17.01.2011

Politics & the Nation

• Governance slow down abnormally
• The government’s stamina for running the course with policy decisions nosedived in 2010. This confirms the widespread sense that governance has suffered in UPA’s second term, with the ruling coalition besieged by corruption scandals, bickering ministers and the absence of a strong power centre.
• The union cabinet managed to sign off on an abysmally lower number of decisions in 2010 compared with previous years. During UPA’s first term, between 2005 and 2008, the cabinet took an average of 242.5 decisions every year. The average for every year of UPA rule since 2005 is 183 cabinet decisions per year. In 2010, a year marked with big corruption scandals, parliament paralysis and ministers working at cross-purposes, the cabinet managed to agree on just 112 decisions, the lowest single-year tally since UPA assumed power.
• Finance ministry blocks PF payout @ 9.5%
• The finance ministry has rejected the 9.5% interest pay out proposed on provident fund savings for 2010-11 saying the ‘surplus funds’ found by the PF department from its past accounts were ‘unverifiable.’
• Labour Minister Mallikarjun Kharge had recommended raising the employees’ provident fund (EPF) rate to 9.5% in September 2010 after the PF department’s accounts revealed a surplus from the past.
• The EPF rate has been at 8.5% since 2005-06 and the rate would have stayed the same in 2010-11 as per its earnings. But a review exercise of EPFO’s Interest Suspense Account, where EPF's annual income is parked till it is distributed to members, revealed a surplus of about Rs. 2,000 crore.
• While the EPFO board cleared the 9.5% PF rate on this basis, the finance ministry had commissioned a special audit of the accounts in question by the Comptroller and Auditor General of India (CAG).
• The CAG found that the surplus amount cited in the suspense account can not be verified till all accounts are updated by the EPFO. The CAG usually audits EPFO’s accounts at the end of a financial year.
• EPF interest is manually credited to workers' accounts. On 31 March 2010, the suspense account had a balance of . 27,000 crore — which means EPFO’s dated systems had not credited that much interest due to its 5 crore members' accounts. More than 11 crore account statements were pending on April 1, 2009.
• Fuel duty tweak to shield buyers, clean oilco books
• After raising petrol prices by 2.50 per litre, the government has decided to spare consumers from higher rates for cooking gas and diesel by tinkering with the tax regime to ensure oil companies can boost revenues without increasing pump prices.
• The government will convene an emergency meeting of top cabinet ministers next week to review the tax regime in the oil sector. This will help it cut duties on crude oil and refined products well before the budget to help oil companies quickly shore up their balance sheets without accelerating inflation, which has remained well above 5.5%, the comfort level of the Reserve Bank of India.
• According to an oil ministry estimate, fuel retailers' revenue losses have soared by over 58% this year from Rs 46,051 crore in 2009-10. The three firms' combined net profit in 2009-10 was Rs 13,060 crore after the government's cash compensation of Rs 26,000 crore, which was 56% of their revenue loss. This financial year, the finance ministry is willing to give only Rs 24,266 crore, which is one-third of the oil firms' total revenue loss.
• IOC, India's largest fuel retailer with over 50% market share by volume, is losing Rs 6.99 per litre on diesel, Rs 19.60 per litre on kerosene and Rs 366.28 per cylinder on cooking gas.

Finance & Economy

• IndiGo flies high
• IndiGo has placed, by far the largest order for aircraft on Airbus for 180 Airbus planes.  Delivery is set to commence in 2016 and end in 2025.  The $15.6 billion purchase is hugely significant for Indian aviation. The projection is that India would be the third-largest aviation market by 2020.
• Are we fighting (if at all) a losing battle against inflation?
• This is the conclusion we will get to, on reading this op-ed from Mythili Bhusnurmath.  She explains our failings in the fight against inflation very well.  Take a look.  A must read.
• While we are getting the jitters on the inflation front, India Inc is gung-ho about our growth prospects
• Take a look at this article by Sunil Mittal.  His bullishness on the medium terms prospects rests on the following factors:
• One, India has espoused an economic growth model that targets rapid GDP growth with inclusive development. Over the last few years, specific policies have been instituted to address marginalised and poor sections of society, especially in the rural areas, including a rural employment guarantee scheme that now impacts 50 million households. These policies have imparted high dynamism to the rural economy. For example, in 2002, the rate of telephony penetration in rural areas was 1.2%; today, it has crossed 21%.
• Second, India has attained high savings and investment rates. In 2007-08, the investment rate was close to 38%, a shift of five percentage points in just four years. The unprecedented developments of 2008-09 lowered the rate to 35%. Given the government’s committed efforts at fiscal consolidation and strong corporate investment, the investment rate is likely to revert to the earlier high in a couple of years, propelling future growth.
• Third, the country’s growth is largely driven by domestic demand. This is fuelled by a growing middle-class population, young consumers, and rising per-capita incomes. Middle-income consumers are estimated to rise from less than 15 million households in 2005 to almost 70 million households by 2015, and further to 140 million by 2025, a dynamic and diversified market for a global producer.   Further, as India enters the sweet spot in its demographic experience, its rising productivity and burgeoning markets will be a major global growth engine.
• Fourth, India’s reform process is still a work in progress. From 1991 onwards, successive governments have remained steadfast on the reforms process, igniting a new growth cycle.
• Fifth, the country’s infrastructure mission will be a major opportunity for global business. In the five years from 2012 to 2017, the country plans to significantly step up its infrastructure spending to $1 trillion. Public-private partnership (PPP) is a major plank of infrastructure engagement, and much investment is expected to come from overseas sources.
• Finally, India is rapidly integrating with the global economy. Its exports almost trebled in the five years before the global economic crisis. More significantly, the country’s demand for goods from the rest of the world went up by close to four times in this period.
• Value-based excise duty to replace flat levy in shift to GST
• The government could replace the flat rupee-denominated excise levy on some manufactured goods with the usual percentage-based system, or ad valorem basis, in the budget as a step towards the proposed goods and services tax, or GST. It could also prune the list of items that enjoy exemption from excise duty.
• Ad valorem taxes are levied as a proportion of value of product and the absolute amount collected rises with the value of the good manufactured.
• In contrast, specific taxes are flat levies not related to the value of good produced.
• Though, most manufactured goods attract duty on an ad valorem basis, there are still a number of items that are levied specific duty or have a specific component over and above a regular duty.
• Coffee, tea, spices, cement, salt, tobacco, sugar and sugar products, automobiles, auto parts and petroleum and petroleum products are some items that attract duty on specific basis.
• The government also levies cesses, which are in the nature of specific duties, on many goods to raise funds for a particular purpose.

Technology

• A new buzzword that we all shold be familiar with
• Outcoming.  Over the last decade, India Inc has developed and exported several new management paradigms — offshoring, bottom-of-pyramid, world-is-flat, and jugaad-style creativity. The newest one to be added to the list is outcoming. Outcoming, experts say, is creating a big opportunity for India, which is well placed to capture a proportion of future growth.
• Outcoming is the continuous process of following client requirement intelligently and delivering exactly what the client wants.  It  is at the intersection of the convergence of some historical trends and enterprising, demanding customers that see the potential of a new set of solutions.
• Outcoming has added a new dimension to outsourcing. Trends towards open standards, interoperability and consolidation have opened up a new set of possibilities and challenges. In the hardware industry, these trends are instantiated in virtualisation, cloud computing and ‘blades’. In the software industry, these trends show up in software as a service (SaaS), service-oriented architecture (SOA), open source and ‘composite applications’. In IT services, these trends manifest in the push towards shared services, ‘deskilling’ and global sourcing.
• So, to learn more about what these some of the historical trends are and the diverse aspects of the new outcoming market applicable to the IT/BPO industries, you should take a look at this article at least once.  Well written.  Good one.

Language Lessons

• dotty: Adjective
• (of a person, action, or idea) Somewhat mad or eccentric
• grandiloquent: Adjective
• Pompous or extravagant in language, style, or manner, esp. in a way that is intended to impress