Current Affairs 22 January 2011

22 January 2011

Politics & the Nation

• Premji shows CEOs the door
• Wipro chairman Azim Premji moved with unprecedented aggression on Friday, removing its two top officials as India's third-largest software exporter tries to stave off challenge from a fast-rising rival while closing a widening gap with market leaders TCS and Infosys.
• Premji appointed TK Kurien, a company veteran, as CEO of Wipro's IT division and junked the joint-CEO model in which the company had been led by Suresh Vaswani and Girish Paranjpe, the sidelined officials.

Finance & Economy

• Some interesting stats on urban infrastructure
• A recent McKinsey report estimates that by monetising urban land assets, together with realistic levy of property taxes and user charges that reflect reasonable costs, India could generate up to $27 billion a year (or $58 per capita per annum). Given that our current investment in urban infrastructure is a paltry $17 per capita, pro-active policy can provide much-needed resources for trunk infrastructure for boosting housing and real estate.
• Panel to rework Factories Act in a step towards labour reforms
• Prime minister Manmohan Singh has set up an expert panel to rework the archaic Factories Act of 1948, giving a big push to labour reforms to ensure the safety of workers.
• The committee led by Planning Commission member Narendra Jadhav has chief economic advisor Kaushik Basu as a member. The panel will submit its recommendations within the next four weeks.
• The Act defines factory as any premise where 10 or more workers are working or were working on any day of the preceding 12 months and manufacturing process is being carried on with the aid of electricity.
• In addition, it lays down the following criteria:
• A factory that has more than 100 employees needs to take govt nod to sack any employee
• An employee working for more than 9 hours a day to be paid double his normal wages as overtime
• No work period can exceed 5 hours without a break of at least 30 minutes
• No factory can be overcrowded to an extent injurious to the health of the workers
• Every factory has to be kept clean and free from effluvia arising from any drain, privy or other nuisance & in particular accumulations of dirt
• Factories with more than 30 women need to have a room for the use of children aged under 6
• Reliance net rises 28% on higher GRM
• Reliance Industries, India's top company by market value, reported a 28% growth in quarterly net profit as it earned more dollars for each barrel of oil it refined while strong demand boosted the petrochemicals business to its best-ever performance.
• The company, which runs the world's biggest refining complex at Jamnagar, is expected to maintain robust refining margins in the current quarter as economic recovery in western countries fuels demand and expands gross refining margins (GRM). Its refinery is expected to process more crude in the current quarter as one unit was shut down for maintenance in the October-December period.
• Third quarter net profit rose to Rs. 5,136 crore, the highest since 2007, while sales rose an annual 6% to 62,399 crore.
• The company's GRM in October-December improved to $9 a barrel from $7.90 in the previous quarter and $5.9 a barrel reported in the quarter ended December 2009.
• The copyright conundrum that is tormenting the film industry in India
• It's supposed to amend the copyright laws in India but The Copyright (Amendment) Bill, 2010 (the Bill) might just also amend the way movies are made. The discordant note here is music — the creators versus the owners. Do the ones who create it, own the music or the ones who invest in it? There are no simple answers. Neither with the industry, nor with the lawmakers. For the last year, since things were brought to a flashpoint by the lyricists, no one seems to have budged an inch. Now, the government has put the ball squarely into the industry's court. They have to come together and arrive at a solution of what constitutes Intellectual Property Rights (IPRs) and how to split the commercials fairly.
• Currently, music rights for big films can contribute as much as 10-15% of the film's revenue while the proposed amendment would reduce this to 5%. According to the amendment the new royalty split would read: 50%: music label; 25%: film producer and 25%: split between the lyricist and composer. This is against the current scenario where 100% goes to the music label (read T-Series, Saregama, Sony BMG, Yashraj etc).

Technology

• Ever heard of cloud telephony?
• Cloud Telephony is on-demand voice services provided by a hosted, dynamically scalable, often virtualized, deployment of voice infrastructure that can manipulate inbound and outbound calls through a simple programmable interface.
• It is an internet-based platform that allows an organisation to make multiple calls.

International

• Some very good ideas on how the post-Cancun framework should be
• Take a look at this article by Ashok Khemka.  Well worth a read.

Language Lessons

• comestible: Noun
• Any substance that can be used as food

 

Current Affairs 21 January 2011

21 January 2011

Politics & the Nation

• MNP is here finally
• Mobile number portability is here finally.  Look at how you can change your mobile operator without losing your number.
• An interesting graphic on rising oil prices
• Take a look at it here.

Finance & Economy

• Secret overseas account holders take refuge in discretionary trust structures to escape tax authorities
• As time runs out for Swiss bank and other secret offshore accounts of resident Indians, some of them are hiding behind trust structures to escape tax authorities.
• At least three individuals who were ordered to pay tax against money lying in Liechtenstein's LGT Bank have told the tax department that their names figure as beneficiaries of a trust that has an account with the bank. The persons said they were neither aware how the trust was formed nor have they received any money from the trust.
• Many residents who stashed money in big as well as boutique Swiss banks like Julius Baer may have parked the money in the names of discretionary trusts.  In discretionary trusts, the proportion of money to be shared with the beneficiaries are left to the discretion of the trustees and not spelt out in the trust deed.
• Will account holders have the last laugh?
• It depends on how complex the structures are. In the case of trusts, they will take refuge as beneficiaries with no knowledge about the trusts
• Is forming trust the preferred route to park money abroad?
• In several cases it is. There are also those who open direct accounts with numbered codes. Till a few years ago, this was considered invincible
• What are account holders doing?
• Many of them are believed to be moving funds from Swiss banks to Dubai. Once the money is with a UAE bank, it can be invested in even FDI-compliant projects in India
• Some views on containing price spiral in vegetables
• The vegetable price sprial is largely artificial, and if the government does not take steps to reform marketing and modernise logistics for perishable farm produce, the problem won't go away, says Saumitra Chaudhuri, Member of the Planning Commission.
• Some excerpts from his op-ed in today's ET are worth our attention:
• The Agricultural Produce and Market Committee (APMC) Acts of the state governments have conferred a monopoly on the APMC mandi to execute trades in farm produce, including perishable horticultural products such as fruit and vegetables. The intention, no doubt, was to provide the farmer with the certainty of a marketplace and assurance of payment. However, the suspicion that the system has been hijacked by traditional middlemen has if anything been amply borne out by this recent experience with brinjal, tomatoes and cauliflower. In theory, it is supposed to be the farmer alone who can offer his/her produce at these mandis. In practice, this function is discharged by primary aggregators whose conflation with the farmer only holds true in the sartorial type-associations in the mind of the urbanite Indian. The mark-up between the mandi price and the retail price in the same city is scandalously high, testifying to the further layers of transactions and transaction costs that are involved. Between the price that the retail consumer pays and what the farmer actually receives is a big chasm. Of what utility is a regulation that ends up fleecing the customer and short-changing the farmer?
• There is a tendency to conflate the issue of corporate retail chains entering the horticultural space with that of foreign investment in these chains. This has contributed to muddying the water. There is a clear imperative to take the necessary steps to have perishable farm produce deleted from the list of items covered by the APMC Act (easier than trying to amend the Act) and create a regulatory framework for the entry of retail chains into perishable farm produce with a direct interface with the farmer. Whether to permit FDI into this business is a second and separate decision, as also is in what form to this.  If we do not take the necessary steps to modernise logistics for perishable farm produce, we will remain for ever hostage to the problems we have faced this winter.
• No change likely in FSDC role
• The government is unlikely to make changes in the mandate of the recently set up Financial Stability and Development Council, despite lingering concern among regulators that the interregulatory mechanism will encroach on their autonomy.
• The FSDC will meet for the second time today to take stock of the economy.
• CAG pegs tax loss of 53K cr on non-resident transactions
• The government has forgone almost Rs 53,400 crore in taxes that it could have mopped up from transactions involving foreign residents over five years, an analysis by the Comptroller and Auditor General has said.
• Only Rs 121 crore was collected from non-resident taxpayers, said the report of the CAG, out of a potential amount of Rs 53,503 crore.
• Such payments included profits remitted by foreign institutional investors and royalty payments by Indian branch offices of foreign companies. The tax on such transfers, called tax deducted at source, or TDS, is supposed to be deducted in India before the money is sent abroad.

Language Lessons

• metronome: Noun
• Clicking pendulum indicates the exact tempo of a piece of music
• conflate: Verb
• Add together different elements

• skunkworks
• The term is widely used in business, engineering, and technical fields to describe a group within an organization given a high degree of autonomy and unhampered by bureaucracy, tasked with working on advanced or secret projects.

 

Current Affairs 20 January 2011

20 January 2011

Politics & the Nation

• Cabinet reshuffle
• Prime Minister Manmohan Singh on Wednesday undertook cosmetic changes in the portfolios of his ministers, particularly those manning key economic and infrastructure departments, with the impending assembly elections and concerns over charges of corruption emerging as the key drivers behind the reshuffle.
• The prime minister went in for only a limited expansion, and a more comprehensive cleansing exercise is expected to follow after the conclusion of the budget session of parliament.
• The reshuffle-cum-expansion exercise saw the induction of three new faces, elevation of five ministers, three of them to cabinet rank, and easing the burden of ministers holding more than two portfolios.
• Take a look at this updated list of the Union Cabinet.  
• What an observation!
• "We talk of the demographic dividend but cannot see that we are courting a demographic disaster as we sacrifice the possible good for the illusive perfect."
• Writing on the subject of Right to Education, Madhav Chavan, CEO and president of Pratham Education Foundation concludes his essay with the above line.  A good article.  Can read at least once.

Finance & Economy

• Proposed audit norms being whittled down
• The government is set to raise the threshold for independent verification of corporate transactions in the Companies Bill, diluting a proposal it made before a key Parliamentary panel.
• The threshold would now be fixed at 1% of a company's annual turnover as against Rs. 5 lakh suggested by the corporate affairs ministry before the Parliamentary Standing committee on finance.
• This means auditors would have to verify all transactions above the 1% threshold with counter parties, such as banks, to ensure their authenticity.
• As of now, an audit is primarily a review of a company's financial statement to establish its truth and fairness. Auditors usually do not go into the veracity of the numbers.
• The move to get the transactions independently verified is aimed at checking corporate frauds, like the one involving Satyam Computer Services (now called Mahindra Satyam).
• The Bill would also give 'audit standards' a statutory recognition, meaning a violation would attract penal action. Currently, accounting standards do not have the force of law.
• States refuse to lend hand to FM in fight against inflation
• Finance Minister Pranab Mukherjee on Wednesday asked the state governments to cut local levies on food items to check their soaring prices, but most non-UPA states shot down the idea at the very outset.
• States, where the government is not part of the United Progressive Alliance, blamed the central government for the high prices and demanded that it cut duties on petrol and diesel.
• RBI opens fund taps, throws MFIs a lifeline
• The Reserve Bank of India saved banks from taking a knock on their portfolio due to slumping recovery from micro lending and threw a lifeline to embattled microfinance companies after the Andhra Pradesh government imposed restrictions on their functioning.
• The central bank relaxed rules on classifying a bad loan when there is a default. Restructuring of loans to the Rs. 25,000-crore microfinance industry will qualify to be classified as standard loans up to March 2011 even if they are not secured.
• The central bank's move is expected to save the banks from providing large sums, rather than lift the fortunes of the sinking microfinance sector.
• The central bank has said this move is temporary, as it did with relaxing the classification norms for real estate lending after the collapse of Lehman Brothers in 2008.

International

• An economist's take on world growth
• The European Union is today the sick man of the world economy. The global economic outlook is more promising than thought a year ago. The world economy will grow at 4.5-5% in 2011. Emerging markets will grow at around 7%. The US is poised to grow at 3-3.5%. The EU will be stuck at 2% or less.

Language Lessons

• kerfuffle: Noun
• A commotion or fuss, esp. one caused by conflicting views

 

Current Affairs 19th January 2011

19^th January 2011

Politics & the Nation

• Compulsory off for SBI staff to sniff out frauds
• SBI has reportedly told all its officers to take compulsory 'preventive vigilance leave' for at least 10 days every financial year. The decision, taken by the high-powered committee of the bank's board, was communicated to employees a week ago. It follows a string of frauds that have rattled several financial institutions in recent months.
• While reviewing high-value frauds, the committee found they had been perpetrated by officers who had established a reputation for being dedicated and hardworking. These are employees who did not avail of any leave earned by them. The frauds only came to light when such employees went for training or took leave for some other reason.
• There are MNC banks which go a step further. For high-risk activities like bond and foreign currency trading, these banks assign compliance officers to scan the books while the dealer is holidaying.
• MGNREGA and minimum wages
• What is the issue?  Why is there a problem?
• To know it, you must read this news report.  Interesting.
• Some excerpts:
• Centre under pressure to link wages paid under the Mahatma Gandhi National Rural Employment Guarantee Act, of MGNREGA, to minimum wages
• Under the Act, a worker is entitled to . 100 a day for minimum of 100 days in a year.
• Centre concerned that states could raise the minimum wages to some unreasonably high level and enforce it just for MGNREGA
• Govt recently decided to benchmark MGNREGA wages to inflation, which will push up remuneration between 17% and 30%

Finance & Economy

• Why are MFIs being castigated in India and what should they do to avoid the negative press?
• MIFs are being castigated in India because it is only in India that there is competition between government-sponsored and private MFIs, with the government wanting a monopoly. Second, India alone has a tradition of politically-induced default. Third, India alone has rival MFIs giving multiple loans to borrowers, leading to overborrowing and unsustainable debt.
• MFIs should think beyond mere lending to avoid the negative press.  
• First, MFIs must spread activities among several states, and not become dominant in any one state.
• Second and more important, MFIs must start organising women borrowers to stage demonstrations on their behalf when needed. Politically, that alone will take the sting out allegations that they are driving people to suicide.
• Third, they need to get involved in livelihoods development, in providing veterinary services and insurance, and in lowering prices of basic goods for clients by clubbing their orders together, passing on wholesale discounts to clients. Only such activities will convince borrowers that they truly need MFIs, and should demonstrate against state action to hobble these.
• The above prescriptions are an excerpt from today's op-ed by SSA Aiyar.
• Government and regulators are at loggerheads over FSDC role
• Take a look at this news report on the subject.  It is interesting to note the differences.  
• What is the conflict between the government and the regulators?
• Financial sector regulators led primarily by RBI and Sebi want the Financial Stability and Development Council, or FSDC, to focus only on financial stability. Both these regulators do not want the mandate of the council to include financial sector reforms. The government looks at it otherwise.
• Why are the regulators wary of financial sector reforms being part of FSDC's mandate?
• Both RBI and Sebi reckon that bringing the issue of financial sector reforms to the FSDC table runs the risk of impinging on their autonomy. Such reforms should rather be debated and finalised at another forum where all policymakers are represented.
• PSBs will get to sever ties with RRBs
• The government may allow public sector banks to exit from regional rural banks, or RRBs, they sponsored if they are not keen on investing more capital into these dedicated lenders.
• The suggestion to let banks move out of RRBs had come up during deliberations on the report of an expert panel set up to suggest measures to strengthen the rural banks.
• There are 82 RRBs in the country with a network of 15,475 branches.  The country's largest lender, State Bank of India, alone sponsored 17 RRBs. While the Centre owns 50% stake in an RRB, the sponsoring bank holds 35% and the concerned state government the remaining 15%.
• The Chakrabarty committee has observed in its report that states are also reluctant to infuse more capital in the expansion of RRBs as they are not fetching them good dividends.
• What is a deep discount bond?
• A deep-discount bond is a bond that sells at a discount from the par value. Often, these bonds have very low coupon or interest rates. In some cases, it is zero and also called zero coupon bonds. Such bonds are considered riskier and hence, the discount in order to attract the investor. Though these bonds carry lower coupon rates, they provide call option to investors. This provides liquidity to the bond. In India, the deep-discount bond was first issued by term-lending institutions like IDBI around early 1990s to finance long-term development projects.

Language Lessons

• gravy train: Noun
• Used to refer to a situation in which someone can make a lot of money for very little effort
• at sixes and sevens: Idiom
• In a state of confusion; In a state of dispute or disagreement

 

Current Affairs 17th January 2011

17^th January 2011

 

Politics & the Nation

• Governance slow down abnormally
• The government's stamina for running the course with policy decisions nosedived in 2010. This confirms the widespread sense that governance has suffered in UPA's second term, with the ruling coalition besieged by corruption scandals, bickering ministers and the absence of a strong power centre.
• The union cabinet managed to sign off on an abysmally lower number of decisions in 2010 compared with previous years. During UPA's first term, between 2005 and 2008, the cabinet took an average of 242.5 decisions every year. The average for every year of UPA rule since 2005 is 183 cabinet decisions per year. In 2010, a year marked with big corruption scandals, parliament paralysis and ministers working at cross-purposes, the cabinet managed to agree on just 112 decisions, the lowest single-year tally since UPA assumed power.
• Finance ministry blocks PF payout @ 9.5%
• The finance ministry has rejected the 9.5% interest pay out proposed on provident fund savings for 2010-11 saying the 'surplus funds' found by the PF department from its past accounts were 'unverifiable.'
• Labour Minister Mallikarjun Kharge had recommended raising the employees' provident fund (EPF) rate to 9.5% in September 2010 after the PF department's accounts revealed a surplus from the past.
• The EPF rate has been at 8.5% since 2005-06 and the rate would have stayed the same in 2010-11 as per its earnings. But a review exercise of EPFO's Interest Suspense Account, where EPF's annual income is parked till it is distributed to members, revealed a surplus of about Rs. 2,000 crore.
• While the EPFO board cleared the 9.5% PF rate on this basis, the finance ministry had commissioned a special audit of the accounts in question by the Comptroller and Auditor General of India (CAG).
• The CAG found that the surplus amount cited in the suspense account can not be verified till all accounts are updated by the EPFO. The CAG usually audits EPFO's accounts at the end of a financial year.
• EPF interest is manually credited to workers' accounts. On 31 March 2010, the suspense account had a balance of . 27,000 crore — which means EPFO's dated systems had not credited that much interest due to its 5 crore members' accounts. More than 11 crore account statements were pending on April 1, 2009.
• Fuel duty tweak to shield buyers, clean oilco books
• After raising petrol prices by 2.50 per litre, the government has decided to spare consumers from higher rates for cooking gas and diesel by tinkering with the tax regime to ensure oil companies can boost revenues without increasing pump prices.
• The government will convene an emergency meeting of top cabinet ministers next week to review the tax regime in the oil sector. This will help it cut duties on crude oil and refined products well before the budget to help oil companies quickly shore up their balance sheets without accelerating inflation, which has remained well above 5.5%, the comfort level of the Reserve Bank of India.
• According to an oil ministry estimate, fuel retailers' revenue losses have soared by over 58% this year from Rs 46,051 crore in 2009-10. The three firms' combined net profit in 2009-10 was Rs 13,060 crore after the government's cash compensation of Rs 26,000 crore, which was 56% of their revenue loss. This financial year, the finance ministry is willing to give only Rs 24,266 crore, which is one-third of the oil firms' total revenue loss.
• IOC, India's largest fuel retailer with over 50% market share by volume, is losing Rs 6.99 per litre on diesel, Rs 19.60 per litre on kerosene and Rs 366.28 per cylinder on cooking gas.

Finance & Economy

• IndiGo flies high
• IndiGo has placed, by far the largest order for aircraft on Airbus for 180 Airbus planes.  Delivery is set to commence in 2016 and end in 2025.  The $15.6 billion purchase is hugely significant for Indian aviation. The projection is that India would be the third-largest aviation market by 2020.
• Are we fighting (if at all) a losing battle against inflation?
• This is the conclusion we will get to, on reading this op-ed from Mythili Bhusnurmath.  She explains our failings in the fight against inflation very well.  Take a look.  A must read.
• While we are getting the jitters on the inflation front, India Inc is gung-ho about our growth prospects
• Take a look at this article by Sunil Mittal.  His bullishness on the medium terms prospects rests on the following factors:
• One, India has espoused an economic growth model that targets rapid GDP growth with inclusive development. Over the last few years, specific policies have been instituted to address marginalised and poor sections of society, especially in the rural areas, including a rural employment guarantee scheme that now impacts 50 million households. These policies have imparted high dynamism to the rural economy. For example, in 2002, the rate of telephony penetration in rural areas was 1.2%; today, it has crossed 21%.
• Second, India has attained high savings and investment rates. In 2007-08, the investment rate was close to 38%, a shift of five percentage points in just four years. The unprecedented developments of 2008-09 lowered the rate to 35%. Given the government's committed efforts at fiscal consolidation and strong corporate investment, the investment rate is likely to revert to the earlier high in a couple of years, propelling future growth.
• Third, the country's growth is largely driven by domestic demand. This is fuelled by a growing middle-class population, young consumers, and rising per-capita incomes. Middle-income consumers are estimated to rise from less than 15 million households in 2005 to almost 70 million households by 2015, and further to 140 million by 2025, a dynamic and diversified market for a global producer.   Further, as India enters the sweet spot in its demographic experience, its rising productivity and burgeoning markets will be a major global growth engine.
• Fourth, India's reform process is still a work in progress. From 1991 onwards, successive governments have remained steadfast on the reforms process, igniting a new growth cycle.
• Fifth, the country's infrastructure mission will be a major opportunity for global business. In the five years from 2012 to 2017, the country plans to significantly step up its infrastructure spending to $1 trillion. Public-private partnership (PPP) is a major plank of infrastructure engagement, and much investment is expected to come from overseas sources.
• Finally, India is rapidly integrating with the global economy. Its exports almost trebled in the five years before the global economic crisis. More significantly, the country's demand for goods from the rest of the world went up by close to four times in this period.
• Value-based excise duty to replace flat levy in shift to GST
• The government could replace the flat rupee-denominated excise levy on some manufactured goods with the usual percentage-based system, or ad valorem basis, in the budget as a step towards the proposed goods and services tax, or GST. It could also prune the list of items that enjoy exemption from excise duty.
• Ad valorem taxes are levied as a proportion of value of product and the absolute amount collected rises with the value of the good manufactured.
• In contrast, specific taxes are flat levies not related to the value of good produced.
• Though, most manufactured goods attract duty on an ad valorem basis, there are still a number of items that are levied specific duty or have a specific component over and above a regular duty.
• Coffee, tea, spices, cement, salt, tobacco, sugar and sugar products, automobiles, auto parts and petroleum and petroleum products are some items that attract duty on specific basis.
• The government also levies cesses, which are in the nature of specific duties, on many goods to raise funds for a particular purpose.

Technology

• A new buzzword that we all shold be familiar with
• Outcoming.  Over the last decade, India Inc has developed and exported several new management paradigms — offshoring, bottom-of-pyramid, world-is-flat, and jugaad-style creativity. The newest one to be added to the list is outcoming. Outcoming, experts say, is creating a big opportunity for India, which is well placed to capture a proportion of future growth.
• Outcoming is the continuous process of following client requirement intelligently and delivering exactly what the client wants.  It  is at the intersection of the convergence of some historical trends and enterprising, demanding customers that see the potential of a new set of solutions.
• Outcoming has added a new dimension to outsourcing. Trends towards open standards, interoperability and consolidation have opened up a new set of possibilities and challenges. In the hardware industry, these trends are instantiated in virtualisation, cloud computing and 'blades'. In the software industry, these trends show up in software as a service (SaaS), service-oriented architecture (SOA), open source and 'composite applications'. In IT services, these trends manifest in the push towards shared services, 'deskilling' and global sourcing.
• So, to learn more about what these some of the historical trends are and the diverse aspects of the new outcoming market applicable to the IT/BPO industries, you should take a look at this article at least once.  Well written.  Good one.

Language Lessons

• dotty: Adjective
• (of a person, action, or idea) Somewhat mad or eccentric
• grandiloquent: Adjective
• Pompous or extravagant in language, style, or manner, esp. in a way that is intended to impress