in prices has also increased the likelihood of a hike in key policy rates when the RBI meets for its next review on January 25. The central bank has raised interest rates six times since March.
  • Core sector grows at 21-month low of 2.3%
    • The output of six key infrastructure sectors grew 2.3% in November from a year ago, the slowest pace in the last 21 months, raising the prospects of a drop in industrial growth for the month.
    • The six core industries — crude oil, petroleum refining, coal, electricity, cement and finished steel — have a combined weight of 26.7% in the index of industrial production and are considered an advance indicator of industrial activity.
    • The sluggish growth was largely because of a contraction in refinery and cement output in November from a year ago.
  • PF rate increase to impact firms with own trusts
    • The government’s decision to raise the Employees Provident Fund (EPF) rate to 9.5% this fiscal could hit the bottom line of 3,000 firms running their own PF trusts.
    • These trusts may find it difficult to bridge the gap between the actual income on their PF investments and the mandated rate, forcing them to dip into their company’s profits to make up for the deficit.
    • Most trusts do not have any reserves left, as the PF rate has been set higher than investment earnings for most of the last seven years. The few firms that have the reserves, are barred from using them to pay interest to subscribers under new regulatory norms issued by the Employees Provident Fund Organisation (EPFO) this year. So, the only alternative with the PF trusts is to seek funds from the parent company. At an EPFO board meet earlier this month, at least two trustees expressed concern over company-run PF trusts’ ability to match the 9.5% largesse from the EPFO.
    • The EPFO is expected to earn about 8.5% interest on its investments in this financial year. But it set a 9.5% PF rate after it located some reserves that had built-up in its poorly maintained records since 1952.
  • RBI report tags soft spots in economy
    • Indian economy's soft spots identified by RBI in its second Financial Stability Report: Rising bad loans, asset-liability mismatch at banks, widening current account deficit, hot-money flow, and fiscal deficit.
    • Look at this RBI Press Release for more info and also to check the link provided for the report.
    • Look at this graphic for a gist of the report.