26.02.2011

Politics & the Nation

• Rail budget is centred on West Bengal polls
• Railway Minister Mamata Banerjee showered goodies on her native land, promising new trains and projects ahead of assembly elections, but the cost of her populism is bleeding the finances of the network that is the country’s biggest employer.
• The firebrand politician from West Bengal said the government would introduce a new super-AC class of travel, consider running trains at speeds of 200 km an hour and launch a series of new trains, projects and collaborations, many in her home state.
• But the Railways has not raised fares for the 22 million passengers that use its over 7,000 stations or freight rates for the 2.5 million tonnes of goods it carries every day.
• The populist agenda, along with the heavy burden of higher wages because of the Sixth Pay Commission, meant that staff costs accounted for 42% of its expenditure. Its costs as a percentage of revenue, called the operating ratio, has risen to 92%, which analysts say is alarming.
• The railway budget for 2011-12 also announced plans to purchase 18,000 wagons, surpassing the current fiscal year’s record procurement of 16,500 wagons. She also said that work on dedicated freight corridors would be completed on schedule.

• Take a look at this op-ed which criticises the budget with considerable finesse.  A must read.

• How should India conduct itself in the context of rising Arab revolutions?
• This is very well answered by this op-ed in today's ET.  Worth a read.  But some excerpts:
• The first obligation of the government of India is to play its historic role as champion of emerging democracies in Arab societies. India has a bitter experience of tin-pot dictators from this region who always took pro-Pakistan and anti-India positions in the meetings of the Organisation of Islamic Countries.
• The government of India and every major political party should clearly understand that people are making their own history and India is expected to actively support the movement for democracy in the Arab world and not miss this opportunity, like in Myanmar where democrats were left alone to fight for themselves. The government and its foreign policymakers, in the name of the vulgar ‘Realist Theory of International Relations’ have followed a policy of engaging with any government of any country, even if that government is antipeople. This approach based on passivity has to be abandoned because India cannot afford to lose a great opportunity of engaging with the new leadership which would emerge after the dust has been settled.
• Further, India’s foreign relations with new democratic state systems should be guided strictly on the basis of an independent non-aligned approach.  India now has a tendency to toe the line of US imperialists while dealing with Arab countries without realising that American interests in that region are absolutely different from India’s. Our approach towards the new democratic wave of Arab societies has to be fundamentally different from that of the western countries. India should be prepared to respond to the Palestinian-Israeli dispute, which is going to become very hot after the tinpot dictators have been kicked out. The Manmohan Singh government should follow the Nehru-Indira Gandhi approach of an independent nonalignment policy while dealing with the changed situation in these societies.

• NALCO head arrested on bribery charges
• The Central Bureau of Investigation (CBI) on Friday arrested Abhay Kumar Srivastava, chairman and managing director of Nalco, his wife and two others on charges of accepting bribes from an unidentified person.
• The CBI raided the residences of Srivastava in Delhi and Bhubaneswar and seized unaccounted cash from lockers allegedly operated by him. Bhushan Lal Bajaj and his wife Anita are the other two people who have been arrested.
• The investigators, who had prior information about the transaction, laid a trap for Srivastava and his wife and arrested them at Maharashtra Bhawan in Delhi when they were receiving 10 kg gold and 29 lakh on Friday afternoon.

• Supreme Court rules that a case should not be decided by courts if the accused has no lawyer
• Judiciary cannot decide a case if an accused is not represented by a counsel, the Supreme Court has ruled in an important judgement.
• There have been instances when lawyers have been branded for taking up cases, like during Kasab’s trial and Jessica Lal case. The bar council in Srinagar too prevented its members from representing those accused in a sex racket case, not long ago.
• The Supreme Court asked courts across the country to appoint amicus curiae to provide legal assistance to accused persons before deciding criminal cases.
• The bench set aside the order of the Guwahati High Court, which had upheld the conviction of an accused without hearing the plea of his counsel.

Finance & Economy

• Survey sees India back on 9% growth path in FY 2012
• The annual Economic Survey is gung ho about GDP growth rising to 9% next year, and staying there in the medium term. Services (which now have a 57.3% share in GDP) will be the main locomotive of the economy. This, plus the coming demographic dividend, will offset many policy flaws and sustain fast growth. The Survey cites a new Index of Government Economic Power, showing India is now the fifth-biggest global economic power after the US, China, Japan and Germany, and is well ahead of Britain or France. Analysts may worry about fiscal deficit, but the Survey declares India is galloping down the road to fiscal virtue. Fiscal deficit in the first three quarters of this year was just 44.8% of the level in the previous year. The Survey says the ratio of consolidated government debt to GDP, which touched 79.3% of GDP in 2004-05, will fall to 68.7% by 2013-14 and 65% by 2014-15. The recent revision of GDP data shows we have underestimated true GDP for many years, and hence have overestimated fiscal deficit. This, plus high inflation this year (nominal GDP will rise 20.3% against the expected 12.5%), means the budget estimate of fiscal deficit at 5.5% of GDP now translates into just 4.8%.
• This in short is a summary of what the survey says.  Take a look at this graphic which presents the same in a more succinct form.  And if you have got the patience and time (you should have both) do take a look at the survey in full by downloading it from here.
• The Survey recognizes that growth depends more on skill development and innovation. It says patent applications are up from 17,466 to 36,812, and patents granted up from 1,911 to 16,061 between 2004-05 and 2008-09.

• The Economic Survey charts a welcome new course of informed discussion
• The 2010-11 edition of the Economic Survey gives up the document’s normal pretence of offering an insight into prospective government policy. It plumps for a discussion of the economy’s problems and possible policy options.
• Three things about the Survey stand out. One is the elaborate enumeration of assorted ills of the Indian economy -- some structural and some contingent on the recent crisis
• The second feature is integration of globalisation into the analysis of the domestic economy, instead of consigning it to the section on the external sector.
• The third remarkable feature is the clearheaded insistence that it is possible to design markets to serve the goals of poverty removal and inclusive growth.

• India Fifth in Global Economic Power
• In an interesting first, the Economic Survey 2010-11 measures the government’s ‘economic power’ or the ability of the government to project itself in the international sphere. The index is composed of four variables: government revenues, foreign currency reserves, export of goods and services and human capital and has been developed by the Finance Ministry for 112 countries over a 10 year span 2000-2009. It shows India in good light at number five in 2009 (up from number 10 in 2000), behind the US, China, Japan and Germany. The four variables capture the government’s ability to raise resources, its credit-worthiness and credibility in international financial markets, its influence on global economic activity and its representational strength or how much of the global economy, including its global manpower, it can claim to represent and includes a normative element .

• Captive port policy; what is it?
• The government is reportedly going to come out with a captive port policy.  What does it exactly mean?
• Through the policy, the government is likely to allot captive berths at major ports to private companies, which will enable them to utilise the given facilities exclusively for their own goods.
• The government is forced to think of this policy as the average turnaround time (the time ships have to wait before they get space to stop) in our major ports a 3.87 days in 2008-09 as against 10 hours in Hong Kong and two days in Adani Group promoted Mundra Port.

International

• West weighs action as Gaddafi digs in
• Muammar Gaddafi tried to tighten his grip on Tripoli as French President Nicolas Sarkozy called on him to resign amid reports that worshippers were being shot as they left mosques after Friday prayers.
• The prospect of civil war in North Africa’s biggest oil producer has pushed crude prices to a 2 1/2-year high, and led to calls for intervention to stop the worst violence yet seen in two months of spreading unrest across the Middle East and North Africa.

Language Lessons

• parlous: Adjective
• Fraught with danger
• eg: Given the cross connections and miscommunications that have dogged political discourse in that state and the parlous condition of the national postal and landbased telecommunications services in general, ...

25.02.2011

Finance & Economy

• A different take on CAD
• It was just yesterday we noted in our blog that a current account deficit (CAD) of over 2% is not conducive for the economy.  But take a look at today's ET editorial.  It takes a different view and pegs the threshold at 3% of the GDP.  A full reading of the editorial is very educative.  But some brief points made by it worth our noting:
• History shows that running a large current account deficit is dangerous if domestic savings are low and exports are sluggish (Greece, Portugal), or if countries borrow abroad for reckless lending at home (Ireland and Iceland in 2008, Thailand, Indonesia and Korea in 1997).  But our domestic savings are over 35% and exports are growing at over 30%.  Nor are we borrowing from abroad for lending domestically.
• That's why India should concentrate more of balancing the composition of our borrowing than worrying more about the CAD.  The share of short term borrowings in India's external debt rose from 18.8% to 22.5%.  If and when a crisis strikes the country, it is the short term borrowings that get pulled out immediately.  This is when our reserves are sucked out.  Therefore the RBI should be more worried about short term external borrowings,
• A CAD of about 3% is a sign of health rather than cause for panic.  

• Rising crude prices to upset fiscal planning
• The spike in the global crude prices has deepened the government’s dilemma.  With crude hovering near $120 a barrel, pressure has increased on the government to raise retail prices of the fuel. But it risks fanning inflation if it does so. And not passing on the increase in cost to consumers may mean a setback to its fiscal consolidation drive.
• When crude crossed $146 a barrel in 2008-09, the government and oil producers together provided over Rs. 1 lakh crore in support to oil marketing companies.
• The average crude price this fiscal is already close to the 2008-09 level. Going by the oil ministry’s estimates, the subsidy bill for oil is set to cross Rs. 1 lakh crore this fiscal.
• The government provides subsidy of about Rs. 10.74 per litre on diesel, Rs. 21.60 a litre on kerosene and Rs. 356.07 per cylinder on LPG.
• Report card on finance minister’s performance
• Look at this graphic.  Interesting.

• FDI in retail on the anvil?
• Finance Minister Pranab Mukherjee is likely to announce a road map for foreign investment in multi-brand retail in the union budget after getting positive response from other ministries, if reports are to be believed.
• The country’s existing foreign investment policy, aimed at protecting owners of kirana shops, bars global retailers from setting up retail chains in India. The country allows 100% foreign investment in wholesale business and 51% FDI in single-brand retailing. If the proposal is announced in the union budget, it will satisfy a longstanding demand of multinational retailers like Wal-Mart and Carrefour that have been seeking to enter one of the fastest-growing economies in the world for several years now.
• The Indian retail industry is estimated at $500 billion, of which organised retail accounts for only $25 billion.

International

• The fallacies thrown up by the debate on financial reform and the prospects for economic recovery
• Take a look at this excellent article by Prof. Jagdish Bhagwati on the topic.  Very educative and informative.  A must read.

• UK Court agrees to extradite Assange
• A British court agreed to extradite WikiLeaks founder Julian Assange to Sweden where he is wanted for questioning over sex crimes, dismissing claims the move would breach his human rights. Swedish prosecutors want to question Assange about allegations of sexual misconduct, which he denies, made by two WikiLeaks volunteers during his time in Sweden last August.
• Lawyers for Assange, who has angered the US government by releas-ing thousands of secret US diplomatic cables on his website, said they would appeal against the decision at London’s High Court, putting the extradition on hold.
• One of the alleged victims accuses Assange of sexually molesting her by ignoring her request for him to use a condom during sex. The second woman said Assange had sex with her while she was asleep and that he was not wearing a condom. Prosecutors say the second allegation falls into the least severe of three categories of rape in Sweden, carrying a maximum of four years in jail.

Obituary

• Uncle Pai, founder of Amar Chitra Katha, passes away
• Anant Pai, popularly known as Uncle Pai, has left generations of his fans behind. Mr Pai, 81, suffered a massive heart attack and died at around 5 pm on Thursday, his family has confirmed. He had fallen from a staircase last week and was undergoing treatment for a fracture.
• He is survived by his wife Lalita. Though the Pais were childless, Uncle Pai’s contribution to educating children about India’s history and mythology will be remembered for ever.
• Though he was an engineer by training, he turned his hands to drawing and founded the Amar Chitra Katha, the thin story books, in the pre-television and pre-internet days. He launched the Amar Chitra Katha series in 1967, which was an instant hit, with its 440 titles selling more than 86 million copies.
• Mr Pai followed it up with Tinkle comics series, which the Indian audiences took to in a big way as it was not just a comic book but had information on everything for children and young adults and was a precursor to several children’s magazines.
• Uncle Pai was given the first Annual Indian Comic Convention (Comi Con) Life Time Achievement Award earlier this week.

24.02.2011

Politics & the Nation

• An excellent article on funding political parties
• This is one article that you should NOT MISS reading.  Very good one.  Some excerpts worth our noting:
• The basic goal in political funding reform should be to achieve complete transparency as to how much parties and politicians spend and how they finance that spending.
• Reform of political funding is necessary, even if not sufficient, to tackle corruption. Indian democracy is funded by corruption. Politicians take money out of the exchequer, sell patronage and extort money, all in the name of mobilising funds for political activity. They pocket a large part of the collection and pass on the rest to the party and the workers they employ. Since civil servants must collude for misuse of state power, this method of mobilising political funds suborns the bureaucracy and procedural hurdles proliferate as rentseeking opportunities.
• All the scams rocking the country have this common root.

• JPC to Have 30 Members
• The government will constitute a 30-member Joint Parliamentary Committee (JPC) to probe 2G spectrum allocation, following the Opposition’s request.
• The initial plan was to have a 21-member JPC. The panel, to be headed by Congress MP PC Chacko, will now have 20 members from the Lok Sabha and 10 from the Rajya Sabha.
• The panel will probe implementation of the telecom policy from 2003. It will be get six months to complete the investigations.
• The Opposition, under whose pressure the government relented to the demand for formation of a JPC, will have 12 representatives on the JPC. If the Samajwadi Party, which had also backed the Joint Parliamentary Committee demand, and the BSP take an antigovernment stand, the Opposition and UPA would have equal numbers on the panel.
• Congress was keen on a 21-member panel, but several parties including the BJP, the Left and smaller parties demanded that its numerical strength be increased to accommodate more political parties.

Finance & Economy

• Some interesting statistics about population
• India is expected to be the world's most populous country by 2025. Currently, India has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is projected that by 2020, the average age of an Indian will be 29 years compared with 37 for China. Yes, by 2030, India’s dependency ratio is projected to be just over 0.4.

• Is there a case for enhancing the exemption ceilings on insurance premiums paid?
• Take a look at this article which argues for a rise in the exemption ceilings that are currently in force in so far as premium payments for life and health covers are concerned.  Some solid reasoning given there.

• Investments from tax havens may be blocked
• India could restrict investments from tax havens such as Panama and Lichenstein that are reluctant to enter into tax information exchange agreements as it looks to stop the flow of black money back into the country.
• India has signed tax information treaties with Bahamas, Bermuda, British Virgin Islands and Isle of Man. It has completed negotiations with Cayman Islands, Jersey, Monaco, Saint Kitts & Nevis, Argentina and Marshall Islands out of 22 identified countries or jurisdictions. Some jurisdictions, however, have not responded to India’s request or are insisting on a double taxation avoidance agreements, which could take time to conclude. India is not keen on entering such treaties with tax havens where there is little direct Indian investment. DTAAs are pacts between two countries to avoid both taxing an income earned in one country. Measures could be taken to restrict investments from such places to put pressure on them to enter into formal information sharing treaties.
• Some snippets of info that is useful in this regard:
• Over 600 tax information exchange agreements have been signed since the London G20 Summit in 2009
• An OECD forum has initiated 40 peer reviews; it plans to have 70 completed by G20 Summit in Cannes this year
• India volunteered to be first to be reviewed and was found to be meeting all requirements
• Global community putting pressure to act through peer reviews

• Why is a large current account deficit a worry?
• A current account deficit of over 1.5-2% of the GDP is undesirable as the country needs to have stable capital flows to finance such deficits. Otherwise, there could be excessive reliance on foreign borrowings to finance these shortfalls. Reliance on debt beyond this threshold level could push a country into a sovereign debt crisis like the way some European countries are now facing. India too was on the brink of a soverign debt crisis in 1991, but managed to avert a default
• How can this be addressed?
• Promoting policies conducive to stable long-term capital flows is one option. That would mean primacy to foreign direct investment and non debt creating inflows. Policies which could encourage more remittances and other private transfers will also help besides promoting merchandise and services exports

• Airwaves in 700 MHz Band to be Sold in ’12
• The government could be in for a windfall from the sale of additional spectrum that will be vacated by state agencies, after raising record amounts from 3G and broadband airwaves auction last year that helped it contain fiscal deficit within the budgeted limit.
• The telecom department has initiated the process of auctioning airwaves in the 700 MHz band, which, it says is the ‘most efficient and cost-effective’ frequency for delivering wireless broadband.
• The ministry has set a target for Doordarshan and other government agencies to vacate these frequencies by the year-end so that the auctions can be held in 2012.
• The country has about 108 units of airwaves in the 700 MHz band that can be utilised for commercial services, half of which is used by Doordarshan, while the armed forces have about 36 units or MHz. The remaining 24 MHz is held by other government agencies.
• The broadband wireless spectrum auctions in India last year delivered the government an unexpected bonanza of Rs. 38,543 crore ($8.25 billion), twice the amount predicted by analysts. The 3G and broadband spectrums jointly fetched Rs. 1,06,000 crore for the government against its estimates of Rs. 35,000 crore.
• Wireless broadband is seen as the only solution for telecom companies to meet the demand for high-speed internet connections in the country. India has just 11 million broadband connections and less than 1% penetration in high-speed internet, compared with 750 million mobile users with over 65% of the its population owning a cellphone. The government has fallen short of it target of achieving 20 million broadband connections by 2010.

• RIL's tie-up with BP has the potential of doubling D-6 gas output
• Reliance’s tie-up with BP will help it more than double gas output from the D-6 block to 120 million cubic metres a day and endorse its capital expenditure in developing the country’s biggest gas field, which is being scrutinised by the national auditor.
• BP is buying 30% in Reliance’s gasrich D-6 and 22 other blocks for an initial payment of $7.2 billion and another $1.8 billion after commercial discoveries. Analysts said the deal would also help Reliance justify its capital expenditure in developing the D-6 block, which is being scrutinised by the Comptroller and Auditor General of India.
• Gas prices in India vary from $4.2 per unit for D-6 to $12 per unit that customers pay for imported liquefied natural gas (LNG).

International

• Arab rulers are facing the heat
• Even as governments rushed to evacuate thousands of expatriates from Libya the writing on the wall is that the spreading revolt may topple the regime within days.
• The evacuations follow Gaddafi’s warning in a televised speech late on Tuesday that he will fight the uprising until his “last drop of blood.” Heavy gunfire broke out again in Tripoli and the streets were empty.
• While Middle East rulers have tried to put down uprisings that have overthrown leaders in Tunisia and Egypt and spread to Bahrain and Yemen, none used as much force as the Libyan ruler. Gaddafi’s crackdown on the week-long demonstrations has already left almost 300 dead, according to Human Rights Watch, and driven oil prices to a 2 1/2-year high. Libya holds Africa’s largest oil reserves.
• Saudi King Abdullah returned home Wednesday after a 3-month medical absence and unveiled benefits for Saudis worth $37 billion in a bid to insulate the world’s top oil exporter from an Arab protest wave. The king, who had been convalescing in Morocco after a surgery in November, stood as he descended from the plane in a special lift, before taking to a wheelchair. Saudi Arabia has so far escaped protests that have raged across the Arab world.

Language Lessons

• bathetic: Adjective
• Effusively or insincerely emotional

18.02.2011

Politics & the Nation

• Honda recalls 58k Citys over faulty engine component
• Honda’s Indian subsidiary will recall over 50,000 of its City cars — a figure close to its domestic annual car sales — in one of the country’s biggest recalls and the second such move by the Japanese giant in just over a year.
• The recalls are being made to replace a defective part that could stall engine restarts and will affect 57,853 units of its best-selling City model manufactured between November 2008 and December 2009. Honda has the capacity to produce about one lakh cars but sells about 55,000-60,000 cars in India every year. It has sold 51,045 units in the nine months ended January 2011.
• This is the second recall by the Japanese major since last January when it recalled 8,532 City cars made in 2007 to replace defective power window switches that could cause fire.

• Govt spikes Antrix deal with Devas
• The Cabinet Committee on Security (CCS) has annulled the satellite transponder lease between state-owned Antrix Corporation and Devas Multimedia, ending weeks of speculation about the future of the controversial high-tech deal. The Cabinet Committee on Security move comes a day after Prime Minister Manmohan Singh announced that his government has decided to annul the deal and the delay was only procedural. The latest in a series of controversies to hit the UPA government, the Devas deal was particularly sensitive as it occurred in the Department of Space, which is under the prime minister’s direct supervision.
• The timeline in Antrix Devas deal:
• 2003: Antrix enter into discussions with US-based consulting firm Forge Advisors exploring the development of commercial applications using ISRO’s satellite capacity. A joint venture is mooted
• December 24, 2004: Antrix board approves a satellite transponder capacity lease agreement with Devas, which was incorporated in India by the parties involved with Forge Advisors. Devas would get 70MHz of S-band spectrum as part of the deal on two upcoming ISRO satellites GSAT6 and GSAT6A. Antrix/ISRO/DoS gets the development of the two satellites approved by the Space Commission and the Cabinet, but the commercial arrangement with Devas is not disclosed
• July 6, 2007: DoT cautions that the spectrum being planned by the DoS is not meant for commercial use, such as in the deal with Devas. No action is taken Dec 8, 2009: DoS institutes a one-man panel to review the deal and submits recommendations. BN Siresh committee submits its report on June 6, 2010.
• June 2010: Opinions sought from law ministry & DoT. Both advise against the deal. Space Commission asks DoS to direct Antrix to cancel the deal
• July 12, 2010: ASG advises DoS that the decision to annul the contract should be a policy decision
• Sept-Oct 2010: Reacting to reports in the media, Devas writes to the members of the Space Commission, including those in the PMO. US Chamber of Commerce writes to the PMO on the issue
• February 2011: Media reports say the CAG suspects a loss of 2 lakh crore to the exchequer as a result of the deal.
• Feb 17, 2011: Deal is annulled by CCS

• TRS hooliganism in Andhra House, Governor manhandled
• Bedlam prevailed in the Andhra Pradesh Assembly on the first day of the Budget session with Telugu Desam Party (TDP) and Telangana Rashtra Samithi (TRS) MLAs rushing to podium, pushing and jostling Governor ESL Narasimhan, Chairman of the AP Legislative Council Dr Chakrapani, and Deputy Speaker of Assembly Nadendla Manohar at the central hall.
• The Telangana agitators not only grabbed the papers from the governor, but also tore off the speech copies given to them and threw them on the governor’s face.
• TDP MLAs -- A. Revanth Reddy and Mahender Reddy -- rushed onto the podium from behind and pulled down the chairs of the governor, deputy speaker and chairman of the council. The legislators were soon overpowered by the marshalls and pushed away from the podium. The personal security of the governor prevented Revanth Reddy from attacking on the governor and in an attempt to stop him from completing his address to the house.
• They were contending that the governor’s address did not reflect the separate Telangana state aspirations of four crore people.
• Bureaucrat-turned-legislator and campaigner against corruption, Dr N Jayaprakash Narayan, the president of the Lok Satta Party, was the other casualty of the Telangana agitator’s ire.  Soon after the governor performed his usually one-hour long ritual in 14 minutes, only reading out six pages out of the 32-page speech copy, TRS legislators hit Jayaprakash Narayan, for denouncing the Telangana MLAs stand.
• Except TRS, all the parties unanimously and unequivocally condemned the attack on Jayaprakash Narayan. Chief Minister N Kiran Kumar Reddy apologized to the Governor for being responsible for the bitter experience caused to him. Also condemning the attack on Jayaprakash, he described it as a black day in the history of AP Assembly whose parliamentary practices hitherto were well acclaimed by the rest of the country. Opposition leader Chandrababu Naidu said the attack on Jayaprakash Narayan as `undemocratic and unethical.’
• February 17 will go down in AP's history as a black day.

Finance & Economy

• Official definition of CSR
• The World Business Council defines CSR (Corporate Social Responsibility) as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”.
• Accordingly, corporate responsibility involves a commitment by a company to “manage its role in society as a producer, employer, marketer, customer and a citizen in a responsible and suitable manner”.

• Government moves on making CSR mandatory
• The Companies Bill 2009, which is likely to be tabled in the forthcoming budget session, has proposed that companies will have to earmark 2% of their average net profits during the preceding three years for corporate social responsibility spending or disclose to their shareholders if they fail to do so.
• The government had earlier taken a similar stance before the Parliamentary Standing Committee on Finance. It had told the panel that it could ask companies having a minimum net worth of Rs 500 crore, or an annual turnover of Rs 1,000 crore, or a net profit of Rs 5 crore in a year to spend at least 2% of their average net profit during the three preceding fiscal years on CSR. However, later the ministry diluted the proposal following intense lobbying from the industry.
• In an earlier presentation to the government, the Confederation of Indian Industry had demanded that the new law should not specify an amount to be spent on CSR, and that a decision on the actual spend be left to company boards. The industry body had suggested that CSR should be voluntary and backed by a system of state recognition and honour.
• To check non-compliance, the parliamentary committee had recommended separate disclosures by companies in their annual reports through a CSR statement indicating the company policy as well as specific steps taken.

• Vegetables help bring down food inflation to 11.05%
• Food inflation eased to a nine week low in the first week of February as prices of vegetables came down sharply from the previous week.
• It stood at 11.05% for the week ended February 5 down from 13.1% a week earlier and economists expect a further easing as vegetable prices at the wholesale level come down further.
• Inflation in vegetables was down to 23.99% during the first week of February from 44.34% in the previous week. Onion prices contracted sharply by 26.85% during the week and inflation in onions was down to 31.33% from 78.64% in the last week.
• Food has a share of 14.34% in the overall WPI, which stood at 8.23% in January primarily due to high inflation in food products. Inflation in primary articles stood at 14.59% for the current week down from 16.24%.
• Fuel inflation increased to 11.92% from 11.61% in the previous week.

• Are external factors fuelling inflation in the country?
• Yes, according to Indranil Sen Gupta of BofA Merrill Lynch.  Look at his reasoning.
• The present round of inflation really stems from an unfortunate confluence of global liquidity and weather shocks rather than domestic monetary or structural factors.
• The reasons for the extended period of inflation:
• First, this is because the world is recovering sequentially - emerging markets in 2010 and the US in 2011 - from the 2008 shock as opposed to a simultaneous recovery (like, say, in 2004). Commodities, therefore, are re-pricing recovery in two phases in contrast to only once earlier. Besides, India's ability to insulate domestic inflation has also come down with import tariffs already pared to deflect earlier commodity price shocks.
• Second, this has led to asynchronous monetary policy. Many central banks, such as the People's Bank of China and the Reserve Bank of India (RBI), followed the US Fed into tightening during the 2004 recovery to rein in commodity price inflation. This time round, effect of monetary action by the RBI and other EM central banks are largely negated by the G-3 easing.
• Finally, the ongoing switch from a very deep El Nino to an equally extreme La Nina is impacting harvests globally. This is naturally fuelling agflation given the backdrop of rising food demand driven by higher incomes and easy G-3 liquidity. In India, for example, the El Nino brought a drought which led to higher food prices in the mid-2009. And in end-2010, just when a good south-west monsoon was about to harvest a good kharif crop, aseasonal winter rains damaged the vegetable crop spiking vegetable prices.

• New geothermal policy likely to spur investments into the sector
• India may have a geothermal energy policy by March, spurring investment from companies including Tata Power and Thermax that aspire to build the nation’s first electricity plant tapping underground heat.
• The country, which imports more than 75% of its crude oil and burns polluting coal to generate more than half of its power, first needs a framework agreement with Indian states to ensure they don’t contest the right to allocate geothermal fields.
• Geothermal’s advantage over wind and solar power lies in its potential to generate round the clock.  Electricity from harnessing underground heat currently costs about twice as much as conventional coalbased energy.
• The government has identified 10,600 mw of power that could be generated from underground heat trapped in rocks, less than the nation’s power capacity shortfall of almost 15,000 mw as of January 2010.
• The cost of generation plus an equity return of 10% for geothermal can go as high as $114 per mw-hour compared with $55 per mw-hour on average for conventional power plants in India.

International

• On the reducing importance of the West in the Middle East scheme of things
• The three pillars upon which Western influence in the Middle East was built – a strong military presence, commercial ties, and a string of dollar-dependent states – are crumbling. As a result, the Middle East that emerges in the weeks and months ahead may become much harder for the West to influence.
• The first pillar – military presence – dates back to French and British occupation of parts of the Ottoman Empire after World War I, and was reinforced by the Cold War-era military links forged by the United States and the Soviet Union. In 1955, the West was even strong enough to sign up a remarkable cast of Turkey, Iraq, Iran, and Pakistan in a kind of West Asian NATO known as the Baghdad Pact.  But this military pillar has been steadily eroded. An early sign was the failure of “Operation Eagle Claw” to rescue US hostages in Iran in 1980. Another crack appeared with the 1983 Hezbollah attack on the US Marine barracks in Beirut, which triggered an abrupt US withdrawal from Lebanon. Since the invasion of Iraq in 2003, US forces have withdrawn from Saudi Arabia and discovered that their conventional military potency does not necessarily translate into impact on the ground.
• The second pillar of the West’s Middle East role – commercial ties – has also been weakened. America used to be the essential trade partner for the Gulf countries, but this has now changed. In 2009, Saudi Arabia exported 57% of its 2009 crude oil to the Far East, and just 14% to the US. Responding to this underlying shift, King Abdullah has been pursuing a “look East” policy since 2005, resulting in trade worth more than $60 billion.  This eastward shift has made China a bigger trading partner than the US for both Qatar and the UAE. And almost a quarter of Qatar’s trade is with China, compared to just over 5% with the US. Likewise, 37% of the UAE’s trade is with China, India, and South Korea. To many Middle East states, what China wants is now just as important as US interests.
• Finally, the US no longer has a string of relatively stable clients in the region. The US believed that the massive amounts of aid that it doled out to Egypt, Israel, and Jordan guaranteed both stability and cooperation on issues of American interest. This worked for three decades, but now the link is weakening.