09.02.2011

Politics & the Nation

• Experts’ take on proposed NIUs
• We have noted about the proposal to set up NIUs from the technology advisory group headed by Nandan Nilekani.  Let’s take a look at the views of two experts on this concept.  

• Isro to annul S-band deal
• Under fire for selling S-band to a Bangalore-based firm by bending laws, the Indian Space Research Organisation (Isro) said that the deal, which had been under review since 2009, will be cancelled soon.
• Way back in June, 2005, Isro’s commercial branch, Antrix, had agreed to build two satellites on which Devas would lease transponders. ISRO chief K Radhakrishnan had reportedly said that at the time, the deal seemed to support the mandate for entering into “new and novel” projects. Neither the transponders nor the spectrum have so far been handed over to Devas.
• S-band had become available for use after India began using KU band for broadcasting services. However, in 2008, it became clear that new requirements from the country’s national agencies would need S-band spectrum.
• Therefore, in December 2009, the Department of Space (DoS) began a comprehensive review of the Antrix-Devas contract and, in July 2010, a decision was taken to annul the contract.

Finance & Economy

• Stress on unorganised sector in new IIP
• A government appointed panel has proposed more weight for industries such as textiles, tobacco, food & beverages and apparels in the Index of Industrial Production, or IIP, to give true representation to the contribution made by the unorganised sector, which accounts for more than 90% of the country’s workforce.
• The panel has suggested changes in the way relative weight of an item is computed in the IIP.
• Chaired by Planning Commission Member Saumitra Chaudhuri, the group was asked to examine the new index prepared by the Central Statistics Office after its trial runs brought out several deficiencies.
• The new index has a base year of 2004-05 as compared with a base of 1993-94 of the current IIP.

• Farm credit target to see 20% rise to Rs. 4,50,000 cr
• The budget for the next fiscal is likely to step up the target for farm credit to Rs. 4,50,000 crore, up 20% from the current year’s Rs. 3,75,000 crore.
• With the agriculture sector seen growing at 5.4% in the current fiscal, the government will push banks to disburse more to the sector to maintain the momentum.
• Last fiscal, the government had increased the lending target for farm sector by 15% to Rs. 3,75,000 crore from Rs. 3,25,000 crore in 2009-10.
• The government wants to make sure that such lending does not lead to a spike in non-performing assets of banks. RBI data show that the total NPAs in agriculture stood at Rs. 8,330 crore at the end of March 2010.
• The 2% interest subsidy on timely repayment of loans is likely to continue. The effective cost of short-term crop loan comes to 5% if a farmer repays his debt on time.
• Under the current norms, banks are required to set aside 18% of their total advances for agriculture. It is included in the target of 40% to all sectors classified as “priority” by the Reserve Bank of India.

• AI to take 600-cr loan to pay salary dues
• Cash-strapped Air India will borrow Rs. 600 crore from Corporation Bank to pay salaries to its 31,000 employees.  The state-owned airline had arranged a short-term loan to pay wages, including salaries for January that are more than a week overdue.
• A union representing pilots flying on domestic routes has threatened to strike on February 10, adding to the woes of the state-owned airline that has been losing market share to private airlines. In December, Air India slipped to fourth position behind Jet, Kingfisher and low-cost carrier IndiGo.
• For Air India, which has a wage bill of 3,000 crore, late payment of salaries has become a regular affair for almost a year now.
• Air India has been seeking equity infusion from the government for quite some time.  The government invested Rs. 2,000 crore in the airline by way of equity in the financial year ended March 31, 2010, and has committed another Rs. 2,000 crore for the next year, subject to progress on the turnaround plan.  But the money infused from the government has reportedly gone for payment of oil dues and other payments to vendors.  Questions are being raised about this piecemeal infusion, which is not working.
• Air India's losses stood at over Rs. 5,000 crore for 2010. The airline has to service Rs. 40,000 crore of debt, of which over Rs. 19,000 crore is in the form of working capital loans used to meet day-to-day expenses.
• While the working capital is from Indian banks, the long-term debt, largely used to purchase aircraft, is from foreign banks. After a debt recast was sanctioned by RBI, Air India is currently trying to restructure its debt which is likely to get completed by this month end.

International

• Why did academic economists fail to foresee the financial crisis?
• Raghuram Rajan tries to answer this question.  Take a look:
• Three factors largely explain the collective failure: specialization, the difficulty of forecasting, and the disengagement of much of the profession from the real world.
• Like medicine, economics has become highly compartmentalized – macroeconomists typically do not pay attention to what financial economists or real-estate economists study, and vice versa. Yet, to see the crisis coming would have required someone who knew about each of these areas – just as it takes a good general practitioner to recognize an exotic disease. Because the profession rewards only careful, well-supported, but necessarily narrow analysis, few economists try to span sub-fields.
• Even if they did, they would shy away from forecasting. The main advantage that academic economists have over professional forecasters may be their greater awareness of established relationships between factors. What is hardest to forecast, though, are turning points – when the old relationships break down. While there may be some factors that signal turning points – a run-up in short-term leverage and asset prices, for example, often presages a bust – they are not infallible predictors of trouble to come.
• The meager professional rewards for breadth, coupled with the inaccuracy and reputational risk associated with forecasting, leads to disengagement for most academics. And it may well be that academic economists have little to say about short-term economic movements, so that forecasting, with all its errors, is best left to professional forecasters.

Etc...

• Church blesses iPhone confession app
• An iPhone app aimed at helping Catholics through confession and encouraging lapsed followers back to the faith has been sanctioned by the Catholic Church in the United States.
• Confession: A Roman Catholic app, thought to be the first to be approved by a church authority, walks Catholics through the sacrament and contains what the company behind the program describes as a “personalised examination of conscience for each user”.
• The app is not designed to replace going to confession but to help Catholics through the act, which generally involves admitting sins to a priest in a confessional booth. Catholics still must go to a priest for absolution.
• What else will the crazy iPhone do?