31.03.2011

Politics & the Nation

• India wins the match but Pakistan walks away with the peace award
• Pakistan may have lost the match in cricket; but it surely is going home with near normalized relations with India, if sentiments are any indication.
• The signs of near-normalisation were evident when Pakistan Prime Minister Yousuf Raza Gilani reciprocated his Indian counterpart’s initiative and invited Manmohan Singh to visit his country. This will be worked out through diplomatic channels. Sporting ties between the two nations are also set to be revived with Gilani inviting the Indian cricket team to play in Pakistan.
• Why is 'merit' not a reasonable consideration when it comes to expecting women to have it for board membership?
• TT Ram Mohan explains the point in his op-ed very well today:
• For educational institutions or jobs, ‘merit’ is defined in terms of academic performance. A person who has secured the cut-off level of, say, 85% is deemed to be meritorious. A person from a disadvantaged group, who gets 82%, is said to lack merit even if he has managed the performance without paying for expensive tuitions.
• In the case of independent directors, claims about selecting people on merit sound even more hollow. First, promoterrun companies in India overwhelmingly prefer to select independent directors from amongst friends and associates.
• Secondly, retired bureaucrats, serving or retired corporate executives and celebrities, who are the second-most important source of independent directors, also tend to be people known to the promoter.
• Thirdly, independent directors are not so independent of management because it is management that selects them and compensates them handsomely. In this situation, the so-called merit has little bearing on the key outcome, namely, good governance.

Finance & Economy

• The issues that need to be addressed by a new policy to revive the PPP mode of executing projects
• First, governments, mostly at the state level, allow private players who win in competitive auctions to wangle sweetheart agreements with the state thereafter. This has to stop. There must be no post-bid revisions of the contract.
• Second, governments must take away projects, or impose strict penalties on private players if they fail to meet project milestones.
• Third, almost every state has its own PPP department, each functioning with its own set of rules. These rules have to be harmonised among states, to make sure that there is no race to the bottom. If states start competing among themselves to give sops to attract projects, the quality of governance and state revenues will slide dramatically.
• Finally, land acquisition has become a political minefield. A new law to humanise India’s colonial-era land acquisition rules is to be made.  It should provide for some guaranteed income for the dispossessed.  

• India's strengths and weaknesses in manufacturing
• India was the ninth largest manufacturer in the world in 2010 in terms of manufacturing value added (MVA), says the United Nations Industrial Development Organisation, ahead of all emerging markets save China.
• But India accounts for just about 1.8% of the world MVA. China accounts for 15.4%, and the US 23.3%.
• Similarly, India disappoints on per capita productivity: average output was estimated at $107 compared with China’s $841.6.

• Hemline forecasting
• Do you know the old saying which says that hemlines go up during boom times and come down with recession?
• Mary Quant is credited with introducing miniskirts to the world of fashion.  That was sometime in the 1960's.
• She was also credited with introducing hot pants.

• The impact of oil price on our economy
• Experts say that every extra $10 in oil prices increases the government’s borrowing requirements by Rs. 36,000 crore and the fiscal deficit by 0.3%.
• Islamic banking
• ET in the Classroom on this concept.  

International

• Economic calculus of Japan’s tragedy
• Some snippets from an article that appeared in today's ET.  Worth our attention:
• Direct losses are currently estimated at between $100 and $200 billion. The 1995 Kobe earthquake resulted in approximately ¥10 trillion in damage (around $102 billion), equating to around 2.5% of Japan’s GDP at the time.
• As the level of insurance cover is limited, the bulk of the reconstruction cost will have to be financed by governments and individuals drawing on savings.
• Financial markets have assumed that Japan will sell its overseas financial investments including US government bonds (holding of around $900 billion) to finance reconstruction.
• The ‘repatriation thesis’ sees US interest rates rising as the Japanese sell dollar bonds and the yen increasing in value as the dollars are converted into local currency. But it is not clear that this actually happened following the Kobe earthquake. Currently, there are no signs that the government, insurance companies or private investors are selling or plan to sell foreign assets to finance the rebuilding.
• If the government chooses to finance the rebuilding by raising debt, then attention will be on the increasingly parlous state of Japan’s public finances.
• Even before the disaster, Japan’s government borrowing was over $12 trillion, around 200% of its GDP, although net borrowing is around 140%. This debt reflects the effect of two decades of government spending in unsuccessful efforts to restore the Japanese economy to health after the crash of the ‘bubble economy’ in 1989. The cost of re-construction may add additional debt, of as much as 5-10% of the GDP.
• Japan’s current debt position is very different from the time of the Kobe earthquake. In 1995, Japan’s debt levels were much lower (net government debt was around 25% versus 140% today). In addition, the global economy was in a more robust position with stronger economic growth. These factors helped Japan absorb the effects of the Kobe disaster. Japan’s three problem Ds, depression, deflation and demography, have now been joined by two new Ds, disaster and destruction.

Language lessons

• anodyne: Adjective
• Capable of relieving pain; Noun: A medicine used to relieve pain
• portmanteau: Noun
• A portmanteau is a blend of two (or more) words or morphemes into one new word.  A portmanteau word typically combines both sounds and meanings, as in smog, coined by blending smoke and fog.  More generally, it may refer to any term or phrase that combines two or more meanings.  In linguistics, a portmanteau is defined as a single morph which represents two or more morphemes.
• sotto voce: Adverb
• In an undertone
• eg: The policy, as the Prime Minister sotto voce suggested, was to subsidise mobile users, but a good bit of it ended up in the pockets of spectrum resellers.