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31.03.2011
Politics & the Nation

India wins the match but Pakistan walks away with the peace award o 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. o The signs of near-normalisation were evident when Pakistan Prime Minister Yousuf Raza Gilani reciprocated his Indian counterparts 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? o TT Ram Mohan explains the point in his op-ed very well today: o 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. o 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. o 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. o 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 o 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. o Second, governments must take away projects, or impose strict penalties on private players if they fail to meet project milestones. o 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 Indias 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 o 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. o But India accounts for just about 1.8% of the world MVA. China accounts for 15.4%, and the US 23.3%. o Similarly, India disappoints on per capita productivity: average output was estimated at $107 compared with Chinas $841.6. Hemline forecasting o Do you know the old saying which says that hemlines go up during boom times and come down with recession? o Mary Quant is credited with introducing miniskirts to the world of fashion. That was sometime in the 1960's. o She was also credited with introducing hot pants. The impact of oil price on our economy o Experts say that every extra $10 in oil prices increases the governments borrowing requirements by Rs. 36,000 crore and the fiscal deficit by 0.3%. Islamic banking o ET in the Classroom on this concept.

International

Economic calculus of Japans tragedy o Some snippets from an article that appeared in today's ET. Worth our attention: o 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 Japans GDP at the time. o 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. o Financial markets have assumed that Japan will sell its overseas financial investments including US government bonds (holding of around $900 billion) to finance reconstruction. o 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 Japans public finances. Even before the disaster, Japans 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. Japans current debt position is very different from the time of the Kobe earthquake. In 1995, Japans 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. Japans three problem Ds, depression, deflation and demography, have now been joined by two new Ds, disaster and destruction.

Language lessons

anodyne: Adjective o Capable of relieving pain; Noun: A medicine used to relieve pain portmanteau: Noun o 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 o In an undertone o 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.

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29.03.2011
Politics & the Nation

Cricket is after all a game; enjoy it as one o We all know that a cricket match between the traditional rivals -- India and Pakistan -- evokes more than enthusiasm. Is that required at all? The fans on both sides of the border, aside from some ill-thought comments from people on the field too, contribute a lot to the rise in temperature.

Today, its more important than ever to sit back and enjoy a game of cricket as a game and nothing more. All the best to the game and the spectators. May their wishes be fulfilled. The following comments by Mukul Kesavan in todays ET are well worth our notice in this regard. Take them well for their ability to represent the collective feelings of the reasonable people. But enjoy the game as a game. Most of this (cricket matches between India and Pakistan being reduced to a blood sport sustained by an excitement born of desperation and fear and loathing) has to do with the insufficiently bifurcated histories of India and Pakistan. The quarrel over Kashmir, nightmares like the slaughter of 26/11, the residual Indian belief that Partition was a tragic cock-up and the furious Pakistani rejection of the idea that their nation was a mistake, means that Indians and Pakistanis watch their two countries play in a state of bilious delirium. The disproportion between fact (losing a cricket match) and feeling, the absurdly inflated sense of joy and despair that characterises any IndiaPakistan ODI, makes every such match an occasion to be avoided by sensible people. Pakistani cricket is so oppressively freighted with nationalism at the moment that its unreasonable to expect the team or its captain to treat Wednesdays encounter as just another game. To be fair to the Pakistanis, hundreds of millions of Indian spectators will also see the match as a kind of proving ground for nationalism.

SC comes down heavily on Government o While looking into the progress report submitted by the ED, the SC observed that the probe should be widened to include the other names that have popped up in ED's report. It has also questioned whether Government had any in principle objection to the formation of a SIT (Special Investigation Team) comprising of officers from various agencies like the RAW, CBI, IB and ED to go into the wider issue of black money being stashed abroad by Indians. o The SC deferred its decision on the formation of SIT till the next date of hearing when the ED is expected to submit another progress report. o Dealing with another case, the Supreme Court has said that political parties supporting an agitation should be derecognised if public property is destroyed during the stir. o The court indicated that it would frame guidelines fixing responsibility on state governments for their failure to deal with agitationists destroying public property. o It asked the Haryana government to explain why it should not pay the loss incurred by Railways during the course of 11-day stir organised by 12 'khap' panchayats against booking of some upper caste people in connection with the Mirchpur Dalit killings case. o The court also sought the responses of all parties to suggest guidelines and on fixing responsibility for damage done to public property during agitation. o Though the response of the SC may look too intrusive on the domain of the Executive, the citizenry of the country is expected to back such

interventions in the light of the past and present experience wherein the political class (which is supposed to control the executive) has miserably failed to tackle lawlessness and corruption. Finance & Economy

Why did the financial meltdown happen? o The recent report of the Financial Inquiry Commission set up by the US government provides an exhaustive narrative of the crisis and its proximate causes. It found that just prior to the crisis, there was an explosion in risky subprime lending and securitisation, an unsustainable rise in housing prices, widespread reports of egregious lending practices, a dramatic increase in household mortgage debt and an exponential growth in unregulated derivatives, among many other red flags. The commission also identified widespread failures in financial regulation, corporate governance and risk management, lack of transparency, and a systematic breakdown in accountability and ethics as key causes of the crisis. Nothing Global about Nelp-IX o Most global oil majors shunned Indias offer of oil and gas blocks as its patchy exploration record and tax worries deterred potential investors, although crude oils sustained rally usually encourages companies to hunt for hydrocarbons. o BPs recent acquisition of a stake in 23 exploration blocks of Reliance Industries had raised hopes that more big companies would bet on the countrys oil and gas sector, but the only large foreign firm that bid for a block in the ninth round of the New Exploration Licensing Policy (Nelp ) was BG. o Domestic companies dominated the auction, with ONGC set to win five of the eight highly prospective deepwater blocks while private oil major Reliance Industries is seen as the frontrunner in two. o The government received total 74 bids for 33 blocks from 37 companies, including eight foreign firms. o Of the 74 bids, 41 were from private firms and 33 by state-run companies. Experts criticised unstable fiscal policies and the finance ministry's approach towards taxation as a key reason for the poor response. o The government offered 34 blocks in this round, but one shallow-water block received no bids. Of the 34 blocks, eight are deepwater, seven shallow-water and 19 on shore blocks. o India has awarded 235 blocks in the previous eight Nelp rounds, more than half of them which are held by ONGC and OIL. Primer on reserves o Take a look at this ET in the Classroom column that appeared in todays ET.

Environment

Country goes gaga over Tiger population

The 2010 tiger census, unveiled on Monday, raised some hopes for the future of the endangered Royal Bengal Tiger. Tiger population has seen a 20% increase over four years between 2006 and 2010. The All India Tiger Estimation puts the figure of tigers at 1,706. While these numbers would suggest that the previous decline in the number of tigers has been reversed, experts are not convinced. But, even if the increase in tiger population is not contested, what is worrying is the shrinking of the tiger habitat. In 2006, Indias tigers occupied 93,600 square km; it is down to 72,800 square km in 2010. The previous enumeration undertaken in 2006 estimated the total number of tigers at 1,411. The latest census reveals a 12% increase in tiger population (1,580 tigers) in the area surveyed in 2006. The current census takes into account the 70 tigers in the Sunderbans, which had not been assessed in 2006. New areas in Uttarakhand, Maharashtra and Assam were covered in the 2010 census. Several other areas outside tiger reserves and national parks were also reviewed for the first time.

International

Indian geeks in the US heading home? o Today's ET report says that Indian entrepreneurs in Silicon Valley are finding their dreams imprisoned in an immigration warp. o Over half-a-million highly-educated and skilled immigrants are stuck with temporary, non-immigrant work visas like the H-1B, which dont allow them to start a company or even change jobs. Pushed to a corner, they come back to India, where the entrepreneurial climate is far from ideal. o These are people with new business ideas, energy and the drive to succeed in an ecosystem that fosters creativity, but their dreams are shattered by a system which believes they are taking away American jobs. But in reality, this is actually hurting job creation in recessionhit US. o Between 1995 and 2005, 25% of Silicon Valleys startups which had at least one immigrant founder employed nearly 4,50,000 people. The companies generated $52 billion in revenue in 2006. Besides losing some of the brightest minds, US immigration is putting Silicon Valleys innovation hub status in serious jeopardy. So what in a nutshell is the H1B visa enabling or entailing? o The H-1B visa is a non-immigrant employer-sponsored visa for professionals to work in the US for a maximum of six years. o The US issues just 85,000 H-1B visas each year, and the demand is immense. o Dependent spouses on H4 visas are not allowed to work. They don't qualify for a social security number. Consequently they can't get a credit card, a phone connection, etc. and in some cases even a driver's licence. The social and psychological effects are immense. o H-1B visa holders are glued to their employers. They can't change jobs, leave alone open their own company. And if they lose their jobs they have to leave the US immediately with little notice. o Moves are afoot in US to come up with a Startup Bill to help immigrant entrepreneurs. According to a new bill, startup visas will be available to some groups, subject to conditions:

Entrepreneurs living outside the US: If a US investor agrees to financially sponsor their entrepreneurial venture with a minimum in-vestment of $100,000. Two years later, the startup must have created five new American jobs and either have raised over $500,000 in financing or be generating over 500,000 in yearly revenue. Workers on an H-1B visa, or graduates from US universities in science, technology, engineering, mathematics, or computer science: If they have an annual income of at least $30,000 or assets of at least $60,000 and have had a US investor commit investment of at least $20,000 in their venture. Two years later, the startup must have created three new American jobs and either have raised over $100,000 in financing or be generating more than $100,000 in yearly revenue. Foreign entrepreneurs whose business has generated at least $100,000 in sales from the US: Two years later, the startup must have created three new American jobs and either have raised over $100,000 in financing or be generating more than $100,000 in yearly revenue. The investor must be a qualified government entity or a qualified venture capitalist or an angel investor who is a US citizen: He should have made at least two equity investments of at least $50,000 every year for the past three years.

Language lessons

oafish: Adjective o Ill-mannered and coarse and contemptible in behaviour or appearance perfervid: Adjective o Characterized by intense emotion

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28.03.2011
Politics & the Nation

Are IIMs about to be privatized? o If you read this op-ed today, that is the impression one gets. The op-ed rails the attempts by the HRD minister to privatize the IIMs. Some cogent arguments are put forth. Worth a read; though we may not necessarily agree with all of the criticism. The point is, IIMs being the higher institutions of learning that they have become in India, need to constantly be in the forefront of innovation, research and new ideas. Any attempt -- howsoever misconceived it may look -- at trying to better them, should not be lampooned only for the sake of preserving the status-quo. Lets study what is really bad in the proposals and then give up the bad ideas. Not all ideas need be or can be bad. o New ideas that are sought to be tried, need not necessarily be seen as attempts at thwarting the academic freedom that prevails in IIMs. Any impression that an institute is good and happy and at equilibrium with

itself and the world with the way things stand, is a sure recipe for disaster and decline. By their very nature, academic institutions -- especially of the IIM kind -- should be constantly innovating and experimenting. They should ideally be unhappy with the way things are. It is only then that innovation and research are promoted. Look at ISB, Hyderabad. Has more interaction with non-academics at the board level brought it any encumbrances in excelling as an institution of higher learning? Why should we fear that such a thing will happen with IIMs?

Finance & Economy

Sunlight and water to planets energy rescue? o Look at this interesting interaction. Will we see it in our lifetimes? Grids should be passe. Governments and people will be far better off without grids. Pension bill tabled in Parliament o The government moved a step closer to initiating the financial sector reforms it promised in the budget with the introduction of the muchawaited pension and factoring bills in Parliament on Thursday. o The much-awaited Pension Fund Regulatory and Development Authority Bill, 2011, will give a greater legal authority to the pension regulator that has been set up through an executive order, and lacks the legislative sanction it needs to develop the pension sector through greater private participation. o The interim regulator currently overseas the New Pension Scheme, or the NPS, which the government hopes will become the flagship scheme for building a retirement corpus. o So far, the scheme has failed to make a dent in the non-government sector. It manages the retirement savings of central government and many state employees who are on a defined contribution scheme. o The bill had failed to get parliamentary approval in the previous term of Prime Minister Manmohan Singh's government due to strong opposition from its then Left allies. o This time the government has decided to play safe and keep the foreign investment issue outside the bill. o The bill has greater chance of getting through this time as it has the tacit support of the key opposition party, the BJP. On Thursday, the bill could be introduced only with the support of the BJP after the Left opposed its introduction in the Lok Sabha. o The Bill was introduced after a division of votes with 115 of the 159 present supporting it, including 30 from the BJP. Earlier, FM Pranab Mukherjee had urged the opposition to support the Pension Bill. o The government also introduced the Factoring and Assignment of Receivables Bill 2011 that will provide for a consolidated legal framework with specific provisions covering all aspects of the factoring business in the country. o The government is also set to notify the expert body, the Financial Sector Legislative Reforms Commission (FSLRC), which has been set up to

rewrite the countrys financial laws. The 11-member FSLRC will be headed by retired Supreme Court Justice BN Srikrishna and will hold its first meeting on April 5. Among other things, the commission will examine the architecture of the legislative and regulatory system governing the financial sector in India and look at the most appropriate means of oversight over regulators and their autonomy from the government. The commission will submit its report to the FM within 24 months.

How is the NPS superior to EPFO? o The NPS organisational structure with electronic accounts portable across jobs and geography, maintained by a single record keeper at a low cost, asset management flexibility as to both assets and managers, ultralow asset management costs and regulatory oversight make the NPS far superior to the EPFO. Centre moves to restore fiscal order o The finance ministry has moved to impose fiscal discipline on states by asking them to limit their net borrowings in the new financial year. o It has also asked the Central Statistics Office, or CSO, to provide an estimate of the gross state domestic product, or GSDP, of each state for 2011-12, a reflection of the Centres lack of confidence in the numbers put out by the states. o The ministry has asked the states to cap their net borrowings between 3% and 3.5% of GSDP in 2011-12, in line with the recommendations of the 13th Finance Commission. o The Centre had relaxed the fiscal deficit target for states to 3.5 % of GSDP in 2008-09 and further to 4% in 2009-10 in view of the economic slowdown. o But now that the economy is back on track, it wants states to stick to the fiscal consolidation roadmap and achieve the targets set by the Finance Commission.

Language lessons

burnish: Noun o The property of being smooth and shiny o Verb: Polish and make shiny prole: Noun o A member of the working class (not necessarily employed)

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24.03.2011
Politics & the Nation

Rajat Gupta is getting painted into a tight corner

o o

Goldman Sachs Chief Executive Lloyd Blankfein made his muchanticipated appearance at Raj Rajaratnams trial, telling jurors that former director Rajat Gupta leaked inside details to the accused hedge fund manager. Blankfein was called to testify by prosecutors in Manhattan federal court. The Goldman chief told jurors that Gupta violated Goldman confidentiality policies by revealing to Rajaratnam the boards June 2008 discussion of a possible merger with Wachovia Corp or an insurance company. Gupta, a former worldwide managing director at consulting firm McKinsey & Co, has denied the SECs accusations and sued the agency last week. Goldman has not been accused of wrongdoing.

Finance & Economy

Country is sitting on grain bomb, warns the CACP o The Commission for Agricultural Costs and Prices (CACP) warned that the country's overflowing grain bins will lead to a crisis if the government did not come up with a plan to dispose of the stored grain. o It said the Centre, which is the biggest buyer of grain in the country, was sitting over huge grain inventories and that the problem will compound further when the wheat procurement begins in a few days. Indias wheat production is expected to touch a record 81.47 million tonnes (mt) this year. o The disclosure is indicative of an increasing concern in the government on the subject and comes barely a year after the country faced an acute grain supply strain, which resulted in double-digit inflation and spiraling food prices. o The CACP computed the cost to the government on the storage of additional grain based on current economic cost of around Rs. 20 per kg for rice and Rs. 16 for a kg of wheat. o According to government estimates, foodgrain harvest in 2010-11 would be to the tune of 232mt, second highest of all time. o The government has set a procurement target of 26.3mt, but storage is woefully inadequate and incentive schemes for the private sector slow and unattractive. The government had sanctioned 150 lakh tonne of additional storage facility, but less than 1% of it has been constructed so far. o Last year, archaic distribution rules forced release of only a small amount of grain despite high inflation. This led to wastage of about 50,000 tonnes of wheat. On potential growth rate and its link to inflation o Some economists link the persistently high prices to the pace of economic growth. They say Indian economy is expanding at a rate beyond its potential growth rate. ET examines the concept and its relationship with prices in today's ET in the Classroom column. Interesting concept to learn. An noteworthy criticism of our petroleum sector

Successive petroleum ministers have been alleged to milking these companies for political largesse. Skewed policies geared towards the vote bank have consistently killed competition, creating an uneven play for both public and private sectors. How do we take India on a $45 trillion path? o Take a look at this interesting article that appeared in todays ET. Well worth a read.
o

Obituary

Liz Taylor o Elizabeth Taylor, the violet-eyed film goddess whose sultry screen persona, stormy personal life and enduring fame and glamour made her one of the last of the old-fashioned movie stars and a template for the modern celebrity, died Wednesday at age 79. She was surrounded by her four children when she died of congestive heart failure at Cedars-Sinai Medical Center, where she had been hospitalised for about six weeks. o Taylor was the most blessed and cursed of actresses, the toughest and the most vulnerable. She had extraordinary grace, wealth and voluptuous beauty, and won three Academy Awards, including a special one for her humanitarian work. She was the most loyal of friends and a defender of gays in Hollywood when AIDS was still a stigma in the industry and beyond. But she was afflicted by ill health, failed romances (eight marriages, seven husbands) and personal tragedy. o Her more than 50 movies included unforgettable portraits of innocence and of decadence, from the childrens classic National Velvet and the sentimental family comedy Father of the Bride to Oscar-winning transgressions in Whos Afraid of Virginia Woolf? and Butterfield 8. o The historical epic Cleopatra is among Hollywoods greatest onscreen fiascos and a landmark of offscreen monkey business. o The London born actress was a star at age 12, a bride and a divorcee at 18, a superstar at 19 and a widow at 26. o Taylors ailments wore down the grudges. She underwent at least 20 major operations and she nearly died from a bout with pneumonia in 1990. In 1994 and 1995, she had both hip joints replaced, and in February 1997, she underwent surgery to remove a benign brain tumour. In 1983, she acknowledged a 35-year addiction to sleeping pills and pain killers. Taylor was treated for alcohol and drug abuse problems at the Betty Ford Clinic in Rancho Mirage, California. o Her advocacy for AIDS research and for other causes earned her a special Oscar, the Jean Hersholt Humanitarian Award, in 1993.

International

Global wheat output figures o Global wheat output is estimated to rise by 3.4% to 676 million tonnes in 2011 as high global prices led to an increase in the area under coverage in many countries, United Nation's body Food and Agriculture Organisation said on Wednesday.

The production in 2011 would still be below the bumper harvests in 2008 and 2009. Besides rise in area, FAO expects that productivity would increase in countries which were affected by drought in 2010.

23.03.2011
Politics & the Nation

Warren Buffet and Bill Gates are in India o Billionaire investor Warren Buffett said he is looking forward to using the enormous cash pile of flagship firm Berkshire Hathaway to acquire companies in India, which he described as a large, and not an emerging, market. o The Omaha, Nebraska-based Berkshire has made two large acquisitions in the past one year, buying chemicals additive firm Lubrizol for about $9 billion a few days ago and railroad firm Burlington Northern Santa Fe for about $26.5 billion last year. The cash pile on its books is estimated at $38.2 billion. o Buffett will also use the India visit to join his billionaire friend and Microsoft founder Bill Gates on a mission to push wealthy Indians to pledge money for a global philanthropic drive called the Giving Pledge. o Buffett begins his maiden India trip with a visit to metal-cutting tools maker TaeguTec India Pvt Ltdhis only investment in the country till date on Wednesday. His other major India connection is the recent tie-up with Bajaj Allianz to sell auto insurance policies. o On Thursday, after wrapping up his Bangalore visit, Buffett will fly to Delhi, where he will hold a joint press conference with Gates and then speak with some leading Later, in the afternoon, he is expected to meet Prime Minister Manmohan Singh. ED finds Hasan Ali links with politicians and babus o The Enforcement Directorate has found Pune-based stud farm owner Hasan Ali Khan has links with middle level politicians and bureaucrats. Some of these politicians are believed to be from as far as Bihar. o Khan, accused of stashing away black money worth $8 billion in Swiss banks, is being interrogated by ED under the Prevention of Money Laundering Act, or PMLA, and Foreign Exchange Management Act, or Fema. His custodial remand, which came to an end on Monday, was extended by three days by the Supreme Court.

Finance & Economy

Zero rating of taxes explained o A country does not export its taxes and, hence, exports would be zerorated under GST. This means the final product or service will be spared tax, and taxes paid on all inputs refunded. o The above explanation may sound a little confusing to the uninitiated in taxation. Lets try a bit. Suppose there is a series of transactions before a commodity is exported. Under GST, at every stage of this series, tax

has to be levied, duly deducting whatever tax is paid on the purchase value. When the commodity is finally exported, there is no tax on the sale; but the exporter would have paid taxes on his purchases. When we say exports are zero rated, what it means is that the exporter has to be refunded the tax paid by him on his purchases which were exported out of the country.

Some very good thoughts on chasing black money o Look at this face off column in today's ET. Worth a read. Should not miss it. Some interesting snippets about our healthcare o According to NSO estimates, upto 79% cost of healthcare in rural areas is due to the cost of medicines and this situation is further compounded by the fact that 78% of the total expenditure on the healthcare is out of pocket with 65% of the Indian population, as per WHO estimates, not having access to modern health care. o Various state governments spend only between 8% and 30% of health expenditure on drugs, thereby leaving patients with little choice but to buy expensive drugs from the market. GST Bill introduced in Parliament o State governments will enjoy virtual veto power on matters concerning the proposed goods and services tax, with the Centre ceding ground to opposition-ruled states on the Constitutional Amendment Bill in an attempt to build consensus in Parliament. The legislation stipulates that every decision of the goods and services council, a joint decision making body of states and Centre, must be supported by all the members present, giving every state the power to block a proposal. o The government will need the support of a large opposition party or block to garner two-thirds majority in Parliament, needed for making constitutional changes. The new tax regime also needs to be ratified by at least 15 state assemblies. Nine states, mostly ones ruled by main opposition party BJP, have opposed the constitutional amendments citing loss of fiscal autonomy. o The finance ministry seems to have bent backwards to get states to support the legislation that will help it roll out the proposed goods and services tax. The Centres position seems to have taken opposition-ruled states by surprise. o The Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 will give the states the power to tax services while the Centre will get the authority to levy tax on retail trade. At present, states do not have the power to tax services while the Centre cannot impose a levy on retail sales of goods.

22.03.2011
Politics & the Nation

On the state of reservation politics in India o Take a look at this very well written ET editorial. A must read. A comment that is worth our noting... o The idea of affirmative action, or positive discrimination in favour of the downtrodden, has been subsumed by patronage politics in India. The reservation policy, in effect, has become a battleground with political parties casting the electorate as competing caste groups and these social groups, in turn, striving for ever more backwardness. Some facts on phone tapping o Phone intercepts are permissible under Section 5(2) of the Indian Telegraph Act. The Union home secretary or the home secretary of a state can allow interception. o A phone can be tapped for 60 days. Can be extended by another 60 days on credible evidence. o Allowed only for public safety & integrity of the country. Three years imprisonment & fine for unlawful tapping. Penalty could be up to 50 cr. o Between 7,500 and 9,000 phone taps are authorised by the Centre every month. Government says tapping does not exceed six months. Centre may list about 10 PSUs in FY12 o The department of disinvestment plans to list as many as 10 central public sector units that have turned profitable to raise the budgeted Rs. 40,000 crore from disinvestment in the next fiscal. o There are 158 profitable state-run companies, of which only 47 are listed. o The net profit of all the 217 central public sector units rose by 11% to Rs. 92,593 crore in 2009-10, according to data released by the department of public enterprises. These firms had made a net profit of Rs. 83,867 crore in the previous year.

Finance & Economy

Look at our banking strength o As on March 31, 2009, we had 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks (RRBs), four local area banks (LABs), 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks. o In spite of these impressive numbers, more than half of our population is not having bank accounts. Rajat Gupta quits as ISB Chairman o It was just yesterday that we were noting about this prospect. Now it is confirmed. Rajat Gupta, the former worldwide managing director of McKinsey & Co, has decided to resign as the chairman of Indian School of Business. Guptas resignation comes three weeks after the US Securities and Exchange Commission (SEC) filed administrative civil insider trading charges against him. The ISB executive board will meet on April 2 in Hyderabad to decide on the new chairman.

Gupta, one of the first Indian Americans to become the CEO of a big US firm, has been charged with leaking secret details to Galleon Group hedge fund manager Raj Rajaratnam on Warren Buffetts plan to invest $5 billion in Goldman Sachs at the height of the financial crisis. The deal helped ensure Goldmans stability while Galleon Group made a profit of $18 million, according to US SEC charges. This is not for the first time ISB is in the spotlight for the wrong reasons. In October 2009, an executive board member, Anil Kumar, then director at consulting firm McKinsey & Co, was charged on the same insider trading scheme involving Galleon Group, following which he resigned from the board. In January 2009, ISBs then dean M Rammohan Rao resigned as dean after Satyam Computer Services founder Ramalinga Raju admitted to inflating profits and revenue. Rao was a member of the Satyam board.

National interest paramount, not MNC's contractual rights; rules SC o The Supreme Court has ruled that private companies cannot complain about violation of their contractual rights by government when national interest is involved in awarding contracts for public projects involving taxpayers' massive money. o A bench of justices VS Sirpurkar and TS Thakur in a judgment expressed anguish at the manner in which the Tehri Pump Storage Plant could not be taken up for the past three and half years due to the legal battle involving two MNCs Voith GMBH (respondent No.1) and Alstom (respondent No.2). o The apex court passed the judgment while staying an Uttarakhand High Court order which had halted the tendering process adopted by Tehri Hydro Development Corporation after Voith Hydro GMBH challenged the process as being in favour of rival bidder Alstom. In this case, the notice inviting tenders on the prime turn-key execution was issued on August 31, 2007. But the two companies, which were finally shortlisted for the contract, fought legal battles in the high court and the apex court accusing THDC of being biased in favour of the other.

21.03.2011
Politics & the Nation

Western forces pound Libya; India calls for restraint o Western forces pounded Libyas air defences and patrolled its skies on Sunday, but their day-old intervention hit a serious diplomatic setback as the Arab League chief condemned the bombardment of civilians. o European and US forces unleashed warplanes and cruise missiles against Gaddafi on Saturday in a United Nations-backed intervention to prevent the veteran leader from killing civilians as he fights an uprising against his 41-year rule. But Arab League chief Amr Moussa said what was happening was not what Arabs had envisaged when they called for the imposition of a no-fly zone over Libya. Arab backing for a no-fly zone provided crucial underpinning for the passage of the UN Security Council resolution last week that paved the way for the Western intervention, the biggest against an Arab country since the 2003 invasion of Iraq.

Withdrawal of that support would make it much harder to pursue what some defense analysts say could in any case be a difficult, open-ended campaign with an uncertain outcome.

Galleon case: Gupta sues SEC o Rajat K Gupta, a former director of Goldman Sachs and Procter & Gamble who has been accused by the Securities and Exchange Commission of leaking confidential information about those companies, on Friday sued the agency. Guptas complaint against the agency, filed in US District Court in Manhattan, contends that the SEC violated his rights by bringing its case under the Dodd-Frank Act instead of suing in a court. Dodd-Frank allows the agency to pursue its case in a special administrative proceeding. o Gupta is also the Chairman of the Indian School of Business based in Hyderabad. Markets are rife with rumours that he has offered to quit as Chairman of ISB too. o Gupta, 62, is accusedof tipping Raj Rajaratnam, the Galleon Group hedgefund manager now on trial for securities fraud and conspiracy charges, about Goldmans and P&Gs earnings, as well as information about Warren Buffetts $5 billion in investment in Goldman, just minutes after the board approved it.

Finance & Economy

Some thoughts on financial inclusion o Take a look at this ET editorial. It describes how regulation is actually stunting the outreach of banks to the unbanked. It presents the way forward. Worth a read. Varieties of teas o First flush tea: First Flush refers to the first picking season of the year. Typically around March. First Flush Indian tea typically has a rich and fresh aroma. The flush might have a marginal green tint. Analysts say that first flush tea is generally used for gifting purpose during the Easter time. Incidentally, the first flush teas fetch price anything between 2,000 and 12,000 per kg. With GJM (Gorkha Janmukti Morcha) calling for a ban on movement of tea now, demanding more wages and inclusion of the Terai and the Dooars regions in the north Bengal jurisdiction, Darjeeling tea companies are a worried lot as their first flush teas will lose international clientele. o Orthodox tea: Orthodox tea refers to either hand-processed tea or tea that is rolled with machinery in a manner that mimics hand-rolling. Most specialty tea is made with orthodox production methods. Orthodox tea is generally known for being more nuanced and complex than CTC tea. All whole-leaf tea is made with orthodox production methods. o CTC tea: (Crush, Tear, Curl) The opposite of orthodox tea is CTC tea, which is machine-processed in a way that chops the leaves into uniformly-sized bits that are typically used for low-grade teabags.

Goldman Sachs to repay Buffetts expensive $5-billion investment o Goldman Sachs has decided to repay Buffet's money that it took during the darkest days of financial crisis. The deal was a lifeline for Goldman but it came at a hefty price, namely a 10% annual dividend. It was due to expire in 2013. Because of its high cost, Goldman reportedly decided to repay it early. o In total, the investment netted the billionaire investor $1.7 billion, or approximately $187,000 a day.

International

Elections for Tibetan government in exile o Do you know that there is a current prime minister-in-exile for Tibetans? It is Samdhong Rinpoche. He served two terms. The Tibetan charter bars an individual from holding the office for more than that period. o With the announcement by Dalai Lama that he is stepping down as the political leader of Tibetans, the role prime minister in exile assumes significance. Currently elections are on for the post. o The three candidates in the fray for the post of the prime minister of the Tibetan government-in-exile, which is known as Kalon Tripa in Tibetan language, are Lobsang Sangay, Tenzin Namgyal Tethong and Tashi Wangdi. Lobsang Sangey is a senior fellow of Harvard Law School, whereas Tenzin Namgyal Tethong is a diplomat also settled in the US. Tashi Wangdi was the Dalai Lamas representative in Brussels, New York and New Delhi

18.03.2011
Politics & the Nation

Expert take on the high risk perception in public about nuclear power plants o There are two reasons for this. One is that while the probability of a catastrophic nuclear plant accident is very small, the damage due to a meltdown could be very high. The general fear is that it could be as high as what happened in Hiroshima or Nagasaki. However, this is misleading. When Hiroshima was bombed, people had no advance warning. At Fukushima, the population in a 20-km radius is already evacuated. So, even if there is a meltdown, the loss of life would be limited. Of course, these will be a high loss of property. o The second reason why people are wary of the risk of a nuclear power plant is that it is a risk not knowingly and willingly taken by people. People who may be affected by a nuclear power plant accident feel that it is a risk imposed on them. o One serious accident in a nuclear plant can lead to large-scale and longlasting impacts impacts that do not differentiate between the rich and the poor or the young and the old. But it is also true that our inability to provide clean energy sources to the masses is resulting in around 4,00,000 premature deaths annually from indoor air pollution largely impacting children under 6. It has also been estimated that air pollution in urban areas leads to approximately 50,000 premature deaths. The key

difference between these casualties and those arising from a nuclear accident is that these are widely dispersed geographically and spread through the year, although repeated annually.

Opposition demands PM's resignation over WikiLeaks o The latest tranche of documents from WikiLeaks, detailing use of cash for purchasing votes for the UPA regime during the 2008 trust vote, has compounded the woes of the scandal-scarred Manmohan Singh government. The Opposition, which has been homing in on Manmohan Singh as a political punching bag, seized upon the latest revelation to demand his resignation. o Finance minister Pranab Mukherjee, who spoke on the issue in the Rajya Sabha, rejected the Opposition's demand for the government's resignation. "The cables were correspondence between a sovereign government and its mission abroad. They enjoyed diplomatic immunity and it is not possible for the government to either confirm it or deny it," he said. Mukherjee also said the charges pertained to the 14th Lok Sabha but the government of the day was responsible to the 15th Lok Sabha.

Finance & Economy

RBI's midquarter monetary policy review o The Central Bank has raised by 25 bps the repo and the reverse repo rates, as predicted. o The Central Bank has identified three tasks for the government to keep inflation in check and sustain growth. These are: 1. Keep a lid on subsidies to keep the overall fiscal deficit in check, so as to leave room for robust private sector investment; 2. Remove fuel subsidies, so as to stop feeding inflationary expectations (after all, as global crude prices keep rising, domestic retail prices have to reflect them sooner or later); and 3. Invest to raise farm productivity, to ease food inflation. o The central bank notes with satisfaction that the Budget for 2011-12 does promise to make progress on these three vital fronts, and calls on the government to deliver on the promises made. Are FDI inflows disappearing? o Manoj Pant discusses the issue in his op-ed today. He says that the alarm on this count is misplaced. He gives some solid reasons as to why this is so. Take a look. An interesting read. Government considering bio-shields against tsunami o The Environment Ministry is considering the idea of developing bioshields comprising mangrove and non-mangrove species in coastal areas adjoining critical infrastructure projects such as power plants and oil storage depots. o The idea of promoting mangroves and other biological shields to provide a speed breaker was suggested by agricultural scientist and Rajya Sabha MP MS Swaminathan. The suggestion is being followed up by the

expert group appointed by Environment Minister Jairam Ramesh to evaluate additional safeguards against the risk of tsunami. Swaminathan has also suggested that the coastal areas adjoining the nuclear plants could be declared as critically vulnerable coastline. The senior agricultural scientist said that the idea of using mangroves as line of defence against coastal storms and tsunamis came following a discussion with older generation of Japanese scientists in 1989.

International

On nuclear accidents and incidents o The Nuclear Regulatory Commission in the United States generally separates unplanned nuclear events into two classes, incidents and accidents. Incidents are unforeseen events and technical failures that occur during normal plant operation and result in no off-site releases of radiation or severe damage to equipment. Accidents refer to either off-site releases of radiation or severe damage to plant equipment. o The Nuclear Regulatory Commission in the United States generally separates unplanned nuclear events into two classes, incidents and accidents. Incidents are unforeseen events and technical failures that occur during normal plant operation and result in no off-site releases of radiation or severe damage to equipment. Accidents refer to either off-site releases of radiation or severe damage to plant equipment. Global tremors from Japan's woes o Beijing has suspended approval for nuclear power plants across the country, putting brakes on a development programme that accounts for almost 40 % of the worlds planned reactors. In the US, billions in loan guarantees as well as the first wave of new plant licences since the Three Mile Island accident in 1979 are in jeopardy. Germany has idled one-third of its nuclear capacity. Spain, Switzerland, the UK, the US and India have announced safety reviews. o The yen is surging ahead (current $1 = 79Y is the highest since World War II) due to Japanese insurance companies repatriating foreign assets to finance claims payouts and Japanese investors repatriating funds for reconstruction. o Not just these, there are quite a few immediate and mid term possibilities. Take a look at them in this article. While some of it may look like counting the money while the corpse is still there, experts have to do their job!