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http://indiancurrentaffairs.blogspot.com/

31.03.2011

Politics & the Nation

India wins the match but Pakistan walks away with the peace awardo 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 initiativeand invited Manmohan Singh to visit his country. This will be worked outthrough diplomatic channels. Sporting ties between the two nations arealso set to be revived with Gilani inviting the Indian cricket team to play inPakistan.

Why is 'merit' not a reasonable consideration when it comes to expecting womento 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% isdeemed to be meritorious. A person from a disadvantaged group, whogets 82%, is said to lack merit even if he has managed the performancewithout paying for expensive tuitions.

o In the case of independent directors, claims about selecting people onmerit sound even more hollow. First, promoterrun companies in Indiaoverwhelmingly prefer to select independent directors from amongstfriends and associates.

o Secondly, retired bureaucrats, serving or retired corporate executives andcelebrities, who are the second-most important source of independentdirectors, also tend to be people known to the promoter.

o Thirdly, independent directors are not so independent of managementbecause it is management that selects them and compensates themhandsomely. In this situation, the so-called merit has little bearing on thekey outcome, namely, good governance.

Finance & Economy

The issues that need to be addressed by a new policy to revive the PPP mode of

executing projectso First, governments, mostly at the state level, allow private players who

win in competitive auctions to wangle sweetheart agreements with thestate thereafter. This has to stop. There must be no post-bid revisions ofthe contract.

o Second, governments must take away projects, or impose strict penaltieson private players if they fail to meet project milestones.

o Third, almost every state has its own PPP department, each functioningwith its own set of rules. These rules have to be harmonised among
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states, to make sure that there is no race to the bottom. If states startcompeting among themselves to give sops to attract projects, the qualityof governance and state revenues will slide dramatically.

o Finally, land acquisition has become a political minefield. A new law tohumanise Indias colonial-era land acquisition rules is to be made. Itshould provide for some guaranteed income for the dispossessed.

India's strengths and weaknesses in manufacturingo India was the ninth largest manufacturer in the world in 2010 in terms of

manufacturing value added (MVA), says the United Nations IndustrialDevelopment Organisation, ahead of all emerging markets save China.

o But India accounts for just about 1.8% of the world MVA. China accountsfor 15.4%, and the US 23.3%.

o Similarly, India disappoints on per capita productivity: average output wasestimated at $107 compared with Chinas $841.6.

Hemline forecastingo 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 economyo Experts say that every extra $10 in oil prices increases the governments

borrowing requirements by Rs. 36,000 crore and the fiscal deficit by0.3%.

Islamic bankingo ET in the Classroom on this concept.

International

Economic calculus of Japans tragedyo 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 indamage (around $102 billion), equating to around 2.5% of Japans GDPat the time.

o As the level of insurance cover is limited, the bulk of the reconstructioncost 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 $900billion) to finance reconstruction.

o The repatriation thesis sees US interest rates rising as the Japanese selldollar bonds and the yen increasing in value as the dollars are convertedinto local currency. But it is not clear that this actually happened followingthe Kobe earthquake. Currently, there are no signs that the government,
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insurance companies or private investors are selling or plan to sell foreignassets to finance the rebuilding.

o If the government chooses to finance the rebuilding by raising debt, thenattention will be on the increasingly parlous state of Japans publicfinances.

o 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 inunsuccessful efforts to restore the Japanese economy to health after thecrash of the bubble economy in 1989. The cost of re-construction mayadd additional debt, of as much as 5-10% of the GDP.

o Japans current debt position is very different from the time of the Kobeearthquake. In 1995, Japans debt levels were much lower (netgovernment debt was around 25% versus 140% today). In addition, theglobal economy was in a more robust position with stronger economicgrowth. These factors helped Japan absorb the effects of the Kobedisaster. Japans three problem Ds, depression, deflation anddemography, have now been joined by two new Ds, disaster and

destruction.

Language lessons

anodyne: Adjectiveo Capable of relieving pain; Noun: A medicine used to relieve pain

portmanteau: Nouno A portmanteau is a blend of two (or more) words or morphemes into one

new word. A portmanteau word typically combines both sounds andmeanings, as in smog, coined by blending smoke and fog. Moregenerally, it may refer to any term or phrase that combines two or moremeanings. In linguistics, a portmanteau is defined as a single morphwhich represents two or more morphemes.

sotto voce: Adverbo In an undertoneo 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 ofspectrum resellers.

0 comments Listen to this article

29.03.2011


Cricket is after all a game; enjoy it as oneo We all know that a cricket match between the traditional rivals -- India and

Pakistan -- evokes more than enthusiasm. Is that required at all? Thefans on both sides of the border, aside from some ill-thought commentsfrom people on the field too, contribute a lot to the rise in temperature.
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Today, its more important than ever to sit back and enjoy a game ofcricket as a game and nothing more. All the best to the game and thespectators. May their wishes be fulfilled.

o The following comments by Mukul Kesavan in todays ET are well worthour notice in this regard. Take them well for their ability to represent thecollective feelings of the reasonable people. But enjoy the game as a

game.o Most of this (cricket matches between India and Pakistan being reduced

to a blood sport sustained by an excitement born of desperation and fearand loathing) has to do with the insufficiently bifurcated histories of Indiaand Pakistan. The quarrel over Kashmir, nightmares like the slaughter of26/11, the residual Indian belief that Partition was a tragic cock-up andthe furious Pakistani rejection of the idea that their nation was a mistake,means that Indians and Pakistanis watch their two countries play in astate of bilious delirium.

o The disproportion between fact (losing a cricket match) and feeling, theabsurdly inflated sense of joy and despair that characterises any India-Pakistan ODI, makes every such match an occasion to be avoided by

sensible people.o Pakistani cricket is so oppressively freighted with nationalism at the

moment that its unreasonable to expect the team or its captain to treatWednesdays encounter as just another game. To be fair to thePakistanis, hundreds of millions of Indian spectators will also see thematch as a kind of proving ground for nationalism.

SC comes down heavily on Governmento While looking into the progress report submitted by the ED, the SC

observed that the probe should be widened to include the other namesthat have popped up in ED's report. It has also questioned whetherGovernment had any in principle objection to the formation of a SIT(Special Investigation Team) comprising of officers from various agencieslike the RAW, CBI, IB and ED to go into the wider issue of black moneybeing stashed abroad by Indians.

o The SC deferred its decision on the formation of SIT till the next date ofhearing when the ED is expected to submit another progress report.

o Dealing with another case, the Supreme Court has said that politicalparties supporting an agitation should be derecognised if public propertyis destroyed during the stir.

o The court indicated that it would frame guidelines fixing responsibility onstate governments for their failure to deal with agitationists destroyingpublic property.

o It asked the Haryana government to explain why it should not pay the lossincurred by Railways during the course of 11-day stir organised by 12'khap' panchayats against booking of some upper caste people inconnection with the Mirchpur Dalit killings case.

o The court also sought the responses of all parties to suggest guidelinesand on fixing responsibility for damage done to public property duringagitation.

o Though the response of the SC may look too intrusive on the domain ofthe Executive, the citizenry of the country is expected to back such

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interventions in the light of the past and present experience wherein thepolitical class (which is supposed to control the executive) has miserablyfailed 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 itsproximate causes. It found that just prior to the crisis, there was anexplosion in risky subprime lending and securitisation, an unsustainablerise in housing prices, widespread reports of egregious lending practices,a dramatic increase in household mortgage debt and an exponentialgrowth in unregulated derivatives, among many other red flags. Thecommission also identified widespread failures in financial regulation,corporate governance and risk management, lack of transparency, and asystematic breakdown in accountability and ethics as key causes of thecrisis.

Nothing Global about Nelp-IXo 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 huntfor hydrocarbons.

o BPs recent acquisition of a stake in 23 exploration blocks of RelianceIndustries had raised hopes that more big companies would bet on thecountrys oil and gas sector, but the only large foreign firm that bid for ablock 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 ofthe eight highly prospective deepwater blocks while private oil majorReliance 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, sevenshallow-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 todaysET.

Environment

Country goes gaga over Tiger population

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o The 2010 tiger census, unveiled on Monday, raised some hopes for thefuture of the endangered Royal Bengal Tiger. Tiger population has seen a20% increase over four years between 2006 and 2010. The All India TigerEstimation puts the figure of tigers at 1,706. While these numbers wouldsuggest that the previous decline in the number of tigers has beenreversed, experts are not convinced. But, even if the increase in tiger

population is not contested, what is worrying is the shrinking of the tigerhabitat. In 2006, Indias tigers occupied 93,600 square km; it is down to72,800 square km in 2010.

o The previous enumeration undertaken in 2006 estimated the total numberof tigers at 1,411. The latest census reveals a 12% increase in tigerpopulation (1,580 tigers) in the area surveyed in 2006. The currentcensus takes into account the 70 tigers in the Sunderbans, which had notbeen assessed in 2006. New areas in Uttarakhand, Maharashtra and

Assam were covered in the 2010 census. Several other areas outsidetiger 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 allowthem to start a company or even change jobs. Pushed to a corner, theycome back to India, where the entrepreneurial climate is far from ideal.

o These are people with new business ideas, energy and the drive tosucceed in an ecosystem that fosters creativity, but their dreams areshattered 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. Thecompanies generated $52 billion in revenue in 2006. Besides losing someof the brightest minds, US immigration is putting Silicon Valleysinnovation hub status in serious jeopardy. So what in a nutshell is the H1-B visa enabling or entailing?

o The H-1B visa is a non-immigrant employer-sponsored visa forprofessionals 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 isimmense.

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 creditcard, 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 haveto leave the US immediately with little notice.

o Moves are afoot in US to come up with a Startup Bill to help immigrantentrepreneurs. According to a new bill, startup visas will be available tosome groups, subject to conditions:

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o Entrepreneurs living outside the US: If a US investor agrees to financiallysponsor 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 begenerating over 500,000 in yearly revenue.

o Workers on an H-1B visa, or graduates from US universities in science,

technology, engineering, mathematics, or computer science: If they havean annual income of at least $30,000 or assets of at least $60,000 andhave had a US investor commit investment of at least $20,000 in theirventure. Two years later, the startup must have created three new

American jobs and either have raised over $100,000 in financing or begenerating more than $100,000 in yearly revenue.

o Foreign entrepreneurs whose business has generated at least $100,000in sales from the US: Two years later, the startup must have createdthree new American jobs and either have raised over $100,000 infinancing or be generating more than $100,000 in yearly revenue.

o The investor must be a qualified government entity or a qualified venturecapitalist 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 pastthree years.

Language lessons

oafish: Adjectiveo Ill-mannered and coarse and contemptible in behaviour or appearance

perfervid: Adjectiveo Characterized by intense emotion


28.03.2011


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. Somecogent arguments are put forth. Worth a read; though we may notnecessarily agree with all of the criticism. The point is, IIMs being thehigher institutions of learning that they have become in India, need to

constantly be in the forefront of innovation, research and new ideas. Anyattempt -- 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. Anyimpression that an institute is good and happy and at equilibrium with
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itself and the world with the way things stand, is a sure recipe for disasterand decline. By their very nature, academic institutions -- especially ofthe IIM kind -- should be constantly innovating and experimenting. Theyshould ideally be unhappy with the way things are. It is only then thatinnovation and research are promoted.

o Look at ISB, Hyderabad. Has more interaction with non-academics at the

board level brought it any encumbrances in excelling as an institution ofhigher learning? Why should we fear that such a thing will happen withIIMs?

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 withoutgrids.

Pension bill tabled in Parliamento The government moved a step closer to initiating the financial sector

reforms it promised in the budget with the introduction of the much-awaited pension and factoring bills in Parliament on Thursday.

o The much-awaited Pension Fund Regulatory and Development AuthorityBill, 2011, will give a greater legal authority to the pension regulator thathas been set up through an executive order, and lacks the legislativesanction it needs to develop the pension sector through greater privateparticipation.

o The interim regulator currently overseas the New Pension Scheme, or theNPS, which the government hopes will become the flagship scheme forbuilding a retirement corpus.

o

So far, the scheme has failed to make a dent in the non-governmentsector. It manages the retirement savings of central government andmany state employees who are on a defined contribution scheme.

o The bill had failed to get parliamentary approval in the previous term ofPrime Minister Manmohan Singh's government due to strong oppositionfrom its then Left allies.

o This time the government has decided to play safe and keep the foreigninvestment issue outside the bill.

o The bill has greater chance of getting through this time as it has the tacitsupport of the key opposition party, the BJP. On Thursday, the bill couldbe introduced only with the support of the BJP after the Left opposed itsintroduction in the Lok Sabha.

o

The Bill was introduced after a division of votes with 115 of the 159present supporting it, including 30 from the BJP. Earlier, FM PranabMukherjee had urged the opposition to support the Pension Bill.

o The government also introduced the Factoring and Assignment ofReceivables Bill 2011 that will provide for a consolidated legal frameworkwith specific provisions covering all aspects of the factoring business inthe country.

o The government is also set to notify the expert body, the Financial SectorLegislative Reforms Commission (FSLRC), which has been set up to

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rewrite the countrys financial laws. The 11-member FSLRC will beheaded by retired Supreme Court Justice BN Srikrishna and will hold itsfirst meeting on April 5.

o Among other things, the commission will examine the architecture of thelegislative and regulatory system governing the financial sector in Indiaand look at the most appropriate means of oversight over regulators and

their autonomy from the government.o 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 lowcost, asset management flexibility as to both assets and managers, ultra-low asset management costs and regulatory oversight make the NPS farsuperior to the EPFO.

Centre moves to restore fiscal ordero 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 for2011-12, a reflection of the Centres lack of confidence in the numbersput out by the states.

o The ministry has asked the states to cap their net borrowings between3% and 3.5% of GSDP in 2011-12, in line with the recommendations ofthe 13th Finance Commission.

o The Centre had relaxed the fiscal deficit target for states to 3.5 % ofGSDP in 2008-09 and further to 4% in 2009-10 in view of the economicslowdown.

o

But now that the economy is back on track, it wants states to stick to thefiscal consolidation roadmap and achieve the targets set by the FinanceCommission.

Language lessons

burnish: Nouno The property of being smooth and shinyo Verb: Polish and make shiny

prole: Nouno A member of the working class (not necessarily employed)


24.03.2011


Rajat Gupta is getting painted into a tight corner
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o Goldman Sachs Chief Executive Lloyd Blankfein made his much-anticipated appearance at Raj Rajaratnams trial, telling jurors that formerdirector Rajat Gupta leaked inside details to the accused hedge fundmanager.

o Blankfein was called to testify by prosecutors in Manhattan federal court.o The Goldman chief told jurors that Gupta violated Goldman confidentiality

policies by revealing to Rajaratnam the boards June 2008 discussion of apossible merger with Wachovia Corp or an insurance company.

o 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 CACPo The Commission for Agricultural Costs and Prices (CACP) warned that

the country's overflowing grain bins will lead to a crisis if the governmentdid 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, wassitting over huge grain inventories and that the problem will compoundfurther when the wheat procurement begins in a few days. Indias wheatproduction is expected to touch a record 81.47 million tonnes (mt) thisyear.

o The disclosure is indicative of an increasing concern in the governmenton the subject and comes barely a year after the country faced an acutegrain supply strain, which resulted in double-digit inflation and spiralingfood prices.

o The CACP computed the cost to the government on the storage ofadditional 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 slowand unattractive. The government had sanctioned 150 lakh tonne ofadditional storage facility, but less than 1% of it has been constructed sofar.

o Last year, archaic distribution rules forced release of only a small amountof grain despite high inflation. This led to wastage of about 50,000 tonnesof wheat.

On potential growth rate and its link to inflationo Some economists link the persistently high prices to the pace of

economic growth. They say Indian economy is expanding at a ratebeyond its potential growth rate. ET examines the concept and itsrelationship with prices in today's ET in the Classroom column.Interesting concept to learn.

An noteworthy criticism of our petroleum sector

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o Successive petroleum ministers have been alleged to milking thesecompanies for political largesse. Skewed policies geared towards the votebank have consistently killed competition, creating an uneven play forboth 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.

Obituary

Liz Tayloro Elizabeth Taylor, the violet-eyed film goddess whose sultry screen

persona, stormy personal life and enduring fame and glamour made herone of the last of the old-fashioned movie stars and a template for themodern celebrity, died Wednesday at age 79. She was surrounded by herfour children when she died of congestive heart failure at Cedars-SinaiMedical Center, where she had been hospitalised for about six weeks.

o Taylor was the most blessed and cursed of actresses, the toughest andthe most vulnerable. She had extraordinary grace, wealth and voluptuousbeauty, and won three Academy Awards, including a special one for herhumanitarian work. She was the most loyal of friends and a defender ofgays in Hollywood when AIDS was still a stigma in the industry andbeyond. But she was afflicted by ill health, failed romances (eightmarriages, seven husbands) and personal tragedy.

o Her more than 50 movies included unforgettable portraits of innocenceand of decadence, from the childrens classic National Velvet and thesentimental family comedy Father of the Bride to Oscar-winningtransgressions in Whos Afraid of Virginia Woolf? and Butterfield 8.

o The historical epic Cleopatra is among Hollywoods greatest onscreenfiascos and a landmark of offscreen monkey business.

o The London born actress was a star at age 12, a bride and a divorcee at18, a superstar at 19 and a widow at 26.

o Taylors ailments wore down the grudges. She underwent at least 20major operations and she nearly died from a bout with pneumonia in1990. In 1994 and 1995, she had both hip joints replaced, and inFebruary 1997, she underwent surgery to remove a benign brain tumour.In 1983, she acknowledged a 35-year addiction to sleeping pills and painkillers. Taylor was treated for alcohol and drug abuse problems at theBetty Ford Clinic in Rancho Mirage, California.

o Her advocacy for AIDS research and for other causes earned her aspecial Oscar, the Jean Hersholt Humanitarian Award, in 1993.

International

Global wheat output figureso 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 coveragein many countries, United Nation's body Food and AgricultureOrganisation said on Wednesday.

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

23.03.2011


Warren Buffet and Bill Gates are in Indiao Billionaire investor Warren Buffett said he is looking forward to using the

enormous cash pile of flagship firm Berkshire Hathaway to acquirecompanies in India, which he described as a large, and not an emerging,market.

o The Omaha, Nebraska-based Berkshire has made two large acquisitionsin the past one year, buying chemicals additive firm Lubrizol for about $9billion a few days ago and railroad firm Burlington Northern Santa Fe forabout $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 topledge money for a global philanthropic drive called the Giving Pledge.

o Buffett begins his maiden India trip with a visit to metal-cutting toolsmaker TaeguTec India Pvt Ltdhis only investment in the country till dateon Wednesday. His other major India connection is the recent tie-upwith Bajaj Allianz to sell auto insurance policies.

o On Thursday, after wrapping up his Bangalore visit, Buffett will fly toDelhi, where he will hold a joint press conference with Gates and thenspeak with some leading Later, in the afternoon, he is expected to meetPrime Minister Manmohan Singh.

ED finds Hasan Ali links with politicians and babuso 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 Swissbanks, is being interrogated by ED under the Prevention of MoneyLaundering Act, or PMLA, and Foreign Exchange Management Act, orFema. His custodial remand, which came to an end on Monday, wasextended by three days by the Supreme Court.

Finance & Economy

Zero rating of taxes explainedo A country does not export its taxes and, hence, exports would be zero-

rated under GST. This means the final product or service will be sparedtax, and taxes paid on all inputs refunded.

o The above explanation may sound a little confusing to the uninitiated intaxation. Lets try a bit. Suppose there is a series of transactions beforea commodity is exported. Under GST, at every stage of this series, tax
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On the state of reservation politics in Indiao 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. Thereservation policy, in effect, has become a battleground with political

parties casting the electorate as competing caste groups and these socialgroups, in turn, striving for ever more backwardness.

Some facts on phone tappingo Phone intercepts are permissible under Section 5(2) of the Indian

Telegraph Act. The Union home secretary or the home secretary of astate can allow interception.

o A phone can be tapped for 60 days. Can be extended by another 60days on credible evidence.

o Allowed only for public safety & integrity of the country. Three yearsimprisonment & 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 everymonth. Government says tapping does not exceed six months.

Centre may list about 10 PSUs in FY12o 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 ofpublic enterprises. These firms had made a net profit of Rs. 83,867 crorein the previous year.

Finance & Economy

Look at our banking strengtho 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 regionalrural banks (RRBs), four local area banks (LABs), 1,721 urbancooperative banks, 31 state cooperative banks and 371 district centralcooperative banks.

o In spite of these impressive numbers, more than half of our population isnot having bank accounts.

Rajat Gupta quits as ISB Chairmano It was just yesterday that we were noting about this prospect. Now it is

confirmed. Rajat Gupta, the former worldwide managing director ofMcKinsey & Co, has decided to resign as the chairman of Indian Schoolof Business. Guptas resignation comes three weeks after the USSecurities and Exchange Commission (SEC) filed administrative civilinsider trading charges against him. The ISB executive board will meet on

April 2 in Hyderabad to decide on the new chairman.
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o Gupta, one of the first Indian Americans to become the CEO of a big USfirm, has been charged with leaking secret details to Galleon Grouphedge fund manager Raj Rajaratnam on Warren Buffetts plan to invest$5 billion in Goldman Sachs at the height of the financial crisis. The dealhelped ensure Goldmans stability while Galleon Group made a profit of$18 million, according to US SEC charges.

o This is not for the first time ISB is in the spotlight for the wrong reasons. InOctober 2009, an executive board member, Anil Kumar, then director atconsulting firm McKinsey & Co, was charged on the same insider tradingscheme involving Galleon Group, following which he resigned from theboard. In January 2009, ISBs then dean M Rammohan Rao resigned asdean after Satyam Computer Services founder Ramalinga Raju admittedto inflating profits and revenue. Rao was a member of the Satyam board.

National interest paramount, not MNC's contractual rights; rules SCo The Supreme Court has ruled that private companies cannot complain

about violation of their contractual rights by government when nationalinterest is involved in awarding contracts for public projects involvingtaxpayers' massive money.

o A bench of justices VS Sirpurkar and TS Thakur in a judgment expressedanguish at the manner in which the Tehri Pump Storage Plant could notbe taken up for the past three and half years due to the legal battleinvolving two MNCs Voith GMBH (respondent No.1) and Alstom(respondent No.2).

o The apex court passed the judgment while staying an Uttarakhand HighCourt order which had halted the tendering process adopted by TehriHydro Development Corporation after Voith Hydro GMBH challenged theprocess as being in favour of rival bidder Alstom. In this case, the noticeinviting tenders on the prime turn-key execution was issued on August 31,2007. But the two companies, which were finally shortlisted for thecontract, fought legal battles in the high court and the apex court accusingTHDC of being biased in favour of the other.

21.03.2011


Western forces pound Libya; India calls for restrainto Western forces pounded Libyas air defences and patrolled its skies on

Sunday, but their day-old intervention hit a serious diplomatic setback asthe Arab League chief condemned the bombardment of civilians.

o European and US forces unleashed warplanes and cruise missilesagainst Gaddafi on Saturday in a United Nations-backed intervention toprevent the veteran leader from killing civilians as he fights an uprisingagainst his 41-year rule. But Arab League chief Amr Moussa said whatwas happening was not what Arabs had envisaged when they called forthe imposition of a no-fly zone over Libya. Arab backing for a no-fly zoneprovided crucial underpinning for the passage of the UN Security Councilresolution last week that paved the way for the Western intervention, thebiggest against an Arab country since the 2003 invasion of Iraq.

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

Galleon case: Gupta sues SECo Rajat K Gupta, a former director of Goldman Sachs and Procter &

Gamble who has been accused by the Securities and ExchangeCommission of leaking confidential information about those companies,on Friday sued the agency. Guptas complaint against the agency, filedin US District Court in Manhattan, contends that the SEC violated hisrights by bringing its case under the Dodd-Frank Act instead of suing in acourt. Dodd-Frank allows the agency to pursue its case in a specialadministrative proceeding.

o Gupta is also the Chairman of the Indian School of Business based inHyderabad. Markets are rife with rumours that he has offered to quit asChairman of ISB too.

o Gupta, 62, is accusedof tipping Raj Rajaratnam, the Galleon Grouphedgefund manager now on trial for securities fraud and conspiracycharges, about Goldmans and P&Gs earnings, as well as informationabout Warren Buffetts $5 billion in investment in Goldman, just minutesafter the board approved it.

Finance & Economy

Some thoughts on financial inclusiono Take a look at this ET editorial. It describes how regulation is actually

stunting the outreach of banks to the unbanked. It presents the wayforward. Worth a read.

Varieties of teaso 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 andfresh aroma. The flush might have a marginal green tint. Analysts saythat first flush tea is generally used for gifting purpose during the Eastertime. Incidentally, the first flush teas fetch price anything between 2,000and 12,000 per kg.

With GJM (Gorkha Janmukti Morcha) calling for a ban onmovement of tea now, demanding more wages and inclusion ofthe Terai and the Dooars regions in the north Bengal jurisdiction,Darjeeling tea companies are a worried lot as their first flush teaswill lose international clientele.

o

Orthodox tea: Orthodox tea refers to either hand-processed tea or teathat is rolled with machinery in a manner that mimics hand-rolling. Mostspecialty tea is made with orthodox production methods. Orthodox tea isgenerally known for being more nuanced and complex than CTC tea. Allwhole-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 intouniformly-sized bits that are typically used for low-grade teabags.

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Goldman Sachs to repay Buffetts expensive $5-billion investmento 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 dueto expire in 2013. Because of its high cost, Goldman reportedly decidedto repay it early.

o In total, the investment netted the billionaire investor $1.7 billion, orapproximately $187,000 a day.

International

Elections for Tibetan government in exileo Do you know that there is a current prime minister-in-exile for Tibetans?

It is Samdhong Rinpoche. He served two terms. The Tibetan charterbars an individual from holding the office for more than that period.

o With the announcement by Dalai Lama that he is stepping down as thepolitical leader of Tibetans, the role prime minister in exile assumessignificance. Currently elections are on for the post.

o The three candidates in the fray for the post of the prime minister of theTibetan government-in-exile, which is known as Kalon Tripa in Tibetanlanguage, are Lobsang Sangay, Tenzin Namgyal Tethong and TashiWangdi. 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 Yorkand New Delhi

18.03.2011


Expert take on the high risk perception in public about nuclear power plantso 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 ameltdown could be very high. The general fear is that it could be as highas what happened in Hiroshima or Nagasaki. However, this is misleading.When Hiroshima was bombed, people had no advance warning. AtFukushima, 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 powerplant 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 riskimposed on them.

o One serious accident in a nuclear plant can lead to large-scale and long-lasting impacts impacts that do not differentiate between the rich andthe poor or the young and the old. But it is also true that our inability toprovide clean energy sources to the masses is resulting in around4,00,000 premature deaths annually from indoor air pollution largelyimpacting children under 6. It has also been estimated that air pollution inurban areas leads to approximately 50,000 premature deaths. The key

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difference between these casualties and those arising from a nuclearaccident is that these are widely dispersed geographically and spreadthrough the year, although repeated annually.

Opposition demands PM's resignation over WikiLeakso The latest tranche of documents from WikiLeaks, detailing use of cash for

purchasing votes for the UPA regime during the 2008 trust vote, hascompounded the woes of the scandal-scarred Manmohan Singhgovernment. The Opposition, which has been homing in on ManmohanSingh as a political punching bag, seized upon the latest revelation todemand his resignation.

o Finance minister Pranab Mukherjee, who spoke on the issue in the RajyaSabha, rejected the Opposition's demand for the government'sresignation. "The cables were correspondence between a sovereigngovernment and its mission abroad. They enjoyed diplomatic immunityand it is not possible for the government to either confirm it or deny it," hesaid. Mukherjee also said the charges pertained to the 14th Lok Sabhabut the government of the day was responsible to the 15th Lok Sabha.

Finance & Economy

RBI's midquarter monetary policy reviewo 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 thegovernment 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 whythis is so. Take a look. An interesting read.

Government considering bio-shields against tsunamio The Environment Ministry is considering the idea of developing bioshields

comprising mangrove and non-mangrove species in coastal areasadjoining critical infrastructure projects such as power plants and oilstorage depots.

o The idea of promoting mangroves and other biological shields to providea speed breaker was suggested by agricultural scientist and RajyaSabha MP MS Swaminathan. The suggestion is being followed up by the

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expert group appointed by Environment Minister Jairam Ramesh toevaluate additional safeguards against the risk of tsunami.

o Swaminathan has also suggested that the coastal areas adjoining thenuclear plants could be declared as critically vulnerable coastline. Thesenior agricultural scientist said that the idea of using mangroves as lineof defence against coastal storms and tsunamis came following a

discussion with older generation of Japanese scientists in 1989.

International

On nuclear accidents and incidentso The Nuclear Regulatory Commission in the United States generally

separates unplanned nuclear events into two classes, incidents andaccidents. Incidents are unforeseen events and technical failures thatoccur during normal plant operation and result in no off-site releases ofradiation or severe damage to equipment. Accidents refer to either off-sitereleases of radiation or severe damage to plant equipment.

o The Nuclear Regulatory Commission in the United States generallyseparates unplanned nuclear events into two classes, incidents andaccidents. Incidents are unforeseen events and technical failures thatoccur during normal plant operation and result in no off-site releases ofradiation or severe damage to equipment. Accidents refer to either off-sitereleases of radiation or severe damage to plant equipment.

Global tremors from Japan's woeso Beijing has suspended approval for nuclear power plants across the

country, putting brakes on a development programme that accounts foralmost 40 % of the worlds planned reactors. In the US, billions in loanguarantees as well as the first wave of new plant licences since the ThreeMile Island accident in 1979 are in jeopardy. Germany has idled one-thirdof its nuclear capacity. Spain, Switzerland, the UK, the US and India haveannounced safety reviews.

o The yen is surging ahead (current $1 = 79Y is the highest since WorldWar II) due to Japanese insurance companies repatriating foreign assetsto finance claims payouts and Japanese investors repatriating funds forreconstruction.

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 theirjob!
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