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.