Current Affairs January 11th 2011

January 11^th  2011

 

Politics & the Nation

• How should India deal with Pakistan and Afghanistan?
• In these excerpts from a lecture delivered by Rajmohan Gandhi during the Saifuddin Kichlew Lecture at Jamia Millia Islamia, traces of some original thinking that proffers a more humane embrace with both of these countries are seen.  Though we may not necessarily agree with the conclusion, the thoughts presented, though sound very utopian, are worth our attention.  Makes a good reading.
• Sibal onslaught against CAG estimates on 2G losses
• With Union minister Kapil Sibal and his party firing a fresh salvo at the CAG over its calculation on the loss to the exchequer because of the sale of 2G spectrum, the confrontation between the ruling side and the Opposition is likely to intensify in the coming days, putting a question mark over the fate of the budget session of parliament.
• On a day when the CAG said it stood by the 2G report submitted by it and the Supreme Court expressed its indignation over the Union minister's decision to trash the 1.76 lakh crore loss figure arrived at by the audit watchdog, Sibal sought to complicate matters by expressing doubts over its leakage in the media even before it could be submitted in parliament. The Congress, on its part, came out backing the Union minister, endorsing his contention that the allocation of the 2G spectrum had not resulted in any loss to the government.
• Shunglu panel seeks info on OC staff from whistleblowers
• VK Shunglu Committee, which is investigating allegations of corruption in organisation of Commonwealth Games 2010, has put up a list of 2,100 Organising Committee employees on the national portal and sought information regarding their appointments from whistleblowers and common citizens.
• While making the list public, the committee has said, "It has been represented that several of these candidates are relatives of VIPs or friends of office bearers of the OC. It has been stated that some have been given salaries disproportionate to their qualifications and experience.
• Shunglu Committee is likely to submit its report in February. Appointed in October, the committee has been given a free hand as the office order on terms of reference clearly said that Shunglu Committee would determine its own ways of functioning. It also has the powers to summon officers and government records.

Finance & Economy

• After self-assessment, India goes to IMF, World Bank for health check
• India has voluntarily asked the International Monetary Fund and the World Bank to conduct a comprehensive and in-depth analysis of the country's financial sector.
• The scrutiny of the country's financial sector will take place under the Financial Sector Assessment Program (FSAP) established by the two multilateral lenders in 1999 after the Asian crisis.
• Since the FSAP was launched, more than 130 countries have volunteered to participate in the programme, according to the IMF website.
• India was among the first to undertake the pilot FSAP in 2000-01. In addition, India also undertook a comprehensive self-assessment of International Financial Standards and Codes during 2002 and undertook a review in 2005.
• New manufacturing policy
• The country's more than 35 million small and medium firms that accounts for roughly 45% of the country's industrial output get just 5-8% of the available institutional funding, despite the priority status accorded to them by the central bank.
• More than 60 million people are employed by SMEs in the country. The sector accounts for almost 95% of the industrial units and contributes about 40 per cent of the value addition in the manufacturing sector.
• The priority status means banks will have to lend a certain faction of their total advances to SMEs every year. But even this provision has failed to ensure adequate funds for the sector.
• Now the government is reportedly coming out with a new manufacturing policy to help the SME sector.
• The manufacturing policy that is expected to be unveiled in a month will propose an exchange that will offer an exit window for investors, steps to institutionalise factoring services to allow companies to cash their future income and easier bank guarantees to support small businesses.
• The industry policy looks to create 100 million jobs in the next 15 years, bringing the share of manufacturing in the country's gross domestic product to 25% by 2022.
• The policy will propose a stock exchange that will focus on finding money for SMEs. The proposed exchange would address an important piece missing in the financial markets. The entry and exit of firms will be made much easier through these exchanges.
• Institutionalising of factoring services is another long-standing demand of the SMEs, which are dependent on short-term working capital loans. Factoring is the process by which receivables are sold to companies who take the responsibility of collecting those funds. Such companies would provide the companies with cash, after charging a fee.
• The government is also considering stamp duty exemption for factoring services under the Factoring and Assignment of Receivables Bill 2010 that will be placed before the Union Cabinet ahead of the budget session of Parliament.
• Global investors flee Street as rate hike fears loom
• HDFC Bank and developer DLF led the fifth straight day of declines in equities as global investors fret over the potential increase in interest rates by the central bank to tame price rise.
• With global commodity and crude oil prices rising on revival of demand in the US, analysts believe that Indian companies' earnings would be hit due to high input costs.
• The benchmark Sensex fell 2.4% to 19,224.12 and the S&P CNX Nifty shed 142 points. The benchmarks are off 8.5% since their peaks last November. All sectoral indices on BSE fell. An average of 3.4 shares declined for every share that rose. As many as 28 of the 30 Sensex components fell.
• The Sensex is now at a one-month low after the second biggest fall this year.
• ET in the classroom on some of the functions overseen by RBI
• This is a good column that explains us about concepts like oversight by RBI, ECS, NEFT, RTGS etc.  Good read.

Sport

• The IPL auctions
• An excellent piece about the IPL auctions.  Makes an interesting reading.  Must read.

International

• China's trade surplus dips for 2nd year
• China's trade surplus narrowed in 2010 for the second straight year, giving Beijing grounds to rebuff US pressure for faster currency appreciation ahead of President Hu Jintao's visit to Washington next week. The Chinese government will point to the latest numbers as evidence that it is making steady progress in rebalancing its economy toward domestic consumption, cutting reliance on exports and giving the world a lift through surging demand for imports.
• For the United States, however, this may be happening too slowly, with the politically sensitive bilateral trade gap between the world's two biggest economies widening further in 2010.
• For all of 2010, China's trade surplus was $183.1 billion, down 7% from $196.1 billion in 2009. The surplus had fallen 34% in 2009 from its pre-crisis peak of nearly $300 billion in 2008.
• A smaller trade surplus means that less money is flowing into China, decreasing the central bank's urgency to mop up the excess cash in the economy that has pushed prices higher. Beijing has let the yuan rise 3% against the dollar since mid-June, when it lifted the currency from a nearly two-year peg that cushioned the economy from the impact of the global financial crisis.

Language Lessons

• natty: Adjective
• Marked by up-to-dateness in dress and manners
• Adverb: nattily -- In a natty manner; with smartness
• go out on a limb: idiom
• Put oneself in an isolated or disadvantaged position in one's support of someone or something.

 

Current Affairs January 10th 2011

January 10^th  2011

 

Finance & Economy

• What is predatory pricing?  Why is it difficult to prove predatory pricing?
• Predatory pricing refers to a situation where a firm charges a price below its cost of production, with the intent of forcing its competition to either immediately exit the market, or to exit the market after facing losses for a while. Once the competition exits the market, the predatory firm raises prices.
• There are three main reasons why it is difficult to prove that a firm is engaged in predatory pricing.
• The first is determining whether a firm is charging prices that are below average variable costs.  A rational firm will not stay in business when the price for its product is below its average variable cost, unless it has some intent other than current loss minimisation.  The Areeda-Turner test is employed by the US courts to determine whether or not there is any predatory intent.  According to this test, a price below the shortrun marginal cost should be unlawful.
• The second is proving intent. Firms can reduce prices because costs have fallen; hence, it is difficult to prove that a firm reduced prices with predatory intent.  
• The third is the rationale for predatory pricing. The rationale is that the predatory firm manages to force competitors out from the market, and after their exits, raises prices above the competitive level.
• Companies will have to report resettlement misses
• Companies will be asked to extend proper rehabilitation and resettlement packages for people displaced by their operations, failing which they will have to report reasons in their annual statements.
• This proposal forms part of the corporate ethics guidelines being prepared by the corporate affairs ministry. Companies will also be asked to maintain ecological diversity in areas where they operate and report project-wise work done in this regard.
• While the new guidelines will be kept voluntary, companies will have to explain reasons for their non-compliance, hence creating an indirect sanction. The government has adopted the strategy of "apply or explain", which effectively means any non-conformity with the norms will have to be reported with reasons. These details will form part of the business responsibility statement, accompanying the company's annual report.
• The government has been concerned over the way corporates have been exploiting the riches of the country's tribal belt, with many key projects hitting the regulatory wall for flouting norms.

International

• On how developed countries got away with more benefits in climate change negotiations
• The geopolitical nature of climate change has focused on institutional arrangements to dilute commitments of developed countries in three different tracks.  They are:
• Negotiations around the Kyoto Protocol saw developed countries shift the focus to flows from stocks of carbon with offsets reducing the costs of measures. Consequently, the total amount of surplus emissions credits, or 'hot air,' is large enough to allow these countries to follow a business-as-usual pathway until after 2020, while still complying with the emissions targets announced at Copenhagen.
• The second track has been to keep developing countries engaged in new institutions to support capacity building projects (Global Environment Facility, Green Climate Fund), expert groups (technology transfer, adaptation) and programmes of action (adaptation, forests) whose only tangible result has been to increase awareness and transfer limited funds to the least developed countries. Adoption of new energy or agriculture technology has not been provided the promised incremental costs. At Cancun, too, intellectual property rights were off the table and discussion on the nature and modalities of funding postponed. Finance serves to solve a political problem and not the problem itself.
• The third track has been to end the differentiation between countries in undertaking emissions reductions, and each annual meeting of the Convention post-Kyoto has advanced this agenda to the point where developed countries, in the Cancun agreements, are only required to take the lead before developing countries take on commitments.

Language Lessons

• pyrotechnics: Noun
• (music) brilliance of display (as in the performance of music); The craft of making fireworks
• eg: While the step by step process by which the minister whittled down the Comptroller and Auditor General's numbers provided the pyrotechnics at his demolition job, the operative part was reiteration of the telecom policy itself...

 

Current Affairs January 7th 2011

January 7^th  2011

 

Politics & the Nation

• Create Telangana says our favourite paper
• Look at this editorial that pleads for the formation of Telangana on economic footing.
• An excellent critique of the proposed Lok Pal bill
• In the context of the country witnessing scams all around in every sphere, the institution of Lok Pal has again got some attention.  Here is an excellent critique of the proposed bill by Justice Rajindar Sachar former Chief Justice of the Delhi High Court.
• Telangana panel roots for united AP
• The Srikrishna panel has suggested six routes to settle the dispute over Telangana but found a "united Andhra Pradesh", with an economically and politically empowered Telangana region, as the "most workable option".
• "This can be done through the establishment of a statutory Telangana Regional Council with adequate transfer of funds, functions and functionaries. The regional council would provide a legislative consultative mechanism for the subjects to be dealt with by the council," said the report placed by Union Home Minister P Chidambaram before a meeting of political parties from Andhra Pradesh here on Thursday.
• The suggests that Telangana Regional Council be allowed to exclusively deal with subjects such as planning and economic development, water and irrigation, education and skill development, local administration and public health.
• Recommending the bifurcation of Andhra's boundaries into Telangana and Seemandhra, with a new capital for the latter, as the "second best option", the panel insisted that the option may be exercised only if "unavoidable and if this decision can be reached amicably amongst all the three regions".

Finance & Economy

• NREGA wages to be linked to inflation
• The government will link wages under the employment guarantee act to inflation risking higher food inflation, but resisted the demand to bring them on par with minimum wages.
• Minimum wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) will rise between 17% and 30% from the current Rs. 100 a day with effect from January 1. The new rate will come into effect from January 1 this year and will require an additional Rs. 3,500 crore spend in the current year itself.
• The decision to link NREGA wages to inflation is a half-way solution to the demands of social activists that the scheme guarantee at least the minimum wages.
• Sonia Gandhi had backed the demand to align NREGA payments with minimum wages. But the government had admitted its inability to meet the demand as states could then revise the minimum wages sharply knowing that the Centre will be legally bound to pay.
• It had, instead, set up an expert committee under Planning Commission member Pranob Sen to suggest an appropriate indexing of NREGA wages. The government said it will consider its recommendations once submitted.
• India to grow 8.8%, but inflation a concern: IMF
• The International Monetary Fund (IMF) expects Indian economy to grow by 8.8% during the current financial year, up from 7.4% a year ago, mainly driven by robust growth in farm sector and pick up in consumption.
• It had, however, expressed concern over rising prices and underlined the need for controlling inflationary expectations by more monetary actions by the Reserve Bank.
• Price fighters in a tizzy as food inflation hits 18.3%
• Food inflation rose to 18.3% for the week ended December 25, its highest level in 23 weeks, even as key policymakers in charge of fighting price rise threw their hands up in despair.
• The untimely spurt in prices is being attributed to a supply shock, whose effect on retail prices is seen as disproportionate. Food inflation stood at 14.4% in the previous week.
• The government's efforts to tackle food inflation, which has been in double digits since June 2009 except for a three-week period in November, have not yielded much result so far.
• Schlumberger drills India's first shale gas well for ONGC
• American oilfield service provider Schlumberger has executed state-owned Oil and Natural Gas Corporation's (ONGC) contract to drill India's first shale gas well in the Damodar Valley. The Houston-based company's Asian arm drilled the well and is expected to submit its report to ONGC this month. Schlumberger will drill three more wells subsequently to establish possibilities of producing shale gas in India.
• Shale gas accounts for 21% of US' total gas production. Now India is also exploring possibilities to produce shale gas and ONGC is investing 120 crore for the pilot project underway in West Bengal and Jharkhand. With growing demand for energy, companies are looking at shale gas, which is natural gas present within shale formations.
• India is yet to conduct comprehensive studies to evaluate shale gas prospects. However, experts believe that the country has more shale gas reserves compared with conventional gas.

International

• Take a look at how the Irish baliout works
• The Irish National Asset Management Agency (Nama) was set up in 2009 to clean up Irish banks' balance sheets. It does this by giving the banks newly conjured government IOUs — not euros — in return for dodgy debt. The banks then dump the IOUs on the European Central Bank, which then provides the actual cash. Since Nama swaps IOUs for bank debt at only about half its face value, the three-way transaction can result in a €1 capital loss for every €1 the banks get from the ECB.
• Of course, the IOUs now lodged with the ECB may themselves have to be written down, threatening to undermine the ECB's own balance sheet.

Language Lessons

• commiserate: Verb
• To feel or express sympathy or compassion
• zombie: Noun
• A dead body that has been brought back to life by a supernatural force; (voodooism) a spirit or supernatural force that reanimates a dead body; Someone who acts or responds in a mechanical or apathetic way
• effrontery: Noun
• Audacious (even arrogant) behaviour that you have no right to
• demagogue: Noun
• A political leader who seeks support by appealing to popular passions and prejudices

 

Current Affairs January 6th 2011

January 6^th  2011

 

Politics & the Nation

• What is the cause of rise of religious extremism in Pakistan? (aka Islamization of Pakistan's polity)
• What has aided the spread of such extremism, apart from the security establishment having used extremist/ terror groups as instruments of state policy, is the Islamisation the Zia-era laws sought to bring about.
• Another reasons is the wider failure of Pakistan's secular political parties to foster an agenda of progressive, inclusive democracy and development. Given the failures of the state, the religious parties have found the space to mutate the anger of the disempowered masses into disaffection articulated along religious lines.
• Srikrishna Committee report made public
• The Government of India had made public the report of the committee that looked into issue of Telangana formation.  
• You can download the full report from here.

Finance & Economy

• An excellent critique of the Jalan committee recommendations
• This committee has been in the news of late for the recommendations it made on reforming the market infrastructure institutions.  The recommendations have attracted both negative and positive support.  Take a look at this very excellent critique that appeared in today's op-ed.  Worth a read.
• The retail potential in India
• The country's private, retail spending, estimated at about $530 billion today, is poised to cross $1 trillion (at current prices) by 2020. Of this, modern retail (domestic and potentially international too) will not touch even $200 billion by then, leaving an $800 billion or more opportunity for the traditional, small, independent retail.
• Indeed, just to keep pace with an 8% GDP growth rate-induced increase in private consumption, the country will need an additional 650 million sq ft of retail space by 2015, and about 800 million sq ft more between 2016 and 2020.
• In absence of a clear real estate policy for the retail sector, it is unlikely that such space will come up.
• The benefits of excise and service tax integration
• In a very interesting article Pratik Jain lists the advantages.  Let's take a look:
• If there is a common legislation for levying tax on manufacture of goods and supply of services, hopefully, the underlying input tax credit rules would also be common and simplified. This would also give the businesses flexibility to transfer their surplus credits from a particular manufacturing location to another manufacturing location and also to a service unit, or vice versa.
• The other major advantage of this integration would be simplified compliances for taxpayers.  
• A unified regime would not only conserve time and money of the taxpayer, but it would also offer her the flexibility to streamline or automate the underlying business and IT processes for handling these taxes.
• The integration would also provide an opportunity for the government to align the administration of these legislations by having common personnel for processing the applications, audit and appeal proceedings and so on. It would also reduce the number of legislations by at least one, which would again be a welcome change.
• On subsidizing fuels
• Look at this ET in the Classroom column on the subject.  Very educative.
• Are we feeding on our future generations?
• This graphic discusses the question very beautifully.

Language Lessons

• dastardly: Adjective
• Despicably cowardly
• eg: The killing of a liberal politician arguing against the country's repressive blasphemy laws is dastardly enough in itself.
• antidiluvian: Adjective
• Of or relating to the period before the biblical flood; So extremely old as seeming to belong to an earlier period
• eg: Time and again, quixotic ideology has led to meaningless debates, antediluvian policy and inexplicable strangulation of capacity buildup in both physical and social infrastructure.

 

Current Affairs January 5th 2011

January 5^th  2011

 

Politics & the Nation

• Should there be another investigation into Bofors issue because of the ITAT order?
• Take a look at this well-reasoned editorial that argues against the demand raised by the BJP / NDA.  While not condoning the wrongs that made up the Bofors scandal, it argues that it is a waste of time and precious resources to seek another probe again into the issue.
• Bodyguard kills Pak Punjab Governor
• Salman Taseer, the governor of Pakistan's wealthiest and the most populous province, was shot dead in Islamabad on Tuesday by one of his own guards, who later told interrogators that he was angry about the politician's stance against the country's blasphemy law.
• The killing was the most high-profile assassination of a political figure in Pakistan since former prime minister Benazir Bhutto was assassinated in December 2007, and it rattled a country already dealing with crises ranging from a potential collapse of the government to a virulent Islamist insurgency. The killing could also add to concerns about inroads by Islamist extremists and fundamentalists into Pakistan's security establishment and represented another blow to the country's Pakistan's embattled secular movement.
• Pakistan's blasphemy law has come under greater scrutiny in recent weeks after a Christian woman, Asia Bibi, was sentenced to death for allegedly insulting Islam's Prophet Muhammad. The law effectively orders death for anyone convicted of insulting Islam. Taseer had said Bibi should be granted a pardon, a stance that earned him opprobrium from Islamist groups across the country as well as threats.
• Dozens of Pakistanis are sentenced to death each year under the blasphemy law, which dates back to the 1980s military rule of General Mohammad Zia ul-Haq. Most cases are thrown out by higher courts and no executions have been carried out, but human rights activists have long complained that the law is used to settle rivalries and persecute religious minorities.

Finance & Economy

• Are lobbyists good for the nation?
• Former Chairman of SEBI, Mr. G.V. Ramakrishna writes on the subject in an op-ed today.  Makes a good reading.  Some excerpts:
• In the US, lobbyists would collect data, analyse the implications of particular laws for various groups, promote articles and research papers and suggest the line of action that would promote their interests. Similarly, the position of opposing groups gets developed and presented to the legislators. Gradually, this healthy activity spread to socialising by parties, holidays and expensive gifts to important members of the various committees. Cash gifts and election funding also came along as a normal activity of lobbyists.
• In India, the system of lobbyists is not a recognised activity and has acquired an odour of bribery of legislators, officials and the media.
• The main problem is that the activity of lobbyists is carried out clandestinely. The interests of different companies or groups are rarely based on research or discussion among disinterested groups.
• The real criticism about the lobbyists can be summarised as follows: They are mostly individuals. They work behind the scenes. They do not reveal the companies or groups of companies they represent. They do not present any researched papers except through the media without owning their positions openly. The object of lobbying may be policy changes or individual cases. They try to change policy through the ministers or through their advisers.
• What can be done to make lobbying more transparent?
• In a sense, the lobbyists should act as advocates that present different views and interpretation to enable the government to take an informed decision.  
• Rules for lobbyists should be formulated for both individuals and companies to be registered with the ministry of company affairs with sufficient details of the companies or groups of companies they represent.
• The representations they make should be to the minister or the secretaries and it should be in writing and made available on the website of the lobbyist.
• The contacts with the minister or secretary should not be in private but in the offices.
• Lobbyists should represent not individual companies but industry groups where large industry associations have divided interests and cannot take separate views to represent groups.

Language Lessons

• annus horribilis
• Annus horribilis is a Latin phrase meaning "horrible year". It alludes to annus mirabilis meaning "year of wonders".
• ceteris paribus: Adjective
• All other things being equal