30.11.2010

Politics & the Nation

• Did you ever hear of Pavan Sukhdev?
• It is well worth knowing about his work.  Take a look at this Special Report in today’s ET.  An eye-opener for many of us.
• He is championing the cause of giving an economic value to nature!  A radically different way of looking at environment.  Mind boggling work.  Read the full report here.  Those of you that can’t read it for want of time or any other reason can get a brief intro about his work here.
• Jagan quits Cong, to float new party
• Kadapa MP Jaganmohan Reddy and his mother Vijayalakshmi, MLA from Pulinvendula, the seat represented by former Andhra Pradesh chief minister, the late YS Rajasekhara Reddy, expectedly parted ways with Congress on Monday — a move which has the potential of sending the state’s political landscape into convulsions.
• The Congress party leadership is apprehensive about the manner in which Jaganmohan Reddy’s resignation is likely to play out in Andhra Pradesh politics. The late YSR is still a revered figure in the state, and with his wife and son out of the party, there are likely to be repercussions.
• As soon as the news about his resignation spread across the state, the Congress high command became the target of angry reactions from Jagan supporters of Kadapa.
• His supporters in Kadapa and Anantapur districts went on a rampage attacking party offices, ransacking furniture, burning effigies of the Congress president. Scores of his followers thronged his residence at Sagar Society at Banjara Hills in Hyderabad and raised slogans against Sonia Gandhi and Congress.

Finance & Economy

• On the urbanization challenge
• Some facts and prognosis: About 17% of the world population lives in urban India.  The present number of our 35 million-plus population cities will go up to 68, 13 of these will have population more than four million each and six will be mega cities with population crossing 10 million. Mumbai and Delhi from this category will be among the five largest cities of the world by the year 2030. The states of Tamil Nadu, Gujarat, Maharashtra, Karnataka and Punjab will have more than 50% of their population living in cities with Tamil Nadu topping urbanisation rate at 67%.
• How well is India prepared to face this kind of urbanization?  How effective will its JNNURM be in facing this?
• There cannot be two opinions on the point that the urban flagship programme, Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched in December 2005 with focus on 65 mission cities was a bold beginning as far as squarely addressing the need for reforms in urban India and drastically improving basic infrastructure services like water supply is concerned. But when we take stock of the status of implementation of the 23 reforms after four-and-a-half years of action out of the total seven-year duration of the mission, the picture is not very encouraging. As the mid-term appraisal of the current plan points out, many of the tougher reforms are still pending, the real impact of even the completed reforms on the ground is sometimes unclear and there is a clear need to improve the capacity of state governments and urban local bodies to undertake these reforms.

• Plan panel told to set up body for working out uniform gas price
• India's apex planning body will set up an inter-ministerial committee to suggest a mechanism to have a uniform price for all consumers of natural gas after it rejected an independent recommendation to have different rates for power and fertiliser sectors. Currently, gas prices vary sharply depending on the source of the fuel and location of the buyer, severely distorting the market in the country.
• Power and fertiliser sector account for more than 60% of country’s total natural gas demand. While power tariffs are either fixed or move within a price band, the government provides subsidies to fertiliser plants to control its price.
• Natural gas consumers pay different prices for the fuel varying between $4.20 mBtu (million standard British thermal unit) for domestic gas and $8-10 per unit for imported LNG. At times spot price of LNG goes as high as $12 a unit.

• Hi-tech plan to streamline NREGA payment
• India Post has charted out an ambitious rural information technology (IT) plan that will make the wage disbursement under the scheme paperless.
• Although NREGA is administered by the ministry of rural development, payments under the UPA government’s flagship job safety programme are routed through the postal network and bank branches. The postal department services more than half of the wage earners under the scheme in most states of the country.
• The government has allocated Rs. 40,100 crore for NREGA in 2010-11. It is estimated that the rural development ministry will be able to utilise only about Rs. 35,000 crore in the current year. A total of 179,43,189 families have been provided employment under the scheme till June 30 this year.

International

• WikiLeaks makes America blush
• The latest wave of WikiLeaks threatens to affect Indo-US ties, with the startling disclosure that US Secretary of State Hillary Clinton called India a ‘self appointed’ UNSC front-runner and ordered spying of the country’s bid to become a permanent member of the body.
• The US had forewarned India about the latest rash of leaks, observing that they may harm American interests and create tension in its ties with its ‘friends.’
• And now that the leaks are out, there are fears in the foreign policy establishment here that the disclosures, which cover 2006-2010, may have damaging information on the Indo-US nuclear deal too.
• Paul Krugman explains how Spain is a prisoner of the Euro
• His piece in today's ET deserves a read at least once.  Do so here.  Some excerpts:
• Through the good years the Spanish government appeared to be a model of both fiscal and financial responsibility: unlike Greece, it ran budget surpluses, and unlike Ireland, it tried hard (though with only partial success) to regulate its banks. At the end of 2007, Spain’s public debt, as a share of the economy, was only about half as high as Germany’s, and even now its banks are in nowhere near as bad shape as Ireland’s.
• So, why is Spain being branded alongside Portugal, Ireland and Greece?
• Problems were developing under the surface. During the boom, prices and wages rose more rapidly in Spain than in the rest of Europe, helping to feed a large trade deficit. And when the bubble burst, Spanish industry was left with costs that made it uncompetitive with other nations.
• Now what? If Spain still had its own currency, like the United States — or like Britain, which shares some of the same characteristics — it could have let that currency fall, making its industry competitive again. But with Spain on the euro, that option isn’t available. Instead, Spain must achieve “internal devaluation”: it must cut wages and prices until its costs are back in line with its neighbours.
• And internal devaluation is an ugly affair. For one thing, it’s slow: It normally take years of high unemployment to push wages down. Beyond that, falling wages mean falling incomes, while debt stays the same. So internal devaluation worsens the private sector’s debt problems.
• What all this means for Spain is very poor economic prospects over the next few years.

Language Lessons

• perfidy: Noun
• Betrayal of a trust; An act of deliberate betrayal
• to cut one's teeth
• (idiomatic) To begin; to gain early experience.
• eg: He cut his teeth flying model airplanes as a child, so aeronautical engineering came naturally.
• mien: Noun
• Dignified manner or conduct
• eg: ...a hefty six-footer with a rather severe mien.
• moulting: Noun
• Periodic shedding of the cuticle in arthropods or the outer skin in reptiles
• Verb: Cast off hair, skin, horn, or feathers
• high-falutin’
• Highly pompous, bombastic (speech).
• Showing off, ostentatious, pretending to be above one's station in life, putting on airs.
• eg: One of the reasons he plunged headlong into the study of ecosystems was an innocuous question asked by a friend, who subtly mocked his high falutin work as a global banking expert...

28.11.2010

Politics & the Nation

• Parliament Stalemate
• The stand-off has stalled parliament proceedings ever since the winter session of parliament began on November 9. The government last week ruled out the possibility of cutting short the session, which is scheduled to end on December 13. The government, which has held two all-party meetings in an attempt to end the logjam, has proposed alternatives like discussing the issue on the floor of the House and attaching investigating agencies to the Public Accounts Committee headed by BJP leader Murli Manohar Joshi.  Opposition is not in any mood to settle for anything less than a JPC. The govt’s determination to fend off the JPC demand stems from its anxiety over fears that the parliamentary panel would summon the prime minister and go into any aspect relating to the issue.

Finance & Economy

• Even Tata’s are under scanner now
• Investigating agencies probing the allotment of mobile permits by former telecom minister A Raja are examining a transaction between Tata Realty and Infrastructure Ltd (TRIL), a Tata Group company, and real estate firm Unitech in 2007.
• A loan of around Rs. 1,600 crore was reportedly advanced by TRIL to Unitech in a deal that investigators believe was facilitated by Niira Radia, a lobbyist and owner of a firm that handles the public relations work of all Tata companies.
• The end-use of the money is of interest to the government, because it is pursuing leads that it may have been used by Unitech to pay for a 2G GSM licence awarded in early 2008.  Investigators are reportedly trying to unearth if there was any understanding that Tata Group would pick a stake in the telecom arm of Unitech.
• TRIL says no loan was given to Unitech, but says it did provide the realty company with a commercial advance. According to TRIL, it had identified a large tract of non-agricultural land in Gurgaon for commercial and residential development, against which a commercial advance was paid to Unitech in 2007. Subsequently, in 2008, the commercial transaction was renegotiated for a smaller size of land which is currently under development.
• It would be interesting to see whether the veracity of the statements made by TRIL hold water after the investigations.  If they don't, then we can conclude that the last bastion of excellence in corporate governance has fallen.

• Montek Ahluwalia in race for IMF top post
• It is a matter of pride for India that Montek Singh Ahluwalia figures among the probables to succeed Dominique Strauss-Kahn as the next chief of International Monetary Fund.  The clout and role of the international lender has increased substantially in the emerging markets.
• Mr Kahn is reportedly planning to run for French presidency in 2012.  Other frequently mentioned names include Mohamed A El-Erian, the American born son of an Egyptian diplomat and an economist who leads the giant bond investor Pimco and Arminio Fraga and Guillermo Ortiz, former heads of the central banks of Brazil and Mexico respectively.
• I-T dept floats new number, DIN, for taxpayers
• Taxpayers will now have to procure a 'new number' for filing returns and making any communication with the Income Tax department. The unique document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11. According to the new guidelines brought out by the Central Board of Direct Taxes (CBDT), the DIN will be mandatory "in respect of every notice, order, letter or any correspondence" with the department, by the taxpayers.
• House panel recommends single regulator for ports
• The Committee of Estimates has asked the government to establish a single quasi-judicial regulator for settling disputes for all ports in the country. At present, the ports are divided into two categories: major ports, and minor and intermediary ports. While the central government manages and regulates the major ports, the minor and intermediate ports are administered by state governments. There are 13 major ports in the country, including Nhava-Sheva, Mumbai, Kandla, that are regulated by the Tariff Authority of Major Ports.
• Economix
• This is one column that we are liking so much.  It gives dashboards of various important items that paint a concise picture of the economy.
• Look at it here.

International

• India & US protest farm subsidy breach
• India, the US and some other countries have protested growing instances of countries doling out higher levels of farm subsidies than agreed upon under the World Trade Organization brokered multilateral trading agreement, putting pressure on errant countries to lower these trade distorting sops.
• Four countries have reported doling out higher food subsidies in 2008 than what they had committed.  These four countries are Costa Rica, Poland, Israel and Norway, which have a good export market in some niche farm products.
• Though the breaches may have been triggered by genuine stress arising out of the global financial crisis, India and the US have argued they undermine the credibility of the WTO's trading system and need to be flagged.
• All the four countries have reportedly said that they would bring down their subsidies to committed levels. The WTO member countries had taken on commitments to keep their total farm subsidies within specific levels at the Uruguay round in 1995.

• Ireland to get $115 b with EU set to ink bailout deal
• The European Union was poised to approve an € 85 billion ($115 billion) rescue for Ireland on Sunday and announce outlines of a permanent system to resolve Europe’s spreading debt crisis.
• Finance ministers from the 16-nation euro zone, anxious to prevent financial market contagion from engulfing Portugal and Spain, met to endorse an emergency loan package to help Dublin cover bad bank debts and bridge a massive budget deficit. A German government source said the ministers were also discussing Portugal and its possible need of an EU bailout.
• With anxiety rattling bond markets, the Irish government has been under intense pressure to accept a bailout despite repeatedly saying in recent weeks that it did not need one.
• European leaders are hoping that the package for Ireland, drawn from a € 750 billion rescue fund agreed by the EU in May this year, will convince markets that the crisis can be contained and spare Portugal and Spain — the next two countries identified as potentially at risk.

Language Lessons

• rapier: Noun
• A straight sword with a narrow blade and two edges
• correctitude: Noun
• Correct or appropriate behaviour
• contumelious: Adjective
• Arrogantly insolent
• eg: ...Happily for the contumelious MP, this interlocution took place in Britain, not India.
• insolent: Adjective
• Marked by casual disrespect

27.11.2010

Politics & the Nation

• Ratan Tata says Radia tapes a smokescreen
• Ratan Tata, the chairman of India’s largest conglomerate, has described the media frenzy over the tape leaks featuring conversations between Niira Radia, the owner of a public relations agency, and prominent politicians, industrialists and journalists as a “smokescreen” which was deflecting attention from bigger scandals.
• Mr Tata suggests that the real scandal was out-of-turn allocation of spectrum and what he described as the “hoarding” of spectrum by some telecom companies.  Mr Tata said the government should hold a proper investigation to book the guilty.
• The tapes feature conversations between Ms Radia, Mr Tata and other industrialists, politicians and journalists. The tapes suggest that Ms Radia was lobbying for the continuation of Mr Raja as telecom minister after the 2009 elections.
• On combating corruption
• Raghunathan’s op-ed pieces are not missed by us usually.  Today he takes on ourselves as the reason for India being corrupt.  
• As he rightly puts it, we all suffer from fatigue when it comes to discussing corruption.  
• Take a look at his well written piece.  Once in a way we do need a shock treatment; don’t we?  In this case, we deserve it.  The ‘we’ here refers to us all Indians; not just the blog readers.
• Even the Supreme Court is forced to make strong observations against judiciary
• Look at this news report wherein the SC has found fault with the Allhabad High Court functioning.

Finance & Economy

• Is our current account deficit worrisome?  How should we bridge the deficit?
• This is an excellent editorial that tells us about why FDI is a better bet over FII for bridging the current account deficit.  It also suggests how we can do that.  
• BTW the current account deficit at present is 3% of our GDP.  Not an alarming figure; yet. What is alarming however, is the fact that FDI inflows have fallen by 23% during the first half of the current fiscal.
• Fine tuning the IIP
• An expert committee chaired by Dr Saumitra Chaudhuri is reportedly fine-tuning the new series of the index of industrial production (IIP).
• Product like LCDs, laptops, mobile phones and a large number of chemicals and pharmaceuticlas that were not manufactured when the last base revision was carried out in 1993-94 will be included in the basket this time.
• The base year also should be as recent as possible, it being a normal year without extraordinary influences.
• A titbit on PSUs
• PSUs account for 26% of the gross domestic capital formation in our country.
• What are the strategies that states in India have to follow to tap their demographic dividend?
• According to the theory of demographic dividend, the rate of economic growth increases due to a rising share of working age people in a population. For India, falling fertility rates are resulting in a larger chunk of working-age people, who can contribute to the GDP and generate higher output per capita.
• In fact, the International Labour Organization (ILO) has stated that India will account for the highest working age population in the next 10 years, in a report released recently. In the document prepared for the G-20 Summit held earlier this month in Seoul, the ILO says that the G-20 nations will see their working age population between 15 and 64 years increase by 212 million in the period 2010-2020. Over 64% of this increase will occur in India alone!
• In this context, it is interesting to look at how our states are placed on the demographic dividend map.  Look at this article which identifies four broad categories of states and suggests the strategies that they have to follow to tap their full potential.  The accompanying graphic is also very educative.
• What is our FDI policy?
• The policy was enunciated through a series of Press Notes over the years.  But on March 31, 2010 the department of industrial policy and promotion (DIPP) had come out with Circular 1 of 2010, which enunciated a comprehensive policy overriding all the existing press notes, circulars and clarifications.  When this left some confusion on issues relating to upfront determination of price for capital instruments and non-inclusion of party paid shares and warrants within teh definition of 'capital', it came out with yet another Consolidated FDI Policy in Circular 2 of 2010.
• Decrease in area of cultivation is causing concern among economists
• Government data shows agricultural land has declined to 182.4 million hectare in 2007-08 from 183 million hectares in 2004-05, a drop of nearly 600 thousand hectares.
• Land acquisition has increased for various non-agricultural needs such as special economic zones, urbanisation, power projects, roads and mining. As a result, the percent share of agricultural land has declined to 59.7% in 2007-08 from 59.9% in 2004-05.
• India has more agricultural land than China, but its farm output is much less because of a sharply lower per hectare yield for most crops, thanks to outdated agricultural practices, poor use of inputs and fragmented land that makes mechanisation difficult.
• Independent estimates put India’s crop land at 170 million hectare as compared to 135 million hectare for China, but the latter manages to produce more from the smaller area it has under cultivation.
• A look at this graphic in this context is educative.

International

• Some interesting statistics and data interpretation work on government debt
• This is an interesting article that opens our eyes to how nations will be faring in incurring debt over the future years.  Some excerpts:
• Based on IMF forecasts, the level of aggregate net government debt in the world will more than double from $23 trillion — 44% of world GDP — in 2007 to $48 trillion — 65% of GDP — in 2015. Advanced economies account for much of this increase.
• In 2007, emerging markets (EMs) accounted for 24% of world nominal gross domestic product (GDP), in US dollars terms, and 17% of world debt. By 2015, they are expected to produce 35% of world output but account for just 14% of world debt. Thus, even as EMs increase their share in world GDP, their share in world debt is expected to come down. That is to say, EMs will power their growth from internal rather than borrowed resources.
• Paul Krugman explains the Ireland problem
• The Irish story began with a genuine economic miracle. Eventually, though, this gave way to a speculative frenzy driven by runaway banks and real estate developers, all in a cozy relationship with leading politicians. The frenzy was financed with huge borrowing on the part of Irish banks, largely from banks in other European nations.
• Then the bubble burst, and those banks faced huge losses. You might have expected those who lent money to the banks to share in the losses. After all, they were consenting adults, and if they failed to understand the risks they were taking that was nobody’s fault, but their own. But, no, the Irish government stepped in to guarantee the banks’ debt, turning private losses into public obligations.
• Before the bank bust, Ireland had little public debt. However, with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nation’s creditworthiness was put in doubt. So, Ireland tried to reassure the markets with a harsh programme of spending cuts. Step back for a minute and think about that. These debts were incurred, not to pay for public programmes, but by private wheeler-dealers seeking nothing but their own profit. Ordinary Irish citizens are now bearing the burden of those debts.

Language Lessons

• smokescreen: Noun
• (military) screen consisting of a cloud of smoke that obscures movements; An action intended to conceal, confuse or obscure
• cloud cuckoo land
• It refers to an unrealistically idealistic state where everything is perfect. ("You're living in Cloud Cuckoo Land.") It hints that the person referred to is naïve, unaware of reality or deranged in holding such an optimistic belief.
• up to speed
• being fully informed or up to date on some matter; being conversant with something
• eg: Following the private meeting, the board now is up to speed on the investigation.

26.11.2010

Politics & the Nation

• SC raps the CBI for lax chargesheet in 2G scam
• The Supreme Court has rapped the Central Bureau of Investigation for treating politicians and corporate entities involved in the 2G spectrum scandal with kid gloves.
• The apex court asked CBI why former telecom minister A Raja has not been interrogated and why Unitech and Swan have not been named in the chargesheet.
• But do take your time read this news report in full.  It throws light on how intelligent the senior lawyers in Supreme Court are.  Notice the interaction between the CBI counsel Mr. Venugopal and the SC.
• Airlines under fire for ‘inappropriate’ fare hikes
• A confrontation appeared to be brewing between airlines and the civil aviation ministry after airline companies rejected claims of predatory pricing by civil aviation minister Praful Patel.
• Mr. Patel who is known for his industry-friendly ways, is reported to have told that he would take 'strict action' against airlines which are indulging in 'inappropriate' fare hikes.  But industry honchos say that there were no such fare hikes.  

Finance & Economy

• The impact of CBI raids on bankers and financiers
• Soon after the raids, the finance minister is reported to have directed the state-run lenders to prevent recurrence of the bribes-for-loans scandals.  On top of this, bankers have decided to go for a critical appraisal of all real estate loans above Rs. 50 crore.  This is going to drive the realtors to private funds.
• Liquidity for the sector may dry up as bankers turn cautious in sanctioning fresh loans, forcing builders to cut prices to improve cash position, helping prospective buyers who have been holding on due to high prices.
• Increased fertiliser subsidy bill threatens the fisc
• The fertiliser ministry has sought an additional Rs. 30,000 crore to meet the rising subsidy bill, bringing the government’s finances under stress.
• The ministry has projected a revised demand of Rs. 82,245 crore as against the budgeted Rs. 52,837 crore, citing hardening international prices of key inputs and imported fertilisers.
• A group of ministers is likely to meet next Monday to consider partial freeing of urea prices to attract fresh investment in the fertiliser industry.

International

• Europe can’t afford a Spanish collapse
• Europe so far has survived the bailout of Greece. The financial rescue of Ireland also is manageable. Even if Portugal becomes the third country to succumb and seek aid, as many people widely predict, it is unlikely to push Europe to the financial brink.
• But any bailout of Spain — with an economy twice the size of the other three combined — could severely stress the ability of Europe’s stronger countries to help the financially weaker ones, and spell deep trouble for the euro, Europe’s common currency. Even though Spain, like Ireland, has adopted an austerity plan to help it avoid the need for a bailout, it still could need aid if its banking system proves frailer than the government thinks it is, as was the case in Ireland.

Language Lessons

• diddle: Verb
• Deprive of by deceit; Manipulate manually or in one's mind or imagination; [N. Amer, vulgar] Have sexual intercourse with; (slang) spend time ineffectually; procrastinate
• eg: ...they were also diddled out of some $3,900 worth of the other kind of dough...
• incipient: Adjective
• Only partly in existence; imperfectly formed
• eg: Banks and financial institutions should strengthen the NPA (non-performing assets) monitoring and management in their institutions to ensure that advance action is taken to identify incipient sickness and take appropriate action on it.